USA Week Ahead:
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Thursday 10:00am - Jackson Hole Fed officials interviews
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Friday 10:05am - Jackson Hole Powell 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.
Math-minded people here, pardon any typos.
MACRO THEMES:
This week we have the Jackson Hole economic outlook from the Fed.
This is the reason for more activity across asset classes this week.
Despite bearish news out of China (risk-off), US rates continue to move higher, likely the driving force for last week’s price action.
Equity volatility climbed substantially higher last week in response to activity in the credit markets. Risk-free yields moving higher and commercial real estate woes are credit market factors that are bleeding into equity risk.
This has sent the VIX from the 12+ → 18+.
Crypto finally saw some volatility, unfortunately to the downside.
Looking at BTC futures and perpetuals across CeFi venues, we can see Aug. 17th had a ton of liquidations, which brought down overall open interest across venues.
With positioning in the BTC levered instruments coming down, one could argue that crypto positioning is now on a stronger footing. Although, with the macro activity coming online this week, I think we’re likely going to see more sparks as the market digests the Fed’s outlook.
BTC: $26,117 (-10.7% / 7-day)
ETH :$1,681 (-8.6% / 7-day)
Aug 17th had the second largest liquidations in Deribit history (in notional terms).
This type on liquidation activity not only “cleared” futures/perps positioning but also caused a sharp dip in option OI.
Although the sell-off in spot BTC caused the term structure to spike higher, briefly hitting Backwardation, if we contextualize the vol rally to YTD levels, we’re nowhere near SVB banking crisis highs.
This pattern holds true for other macro assets too: Gold Vol (GVZ), S&P Vol (VIX), and Crude Oil Vol (OVX).
To me, this means two things:
1) Most importantly, things COULD get crazier… Let’s see what kind of clarity we get from Jackson hole this week.
2) The structural downtrend in vol is NOT violated. Although it’s too early to call it, this is something to keep in mind.
Currently, RR-skew is near YTD lows.
This is another interesting data point to keep in mind, especially for those under-invested in BTC exposure.
TL:DR - Let’s wait for Jackson hole clarity to help gauge the IV trend (which we can confirm with other asset classes). RR-Skew is offering “Buy-The-Dip” opportunities for BTC exposure… Especially given the 2023 BTC spot/vol trends seen YTD.
Paradigm Block Insights
💥 After several quiet weeks, #Bitcoin & #Ethereum took a nosedive! Both down ~15% but managed to close at -10%.
🔍 Wondering what the big crypto #options traders were up to? Let's unravel the action!👇
#BTC 🌊:
🔹 1082x Sep 25000 Put - Bought
🔹 1025x Sep 30000 Call - Bought
🔹 1000x Sep 32000 - Sold*
📈We have not seen #volatility since the Blackrock/iShares news last month
(📸 below)
**BTC 🌊 (continued):
🔹 750x Aug 25000 Put - Bought
🔹 500x Aug 26000 Put - Bought
🔹 400x Aug 27000 Put - Sold
🛡 Traders sought well timed short-term protection before & during the 15% dip.
💰 The sell orders? That's clients cashing in on their longs.
#ETH 🌊
🔹10500x Dec23 2000 Call sold
🔹6750x Mar24 2000 Call sold
💭 Recap: Prior to the big swing, there was vega being offloaded from an overwriter through different strategies (📸 below). Many clients saw this and chose to jump onboard with the flow.
ETH 🌊 (Continued)
🔹 7250x Oct-23 2200 Call bought (45v)
🔹 6600x Oct-23 2100 Call bought (42.5v)
🔹 5250x BUY 21Aug23 1600/1450 Put Spread
✨ Post-volatility, clients snapped up some low-delta options. Plus, a standout put spread amidst the turmoil!
🔄 Paradigm taker OI generally leaned towards a bullish Q4. After Thursday’s selloff, this trend seems to be shifting...
😰 Massive liquidation on Deribit; BTC perps hit a $1500 discount!
🔍 For more details, check out our last tweet: https://rb.gy/nvuqu
Hit us up on Telegram! 🙏
Daily Commentary✍️ http://pdgm.co/edge
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Sign up now! 👉 https://pdgm.co/3BLEw1Y
Bybit x Paradigm Futures Spread Trade Tape:
https://t.me/paradigm_bybit_fspd
BTC
ETH
The Squeethcosystem Report (8/13/23 - 8/20/23)
Crypto markets found their way sharply lower through the week on the back of derisking broadly. ETH ended the week -9.65%, oSQTH ended the week -17.19%.
Volatility
oSQTH IV saw a rapid increase on the back of ETH spot declines this week trading in the mid-80s.
Volume
The 7-day total volume for oSQTH via Uniswap oSQTH/ETH pool was $174k
August 8th saw the most volume, with a daily total of $62.11k traded.
Crab Strategy
Crab saw slight declines ending the week -0.23% in USDC terms.
Twitter: https://twitter.com/opyn
Discord: discord.gg/opyn
Lyra Weekly Review
Arbitrum:
Optimism:
Volatility
Current ATM IV is ~40% in ETH, off all-time lows after a shocking down candle this week. Both ETH and BTC have flipped to backwardation with a slight premium to the puts.
Trading
XRP and Link markets are now live on Optimism!
ETH Market-Making Vault
ETH Arbitrum: +3.56% since inception, +6.21% annualized
ETH Optimism:
Depositors earn an additional 5.84-22.75% rewards APY, boosted up to 49.05% for LYRA Stakers by depositing USDC to Lyra’s Market Making Vaults.
Net MMV Exposure:
ETH vaults on both Arbitrum and Optimism remain long at-the-money options but price action this week has brought lots of put buyers. Vaults need a move in underlying or will be bleeding theta over the next week.
ETH Arbitrum:
ETH Optimism:
BTC Volatility
BTC IV has settled ~40%, remaining slightly firmer than ETH.
Net BTC MMV Exposure:
BTC vaults also remain long gamma, short theta
Learn more about Lyra in this GVOL explainer video!
Trade: app.lyra.finance
Twitter: https://twitter.com/lyrafinance
Discord://discord.gg/Lyra
Watch @itseneff and @GenesisVol talk options here
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.
