Summary

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The Fed decided last week to scuttle any expectations of Pivot. Powell was forceful in his speech, he is not going to listen to the market's pleas and prayers and he is going all out to fight inflation. Of course, neither Powell nor the market want to assimilate that inflation does not only come from the demand side, there is a structural component of supply that will not relax with the monetary policies of central banks, energy.

Once again, as usual, we are facing an exciting week full of events. Tuesday, mid term elections in the US and on Thursday, the star data, US CPI for October along with numerous appearances of members of the FED throughout the week. In the crypto ecosystem, spears in the air, the war between FTX and Binance has begun.

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Macro Analysis

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Powell goes all out to fight inflation, raising rates in the US by 75 bps to 4%. Nothing that was not discounted, however his tone was more hawkish than expected. According to Powell, the risk of not acting forcefully is much greater than the risk of acting and overshooting, since he believes that he would quickly activate mechanisms to relieve the pressure.  

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"It is premature to consider pausing

I don't believe we have overtightened

We are firmly committed to lowering inflation and we have to resolve

The ultimate level of rates will be higher than previously expected

We will want to reach real positive rates

Nobody knows whether or not a recession will occur, or how severe it will be."

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Macroeconomic data continues in line especially in the old continent, last week we had data related to manufacturing.

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The trade balance in Europe, as expected, is strongly correlated with energy, the data speak for themselves, they are chilling.

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Powell's slam dunk on Thursday triggered a severe sell-off in risk assets, sharp declines in the SPY and QQQ along with a further tightening of the yield curve.

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However, the market was trying to recover on Friday from the overselling, following rumors of a real re-opening in China, with a relaxation of the strict zero covid measures. Over the weekend, those rumors were to collapse, covid cases are on the rise and the Chinese administration has ratified its zero tolerance stance on the issue.

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This Tuesday, we will have the midterm elections in the USA, it seems to be a foregone conclusion that the Democrats will lose control, which could mean a significant burden in terms of governance and relevant decision making for Biden.

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Cryptoassets

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Bitcoin

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With no notable changes, the market is still trying to consolidate above $20500, showing a clear weakness to win this short term battle that we demand from it in order to qualify for more ambitious upside targets. A failure of a bullish continuation of this minor value area (marked in blue) could put the market in trouble again. The $19000 level is the most traded level, vpoc (volume point of control), this level is the last buying trench and a level to watch seriously.

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Ethereum

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The market continues to consolidate at the prominent $1500-1600 volume node.

We observed some overlapping, which is indicative of a loss of buying momentum. It is important for the market to consolidate this zone in order to attempt the next attack, to neutralize the clear upper zone of selling initiative.

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We are especially cautious this week with the crypto ecosystem. The war between FTX- Alameda and Binance has begun and may bring severe consequences in the ecosystem.

Last week, Coindesk was shouting to the skies, according to an internal document, Alameda presented the following balance sheet, a balance sheet that started a sea of doubts about its solvency.

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Alameda research has $14.6 billion of assets, against $8b of liabilities.

For assets: $3.66b FTT, $2.16b FTT collateral, $3.37b crypto ($292m SOL, $863m locked SOL), $134m USD & $2b equity securities.

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Most net equity tied in completely illiquid altcoins.

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The response from the other rooster in the henhouse was not long in coming:

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The war has begun. Alameda's CEO came out to defend herself against these accusations, specifying that the photo of Alameda's balance sheet published by Coindesk was incomplete.

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The $22 level is the level to watch for the FTT token, which is clearly being defended. More details are attached in the on-chain metrics analysis.

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Metrics on chain / Derivatives

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The open war between FTX and Binance has revolutionized all on-chain metrics. FTX stablecoin reserves have suffered a severe drop and FTT tokens show worrying inflows in exchanges. Is Alameda-FTX under attack? What is its resilience in this situation? Delicate questions that can stir the bowels of the entire crypto ecosystem, as the biggest players in this market are involved.

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The situation of weakness commented in the Bitcoin price and volume chart, is confirmed by the following metrics

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The balance of Bitcoins on the exchanges is rising sharply, which could be interpreted as potential selling pressure in anticipation of events or even a preparation for a major sell-off.  

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The whale ratio, which measures the activity of tokens transferred by whales, has experienced a significant rally. It looks like the market is preparing for the FTX-Alameda soap opera and the macroeconomic events of the week, midterm US elections (Tuesday) and US CPI (Thursday).

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At Turing Capital we pay special attention to entities with balance sheets between (1000-10000 btc), they are the ones that in our opinion move the market. The balance sheet of these entities shows no sign of accumulation at these price levels, which could be indicative that the floor has not been reached. Their balance sheet is significantly reduced and they are sending BTC to the exchanges.

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Classic markets

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As we commented these past two weeks, the markets had a very difficult time validating and consolidating above the important level of 3775 for the SP500 futures.

Powell on Thursday decided to pull the chain, which has left the market in a situation of total weakness. If the market does not react and does not lift its head at 3700 after the bullish continuation failure, selling will return to the market and with severe implications on the rest of the risk assets. The market has lost the main short-term bullish argument, the FED pivot. In our opinion, the market will gradually and painfully shift its attention to earnings and company performance within this complicated macroeconomic and geopolitical situation. There are already rumors of a change of rhetoric in the Ukrainian conflict, it is possible that the US is asking Ukraine to start dialogues with Russia.

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It is important in these turbulent times to look back and extract information from metrics and statistics. According to this series, it seems that the big market declines have come after the Fed's pivot, showing that the monetary authorities' sudden change of direction is a clear sign that things are not going well.

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The market seems to be anxiously looking for any argument to get rid of all this year's oversold position and start the well known Christmas rally, however many of these arguments in our opinion have no sustainability since the underlying trend and its associated indicators do not encourage optimism.

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