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Ethereum​

Sentiment in the cryptocurrency market remains mixed, with major projects moving in a sideways trend. Investors are concerned that Ethereum's correction after the Shapella upgrade will result in more sell-offs.

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What after the Shapella Upgrade?​

• Since December 2020, investors have been able to deposit their ETH on the Ethereum Beacon chain and receive blockchain rewards and profits. However, they couldn't withdraw those funds until the recent upgrade. So far, the declines after the Shapella are relatively small;​
• Before the update, all staked ETH was worth nearly $32 billion (about 15% of supply). According to K33 Research, even with small withdrawals, about $2.4 billion in ETH could hit the market as investors will want to withdraw some funds from the Beacon chain. With crypto market liquidity drying up, this could trigger a deeper correction;​
• On the other hand, Bernstein Fund analysts pointed out that of the 18 million ETH staked, nearly 70% were locked into liquidity protocols, allowing investors to de facto trade funds through decentralized Lido-type protocols, which will take off much of the downward pressure.​
• According to analysts, the 30% of investors who deposited ETH in the Beacon chain without using liquidity protocols are likely to have the highest level of conviction and will not be willing to sell. It is also worth noting that the seamless ability to deposit and withdraw ETH may encourage more investors to staking and drive capital flowing into the chain;​
• Passive ETH returns of 5 or 6% per year are no longer as attractive compared to the 0 interest rate period, when investors could not count on comparable yields from regulated fixed income assets. In addition, staking is to some extent subject to risks associated with crypto market regulation. Rewards for ETH staking will decline as the number of stakers increases.​

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News​

1. According to the Block 'open interest' report, the ETH options market (call options vs. put options) before the update showed the highest level since May signaling possible downward pressure​
2. The U.S. Treasury Department has indicated that the decentralized asset market poses a threat to national security.​
3. Divly revealed a report according to which only 1.62% of US cryptocurrency holders paid tax on their investments. The report is disputed by tax law specialists;​
4. According to Bloomberg, Singaupur's central bank is working to unify cryptocurrency-friendly regulations​
5. According to a survey by CoinGecko and Blockchain Research, 75% of cryptocurrency investors hold NFTs​

Ethereum chart, H4 interval. Looking at the chart, we can see that the price reached before the Shapell update was roughly similar to the peak of the price rally before the Ethereum Merge. If the declines accelerate the key for the price could be the demand reaction around $1700 zone, where we can see SMA200 (red line), 23.6 Fibonacci retracement of the upward wave started last June and previous important price reactions.​

 

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3 Markets to Watch​

Investors that will be returning to the markets after Easter holidays and will face a number of top-tier market events in the week ahead. Rate decision from the Bank of Canada, Q1 earnings from major US banks as well as FOMC minutes and US inflation data are highlights in this week's calendar. Be sure to watch GOLD, US500 and USDCAD in the week ahead.

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GOLD​

A number of top-tier data releases from the United States will be offered to investors this week, including CPI for March (Wednesday, 1:30 pm BST), FOMC minutes (Wednesday, 7:00 pm BST) as well as retail sales for March (Friday, 1:30 pm BST). All of those may shed light on what Fed does next - is a 25 bp rate hike in May still in play or will the Fed pause the rate hike cycle? Higher CPI reading and poor retail sales data may see dovish bets in the markets increase. This, in turn, may help gold look towards highs in the $2,060 per ounce area.

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US500​

Wall Street earnings season for Q1 2023 will begin this Friday with the release of reports from major US banks. JPMorgan, Wells Fargo and Citigroup are set to report their financials before the opening of the Wall Street session on Friday. Beats and misses in results will be company-specific but investors are also likely to be offered hints on an issue with more broad-based implications - impact of recent banking turmoil on the economy, businesses and credit action. Recent data from the Dallas Fed showed signs of a crunch in consumer loans. Confirmation that deterioration in credit action is indeed taking place may deteriorate market moods.

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USDCAD​

USDCAD will be one of the FX to watch on Wednesday. Not only because US CPI data for March and FOMC minutes will be released but also because the Bank of Canada is set to announce the rate decision at 3:00 pm BST. No cut is expected as the Bank of Canada strongly hinted that the rate hike cycle is over. However, wage growth in Canada remains elevated, which should exert upward pressure on inflation. Having said that, some hawkish remarks may be offered by BoC.
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[SOLID ECN LLC]

Solid ECN - Negative Balance Protection

Volatility often occurs in the market. Solid ECN has always been committed to the highest standards.

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US Index​

US Dollar weakened after International Monetary Fund's (IMF) global economy outlook report, and the current US situation at the Washington summit was also commented by US Treasury Secretary Janet Yellen. The content of the commentary was in line with what today's Axios analysis and didn't surprised financial markets. Yellen emphasized the resilience and strength of the U.S. economy and the stability of the banking sector but the comment failed to help the dollar index (USDIDX).

