Options Market Suggests Ethereum To Hit $15,000 By March 2022

Okay, very good morning. It's Thursday, 28th of October, and before I do my normal macro look around the headlines and the outlook for today across different asset classes, thought I'd have a quick chat about Ethereum. And the reason why— there's quite an interesting article in the FT this morning, and it was talking about essentially the positioning that's been happening in the options market, which would suggest then that there's anticipation of a surge in Ethereum prices on the horizon, with the options market indicative then of the price more than trebling to $15,000 by March of next year. And a lot of the rationale there, and actually the option trade volume, has come in the context of the Bitcoin ETF launches that we saw last week from the likes of ProShares and Valkyrie and so on. And there's an anticipation then that we're going to get a repeat scenario for Ethereum ETFs. Again, all speculative in, in opinion, but that in itself then has seen a bit of a disconnect in prices actually more recently between Bitcoin and Ethereum, which generally move in a somewhat tandem fashion. But from a technical perspective, this is a look at the Ethereum price over a 1-year period, and more recently in the last 10 days or so, it's been flirting again with the previous record highs that we were seeing, um, back earlier this year. If we were to go to May of 2021, we obviously failed at around these areas in early September, but we're right back at that mark at the moment. So yeah, in terms of the options pricing for $15K by March, I mean, obviously that's incredibly bullish and would be indicative then of a breakout in what some say is very reminiscent of early phases of, of Bitcoin before, you know, extrapolating out the more recent activity of the last several years. So yeah, technically from that perspective, obviously this is quite a key area. So it'd be interesting to just keep an eye on the price of that going forward, particularly with what the options movement has been over the last several days. But otherwise, away from that, let's just jump in and have a quick look at general traditional asset classes in a sense of equity, FX, commodity, and fixed income. And this morning it's pretty quiet overall, to be quite honest. We did have a bit of a negative close on Wall Street. In fact, the Dow fell for the first time in basically 4 days, but I don't think that comes as any great cause for concern given the fact that we've moved up to record high territory, remember, just the day before in the likes of the S&P and the Dow. So a little bit of kind of mild profit taking. The NASDAQ did actually outperform only a touch, but managed to keep its head above water. And as you can see here from the heat map of the S&P 500 following their earnings, both Microsoft and Google finished up around 4% and 5% each respectively, just helping prop up that, that index, with the likes of Tesla also up just shy of 2%. One market that did move a little bit lower last night was oil prices. I mean, I do think this needs a bit of context. If I just zoom out here a little bit on the 60-minute bar, you can see we've just come back down to an area of technical relevance, generally a bit of an inflection point for price, which is around here. If I just color that so you can see it a bit more clearly of what I'm talking about, this area here of around the $81 mark. Again, it's kind of marked what was the previous high of the recent surge in prices and also the bottom end of this trading range that we've been in over the last 2 weeks or so. A bit of coming off that high though, where we pushed through $85 in the beginning of the week. The rationale here that people are looking at is Iran and European Union agreed to restart negotiations on the revival of the 2019 nuclear accord before the end of next month. And as we've been here before, that kind of promotes expectations then about if that were to happen, there's a greater prospect of Iranian barrels coming back to market. However, I would put a caveat on that and say, remember where we were 10, 11 months ago? The price of oil at the time was coming off because people were thinking, well, the US have started their first rounds of talks with Iran, and it was a similar understanding that then Iran could soon come back to market with oil. And then here we are, we've moved absolutely nowhere with those Iranian talks after going through several rounds of negotiations with US-led— this is talking more about the EU now. And so cutting a deal with Iran has proved incredibly problematic, particularly given how severed relationships became under the Trump administration. And thus, yeah, I don't buy too much into that, that move being really generated by that headline in itself. I would say more if you look at the bigger picture on the weekly chart, of course, you know, we've had such a run-up in price and we got very close to that through $84, that $85 87 mark on the weekly candles here, which was up back to significant levels of 2013-14 price action. So yeah, some profit taking there. I think it's nothing more than that, to be quite frank, for the, for the time being. And then jumping over to the ECB, that's really the, the real main event for the calendar for today, at least. And here's the crib sheet. I have tweeted this out from our friends at ING, the Dutch Bank, they always put out this crib sheet, which just