Crypto Market Analysis: Roller-Coaster Week Ends With Bitcoin Volatility Falling

Bitcoin and ether volatility continued to fall as their average true range (ATR) of price movement fell 14% and 18%, respectively, over the last seven days.

ATR soared by 78% and 56%, respectively, in the days immediately following reports that crypto exchange giant was struggling with severe liquidity problems.

Crypto price stabilization has been a peculiar twist in the ongoing FTX tragedy – unexpected but also reassuring to investors jittery about digital assets’ long-term prospects.

Federal Reserve officials appear to be on the same page, in providing something for everyone

Depending on what you wish to hear, you can find a Fed official to deliver comforting remarks.

Those investors hoping for dovish commentary could cite Federal Reserve Vice Chair Lael Brainard, who said on Monday that it would “probably be appropriate soon to move to a slower pace of rate increases”.

Three days later, St. Louis Federal Reserve President James Bullard offered support for hawks, saying that “inflation remains unacceptably high, well in excess of the Federal Open Market Committee target of 2%”

Seekers of a middle ground could turn to Fed Governor Christopher Waller, who this week implied that while inflation is too high, he’s open to a 50 basis point hike in December.

At an uncertain time, where macroeconomic signals continue to often contradict one another, the comments underscore the range of options and uncertainty even among the officials who determine monetary policy. Which of the three options would be best may not be apparent until well after the Fed has chosen one of them.

A few notable developments occurred with pricing relationships

• The inverse relationship between BTC and the USD reversed completely. Since June, a move higher in BTC meant a move lower in the Dollar Index (DXY), and vice versa. Since the FTX collapse, BTC and DXY have become strongly correlated. This highlights two points. First of all, correlations can still all go to one during crises. And secondly, as important as macro developments are, a sector’s solvency takes precedence
• Momentum for both BTC and ETH appears neutral. This is understandable given current fears about FTX contagion.
• BTC has begun an upward climb versus ETH. After falling 7% during the Nov. 10 and Nov. 11 sell-off, bitcoin has risen 3% versus ether as of press time.
• ETH continues to burn more supply than it produces. The argument that ETH is now a deflationary asset grows louder each day. Its supply since the transition to proof-of-stake has been declining since October.

Whale Investors added coins to exchanges, and asset managers reduced longs.

• Whales, defined as unique BTC addresses with more than 1,000 BTC, have been sending coins to exchanges. This trend should not be ignored, as movement of coins to exchanges is often a signal of future selling.
• The most recent Commitment of Traders report said asset managers reduced their long BTC positions for the first time in three weeks. The report reflects data as of Nov. 8, so it captures any movement related to the FTX announcement. According to the COT report, asset managers still remain 81% long and represent 43% of open interest.