A bullish development for the $CRYPTO space over recent weeks has been that '25-delta skew' has trended lower and is now below 0 for the first time since early May 2021...
I'll attempt to briefly explain the significance of this now
First, let's visualize the #BTC chart and '25-delta skew' chart to show how the two are correlated!
When skew peaks, it often leads a #BTC rally, when skew bottoms it often signals a #BTC sell-off... Monitoring skew in early May would have told you that a sell-off was near
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What the hell is '25-delta skew' and why is it important?
This metric measures the relative 'expensiveness' of calls (bullish bets) to puts (bearish bets) - a reading above 0 indicates demand for puts (bearish), the opposite is also true!
The @federalreserve deliver its statement on monetary policy and updated economic projections on Wednesday
This has the potential to create a large, volatile move across markets, including $CRYPTO!
I'll do my best to explain the significance of this now
(RT appreciated)
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Since the outbreak of the COVID-19 pandemic the US Federal Reserve has stimulated the US economy like never before, with the goal of leading the US economy out of a recessionary environment.
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In the process of delivering the monetary stimulus, the FED has promoted financial risk-taking and provided the catalyst for a sustained bull run 🔥
Up until this point, I dare say that most have benefited from such risk-taking… which is great!
1/ Here's why Thursday, June 10, has the potential to significantly move financial markets (including $CRYPTO)
(Retweets appreciated!)
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June 10 sees KEY economic data out of the US scheduled for release at 12:30pm UTC...
This data has the potential to 'spook' investors into selling their 'long-risk' positions.
'long-risk' referring to equities, commodities and $CRYPTO etc.
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Given the current uber-relaxed stance to monetary policy by central banks, most investors are currently positioned for risk-ON (long equities, crypto, commodities etc.)
Borrowing money and therefore spending/investing it is currently very cheap, thanks to Central Banks.
'Max pain' is often talked about and is made out to be quite complex, so let's make it simple!
The 'Max pain' price refers to the option 'strike price' for which the most number of options contracts will expire worthless 📉
Follow this thread and you may learn something 😀
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The 'max pain' theory suggests that the underlying asset price e.g. #Bitcoin will gravitate towards that max pain price headed into the option expiry (OPEX)
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Theory behind this is that typically market makers attempt to remain 'hedged' against their open interest
When a market maker deals a 'call' or 'put' it's in their best interest to remain hedged that position. They do this by longing/shorting the futures market for example.
So, Crypto and Macro Financial Market Analysis huh?
The two surely cannot go together, one touted a Ponzi scheme by many, the other has been around serving our society for centuries... surely, you are taking the piss by even inferring that the two are correlated!
A THREAD!
1) What is it and Why care about Macro Analysis?
It's not important to understand the ins and outs of what defines macro-analysis, to put it simply, it is analyzing a particular market over the medium-term, considering fundamental drivers that will underpin it‘s performance.
2) Macro analysis is almost always boring and larped on by academics, these people often explain moves in hindsight, useless to us as traders… but what if I was to tell you that you can predict and effectively speculate on the macro-environment, to create ACTIONABLE trade ideas.