to recap is particularly useful because it gives you generally what the expectations are for a subsequent outcome being more dovish or hawkish, and therefore what the reaction could be in the currency market, i.e., the euro-dollar currency pair. And then they divide then this kind of bingo card into two sections. Or 4 categories in total, which being the general outlook for the economy defined by inflation or growth, and then on policy by interest rates and the QE programs or the PEP on top, with any commentary on the exchange rate. So the base case here, um, in as far as ING's view is, is that they will acknowledge higher inflation but core will fall in 2022, but there's a requirement for vigilance. So 2 things there one, inflation globally, as we're seeing, being a little bit more sticky, and they need to kind of make note of that. And so hence the acknowledgement of higher inflation. But the expectation is, as ECB officials and Lagarde have been saying, that in Europe at least, they're talking about inflation being transitory. So still very much holding on to that idea compared to some of the more hawkish comments we've heard from the likes of the Bank of England, for example. And then this word vigilance Some commentary talking about, if you've been in the market for a while and you remember Jean-Claude Trichet, for example, who was before Mario Draghi, who was obviously before Lagarde as the ECB president, that was when we used to be very much in tune with ECB code words and vigilance is the key word, strong vigilance. Things like that can elevate then and give hints and guidance towards the ECB sensitivity toward taking action potentially in moving policy, tightening or loosening, depending on the description of that vigilance word. If anyone's interested, just Google search ECB code words and Jean-Claude Trichet, and I'm sure you'll find a table of the breakdown. But on the growth side, recovery improved, but downside risks from energy prices. Again, this kind of energy price squeeze that we've had, of course, of late, which has been particularly evident here in the UK but also globally, and whether or not then that there's a downside risk on the back of that. And then interest rates and QE and PEP, no change. Again, that's an important point. We're not looking for any change here. Lagarde to avoid giving details on tapering discussion. And I'll get to that in a moment. And as far as the exchange rate is concerned, that really is not a talking point at the moment. So not expecting anything explicit on that for the time being. But the summary of which ING had, I thought was pretty on point. They said Lagarde will use all her diplomatic skills to moderate the diverging views of hawks and doves within the Governing Council. Now, what are they talking about there? Well, at this particular point in time, obviously the ECB is, is very large And so there's a number of, uh, there's a division growing between what's the best course of action, the big kind of macro or monetary policy decision being, do we act now? Is inflation gonna surge forever higher and therefore we need to get on top of it, or is it transitory? Uh, and that's where the two sides of the table kind of lie at this point in time. So she has to basically toe a, a more neutral line, uh, keep both happy but signal they're flexible to move in either direction, essentially, which is a tricky proposition, of course. Now, the neutral message may ultimately defy what ING say is some of the market's hawkish expectations, and the balance of risks for euro-dollar, which by certain metrics is overvalued in the short term, appears slightly tilted to the downside. And so what they're trying to say there in kind of simple terms is if you think about the bigger picture at the moment, for instance, the Bank of England, where following the UK budget yesterday, following things like, you know, the Bank of Canada being super hawkish yesterday, the way that markets have been moving is ever increasing the prospect of rate hikes becoming more imminent. And although the signs haven't come so explicit from the ECB, they've kind of been dragged into this global yield and rate expectation move with the general shift of higher inflation expectations in the future. And so therefore, hence the reason why for a pricing positioning point of view, perhaps then the, the balance of risk is for EURUSD to move lower, not so much on any type of dovish commentary, but on the fact that it doesn't deliver to the hawkish pricing of how the market currently resides. So yeah, we would be interested to see how that plays out, and certainly of course I'll update you by this time tomorrow on the outcome. Otherwise, on the central bank side, don't want to spend too much time on the BOJ because quite frankly it's boring. There hasn't really been any move in the Japanese yen of great note to mention. They stood pat on stimulus while signaling more delays in the economy's post-pandemic recovery. Again, remember it's just a couple of days now before the new Prime Minister Kishida faces his first national election. So quite typical then with those looming political uncertainties for the central bank in any country to really make any drastic changes ahead of that risk event. The BOJ kept its interest rates and asset buying plans unchanged as expected. They cut though their projection for economic growth this fiscal year to reflect setbacks from the summer's COVID