Hero's Image

The Hash Insider: ETH short squeeze kicks off positive week for digital assets

The Hash Insider

The Nasdaq Crypto Index (NCI) closed Sunday (10/30/22) 10.4% above last week’s closing. The index’s positive performance was influenced by ether (ETH), up 19.6%, while bitcoin (BTC) rose 6.4%.

At the start of the final week of an October of unusually small price variations, investors continued to monitor the release of Q3 results in traditional markets while awaiting the last major US inflation reading (PCE, on Friday) before the FOMC’s monetary decision on November 2.

After a late Sunday rally, both ETH and BTC moved sideways within a tight range throughout Monday. This trend extended itself until market opening hours in North America on Tuesday, when ETH shot up by $150 on its way to $1,500, a price level not seen since September 15, recovering most of the losses ETH had after the successful Merge. About an hour into the ETH rally, most major protocols joined in, with the native tokens of rival smart contracts platforms SOL (Solana) and ADA (Cardano) leading the second wave. 

Traditional markets had a positive day too (S&P 500 +1.63%), but ETH’s surprising surge was the consequence of a short squeeze, triggered by an unexpected price rise that generated a wave of buy pressure as short sellers were forced to purchase ETH to cut losses. 

In contrast to what occurred in mid-October — when prices recovered after a hotter than expected core CPI reading — this short squeeze was not caused by macro news.

After a brief selloff on Tuesday afternoon, ETH began a slow but sustained climb — this time taking BTC along for the ride, while ADA and SOL stayed behind. 

Crypto asset prices looked like they were about to lose steam as markets opened in North America on Wednesday and investors began reacting to negative earnings reports from tech giants Microsoft and Alphabet released after closing on Tuesday. 

However, Canada’s Central Bank announced a 50 bp rate hike, surprising investors expecting a Fed-size 75 bp. Is the Bank of Canada’s announcement a sign central bankers around the world are looking to slow down monetary tightening? CME’s FedWatch Tool showed a moderate decrease in probability of a 75 bp rate hike for the upcoming November FOMC meeting (OCT 21: 95% vs. OCT 27: 88.5%) that suggests some investors see it that way.   

Prices dipped on Thursday following the news that US GDP rose 2.6% in Q3, exceeding projections (2.4%) and suggesting there is still some room for the Fed’s monetary tightening.    

As markets prepared to close in the US, crypto asset prices dipped further, in tandem with traditional markets, as investors began positioning themselves for the release of personal consumption expenditures report the next morning.

On Friday, investors breathed a sigh of relief when PCE results came in just under market expectations. Inflation rose 0.3% (expected: 0.4%) for the month and 6.2% on a yearly basis. Core CPE, which excludes the more volatile food and energy categories, rose 0.5% for the month and 5.3% on a 12-month basis, matching August's results.

Investors interpreted the results as a sign that the Fed’s restrictive monetary policy was achieving its desired result and may soon slowdown, as evidenced by the fact that the probability of a 50 bp hike being announced at the conclusion of the FOMC’s final meeting in 2022 (December 14) finally surpassed the probability of a fifth-straight 75 bp hike, according to the CME Group.

Friday's positive inflation reading reestablished the momentum that had predominated throughout the week for crypto assets. BTC would eventually reach its weekly high of $20,925 on Saturday morning. ETH’s rally would be sustained until later in the afternoon, its price rising to the weekly high of $1,645.

Looking Ahead 


On Monday, Eurozone CPI results will help gauge the extent to which the Ukraine War is impacting prices as Europe enters a winter of uncertainty. On Tuesday, all eyes will be on the FOMC’s monetary announcement. Markets are assuming a 75 bp rate hike will be announced (2:00 pm EST), but Chair Powell’s press conference (2:30 pm EST) could bring pivotal information to light. Initial jobless claims (Thursday) and non-farm payrolls (Friday), both from the US, close out the week’s macro calendar. 


Other news


Google announces a cloud-based node engine for Ethereum projects


After announcing plans to accept crypto payments from Google Cloud Web3 clients earlier in the month, Google announced plans to debut a cloud-based node engine for Ethereum projects. According to the announcement, the new engine will allow Web3 companies who require dedicated nodes to “relay transactions, deploy smart contracts, and read or write blockchain data with the reliability, performance, and security they expect from Google Cloud compute and network infrastructure.” Google’s latest project promises to streamline the deployment and syncing of new nodes and signals the continued attention given to the crypto ecosystem by tech companies despite the persistence of the bear market. 


