July 1, 2023
USA Week Ahead:
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Tuesday - TradFi Closed (Independence Day)
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Wednesday 8:15a ET- ADP employment
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Thursday 10a ET- Job Openings
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Friday 8:30a ET - NFP
Disclaimer: Nothing here is trading advice or solicitation.
This is for educational purposes only.
Math minded people here, pardon any typos.
MACRO THEMES:
This upcoming week is shortened with the 4th of July holiday but Friday’s NFP will be important for markets.
The Fed’s June rate “skip” is a “wait-and-see” decision and NFP data is part of the picture they’re waiting to “see”.
A continuation of strong employment data supports a more Hawkish stance.
Stock markets closed strongly into the end of Q2 on Friday, allowing VIX to continue to remain low.
Crypto news looked bullish last week.
Wednesday of last week, Micheal Saylor confirmed that MSFT bought another 12.3k BTC in Q2, paid by MSFT share issuance.
Thursday, Fidelity Investments filed an application to create a spot BTC ETF, making it the latest entrant in the race to launch such a product.
This time it’s starting to look different. There’s a lot of momentum from serious firms for the spot BTC ETF.
BTC: $30,577 (+0.43% / 7-day)
ETH :$1,922 (+1.45% / 7-day)
SOL: $19.46 (+15.50% / 7-day)
Last week we saw the biggest OI expirations YTD in terms of contract count.
This expiration was also the greatest negative gamma exposure we’ve seen on Deribit. This has led to a pressure release, bringing BTC’s gamma exposure close to 0 for MMs, as short-inventory has rolled off the books.
Friday afternoon (post option expiration), the SEC claimed that the BlackRock ETF application was “inadequate”; this sent BTC spot prices sharply lower and pushed up the term structure towards a “flat” shape.
However, the applications can be modified and resubmitted, which makes this news less impactful.
The term structure then resumed Contango, steepening into the holiday weekend.
Something interesting we’re currently observing Sunday evening, however, is the recovery in spot prices and the Term Structure reversing (at least in part) the Contango steepening, confirming that options prices continue to respond with positive spot/vol dynamic.
Week-over-week vol is down slightly.
However, the VRP is historically low here and the environment for BTC spot prices currently appears to trade with slight levels of FOMO, which in bull-runs (such as Q1 2021) caused IV to move a lot higher.
Realized Volatility is also below the 25% percentile for the past 3-years.
Low RV - and almost 0 VRP - makes long vol arguably attractive at these levels.
PROPRIETARY “GVOL-DIRECTION” FLOWS - @Gravity5ucks
The expiration of the quarter passed without much fanfare. Gamma flipped from negative to positive. The SEC's announcement regarding the inadequacy of the ETF requests was initially seen as bearish and later turned bullish. Spot unchanged.
Compared to the last April break-up of the $30k level - where we mainly saw profit-taking - this time the flow was much more constructive, suggesting a continuation of the bullish movement.
Wide-ranging call purchases: $31.5k 7JUL, $32k/$33k 28JUL, $35k AUG/SEP, and call spread $35k-$45k SEP/DEC. Some financing activity with $22k put sell.
On the screen, it's worth noting the aggressive sale of 30DEC $30k calls in the APAC session on June 30th, totaling over $6 million in traded premium.
For Ethereum to highlight call spread $1.9k-$2.5 on December for around $10M of net premium paid: MASSIVE.
Interesting choice of selected strikes, with little positive theta and gamma at inception, suggesting a predominant will of directional exposure.
Paradigm Block Insights
Two main flows this week: large upside buying and steady 2-way interest for gamma.
Natural takers positioning for further move higher buying further OTM calls.
Large Deribit options expiry rolled off on Friday, busy short-dated flows surrounded it as spot whipped between pins.
TBP | Dissecting the world of Crypto in LATAM with NOX. -Ep. 28
Our friends at NOX came on The Big Picture this week for an epic 🇧🇷 style episode!
We dive into 👇
- Vol Insights from NOX Strategies
- Paradigm flows & ETH bullishness
- Bitcoin's dominance & macro backdrop
- Brazilian regulation landscape
Full episode 👇
🌊BTC
Droves of upside buying led the flows this week on Paradigm, as takers positioned for spot rally to continue. Calls trade firmly over puts across the term structure.
1000x 29-Sep-23 35000/40000 Call Spread bought.
1000x 29-Dec-23 35000/45000 Call Spread bought.
1000x 25-Aug-23 35000 (tied) Call bought.
800x 7-Jul-23 31500 Call bought.
🌊ETH
Large upside buying in ETH, especially on Friday post-expiry. New @gvol cross-asset term structure feature makes seeing the stark contrast easy.
45500x 29-Dec-23 1900/2500 Call Spread bought.
10000x 29-Sep-23 2200 Call bought (tied).
6500x 7-Jul-23 2000 Call bought.
We are curious for your thoughts 👇👇
The latest Macro Pulse just dropped.🔥
🌊Riding the Institutional Wave.
✍️Breaking down Paradigm flows.
⚠️Recessionary fears are back.
🤔Trade or Fade?
Join the thousands of other Macro heads in reading @davidbrickell80 thoughts each week. 👇
https://www.paradigm.co/blog/bitcoin-is-about-to-break-to-the-upside-and-markets-arent-ready?utm_campaign=Macro_Pulse_Bitcoin_is_about_to_break_to_the_upside&utm_source=twitter&utm_medium=social&utm_content=tradeparadigm
Hit us up on Telegram! 🙏
Daily Commentary✍️ http://pdgm.co/edge
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Sign up now! 👉 https://pdgm.co/3BLEw1Y
Bybit x Paradigm Futures Spread Trade Tape: https://t.me/paradigm_bybit_fspd
BTC
ETH
Lyra Weekly Review
Arbitrum:
Optimism:
Volatility
Current ATM IV is ~40% in ETH, off recent lows. Calls are trading at a discount as the market looks for catalysts
Trading
Traders position themselves in calls as the market waits for the next catalyst and a large amount of OI expired on June 30th.
https://twitter.com/lyrafinance/status/1672103519426592768?s=20
Markets also reached yet another ATH in OI this week!
ETH Market-Making Vault
ETH Arbitrum: +3.67% since inception, +8.35% annualized
ETH Optimism:
Depositors earn an additional 8.51% rewards APY, boosted up to 22.5% for LYRA Stakers by depositing USDC to Lyra’s Market Making Vaults.
Net MMV Exposure:
ETH vaults on Arbitrum are short vol and call skew, while Optimism vaults are long at the money options. A large amount of OI in both vaults is in calls with Arbitrum call OI being 73%.
ETH Arbitrum:
ETH Optimism:
BTC Volatility
Both IV and RV have spiked in the last week; IV is off its highs but remains elevated.
Net BTC MMV Exposure:
BTC vaults remain long gamma.
Learn more about Lyra in this GVOL explainer video!
Trade: app.lyra.finance
Twitter: https://twitter.com/lyrafinance
Discord://discord.gg/Lyra
Watch @itseneff and @GenesisVol talk options here
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.
