Crypto Options Analytics, Feb 25th, 2024: Fed Minutes & Crypto Trends

USA Week Ahead:

1. Wednesday 8:30am - GDP (1st Revision)

2. Thursday 8:30am - PCE

3. Friday 10am - ISM

Various Fed Speakers appear on Wednesday, Thursday, and Friday.

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 Recap:

Last week we got insights into the Fed via the Jan. FOMC minutes release.

On balance most Fed governors are worried about cutting rates too quickly, causing inflation to return with a vengeance and worse becoming entrenched.

The one item of hope for lower rates is that the Fed also mentioned they’re willing to cut rates even if the economy remains strong, as long as inflation is softening.

The Fed also believes we are currently at the peak Fed Funds rate, but no cuts are expected for the March 20th FOMC rate decision.

Chart: (WSJ.com)

This upcoming week is light for economic numbers, except for PCE on Thursday at 8:30 am. 

This is the Fed’s preferred method of inflation measurement because it covers a broader range of goods/services and the PCE methodology accounts for changes in consumer preferences. 

Friday’s price action in Gold and Treasury futures was rather large given the low volatility environments, so that’s something to keep in mind.

Gold’s volatility index is currently at 11.5%, a historically low level.

BTC: $51,735 (-0.4% / 7-day)

ETH :$3,100 (+9.6% / 7-day)

SOL :$103.14 (-8.3% / 7-day)

Last week we saw massive outperformance for Ethereum in the crypto complex. 

ETH gained +9.6% W/w while BTC remained nearly unchanged and SOL dropped about -8% W/w. 

Chart: (ETH/BTC Ratio via Finviz.com)

This has brought us right up to the ETH/BTC ratio target of 0.06 we mentioned last week. 

In the near term, this likely provides some market resistance but I do think this is a trend likely to continue for the medium term as ETH heads back to the historical high of 0.08 ($4,200 given current BTC prices).

Chart: (ETH Dvol / BTC Dvol)

The relative vol between BTC and ETH is likely to mean-revert to historical norms. Last year, BTC behaved as a safe-haven asset through the SVB banking crisis and the Isreal attacks, but today the environment is different. 

We’re clearly back into a crypto bull market and this type of environment should create higher volatility for Altcoins and ETH’s higher BETA will likely emerge again.

Long ETH Vol and short BTC Vol seem like a good trade here.

Chart: (BTC Gamma Profile)

BTC is currently in a negative gamma profile range, but spot prices seem to be stuck between the $50k-$52k range, we really need to see a move out of there for any momentum to come in. 

Chart: (ETH Gamma Profile)

ETH’s gamma profile is a bit more awkward. We were in a net long gamma profile but ETH traded through that regardless… Now we’re approaching no man’s land.

A spot price range for ETH that no one is really positioned in… people didn’t seem to think we could get here. If we break above $3,200 there’s not much positioning above it… except for $3,500.

Interesting, not sure what to make of that.

Paradigm's Week In Review

BTC -2.01% / ETH +2.53% / NDX +1.79%

Paradigm Top Trades this Week 👇

Weekly BTC Cumulative Taker Flow 🌊

Weekly ETH Cumulative Taker Flow 🌊

BTC Cumulative OI 

ETH Cumulative OI

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The Squeethcosystem Report

Crypto markets had quite a week. ETH ended the week +7.97% and oSQTH ended the week +15.17%.

Volatility

oSQTH IV remained active this week, trading over +125 and quickly reverted back settling in the 90s.

Crab Strategy

Crab saw declines ending the week -0.70% in USDC terms.

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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.