Bitcoin Pauses as Fed Mulls a December Pause – Cryptoasset Weekly Update (November 17, 2024)

BTC/USD & ETH/USD Key Points

• Traders are still digesting the implications of the “Red Wave” election in the US and Trump’s cabinet appointments.
• Bitcoin ETFs saw more than $2B in inflows last week, but “extreme greed” sentiment warns that the market may be overheating
• Bitcoin is showing signs of fading bullish momentum, hinting at pullback potential before another leg higher.

Cryptoasset Market News

• The market capitalization of all cryptoassets eclipsed $3T, exceeding the peak of the 2021 bull market.
• Bitcoin futures open interest soared to record highs, reaching above $56B.
• Inflows into spot Bitcoin ETFs exceeded $2B in just the first four days of last week alone.
• IBIT alone has hit $40B in assets in 211 days since its launch earlier this year. The previous record to hit this number was $IEMG in 1,253 days. It is now bigger than all 2,800 ETFs launched in the past ten years and top 1% of all ETFs.
• Total net flows into spot Ethereum ETFs flipped positive for the first time since launching in August.
• Ethereum researcher Justin Drake introduced the “Beam chain,” a proposed upgrade to Ethereum’s consensus layer intended to improve staking, transaction tracking, and cryptographic security.
• Coinbase’s app ranking has ascended to #1 within finance and #8 overall.
• Stablecoin supply has expanded by $5B Since U.S. Presidential election.
• MicroStrategy bought another 27,200 BTC for $2B.

Macroeconomic Backdrop

Whereas the first week of November was all about coming to terms with the “Red Sweep” in the US election, the proverbial rubber hit the road last week as traders digested what a Republican mandate would mean for policy and markets more broadly.

Most immediately, traders sought to understand how serious Trump is about his aggressive campaign promises (e.g. 60% tariffs on China, deporting 10+ million immigrants, etc). Early returns based on his cabinet appointments suggest that he is at least fairly serious, with picks like Marco Rubio as Secretary of State, Matt Gaetz as Attorney General, Tom Homan as “Border Czar,” and tariff maven Robert Lighthizer reportedly in the running for a high-level position. Traders – especially crypto enthusiasts – eagerly await Trump’s appointments for Treasury Secretary and (likely) SEC Chair to set out a clearer economic policy.

In terms of traditional economic data, traders were treated to mostly “in-line” readings on consumer prices, producer prices, and retail sales in the US, but the bigger development was the chorus of Federal Reserve speakers who were seemingly at pains to emphasize that the central bank could pause its rate cutting cycle as soon as December. The highlight was Fed Chairman Powell, who noted that the central bank is in “no hurry” to lower interest rates. Accordingly, traders are now pricing in close to coinflip odds of a rate cut from the Fed, making the next handful of jobs and inflation figures pivotal in determining the near-term path of interest rates:

Source: CME FedWatch

Sentiment and Flows

The sentiment gauge we watch most closely, the “Crypto Fear and Greed Index,” rose to 80 last week, indicating “extreme greed.” Thursday’s reading of 88 marked the second highest of the year and near the highest reading ever recorded. At the margin, the high level of greed in the market hints at elevated risk for a pullback in the coming week, especially if momentum rolls over:

Source: Alternative.me

Another way of gauging sentiment, flows into exchange-based cryptoasset investment vehicles, have remained near record highs over the last week. As of writing before the release of Friday’s data, Bitcoin ETFs have seen stellar inflows of over $2B over the last four days alone. Over the long-term, inflows from “tradfi” investors provide incremental demand for Bitcoin and could help support the price, as we’ve seen in recent weeks.

Source: Farside Investors

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

After breaking its previous record highs near $73K in the wake of the election, Bitcoin shot higher in nearly a straight line to a peak (so far) above $93K last week. As we noted above, bullish sentiment is reaching historically extreme levels, and the cryptocurrency is showing a small bearish divergence with its 14-day RSI, highlighting fading buying power as the week went on. The “measured move” projection of the $20K midyear consolidation range comes in around 93K, adding to the evidence for at least a pause in the bullish momentum.

Against that backdrop, a near-term pullback into the mid- or lower-80Ks would be a long-term healthy development for Bitcoin and could set the stage for a march to $100K by year end. That said, big breakouts from long consolidation periods can often run further than expected, so readers may want to be cautious about any counter-trend trades.

Ethereum Technical Analysis: ETH/USD Daily Chart

Source: StoneX, TradingView

On an absolute and relative basis, last week was a rough one for the world’s second-largest cryptoasset. Ether tagged the $3400 level at the start of last week before falling four consecutive days to trade near $3,000 even as of writing on Friday afternoon. It also hit new 3.5+ year lows relative to Bitcoin in the process.

Moving forward, previous-support-turned-resistance-turned-support-again near $2800 will be the key zone to watch. As long ETH/USD remains above that level, the technical bias remains at least modestly bullish in anticipation of a more favorable regulatory environment.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos and be sure to follow Matt on Twitter: @MWellerFX