The US debt ceiling negotiations are still facing differences on key issues between the parties involved. If the negotiations are delayed, uncertainty surrounding the USD can be good for crypto assets. As the current interest rate hike cycle approaches its end, the NASDAQ 100 index (NAS100) in the US stock market has rebounded and surpassed its pre-hike level (March 17, 2022). Both $BTC and $ETH traded within a tight price range this week without much OI change. The $Multi FUD resulted in a 5x increase in daily bridging volume and its price slumped 56% this week. Ethereum Foundation researchers stated that the reasonable target date for the activation of the Cancun upgrade is October 2023.
The decoupling between equities and crypto persisted as we see the 30D correlation between BTC and S&P dived further into the negative zone. Unsurprisingly, crypto continued to dart in desultory fashion given there is still little sign of life in the volatility space. For both BTC and ETH, IVs within three months all traded sub-45 handle whereas six-month and one-year IVs were slightly above 45. BTC 25-delta skew saw a modest rise toward puts affected by the call supply and the fact the spot failed to rally further. On the other hand, the skew for ETH manifested more stability observed in the past few weeks.
A tentative agreement to raise the debt ceiling has been reached by President Biden and House Speaker McCarthy over the weekend; a deal draft may be released as early as Sunday and the House will vote on Wednesday. With the real deadline now being June 5th, the Congress has some time to pass legislation. April inflation prints were above consensus: Core PCE price index rose 4.7% YoY and 0.4% MoM vs. forecasted 4.6% and 0.3% respectively; DXY added 1% over the week.