Last week marked the first trading activity of 2025, with SPX rebounding and crypto reflecting risk-on sentiment, while key events like the FOMC Minutes and upcoming inauguration promise potential market shifts. Dive into crypto derivatives trends, ETH yield opportunities, and insights into Solana's ETF outlook in this week's AD Derivatives Newsletter.
Wednesday 8:15 am - ADP employment report
Wednesday 2 pm - FOMC Minutes
Friday 8:30 am - BLS employment report
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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.
Last week was the first trading activity of the year, with a decent recovery for SPX on Friday, after a down day Thursday.
The hawkish rate cut we witnessed in December from the Fed sent the market crashing and vol spiking pretty hard, likely due to crowded positioning post election.
This means that the FOMC Minutes scheduled for Wednesday could definitely trade higher vol., but overall I expect VIX to head lower otherwise.
Tomorrow, Monday Jan. 6th, is the presidential certification process, followed by the Jan 20th inauguration. Both of these events seem like lower volatility catalysts, especially as the labor market remains strong and the new administration will likely announce tax-cut policies that are bullish for equities.
Crypto has been recovering nicely last week and reflects risk-on sentiment as well. The $100k Bitcoin level is an important inflection point to look at to gauge market sentiment.
Wednesday and Friday we have jobs data. Hourly wages and overall NFP are important drivers for the Fed’s rate path. Right now “markets are only pricing in 40bps of cuts for 2025” according to a WSJ.com article.
BTC: $98,049 (+4.8% / 7-day)
ETH :$3,636 (+8.3% / 7-day)
SOL :$212.75 (+10.4% / 7-day)
Bitcoin found strong footing last week after a Fed-induced market pull-back. We can see dealers are net-short gamma at the $100k strike, which highlights the importance of $100k BTC as a gauge of sentiment.
On-Screen traders have also been large net-buyers of the $120k March expiration.
I think the inauguration and right after will be a prime-time for bullish announcements and policies that could be bullish catalysts for Bitcoin to move higher.
Ethereum has ruthlessly underperformed BTC in 2024. Despite ETF approvals, a notable difference for Ethereum versus BTC was the lack of CME futures OI build-up in ETH.
Today we’re finally seeing a OI buildup in the Ethereum CME futures complex… which might be signaling that US institutions are paying attention to ETH finally.
The OI buildup started right after the election.
What’s very interesting however is the potential for an ETH ETF that distributes staking rewards to ETF holders. This product would set-up a fascinating trade opportunity.
Traders could buy the ETH ETF and simultaneously short the CME futures. This would create a delta-neutral dual yield opportunity. Trades could gaing the +14% APY basis yield AND the 3.5% PoS yield.
Together the total yield is about 17% in regulated tradFi products with delta-neutral exposure.
If regulation permits Staking Reward distributions, given a new SEC direction, this could be a great income opportunities in 2025.
VanEck recently released a report that gives 77% probability of a Solana ETF in 2025.
Solana has been a strong competitor to the ETH “smart-contract” L1 play.
That said, looking at the flows on Deribit, on-screen traders have been net-sellers of upside in SOLANA (maybe covered call structures?)
We can see dealers are saddled with upside call inventory, maybe due to the high IV level (around 90%). This makes me think the SOL ETF play might be under-appreciated by the market right now.
Paradigm Top Trades This Week
BTC
ETH
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.