August 14, 2024
USA Week Ahead (ET):
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Democratic National Convention
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Wednesday 2p - FOMC Minutes
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Thursday 8:30a - Jobless claims
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Friday 10a - Powell Jackson Hole speech
Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.
Authors have holdings in BTC, ETH, and Lyra and may change their holdings anytime.
MACRO
This week should be very active in the macro environment.
The biggest event will be the Democratic National Convention in Chicago.
Beyond potential protests, there is likely going to be policy ideas being unveiled by the Kamala Harris team.
The current economic proposals from the Harris camp (price controls and housing subsidies were interpreted by the market as inflationary accelerants.
We saw GOLD react by breaking higher week-over-week. The price trend continues to look strong.
Chart: Gold Futures Daily Prices (Finviz.com)
Gold volatility moved higher as well.
Chart: Gold Volatility Index (TradingView.com)
In theory, inflationary forces moving gold higher would likely help Bitcoin move higher as well, although the Democratic ticket is bearish crypto, potentially explaining the price divergences last week.
DNC visibility into Harris policies might result in lower enthusiasm for Harris and potentially a local bottom for crypto. A potential trading scenario to keep in mind.
Another major market mover will be Friday’s Jackson Hole speech.
The Jackson Hole Symposium is significant because the speeches and discussions often set the tone for global monetary policy. Any indication of future policy shifts tends to have a major impact on financial markets.
With interest rates now expected to be cut at the September FOMC meeting, this speech is likely to give us a strong preview into that… The speech itself might trade like a mini-FOMC.
Given the good CPI reading last Wednesday, we’re likely to get a dovish Powell tone Friday.
Finally, equity volatility has completely melted away. The August 5th spike has now been fully discounted as SPX creates a “V” recovery.
However, realistically speaking, I can’t imagine “this is fine”… There is likely another round of fear between now and the November election.
BTC: $58,315 (-0.9% / 7-day)
ETH :$2,608 (+2.4% / 7-day)
SOL :$141.28 (+0.2% / 7-day)
Crypto
Bitcoin weakness continued last week, despite the equity relief rally.
The divergence could partially be explained by the US Government moving 10,000 BTC to Coinbase Prime, signaling soon-to-be selling pressure.
Although the price weakness continued, the volatility of that price action has calmed down significantly.
Chart: DVol (Orange) & BTC Spot Prices (Blue)
The market continues to clearly price in an election premium. Currently, the forward volatility between Oct/25 and Nov/8 is 89% Vol for the 2-weeks in between.
Chart: BTC Term Structure and Forward Volatility
We can see that the forward volatility premium wasn’t present before the August 5th VIX explosion higher (below).
Chart: BTC Forward Volatility now vs 3 weeks Ago
I think there are interesting trades to be done here… There’s a lot of potential for gamma to pay pre-election.
For example, say, after this week’s DNC, the Odds of a Trump re-election spike higher… Bitcoin could easily rally back to ATH’s and potentially THROUGH all-time-highs before the election.
Owning October gamma, financed by Nov 8th vega, could be a very interesting diagonal structure.
Chart: BTC Top OnScreen Trades
Chart: BTC Top Block Trades
Looking at top trading flow last week, we see that block trades were mixed in terms of delta direction and volatility, but OnScreen trades we’re net bullish… Dominated by put selling and call buying.
Retail continues to want to own BTC exposure.
Chart: Dealer Gamma Inventory by Strike (All Maturities)
We can see this flow being further validated through dealer gamma inventory… dealers are mostly long gamma below current prices, while short massive call exposure at key strike levels: 60k, 70k 100k, etc.
The most interesting trade set-up would be a local BTC bottom, due to poor Harris performance at the DNC.
Something like that!
Paradigm's Week In Review
Paradigm Top Trades This Week
Weekly BTC Cumulative Taker Flow
Weekly ETH Cumulative Taker Flow
BTC Cumulative OI
ETH Cumulative OI
BTC
ETH
The Squeethcosystem Report
Crypto markets remained active, ending the week positive. ETH ended the week +4.33% and oSQTH ended the week at +3.15%.
Volatility
oSQTH IV is 70.69% vs. its ref vol. at 64.49%.
Crab Strategy
Crab saw gains ending the week +3.16%.
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AMBERDATA DISCLAIMER: The information provided in this research is for educational purposes only and is not investment or financial advice. Please do your own research before making any investment decisions. None of the information in this report constitutes, or should be relied on as a suggestion, offer, or other solicitation to engage in, or refrain from engaging, in any purchase, sale, or any other investment-related activity. Cryptocurrency investments are volatile and high risk in nature. Don't invest more than what you can afford to lose.
