Macro analysis

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Relevant data for this week:

- Wednesday: PMI manufacturing and services Germany, Eurozone, UK

Building permits, US home sales, Durable goods orders, unemployment, FOMC minutes, etc.

- Thursday: US holiday, thanksgiving

- Friday: GDP Germany

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Last week's inflation data in the Eurozone and the UK showed no signs of easing:

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U.K. CPI +11.1% -> new high

Italy CPI +11.8% -> 0.1% off the high

Spain CPI +10.9% -> new high

France CPI 6.2% -> new high

Sweden CPI 10.1% -> new high

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Across the pond, mixed data:

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USA PPI 0.2% M/M, Exp. 0.4%.

USA PPI 8.0% M/M, Exp. 8.3%.

USA PPI Core 0.2% M/M, Exp. 0.3%.

USA PPI Core 6.7% Y/Y, Exp. 7.2%.

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The market was once again celebrating as a great victory this tenuous easing of inflationary pressures from the PPI (price producer index). However, retail sales +1.3% (monthly), housing starts +1.425M (October), new home sales +4.43M (October) and low unemployment claims do not seem to be the economic cooling scenario that the Fed wants to create to alleviate the uncontrolled inflation we are experiencing and begin to pivot to its hawkish stance. The hardest wing of the Fed, Mr. Bullard, even commented that rates should rise to a maximum of 7% and that to avoid the mistakes of the 70's, rates should stay higher for longer.

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Unemployment is the lagging economic indicator, but layoffs in the tech sector are already beginning to sound loud and clear:

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Layoffs in 2022 (% of Workforce)

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1. Twitter: 50%.

2. Intel: 20%.

3. Snapchat: 20%.

4. Coinbase: 18%.

5. Target: 13% Target: 13% Target: 13% Target: 13% Target: 13% Target: 13% Target: 13

6. Redfin: 13%.

7. Credit Suisse: 5%.

8. Goldman Sachs: 3%.

9. Microsoft: 1%.

10. Amazon: Hiring Freeze 1

11. Apple: Hiring Freeze

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Despite the strength of the U.S. economy today, I believe it is necessary to be aware of the macroeconomic situation in which we are immersed in order to have a general overview and not so focused on the ultra-short term as the markets are currently doing. These data are a reality and require us to be very cautious for 2023:

1. Rates on credit card debt now highest since 1990

2. Credit card debt at record $930 billion

3. Mortgage balances up $1 trillion this year

4. Average mortgage rate of 7.2% higher than 2008

5. US household debt at record $16.5 Trillion

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1-Month Treasury Yield: 3.93%.

30-Year Treasury Yield: 3.89%.

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The American curve is completely inverted, the last two times this has happened:

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1. August-September 2019 => recession started in March 2020.
2. August 2006-August 2007 => recession started in January 2008

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In fact, the inversion of the U.S. 2yr-10yr curve is the deepest since the 1980s.

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Cryptoassets | Derivatives and Onchain Metrics

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As we said last week, the crypto ecosystem has experienced an earthquake of the highest possible magnitude on the Richter scale and it is now where we are going to know the collateral effects and various contagions on the entire industry and ecosystem. We remain defensively biased but now very attentive to possibilities as many readings give us signs of climaxing markets. Markets should not go up and down vertically, excesses on both sides always end up being corrected even in the short term, these are the usual dynamics in all markets. Everything will depend on whether the contagion becomes systemic and ends up out of control, a scenario that is on the table but is not the main one.

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Bitcoin

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Little change in the price structure with respect to last week. We remain below the June lows, generating value in the 16800 area. In the short term and in order to get rid of the prevailing oversold conditions of the last few weeks, buyers must be able to consolidate above 16800 to be able to consider bullish scenarios with a view to 19160 (main vpoc). On the other side of the coin, a break and test inside 16800 would trigger selling to make new lows. However, the risk/reward ratio for sellers seems unfavorable in current market conditions.

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The order book remains strongly protected at the bottom, even more so compared to last week.

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The skew, which measures the difference between the IV (implied volatility) of OTM puts and the IV of OTM calls, shows extreme readings reminiscent of the end of the January, May and June declines.

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The time structure of volatility has returned to a normal (blue) backwardation situation after the brutal contango experienced last week. Implied volatility quoted in the options market relaxes.

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The readings and conclusions about bitcoins on the exchanges at a time like the one we are living in, where there is a massive flight of CEX and where many institutions are rebalancing and repositioning their portfolios becomes really complicated.

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The November data from the CME Bitcoin futures are very interesting:

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CME's November contract trades at an extreme discount to spot. The current discounts are bigger than those following the March 12, 2020, collapse in BTC, and CME's futures currently trade at an all-time high discount to spot.

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CME's BTC futures saw their most active trading day in the last 13 months on November 8

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Open interest on CME was equivalent to 93,565 BTC on Friday. This is the second-highest recorded open interest in CME's BTC futures ever, only behind the highs of 93,630 BTC following the launch of BITO on October 25, 2021.

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If we extrapolate all this data to a chart, it is not difficult to think that the market is in a climatic moment, everything seems to indicate that short-term opportunities are coming.

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However, in the long term, we remain cautious and emphasize the following five points as fundamental and must be closely monitored

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1) There is latent uncertainty about how the crypto ecosystem will respond in a recession and downturn environment.

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2) The correlation to risk assets, which has been at its highest this year, has experienced severe decoupling over the past few weeks. The crypto ecosystem cease to be considered as a "stock" with high beta to the SPY and QQQ.

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3) The correlation of market cap with money supply growth is a reality that cannot be ignored.

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4) A crypto regulatory framework on a global scale is presumed to be imminent after the events of the last few weeks and should not be considered as dangerous. A regulatory clarification that does not kill the original idea of decentralization would allow many entities to dive into the ecosystem by being able to include crypto assets within their investment policies.

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5) Role of halving in an environment of global recession and multilevel crisis of the crypto ecosystem.

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We will closely follow all these issues and look for any sign of institutional accumulation, which we have not yet seen using these simple metrics of wallets with more than 100 and 1000 bitcoins.

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Ethereum

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The market overlap in the $1500-1600 area was not a good prelude to buying strength. The FTX event has caused the market to go after the lower buying control with wild verticality. The market is currently generating value, above the lower buying control ($1100). Any bullish scenario has to go through a recovery of the main vpoc (1225), but watch out for a loss of the marked buying control, it is the last buying trench and demand response zone.

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Classic markets

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The 0.3% lower-than-expected inflation (PPI) data two weeks ago was good enough for the market to trigger a bullish explosion and put the price above even the previous bullish continuation failure.

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This past week the market has managed to hold above the gray value area marked on the chart. However, buyers have not been able to consolidate the selling control above. The areas that buyers and sellers have to gain in order for the market to begin to develop are very clear.

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This casuistry leaves us with great doubts in higher timeframes. Whether or not the SPY consolidates above 390 is the key to the future of all markets heading into the end of the year.

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