Crypto Options Analytics, March 10th, 2024: New Highs for Bitcoin

USA Week Ahead:

1. Tuesday 8:30am - CPI

2. Thursday 8:30am - PPI

3. Friday 8:30am - Empire State Manufacturing

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

The Labor Department said the economy added 275,000 jobs in February, well above the 198,000 that economists were expecting.

Chart: wsj.com

Unemployment ticked higher to 3.9% and wage growth slowed, despite a blockbuster hiring number.

The combined effects of slowing wage growth, higher than expected unemployment headline number but strong payrolls brings the economy closer to a “soft-landing”, a best-case scenario outcome. 

Gold moved higher last week, making new ATHs, while interest rates held mostly steady week-on-week. 

Chart: ustreasuryyieldcurve.com

Next week we have two big inflation numbers CPI on Tuesday and PPI on Thursday.

BTC: $68,678 (+9.7% / 7-day)

ETH :$3,873 (+11.1% / 7-day)

SOL :$143.41 (+9.5% / 7-day)

Bitcoin prices tested the all-time highs last week and now prices are currently finding a direction.

Chart: Finviz.com

From a short-term trading perspective, this puts us in the no-man’s land of trade ideas. I can see two really good arguments for prices going either up or down. 

1. DOWN: Prices have gone up SUBSTANTIALLY YTD on the back of an already insane 2023 bull rally. There’s naturally going to be profit taking and ATHs are a natural “trading” zone. False breakouts are a great way to trap leveraged longs.
2. UP: You don’t sell ATHs and this is just another pit-stop along the way to $100k+. 

From a Delta bias perspective holding long delta bags (longterm positions) makes the most sense. 

From a short-term perspective, sit and watch. Look at the delta-neutral strategies instead. 

Chart: 90-DTE Basis (March 2023 - Present)

Looking at the current Bitcoin basis, we see substantial opportunity worth exploring. 

1. Selling the +25% annualized basis is an interesting trade on its own. This is naturally a short-delta position but it’s a “forgiving short”. Even if BTC blasts to new ATHs, traders can afford to hold the short-basis with little pain. At worst, a trader can wait 90-days to merely capture the spread. 
2. Should prices breakdown lower, we’d expect substantial basis compression as leverage gets liquidated out of the system. Enabling traders to capture the spread quickly and earn profits as Bitcoin finally provides a “buy-the-dip” opportunity. 

Basis on option prices!

A very interesting element of the crypto landscape is the positive correlation between basis and spot prices. Traditionally, in equities, when markets crash, people buy treasuries and risk-free rates compress… but this effect is small and barely worthwhile. 

In crypto, however, a +25% basis can completely flatten to zero on a market crash (think May 2021). This provides extra juice to long-dated options. 

Call are extra expensive today due to the large annualized basis, while puts are extra cheap. 

Then combine the current option RR-Skew and you get a substantial opportunity for delta-neutral risk-reversal trades.

Chart: 90-DTE Bitcoin ∆25 C-P / ATM IV (March 2023 - Present)

This opportunity can also extend to positive delta structures, such as “Collars”, enabling cheap bag-protection. 

Ultimately, the market is in a real 2-way zone right now w.r.t. delta direction in the short-term and medium-term timeframes. 

Everyone is positioned for the ATH breakout but the cost of the leveraged long trade is absolutely expensive.

Today, pricing for ∆short and ∆neutral structures are VERY enticing and there’s a lot of bulls right now that could EASILY get trapped here!

Paradigm's Week In Review

BTC +8.66% / ETH +12.46% / NDX -1.35%

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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BTC

ETH

The Squeethcosystem Report

Crypto markets remain strong week. ETH ended the week +11.72% and oSQTH ended the week +23.11%.

Volatility

oSQTH IV continues to climb, trading over +135 and closed near highs to end the week.

Crab Strategy

Crab saw declines ending the week -0.69% 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.