Top Interest of the Week
Last week, there was significant enthusiasm among investors and traders for Ethereum ($ETH) following the successful rollout of the Pectra upgrade on its network. Over the past week, the price of ETH surged by 16.5%, while Bitcoin (BTC) remained stable in the $102k–$104k range. This substantial influx of capital into ETH was driven by short covering and increased interest from institutional buyers. Given that ETH has lagged behind BTC over the last two years, many short positions have accumulated, and the swift rise in ETH's price compelled those shorting to cover their positions, further elevating the price.
World ($WLD), the innovative cryptocurrency initiative led by Sam Altman, has ignited worldwide discussions with its strategy to integrate digital finance and biometric identity via iris scanning. Its recent activities in six major US cities have motivated investors to back this project, anticipating rapid adoption and regulatory compliance in the country.
Ether.fi ($ETHFI), a liquid staking and restaking platform on Ethereum, experienced a significant surge as its total value locked reached $6.8 billion. This remarkable growth positioned it as the fourth-biggest player in decentralized finance, following AAVE, Lido, and EigenLayer. Consequently, the network has seen an increase in fees, generating $3.15 million last week, compared to $2.65 million the previous week. Ether.fi is utilizing these earnings to repurchase its tokens, a strategy aimed at bolstering token value.
Overall Market
Source: TradingView
The above chart is the ETH/BTC price in the daily candle chart at a regular scale.
In our analysis from last week, we noted that market sentiment was significantly influenced by tariff-related headlines, while robust demand for ETH bolstered its bullish momentum. We expected a notable recovery in the ETH/BTC price following a substantial rally in ETH.
On May 12, the US and China issued a joint statement agreeing to significantly reduce tariffs on each other's goods for an initial 90-day period after their meeting in Geneva, Switzerland. This unexpected development has eased a severe trade conflict and positively impacted global markets, generating strong bullish sentiment for risk assets and restoring the US stock market to levels seen before April 2, when President Trump enacted a minimum 10% tariff on all US imports. Additionally, the safe haven asset, Gold, experienced a significant sell-off from its peak, trading below $3,200 per ounce this week.
Bitcoin (BTC) demonstrated its responsiveness to market risk by leading the US stock market over the weekend, maintaining a strong position above the $100k mark. However, after the US stock market opened on Monday, we observed some profit-taking on BTC as investors shifted their funds to other altcoins. We also noticed a decline in BTC's dominance. The primary factor behind this drop in BTC dominance is the significant price increase of Ethereum (ETH), which once surged to $2,738 on Tuesday, marking a 97% rise from its low of $1,385 on April 9. This swift increase was fueled by FOMO among investors and the covering of short positions. Additionally, the ETH/BTC trading pair exhibited a pronounced upward trend on the daily chart.
Our desk expects the upward trend in ETH/BTC to persist over the coming weeks, albeit with a gentler price movement, eventually approaching the red zone indicated on the chart. The RSI indicator points to an overbought condition for ETH/BTC, leading us to predict a period of price consolidation at the current level in the next few days, followed by a gradual increase.
Over the next two months, discussions surrounding trade relations between the United States and its global partners, particularly China, are expected to significantly influence market dynamics. Should these negotiations fail to yield positive outcomes, we predict a rise in volatility across global markets. This increased instability is likely to create substantial challenges for cryptocurrencies, which may struggle to maintain their value amidst such fluctuations.
Bitcoin ETF Tracker
The above table is the BTC spot ETF net inflow data in the past five trading sessions.
The inflow tracker table shows a considerable increase in capital entering Bitcoin (BTC) through the exchange-traded fund (ETF) mechanism. In the previous week, the robust demand for BTC ETFs pushed the price above the pivotal $100,000 level. However, the significant decrease in inflows noted on Monday and Tuesday corresponds with our evaluation that short-term investors were selling their holdings and shifting their investments to the US stock market for better upside rewards. Nonetheless, this trend reversed on Wednesday, with net inflows reaching a remarkable $319 million. This strong interest from traditional financial institutions improved the bullish sentiment for BTC, which positively influenced the overall cryptocurrency market.
Macro at a glance
Last Thursday (25-05-08)
The Bank of England has reduced its interest rate by 25 basis points to 4.25%, in line with market predictions. Governor Andrew Bailey indicated the possibility of further reductions, citing a UK-US agreement aimed at eliminating tariffs on specific goods to enhance trade. This move aligns with economic projections and the central bank's messaging.
US initial jobless claims stood at 228,000 for the week, which is lower than the anticipated 231,000, indicating a more robust labor market than expected.
Last Friday (25-05-09)
In April, Canada saw an increase of 7,400 jobs; however, the unemployment rate rose from 6.7% in March to 6.9% during the same period, slightly exceeding the anticipated rate of 6.8%. This information indicates a mixed performance in the labor market, aligning with observed trends.
On Tuesday (25-05-13)
The unemployment rate in the UK was reported at 4.5% in March, in line with market expectations, suggesting a stable labor market.
The US Consumer Price Index (CPI) showed an annual increase of 2.4% in April, as anticipated. The core CPI remained unchanged at an annual growth rate of 2.8%, indicating that inflationary pressures are being managed effectively. This stability could enable the Federal Reserve to uphold its existing policy approach, steering clear of any immediate adjustments to interest rates, as inflation trends are consistent with forecasts.
On Wednesday (25-05-14)
In April, Germany's Consumer Price Index (CPI) recorded a 2.1% increase year-over-year, a minor decline from March's 2.2%. This trend is consistent with forecasts of slowing inflation within the Eurozone. The reduction in German CPI from 2.2% to 2.1% indicates a cooling of inflation, which is a favorable sign for the Eurozone. Such a development may alleviate the pressure on the European Central Bank to implement stricter monetary policies, thereby aiding economic recovery initiatives.
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