Oil Down

Crypto Market Week in Review (09 December 2022)

Markets

This week the markets were in a modest risk-off mood. Stocks declined and bonds were mixed. Long-term bonds gained, but mid-term ones were flat. Inflation-adjusted bonds (TIPS) were down as real rates rose. These moves are largely explained by the falling oil prices, pressuring inflation breakevens (i.e., expected inflation embedded in bond yields). Brent oil plunged by about 10% in the week and became lower than at the beginning of the year.

Brent oil price

The only major macro news remaining this year is due next week. The US inflation data and the Federal Reserve decision will be published on Tuesday and Wednesday, respectively. The Fed is widely expected to hike by 50 bp and to signal a further tightening. The inflation data has been a major market mover this year, easily driving S&P 500 by more than 2% a day.

Cryptocurrencies were mixed this week. Bitcoin was slightly up, and Ethereum lost 1% since last Friday. Grayscale Bitcoin Investment Trust (which is traded in the US under ticker GBTC) dropped this week and reached the highest-ever discount to the NAV, suggesting that a contagion from recent insolvencies may not be over yet.

GBTC premium/discount to NAV

The implied volatility of both Bitcoin and Ethereum declined during the week, returning back to the lows seen before the FTX explosion.

Bitcoin DVOL index

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