Amberdata Derivatives Newsletter: Inflation Trends, Fed Updates, & Crypto Dynamics

Markets rallied last week on cooler-than-expected CPI and PPI inflation data, bringing optimism around a Fed pivot, though Moody’s surprise U.S. credit downgrade added a twist. Meanwhile, crypto saw strong altcoin performance and bullish ETH options flow, hinting at continued upside momentum in risk assets. Learn more in this week's Amberdata Derivatives newsletter!

USA Week Ahead (ET):

1. Monday 10:00a - US Leading Economic Indicators

2. Thursday 10:00a - Existing Home Sales

3. Friday 10:00a - New Home sales

*Various Fed Governors Speak*

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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 Derive and may change their holdings anytime.

MACRO Overview

Last week’s economic data was driven by inflation economic numbers, both CPI and PPI data were released. 

The economic data was great, stellar by my interpretation. The CPI came in at -0.1% for the month-over-month reading, this is was the first negative inflation growth in 5 years.

Expectations were for a +0.1% increase, not a decrease. Year-over-year data was +2.4% (vs +2.6% expected)… We’re steadily approaching the +2.0% inflation target set by the Federal Reserve.

We then also had the PPI release the following day, which further confirmed the downward trend on prices. PPI came it as -0.4% month-over-month, again defying expectations which economists set at +0.2%. 

This has brought year-over-year readings to +2.7% for March, which had recently come in at +3.2% in February. 

This inflation trend looks great. Some economists are skeptical however saying it’s only a matter of time until the inflationary impacts from tariffs start to reverse this trend. 

We’ll see what happens here, it’s hard to gauge trade policy developments right now and the headlines there have also been encouraging there recently. 

Overall risk-assets continued to climb higher last week and enthusiasm seems to be returning to markets as VIX drop back down, along with other volatility measures. 

However, Friday after market close, Moodys joined Fitch (2023) and S&P (2011) in dropping the US debt grade down a notch. 

Moody’s highlighted the overall fiscal position of the US government (as opposed to trade tariff fears) as the catalyst for this downgrade. 

Market’s dipped after-hours but trading is thin, I could imagine equity futures opening “Gap Down” and rallying back through the week. It’s hard to tell how markets will trade the downgrade but I’m not sure this is a big enough deal to break risk-asset momentum here. 

Chart: TradingView (Spy down after-hours)

Outside of this, the data calendar for this upcoming week is very light in the US. We have Fed speakers chatting throughout the week but otherwise the main data points revolve around existing and new home sales. 

BTC: $104,734 (+0.6% / 7-day)

ETH :$2,5469 (-0.9% / 7-day)

SOL :$170.39 (-0.8% / 7-day)

Crypto Options Overview

We can see a bit of a drop in the Bitcoin Dominance chart last week. 

My TL:DR is that we were having a huge rebound in risk assets all week, which been great for altcoins. 

We saw Gold come down as the Chineses/US trade talks progressed and therefore Bitcoin (which still trades as a mix of risk-on & digital gold) has lost ground to altcoins which resemble a more pure risk-on play. 

Chart: TradingView (Bitcoin Dominance)

I think that’s an interesting context to keep in my going forward, especially hunting for upside performance.

ETH block trades last week saw some very bullish flow in EOY December options.
$3,500 / $6,000 C spreads traded for 30,000x contracts through 10 distinct trades. The total premium spent here was a little over $7m dollars. 

Chart: ETH Block Trades (pro.amberdata.io)

I continue to like these upside trades, especially for the beaten-up Ethereum, as risk assets continue to rally. There’s a good argument for ETH “catching-up” as Spot ETFs with staking rewards could be a catalyst for institutional participation, and sentiment turns around. No reason to be “calling tops” right now.

Chart: ETH ∆25/ATM Ratio premium/discount (pro.amberdata.io)

Looking at the OTM 30d ∆25 call wing and put wing for ETH, the put wing still has the higher end of the range. The call wing is middle of the road (compared to the past 12-months) this is interesting in terms of market positioning and opportunity. A continuation of the current upside momentum would reward ∆25 calls nicely. 

Chart: ETH ∆25 RR (pro.amberdata.io)

Trading the ETH ∆25 RR could also be decent, especially if risk assets trade higher, after an initial “gap-down” from the Moody's rating downgrade… 

Providing a decent entry “if” overall risk assets follow that pattern. Something to keep in mind. 

The trend to me still seems higher for BTC, ETH, and other altcoins. 

Paradigm's Week In Review

Paradigm Top Trades This Week

Weekly BTC Cumulative Taker Flow

ETH Cumulative Taker Flow

BTC Cumulative OI

ETH Cumulative OI

BTC

ETH

An interesting development occurred last week in the DRV ecosystem… We’re seeing a vote shortly for a purchase of DRV. 

This type of acquisition is new in the DeFi ecosystem and comes shortly after the recent announcement of Coinbase buying Deribit. 

https://sips.synthetix.io/sips/sip-415/

Readers can see the terms of the proposal above. Interesting to see how all of this will play out. The proposal vote will be happening soon.

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.