MARKETS week ahead: April 8 – 13Last week in the news
Much higher than expected Non-farm Payrolls in March in the US was a major event for the week on financial markets. Equity markets were still holding strong, despite the first major drop since the beginning of this year, while US Treasures reacted with higher yields. Gold reacted to new geopolitical tensions, which pushed the price of oil to higher grounds. The USD had increased volatility, but still managed to hold around 1.08 to euro, while the crypto market continued with higher price fluctuations. Bitcoin shortly tested $ 65K during the week, however, ending it above $68K.
The major event for markets during the previous week was a release of the US jobs data. The number of 303K new jobs in March was far above the expected 200K. The unemployment rate was standing at 3.8% in March, which was in line with market expectation. The market reacted strongly to the jobs data. Although this is positive for the US economy, showing its resilience to monetary measures, it still represents a fear that the Fed might hold interest rates at current levels for a longer period of time than previously expected. Namely, the market perceives that the stronger economy might drive inflation to higher grounds, in which sense, the reaction of the Fed might be to hold interest rates at current levels for a longer period of time, putting in question potential rate cuts during the course of this year. Aside from it, the Federal Reserve Governor Michelle Bowman noted on Friday the possibility for rates to be lifted to the higher grounds, in case that inflation remains persistent. The 10Y US Treasury benchmark reacted by ending the week at the level of 4,4% from 4.2% where they were previously traded.
Aside from potential negative impact on inflation from the heated jobs market, aspects of oil prices are also considered by markets. New geopolitical tensions between Israel and Iran, put pressures on oil futures and the price of oil on the market. Brent crude reached the highest weekly price of $90,65 per barrel. The US Brent crude was up by 18% during the course of this year, while the US crude added around 21%.
The US Treasury Secretary Janet Yellen is traveling to China in order to strengthen the relationships with this country which will be beneficial for both countries, as per her notes. She also noted that the main target of her visit is to discuss issues of “overcapacity and national security-related economic actions”.
The issuer of XRP token, a blockchain company Ripple announced that it will launch a US dollar stablecoin. Current estimate of the US stablecoin market is $150 billion. The company noted that the coin will be 100% backed by the US dollar, through cash, USD deposits and US government bonds, which the company will hold as a reserve for the back of their stablecoin. It is also noted that information on their reserves will be publicly available on a monthly basis. The market of the US stablecoin is currently split between USDT, whose issuer is Tether, and USDC issued by Circle. PayPal also launched its own stable coins, the PayPal USD, which is issued by Paxos.
Crypto market cap
Quite a volatile week is behind the crypto market. Since the middle of the week, Bitcoin has been driven to the downside, where the coin reached $65K. The market had a general reaction to the news that the US jobs market might be a game-changer when it comes to expected Fed rate cuts during the course of this year. Namely, at the latest FOMC meeting, Fed Chair Powell spoke about potential three rate cuts till the end of this year. However, as released data are showing that the jobs market is heating up, this might bring a surge on the demand side and as a consequence, increased inflation. Following the theory of market efficiency, markets had to make an adjustment to their forecast with expectations that the interest rates might stay higher for a much longer period of time. The reaction was visible on equity, US Treasury markets, as well as the crypto market. During the previous week total crypto market capitalization lost $97B in value, which was a drop of 4% on a weekly basis. Daily trading volumes remained elevated, moving around $131B on a daily basis, same as the week before. Total crypto market capitalization increase from the end of the previous year, currently stands at $ 826B, which represents a 50% surge from the beginning of this year.
Bitcoin and Ether were leading the market drop, however, the majority of other coins gave their contribution. On a weekly level, BTC lost around $ 40B in value, decreasing it by 2.9%. Ether followed general market sentiment, with a drop in value of more than $23B or 5.5%.
Another coin with significant drop in value was Solana, who lost almost $8.5B, which represents a decrease of almost 10% within a single week. Binance Coin decreased its market cap by $3.2B or 3.5%, while DOGE was down by $2.3B or almost 8% on a weekly basis. XRP should also be mentioned, as it followed the negative market reaction with a drop in value of $ 2B or almost 6%. Some of coins which lost significantly in relative terms were Miota and OMG Network, who both lost more than 13% in value. Uniswap and Algorand both lost more than 12% during the week, while Filecoin and Cardano were down by 10%. There were only a few coins who managed to end the week in a positive territory, where the absolute leader was Bitcoin Cash, with an increase in market cap of incredible 17%. Maker hold the grounds, with an weekly increase in value of 1.1%.
Coins in circulation continue with increased activity. Tether should be especially mentioned, as it continuously surging its circulating coins, adding 2.2% during the previous week. Miota added 0.6% of new coins to the market, same as Filecoin, while Algorand added 0.4% of new coins this week. XRP and Polkadot increased their coins on the market by 0.2% during the previous week, while the majority of other coins increased by less than 0.1%.
Crypto futures market
Previous week markets had a general reaction to stronger than expected US jobs data, where the crypto futures market reacted in a same manner. Both BTC and ETH futures were traded lower from the week before. BTC short term futures were traded around 5% lower, while longer term futures dropped by modest 0.5%, still trying to hold the previous week`s levels. At the same time ETH short term futures were traded down around 8% on a weekly basis, while longer term ones were down by around 5%.
Regardless of a drop in prices of short term futures, BTC longer term ones managed to hold relatively stable. Futures maturing in December this year were last traded at price of $73.220, while those maturing in December next year closed the week at price $77.865. This shows that the market still believes that BTC will hold higher levels in the future period. Still, not the same sentiment holds for ETH futures. This comes as the market priced longer term futures at lower levels from the week before. In this sense, futures maturing in December this year ended the week at price $3.519, while those maturing a year later were closed at $3.664. On a positive side is that the price of ETH manages to hold levels above the $3K for all maturities.
