1/ BTC Implied Volatilities have been coming off steadily since it peaked the weekend before and is looking to move towards levels we saw at the start of May
2/ We are still cautious of potential BTC downside as the vol skew remains high with Puts being substantially more expensive than Calls
3/ We expect spot to trade in a range (short-term) with a slight bullish bias as frenzied leveraged longs have been washed out. Weโve seen significant buying & selling at 30,000 BTCUSD and 40,000 BTCUSD levels respectively
4/ We reckon that downside vols are a decent sell. Relatively expensive with the put skew, and also expecting implied vols to move lower if BTC continues to trade in a range.
โข โข โข
Missing some Tweet in this thread? You can try to
force a refresh
1/ We cannot stress enough the importance of holding 40k on a closing basis in BTC for all Crypto. Following our identification of the trend change earlier in the month we're now seeing Wave 3 take us from 58k to under 40k handle now
2/ In market cap terms this move has shed $400bn taking us back to the Fib handle that led the breakout in Feb.
3/ โ๐ญ. That this Wave 3 ends at 40k on month-end (possible stop hunt extension now as far as 36k intra-month) & we get a bounce for Wave 4 back up towards 50k first and possible 54k.
1/ The bullish force is strong throughout the crypto world. Once again we saw a post-month end rally pushing BTC from 50k support toward the 60k level. ETH has been even stronger making new highs daily in what seems to be an unstoppable rally into Julyโs catalyst event (EIP-1559)
2/ The driving force remains the same wall of money from traditional finance pouring into crypto. The lightspeed growth has been the fastest of any asset class in history - a $2.2 trillion rally in just 14 months from barely $100bn last year to over $2.3 trillion today
3/ This first exponential phase was largely beta, riding on the back of Fed QE-infinity money printing, which drove a full-on hunt for yield and dash for trash. Triple-C credit spreads for example, the worst of the junk, has seen a one-way compression to now equal..
1/ As expected we saw 14Apr Coinbase top we positioned for that bled into a deleveraging weekend selloff that smashed through both parabolic & channel trendlines. Our favorite trade last week was short Jun futures basis at 40-50% annualized implied premium looking to cover at par
2/But even we werenโt expecting > $10bn worth of leveraged liquidations on Sunday that caused the massively violent backwardation. The sharp dip brought front-month Apr futures close to -50% annualized implied discount with Jun futures a -25% discount on Deribit & -40% discount..
3/ ..on Binance where the bulk of liquidations took place. We've since very quickly bounced back to roughly 20+% premium for Jun-a much fairer value but still a good resell in our books. Weโve also been happy to sell close calls into the mid-month top last week..
1/ In the last 2 weeks the Kimchi premium returned with a vengeance reaching over 20% the highest level weโve seen since 2017-18. While restricted travel is a major contributing factor to the arb, one cannot ignore the buying frenzy in the Korean retail market especially in Alts
2/ On some days crypto volumes on the largest Korean exchange have been larger than on the Korean equity exchanges! The frenzy has consumed all age groups - including the older 40-50s segment, something that could possibly draw increased regulatory intervention
3/ While the Korean market only accounts for roughly 2% of global crypto trading volumes today (compared to 7-8% in 2018) such retail fever in general tends to put a damper on topside price breakouts for the largest market cap coins especially BTC
1/ This month's major move has been the volatility crush we saw into the big March quarter-end expiry on Friday, with 1m ATM implieds falling from well over 100% to just 65% now. This largely tracks collapse in daily realized vol
2/ ..as the consolidation in spot stretched into the expiry. March's expiry was the largest on record with a $6bn notional OI, and with a lot of positions well ITM/OTM much of them were rolled in advance - resulting in the high volume vol selling the last few weeks
3/ The market's huge long gamma position also kept spot heavily pinned - and case in point following Friday's expiry we saw the largest daily price gain since the 1st March bottom.
1/ We were a few days early in positioning for the mid-March reversal, as right after option expiry on Friday there was a leveraged-driven short squeeze that took out the prior highs in both the BTC spot price as well as total futures open interest.
2/ The fresh all-time high on Saturday above $60k, coupled with the closure of traditional markets that has recently kept BTC yoked, meant a hopeful chase by retail participants that took BTC to a high of $61,800 and driving the perp funding rate to the typically unsustainable..
3/ ..maximum 200% annualized level. The 3m futures basis as well jumped to all-time highs at over 35% annualized on this leverage retail buying. ETH as well, taking cue from BTC, failed just under the huge $2k spot level and we expect it to largely underperform BTC from here..