ZONFF Weekly It is the market overview analysis and future market outlook that Zonff Partners brings to you every week

After the Federal Reserve’s bearish landing last week, spot buying against inflation has re-entered the market. Demand is strong, and investors should firmly hold long positions.

For the convenience of readers, we put the "Market Analysis" in the front of the article, and the "Data Analysis" in the back, so that readers can quickly understand the market overview and recent prices. Readers who are interested in the overall market data can turn to the article The second part "Data Analysis" understands changes in market data.

Article structure:

• Market analysis (medium and long term + short term)

• Data analysis

secondary title

Market analysis (medium and long term)

1. The investment value of BTC

Image Source:www.alithya.com

1. Low correlation with other assets

Low correlation brings higher Sharp and lower volatility. The macro environment will only affect the speed of large institutional capital inflows, but the inflow logic will not change.

2. Software-based problem solving, a leap in efficiency brought about by a large-scale collaborative economic model

We believe that the evolution of tools is only related to two elements:speed and efficiency. Speed ​​can break down the original cost logic; while efficiency can change the distribution mode of benefits. Whether it is Defi or a single BTC payment method, the blockchain has a dimensionality reduction blow to traditional financial market tools with its unique credit model, so "blockchain", an efficient tool, will definitely be fully utilized by capital in the long history and zoom in.We have never questioned the long-term investment value of BTC and ETH, as we have always been bullish on China's technology stocks.

From the perspective of the ultra-long cycle, we need to closely track the investment value of BTC and the application scenarios of the blockchain. As long as the above-mentioned investment logic does not change, the idea of ​​​​encrypted asset allocation for super-large institutions in the United States will continue.

2. Unstoppable inflation

According to the US inflation data, the CPI annualized inflation rate in June this year was 5.4%, which was much higher than the market expectation of 4.9%.

According to Friedman's research, the explosive inflation of the US dollar occurs 12-24 months after the growth of the broad money supply.

Observing the issuance of US dollar M2, from October 2019 to March 2020, as the Federal Reserve printed a large amount of money, the growth rate of US M2 began to soar and has continued to this day.

Looking back at history, the current dollar inflation and deeply negative real interest rates are very similar to the 1973-1975 inflation cycle. Since March 2020, the growth rate of US dollar M2 has remained above 10% for 15 consecutive months, and even reached above 25% in some months. Taking history as a mirror, if the growth rate of US dollar M2 cannot fall below 7% in the next few months, a new round of global inflation will come.

3. Reducing QE, raising interest rates and shrinking balance sheets

Total Federal Reserve Securities Holdings (millions of dollars)

Data source: Wind

"Full employment and stable prices are the mandate given to us by the United States Congress."

Price stability:Absolute "stability" is difficult to achieve, only by changing the calculation rules. The Fed uses the average inflation value to measure the price increase. Although the recent inflation has far exceeded expectations, the average is only 1.8%, and there is still a lot of room for imagination.

Full employment:A return to pre-pandemic conditions is full employment.

After the global financial crisis in 2008, the Federal Reserve implemented three rounds of QE, that is, when the employment recovery reached 75%, it released a signal to reduce QE, and when the employment loss was recovered by 100%, it officially started the operation of reducing QE.

Therefore, some scholars have given the expectation of this round of QE tightening:

• In September 2021, the Federal Reserve will signal that it will exit the easing (Tarp) and reduce money printing;

• In December 2021, the Federal Reserve will officially announce the reduction of the scale of QE;

• Throughout 2022, the Federal Reserve will reduce the size of the current $120 billion QE until it reaches zero;

• From the first quarter to the second quarter of 2023, the Fed will raise interest rates.

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Market analysis (short term)

Comparison of the current BTC trend before the pull-up at the end of 2020

Data source: Tradingview

Short perspective:Just be careful not to break your head and shake the warehouse.

Bullish perspective (short-term, medium-term, long-term):U.S. spot buying re-intervened, and after the volatility converged, the volatility increased upwards; the weekly and daily levels both formed a bullish trend; after finishing finishing in the short term, the market will continue to make new highs.

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Data analysis

1. The U.S. dollar and U.S. debt

US dollar index and US 10-year Treasury yield trend

Data source: Tradingview

The U.S. dollar index is still in a bullish pattern, and the market has timely feedback on the U.S.’s reduction in bond purchases, which shows that among many sovereign currencies in the world, the market believes that the U.S. dollar exchange rate will continue to be in a relatively strong position.

The sharp drop in U.S. bond interest rates will directly reduce the cost of funds, which will continue to drive up the prices of risky assets such as U.S. stocks and BTC.

The sword of Damocles of interest rate hike expectations and balance sheet shrinkage expectations is slowly falling, but before the real arrival of macro currency negatives, various risk assets will continue to perform.

2. Fear index and US stock index

The panic index and the trend of the three major U.S. stock indexes

Data source: Tradingview

After the Fed's tightening expectations came to fruition, the market no longer panicked about tightening policy, and gave a positive interpretation of the negative landing, and all major risk assets went up simultaneously.

3. BTC options holdings

BTC option positions
Data source: Coinglass

At present, the open interest of BTC options on the market is about 200,000 pieces, which has reached a new high, and the spot buying in the United States has resumed building positions. The option pain point for short-term delivery is around $70,000, and there are also large put option positions at $70,000, so this area will become an important resistance range.

It is worth noting that the long-short ratio of options delivered on December 31 is very different, and the option positions are extremely optimistic.

4. ETH options holdings

ETH options positions
Data source: Coinglass

At present, the open interest of ETH on-site options is about 1.42 million, which also hit a new high. The biggest pain point is around $5,050, and the market is also bullish on the follow-up market of ETH.

aboutZonff Partners

disclaimer

disclaimer

The encryption market fluctuates violently. Investors should pay attention to risk control management. The above information should not be regarded as the basis for their investment judgment, and it is for research reference only.