AD Derivatives Newsletter: Crypto Market Turmoil Post-FOMC

Get insights into the latest crypto options analytics, FOMC rate decisions, and market trends for Bitcoin, Ethereum, and other key assets. Learn about current volatility and trading strategies.

USA Week Ahead (ET):

1. Monday 10 am - Consumer Confidence

2. Wednesday - Christmas Holiday

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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.

MACRO Overview

So much for lower VIX into Christmas seasonality!

With the hawkish 25bps FOMC Fed cut last week, the crowded markets headed for the exits all at once, sending VIX massively higher. 

The Fed moved up it’s inflation expectations to 2.5% for 2025 (from 2.2%) and shifted down their estimates for 2025 rate cuts as the neutral interest rate is now expected to be 3%.

Chart: VIX Index (TradingView.com)

A bit of relief came on Friday with the release of the PCE, the Fed’s preferred inflation metric, which was below expectations in November, but increased to 2.4%, from 2.3% y/y from October. Core PCE inflation was at 2.8%.

All together, this sent stocks lower, bond prices lower, gold lower and crypto lower on Wednesday and Thursday (which a partial recovery Friday). 

Economic releases will be very light next week given markets are closed for Christmas. The week after next will then have the new years holiday. 

Unlike traditional markets, crypto will keep trading, it will be interesting to see how that goes this year, given that the Spot ETFs and ETF options have now become a significant part of the markets. 

BTC: $94,503 (-9.8% / 7-day)

ETH :$3,260 (-17.6% / 7-day)

SOL :$178.46 (-20.4% / 7-day)

Crypto Options Overview

Chart: Bitcoin 1hr Chart (finviz.com)

Bitcoin 1hr Chart (finviz.com)

Last week, Bitcoin rallied to nearly $110k going into FOMC and then traded as low at about $92k, only to briefly rebound Friday… As of this writing most of the Friday relief rally gains have been faded back down.

Bitcoin sit at $94.5k now. 

Implied Vol is currently moving higher as spot prices drop… and coming down with any relief rally (like we saw on Friday). This makes sense if Bitcoin longs are crowded here. 

Chart: 30-day Bitcoin Futures Basis

We can see basis is coming out of the market as longs cover. Although 30-day basis remains around 12% (versus the 6% low seen in September) 

Chart: Dealer Gamma Profiles on Deribit

Dealers continue to be short the $100k strike for Dec 27th expiration (the relief rally psychological level) and short $92k-$90k put spreads. 

Insurance isn’t well owned here if the market continues lower however. 

Should selling continue there’s good reason to expect implied vol. to move higher given futures positioning. 

We can see open interest across the futures complex dropped about $8B notional. A lot the building-up (and drop) for notional OI can be attributed to the Bitcoin price level, but none-the-less, traders do have that notional exposure (even if it sits as unrealized PnL) and given the lack of option hedges owned, the balance of risk remains if prices lower.

Chart: BTC ∆25 RR

30-day Skew is short enough to reflect the current sell-off, but unlike 7-day, remains rather neutral (near the 0%). This is likely the most interesting maturity to buy some hedges. 

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

$189K trading fees for the week of Dec 15 (all time high!)

ATH TVL of $115M

BTC call OI extremely bullish - OI on calls almost 6x higher than that for puts

Derive borrow rates sitting at 4.6% - some of the lowest in DeFi!

SolvBTC now available as collateral

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.