AD Derivatives Newsletter: Fed Meetings, Inflation, & Bitcoin's Surge

USA Week Ahead (ET):

Every day of the Week - Various Fed speakers

1. Monday 1:55 pm - Jerome Powell Speaks

2. Tuesday 10 am - JOLTS job opening report

3. Wednesday 8:15 am - ADP Payroll

4. Friday 8:30 am - NFP Employment Situation

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

Last week, the Fed's preferred inflation measure, the Personal Consumption Expenditures (PCE) index, was released. The year-over-year change for August showed inflation at +2.2%, the lowest level since 2021—a positive sign for easing inflation.

However, the 'core' PCE index, which excludes food and energy, showed mixed results, rising to +2.7% year-over-year from +2.6% the previous month.

This consistent progress in bringing inflation closer to the +2% target shifts the focus to the labor market.

Next week will be pivotal for labor market data, with the JOLTS report on Tuesday, ADP payroll figures on Wednesday, and the BLS Employment report on Friday.

Currently, the US rates market is pricing in two additional rate cuts by the end of the year, totaling -75 basis points.

The labor market will likely determine whether we see the full -75bps currently priced in, or the more standard -50bps from two -25bps cuts.

All asset classes are reaping significant benefits from the easing cycle. Gold is at all-time highs, silver is breaking through multi-year resistance, and Bitcoin is moving back towards its all-time highs.

However, the rates market may be overly optimistic in pricing in 75bps of cuts by year-end. If market expectations shift to just 50bps in cuts, we could see a slowdown in asset performance.

China Reserve Ratio

Another major macro development is the monetary easing in China. A recent stimulus package includes lowering the lending reserve ratio, cutting interest rates, and increased spending to support risk assets and mortgages.

BTC: $65,815 (+4.9% / 7-day)

ETH :$2,670 (+3.2% / 7-day)

SOL :$158.28 (+9.7% / 7-day)

Crypto Overview

Bitcoin's strength continues with a solid +10% week-over-week gain.

Unlike altcoins, Bitcoin is likely to rally regardless of the outcome of the U.S. Presidential election—either due to a pro-crypto stance or a loose fiscal spending environment.

Chart: BTC Gamma Positioning of Dealers

We're seeing dealers report significant put selling in BTC alongside massive call buying activity at the $75K strike and beyond.

This flow pattern suggests a bullish outlook for spot prices (due to the put selling), while also anticipating an acceleration in price movement. A break above $75K could lead to a swift rally through all-time highs toward $100K, where the last tranche of call buyer activity is concentrated in the December 27, 2024, expiration.

Chart: Bitcoin 7-day implied vs realized

That ‘hopium’ aside, it’s important to note that volatility is falling lower as Bitcoin consistently drifts higher in price. 

We can see that the 7-day realized volatility is basically hanging out around 12-month lows. 

Combine that low realized volatility with a high bullish option buying demand and we get and expanding VRP. 

Chart: BTC ATM Term Structure

Let’s not forget that crypto has already been priced at a premium for the upcoming election.

The combination of Bitcoin's steady spot drift higher, high election demand, and declining realized volatility makes me favor short November 8th, long December 27th option structures.

Strategies like 80K call calendars or diagonals (80-85K) are appealing, and even ratio trades to neutralize Vega and delta while isolating decay (-2x80K Nov + 1x75K Dec) seem particularly interesting.

This isn’t advice—just what’s catching my attention.

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

Crypto markets were active this week ending up, ending the week positive. ETH ended the week at 4.83% and oSQTH ended the week at 7.31%.

Volatility

oSQTH IV is 104.41% vs. its ref vol. at 66.36%.

Crab Strategy

Crab saw gains this week ending +1.53%.

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.