Welcome to our weekly macro review of the crypto and financial markets, where we delve into the latest developments in the cryptocurrency space and traditional financial markets. Here’s a snapshot of what’s been happening in Week 37 of 2023.

Crypto Markets: Bitcoin and Ether Outperform

Performance of Top Cryptocurrencies

Source: altFINS

Cryptocurrencies continued to exhibit their resilience with Bitcoin (BTC) and Ether (ETH) both posting gains over the past week. Bitcoin traded at approximately $26,686 USDT, up by around 3.3% compared to the previous week, while Ether traded at about $1,632 USDT, marking a 0.9% increase. Since the start of the year, both Bitcoin and Ether have outperformed traditional equity markets, with BTC up by an impressive 61% year-to-date (YTD) and ETH up by 36%. In contrast, the NASDAQ was up by 32%, the S&P 500 by 16%, and the iShares STOXX EU 600 by 7%.

Market Performance and Sentiment

Source: altFINS

The NASDAQ index closed the week at $13,708, slightly down by 0.4%, while the S&P 500 ended at $4,450, down by only 0.2%. European Top 600 stocks, on the other hand, posted gains, closing higher by 0.6% at €45.63.

Market sentiment, as measured by the Crypto Fear & Greed Index, dropped slightly, indicating fear at 38.31.

US CPI and Federal Reserve

The headline US Consumer Price Index (CPI) for August 2023 rose to 3.7% compared to the previous year, slightly higher than economists’ expectations. However, it was lower than the Federal Reserve Bank of Cleveland’s forecast. The core US CPI, which excludes volatile food and energy prices, rose by 4.3%, aligning with market expectations and below the Fed of Cleveland’s estimate. This unexpected decline in core CPI suggests that the Fed may consider adjusting its monetary policy tightening strategy sooner than anticipated.

The Federal Reserve had raised interest rates by 0.25% in their July 2023 meeting, bringing the target range to 5.25% – 5.50%, the highest level in over two decades. As of now, there’s only a 1% probability of another rate hike in the upcoming week’s meeting, and market expectations for a rate hike in November and December have also decreased.

Bitcoin ETFs on the Horizon

A significant development to watch closely is the impending decision on Bitcoin exchange-traded funds (ETFs). The SEC has delayed its decision on six applications, including those from BlackRock and Fidelity, to mid-October 2023. Market analysts anticipate that these applications might get greenlit due to a recent federal court decision mandating the SEC to revisit its rejection of Grayscale’s bid for a spot Bitcoin ETF. This delay could potentially lead to multiple spot Bitcoin ETF approvals, paving the way for big institutions to invest in and hold Bitcoin through ETF products. This could have a profound impact on the crypto market.

What’s Next for Markets?

As we look ahead, keep an eye on the next monetary policy meetings for the Federal Reserve and the European Central Bank, scheduled for September 19-20, 2023, and October 26, 2023, respectively. Additionally, be sure to mark your calendars for the release of US headline and core CPI figures for September 2023 on October 12, 2023, at 08:30 AM ET. These events will likely influence market dynamics in the coming weeks.

In summary, the crypto market continues to show resilience and adaptability in the face of economic data, while traditional financial markets remain stable with slight fluctuations. The impending decision on Bitcoin ETFs could usher in a new era for institutional participation in the cryptocurrency space, making it an exciting time for both crypto enthusiasts and traditional investors alike. Stay tuned for more updates in our next weekly review.