surge. Remember the issues that they confronted around the Summer Olympic Games. And then also, of course, these global supply chain issues, which of course Japan was impacted, such as like everyone else was. They also downgraded their view on exports and production, citing those supply constraints. Otherwise, as far as the UK budget was concerned, obviously you've probably read enough about that. But the one thing I thought that was quite interesting, and this was what we were talking about yesterday from a trader's perspective, particularly in the fixed income market, was any of those announcements that would come out from the Debt Management Office, or otherwise known as the DMO. And UK government bond markets yesterday, the 10-year gilt rallied the most since March of last year, so basically the onset of the pandemic, which you'll remember was the meaningful shift in global asset prices. Um, so yesterday's move was akin to the biggest we've seen since that moment in time of the onset of COVID-19. And the lockdown that we had. And the reason for that was that total planned gilt sales for 2021-22 fiscal year were down close to £60 billion relative to its April estimate, taking the total to just under £200 billion. The reduction came after official estimates showed stronger than expected economic growth will boost government receipts, and that lowers, lowers then spending needs and so decreases the volume of, of debt or borrowing in the sense of issuance of government bonds. And so yeah, remember this is comparison to the spring kind of statement, and so back then the vaccination rollout program was, was in its infancy, if you like. And so therefore the general economic recovery that we've had has been more robust than perhaps the more pessimistic view that people were taking before then without the, um, seeing the, the success of the early rollout of the program that we had. So hence the reason, rationale why Rishi Sunak made that move. Okay, for the day ahead, what have we got on the agenda? Well, we've already had a couple of the German state CPIs. Nordrhein-Westfalia came out very early on the month-on-month, 0.4% against previous flat. That puts year-on-year state Northrhein-Westfalia Westfalen German CPI at 4.5%, up from 4.4% last month. We'll get the rest as we go through the morning. We've got the German unemployment rate and change just ahead of 9 AM this morning. Um, otherwise then, going into the afternoon, of course, the ECB, as I mentioned, two-part event. So you get the normal statement at 12:45 followed by the presser with Lagarde. The latter is the one that the market is going to be more sensitive to and watching from an intraday perspective at 1:30. 1:30 is a busy time of day though, because not only does she kick off her press conference, but you've got the weekly jobless claims. But more importantly than that, you've got US Q3 advanced GDP. So our first look at how third quarter GDP fared in America. And as you can see here, the expectation is for a moderation in the headline figure year on year to 2.6%. 7% from 6.7% in the prior quarter. And as you can see here, that would be one of the weakest readings that we've had, of course, since that dramatic kind of initial pandemic lockdown situation that we had in 2020. Now, a couple of things here. Consumer confidence fell and Americans spent less. Remember, this is Q3 and we had that COVID surge coming out the back end of summer. And so hence the reason why there's been a moderation in expectations for growth in the US. They also grew more wary, consumers that is, as higher prices on everything from groceries to petrol to home prices, everything has gone up. And so that would have been a contributing factor as well in the pullback for spending is what analysts are expecting. However, a sharp moderation in growth from Q2, as I've described, I mean, that's not an unknown quantity. We already have factored that in, I'd say largely. And the markets, as we know, are forward-looking. And so given the fact that we've had a decent improvement in case trajectories kind of declining for multiple weeks now in the US, I would say that the impact of today's number is probably going to be fairly muted, barring any very large standard deviations, if you like, away from the consensus figures today. So overall, I don't think it's really going to have too much to alter the perception of what the Fed are going to do with their November taper announcement, and thus then the overall impact, despite what might appear on the surface to be headlines I'm sure the tabloid media will spin saying how weak growth is. The market's already looking at that growth kind of picking up, if you like, going into the back end of the year, all things remaining equal at the moment. So yeah, I don't really see it as too much of a, of a, of a massive event, but obviously I'd be aware of technical setups of various charts. Equities obviously remain quite elevated. Could we snap lower on the breakdown of any key support levels? But you know, perhaps intraday in the short term, but it wouldn't really change the picture, I don't think, beyond that point of the initial moves. All right, that is it. So I'm going to leave it there, let you guys get on with your day. Uh, hopefully that was useful. Again, feel free to drop me a comment if there's any questions. Hit that subscribe button if you're new to the channel. Thanks for watching, and I will see you tomorrow. Take care.