Fed Paused in September, Long-dated Treasury Yields Surged

On September 20th, the Federal Reserve announced that it would maintain interest rates at a target range of 5.25% to 5.5%, in line with market expectations. During his post-meeting press conference, Fed Chair Jerome Powell emphasized that the committee is closely monitoring current economic data to determine whether they have achieved their desired monetary policy stance. Powell also noted that inflation excluding volatile food and energy prices is coming down. However, rising energy costs remain a concern, particularly given the recent surge in gasoline prices to 2023 highs.

The 10-year treasury yield has been steadily increasing over the past couple of months, reaching a yearly high in 2023 at 4.37%, surpassing its previous peak of 4.25% set in November 2022. This is the highest level since the 2008 Great Financial Crisis. Despite the surge in yields, the latest Commitment of Traders (COT) report shows that asset managers are maintaining a long position in 10-year bonds. The US - Philly Fed Recession Probability Index indicates a 34% likelihood of a recession occurring in the next year. The long bond is currently overcrowded, with investors anticipating a potential recession that could force the Federal Reserve to cut interest rates. However, Federal Reserve Chairman Jerome Powell has emphasized that their primary objective is to engineer a soft landing.

If the market has already factored in the belief that inflation is under control and will not pose a significant threat, it remains important to monitor the upcoming period's Consumer Price Index (CPI) data. However, recent trends show that the YOY CPI has increased from 3% in June to 3.7% in August. If the inflation data continues to indicate an upward trajectory, it may prompt the need for the market to reevaluate the pricing of equities and risky assets, considering the possibility of an extended period of higher interest rates.

Trading Slump: Bitcoin Trading Volume and Activity Decline

The first two weeks of September saw a decline in trading volume for Bitcoin Spot and Perpetual Futures markets on Binance. Notably, the Bitcoin Spot market experienced a yearly low in trading volume, with a combined total of approximately 400k BTC per week for BTCUSDT, BTCTUSD, and BTCFDUSD.

COT Report: Commercial Traders Increase Bearish Bets

The Commitment of Traders (COT) report showed that commercial traders raised their net short exposure during the past two weeks, with their aggregate net short position reaching a yearly high in 2023, suggesting a bearish outlook. During the same period, the U.S. Dollar Index has been on a strong upward trajectory, marking 10 consecutive weeks of gains.

BTCTUSD Trading Volume Shifts to BTCFDUSD

Binance introduced FDUSD on August 4th with 0% Maker and Taker fees. Trading volume on BTCFDUSD began to climb starting from September 5th, while volume on BTCTUSD simultaneously decreased. This indicates a clear migration of trading activity to the BTCFDUSD pair. Despite this shift, BTCTUSD continues to trade at a premium over BTCFDUSD.

BTCFDUSD Trades at Premium Over BTCUSDT

As trading volume began to rise on September 5th and activity shifted from BTCTUSD to BTCFDUSD, BTCFDUSD started to trade at a premium over BTCUSDT.

BTCTUSD Maintains Premium Despite Volume Decline

BTCTUSD's trading volume experienced a significant decline starting on September 5th, yet it's noteworthy that it continues to trade at a premium over BTCUSDT despite this decrease in volume.

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