Fidelity survey shows institutional interest remains high


Fidelity, one of the largest asset managers in the world, released the results of a survey that gauges institutional investor interest in crypto investments. According to the Institutional Investor Digital Assets Study, adoption of digital assets among institutional investors increased in both the US (42%) and Europe (67%), a respective 9-point and 11-point change year-over-year. Also, more than half of those surveyed (58%) had invested in digital assets during the first half of 2022 and 74% planned to invest in the future. According to Tom Jessop, president of Fidelity Digital Assets, ”while the markets have faced headwinds in recent months, we believe that digital assets fundamentals remain strong and that the institutionalization of the market over the past several years has positioned it to weather recent events.”



The information contained herein (“Information”) may not be reproduced or redistributed in whole or in part, in any format, without the express written approval of Hashdex Asset Management Ltd. (“Hashdex”) and its affiliates and subsidiaries (“Hashdex Group”). By accepting this document, you acknowledge and agree that all of the Information contained in this document is proprietary to Hashdex Group. While not explicitly referenced within this piece, Hashdex Group manages the Hashdex Nasdaq Crypto Index ETF, Hashdex Nasdaq Ethereum ETF, Hashdex Nasdaq Bitcoin ETF, Hashdex DeFi Index Fund, Hashdex Smart Contract Platforms Index ETF and other investment vehicles focused on digital assets (collectively the “Fund” and each a “Fund”) which invests in digital tokens. The Information is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell, interests in the Funds or any advisory services or any other security or to participate in any advisory services or trading strategy. If any offer and sale of securities is made, it will be pursuant to the confidential offering memorandum of the Fund (the Offering Memorandum). Any decision to make an investment in the Fund should be made after reviewing such Offering Memorandum, conducting such investigations as the investor deems necessary and consulting the investor’s own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.

Each Fund seeks to track a relevant index. The performance of each Fund will vary from the performance of the relevant index that it seeks to track. The Information is being provided to you solely for discussion purposes and may not be used or relied on for any purpose (including, without limitation, as legal, tax or investment advice) without the express written approval of Hashdex Group. Certain statements reflect Hashdex Group’s views, estimates, opinions or predictions (which may be based on proprietary models and assumptions, including, in particular, Hashdex Group’s views on the current and future market for digital assets), and there is no guarantee that these views, estimates, opinions or predictions are currently accurate or that they will be ultimately realized. To the extent these assumptions or models are not correct or circumstances change, the actual performance of Hashdex Group and the Funds may vary substantially from, and be less than, the estimated performance. None of Hashdex Group, the Funds nor any of their respective affiliates, shareholders, partners, members, directors, officers, management, employees or representatives makes any representation or warranty, express or implied, as to the accuracy or completeness of any of the Information or any other information (whether communicated in written or oral form) transmitted or made available to you. 

Each of the aforementioned parties expressly disclaims any and all liability relating to or resulting from the use of the Information or such other information. Except where otherwise indicated, the Information is based on matters as they exist as of the date of preparation and not as of any future date and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. Investing in financial markets, the Funds and digital assets, including Bitcoin, DeFi tokens, and Ethereum, involves a substantial degree of risk. There can be no assurance that the investment objectives described herein will be achieved. Any investment in the Funds may result in a loss of the entire amount invested. Investment losses may occur, and investors could lose some or all of their investment. No guarantee or representation is made that Hashdex’s investment strategy, including, without limitation, its business and investment objectives, diversification strategies or risk monitoring goals, will be successful, and investment results may vary substantially over time. Nothing herein is intended to imply that the Hashdex Group’s investment methodology or that investing any of the protocols or tokens listed in the Information or the Funds may be considered “conservative,” “safe,” “risk free,” or “risk averse.” Neither historical returns nor economic, market or other performance is an indication of future results. Certain information contained herein (including financial information) has been obtained from published and non-published sources. Such information has not been independently verified by Hashdex Group, and Hashdex Group does not assume responsibility for the accuracy of such information. Hashdex Group does not provide tax, accounting or legal advice. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” (or the negatives thereof) or other variations thereof. Due to various risks and uncertainties, including those discussed above, actual events or results, the ultimate business or activities of Hashdex Group or the Funds or the actual performance of Hashdex Group, the Funds, or digital tokens may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward- looking statements in making their investment decisions. None of the Information has been filed with the U.S. Securities and Exchange Commission, any securities administrator under any state securities laws or any other governmental or self-regulatory authority. No governmental authority has opined on the merits of the offering of any securities by the Funds or Hashdex, or the adequacy of the information contained herein.

Logo Hashdex
The material contained on this website is for informational purposes only and Hashdex, and its affiliates, is not soliciting any action based upon such material. The material is not to be construed as investment advice nor is it to be construed as recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Further, the material contained on this website does not constitute a representation that the financial instruments described therein are suitable or appropriate for any person. Past performance is not an indication of any future performance. This website may contain advertising of financial products.