Share this blog:
Dive deeper into last week’s mixed inflation data, energy trends, and what to watch from Powell at Jackson Hole. Explore Ethereum’s recent rally, volatility dynamics, and trade opportunities as it approaches a potential $5,000 breakout. Learn more in this week's Amberdata Derivatives Newsletter:
-
Wednesday 2:00pm - FOMC Minutes
-
Thursday 8:30am - Initial Jobless claims
-
Friday - Jackson Hole Powell Speech
Visit Amberdata.io
Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.
Authors have holdings in BTC, ETH, and Derive and may change their holdings anytime.
MACRO Overview
Last weeks economic data were centered around the CPI and PPI releases.
CPI came in-line, with Core CPI printing +3.1% y/y (as expected) while the CPI headline number came in +2.7% y/y (vs a median forecast of +2.8%).
Although CPI came in slightly better than expected the PPI number wasn’t so good. PPI came in at +0.9% m/m vs an expected print of +0.3%.
This bad PPI print caused September rate cut expectations to drop slightly, from about 90% → 85%.
Alongside the Sept rate cut expectation change, the probability of multiple rate cuts in 2025 also dropped.
Something that’s interesting is the drop in energy prices despite a weakening USD (which is used to price oil).
Trumps international deal-making is most “directly” influential for energy prices, especially if Trump can somehow negotiate a deal around the Russia-Ukraine war.
I don’t know much about these geopolitical situations but it seems to me that we could continue to expect lower energy prices through de-regulation deals, moves away from clean energy mandates and international deals that help keep production high.
I think this is the thinking here… even if tariffs raise import costs and immigration reform raises labor costs, deal making can help offset these impacts through lower energy costs. But who knows for sure.
Just my base-case assumptions.
The PPI release was lead higher due to service costs (1.10%) vs Goods (+0.70%). This is the highest print seen in a long time and a significant deviation from the 0% print for June.
This mixed inflation with jobs weakness from the last NFP report are big questions that will be in focus next week.
Although we have an FOMC minutes release on Wednesday (with respect to the last FOMC rate decision), what’s likely to move the markets next week is the Jackson Hole gathering and Powell’s speech on Aug 22.
We’re likely to get more clarity from Powell around these topics along with a feel for Powell’s fight for Fed independence.
BTC: $117,760 (-0.7% / 7-day)
ETH: $4,478 (+5.8% / 7-day)
SOL: $192.12 (+6% / 7-day)
Crypto Options Overview
Last week’s ETH rally was fantastic.
Prices rose from about $4,200 on August 10th to $4,777 intra-week.
Ethereum still seems to have a lot of momentum and testing $5,000 into new ATH territory is going to be an great “breakout” trading-zone.
There’s likely to be market volatility in crypto this week during Powell’s Jackson Hole speech AND next week around the NVDIA earnings (set for Wednesday August 27th).
Current, implied, and realized volatility have converged on this move higher for ETH. We can see that the VRP has essentially been reduced to almost 0%, meaning vol isn’t overpriced (which is a good deal for buying “asymmetry”)
The chart above shows us the most recent realized VRP, which displays the most recent IV/RV match. This was close to zero as well.
The best vol buying trade will likely be around the $5,000 level, as the market tests a potential breakout into ATHs, but we need to get there first.
Dealer gamma exposure is peaking around current levels ($4,500) and given the large macro headlines; this Friday (Powell) and next Wednesday (NVDA), I wouldn’t be surprised if ETH needs to base between $4,500-$5,000 until after these events.
Longterm ETH longs shouldn’t be affected by this.
Chart: MSTR (pro.amberdata.io)
Financing ETH upside options by selling MSTR (or MSTU) upside options still seems interesting to me.
Michael Saylor himself has been a large supplier of MSTR volatility through his convertible bonds. People who bought the Converts have likely been hedging their vol exposure by selling MSTR optionality… or gamma scalping the underlying shares (reducing RV).
It’s no wonder the MSTR volatility hasn’t been able to recover since Q1 highs of 200% 5-day RV (today MSTR RV is around 50%).
ETH has a completely different dynamic right now… there isn’t a volatility “supplier” (like in MSTR) while staking actively REDUCES the ETH tradable float.
The volatility dynamics between MSTR/MSTU and ETH are completely inverted.
Especially when ETH Staking ETFs come online… more and more of the float will be stuck in staking ETFs.
That seems like the most interesting trade to me.
Long ETH volatility, especially for the $5k breakout, financed by selling MSTR/MSTU upside paper.
Paradigm Top Trades this Week
BTC Cumulative Taker Flow
ETH Cumulative Taker Flow
BTC Cumulative OI
ETH Cumulative OI
BTC
ETH
- On Derive, we’re seeing a large amount of put buying recently, in particular on the 29 Aug and 26 Sept expiries.
- For the August expiry, we see most put OI clustered around the 3.8K mark, but also a modest build up around $2K.
- For BTC, the 29 August expiry has also seen a large build up in put OI relative to calls.
- In particular, most of this put OI is clustered on the 80 and 90K strikes, suggesting that Derive traders are bracing for a rough end of the month
- Overall, vol on Derive has increased slightly for ETH over the last week, up to 71% for weekly vol and 68% (+2%) for monthly vol.
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.