The situation in the US economy was again commented on by John C. Williams, head of the New York Fed. The dollar index is weakening as investors following the IMF analysis saw the Fed's rate hike cycle coming to an end which may herald the lack of significant support for the dollar's strength that has been building since 2022, with US systemic uncertainty in the background. Although the chances of a hike in May increased after the NFP data, its fate is still uncertain and its impact on USD strength almost 'theoretical'.
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IMF​

• IMF head of markets research Gourinchas conveyed that the Fed, the European Central Bank and the Bank of England are nearing the end of their rate hike cycles;​
• The IMF expects U.S. economic growth to reach 1.6% in 2023, compared to the 1.4% estimated in January, and 1.1% y/y growth in 2024 (a staggered slowdown).​

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Yellen​

• The banking system in the United States is healthy, with strong capital and liquidity positions, the global financial system is resilient;​
• Given the war in Ukraine and recent pressures on banking systems, we remain cautious on inflation risks;​
• Price pressures in the United States remain excessive, but have declined over the past six months.​

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Fed Williams​

• I don't think we need to change our balance sheet policy in the near term. QT is proceeding at a rapid pace;​
• The banking system has really stabilized after the last crisis. If inflation falls, we will have to lower interest rates.​
• One more rate hike is reasonable but we will watch the data including retail sales and CPI inflation;​
• If inflation becomes more persistent, we will have to adjust policy accordingly;​
• Bank failures have increased uncertainty about the outlook. We need to see a decline in core inflation;​
• We have brought policy to a restrictive level. The impact of the credit turmoil in the banks is uncertain and it is too early to estimate its impact.​

USDIDX chart, H4 interval. The dollar index reacted by falling below the 38.2 Fibonacci retracement of the wave started in Q1 2021, near 105 points. Since mid-March, when investors learned the extent of the banking sector's problems, the bulls have had a clear problem with rising above the SMA100 (black line).​

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[SOLID ECN LLC]

Solid-ECN Account

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NATGAS​

US natural gas prices took a hit yesterday as analysts mounted their calls that the end of the heating season in the United States is near. While recent weather forecasts pointed to a period of below-average temperatures, average temperatures in this period of the year are usually high enough for demand for heating to drop significantly. Expectations for today's EIA natural gas storage report (3:30 pm BST) also strongly hint that the heating season in the US is drawing to close - median estimate is for a 25 billion cubic feet increase in stockpiles. If confirmed, this would be the second inventory build of 2023 and the first one since mid-January.

Taking a look at NATGAS chart at H4 interval, we can see that price has halted recent upward correction at the resistance zone marked with $2.24 handle and the 23.6% retracement of the downward move launched at the beginning of March 2023. Price launched a pullback and move back to the $2.08 per MMBTu. After a few hours of struggle in the area, sellers managed to push the price below the $2.08 mark this morning. Volatility on the NATGAS market is likely to be elevated around 3:30 pm BST when the EIA report is released. Should analysts be mistaken with their forecasts and US natural gas inventories actually drop, NATGAS could see a price spike.​

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AUDJPY​

• US indices finished yesterday's trading slightly higher. S&P 500 gained 0.33%, Dow Jones moved 0.30% higher and Nasdaq added 0.28%. Russell 2000 was an outperformer and rallied 1.22%​
• Downbeat moods could be spotted during the trading in Asia today - Nikkei gained 0.4%, S&P/ASX 200 moved 0.4% lower, Kospi dropped 0.3% and Nifty 50 traded 0.2% lower. Indices from China traded mixed​
• DAX futures point to a slightly higher opening of the European cash session today​
• Chinese GDP growth reached 4.5% YoY in Q1 2023 and was much better than 4.0% YoY expected by analysts. However, on a quarterly basis growth reached 2.2% QoQ and was in-line with expectations​
• Monthly activity data from China for March came in mixed. Chinese retail sales surged 10.6% YoY in March (exp. 8.0% YoY), industrial production increased 3.9% YoY (exp. 4.7% YoY) and urban investments were 5.1% YoY higher (exp. 5.8% YoY)​
• According to RBA minutes, RBA members considered a rate hike at April meeting before ultimately deciding on a pause. Minutes showed that there is a stronger case to pause rates and assess whether there is need for more tightening​
• BoJ Governor Ueda said that buying government debt is part of monetary policy and is not aimed at monetising it​
• Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.4% higher, Ethereum gains 0.6% and Dogecoin jumps 1.3%​
• Energy commodities trade mixed - oil gains 0.3% while US natural gas prices drop over 1% following yesterday's rally​
• Precious metals gain amid USD weakening - gold and silver trade 0.3% higher while platinum adds 0.2%​
• AUD and EUR are the best performing major currencies while USD and JPY lag the most​

AUDJPY gains following the release of upbeat Chinese Q1 GDP data. The pair climbed above a downward trendline at the end of the previous week and is continuing to advance towards the 91 resistance zone.

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Bitcoin Dips Below $30K​

On Wednesday in morning trading hours Bitcoin and other cryptocurrencies plummeted below significant levels. Despite a strong decline in prices no fundamental information was released to the public. Drop occurred in 20 minutes and led to the liquidation of over $25 million worth of BTC futures long positions.

BTC fell below $30k level and ETH back below $2000. Long squeeze may be caused by investors digesting Gary Gensler Congressional Hearing, which took place yesterday.

BTC dips and is trading near support level marked with green zone. On MACD indicator a bearish divergence occurred which suggest that bullish momentum is weakening.​

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