Crypto Options Analytics, March 3rd, 2024: Crypto Rally & Managing Vol

USA Week Ahead:

1. Monday 12p - Fed Speakers

2. Tuesday 10am - ISM + Fed Speakers

3. Wednesday 8:15 am - ADP employment

4. Wednesday 10am - Powell Testifies to Congress + Fed speakers (BTC Impact Potential)

5. Wednesday 2p - Beige Book

6. Thursday 9:40am - Powell Testifies to Congress + Fed speakers

7. Friday 8:30am - NFP

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 the TradFi markets were driven by both the PCE number and remarks from Fed Gov Chris Waller. 

Waller hinted that the Fed is likely going to change the composition of it’s balance sheet away from MBS and into Treasury Bills.

Unofficially, this would help the US treasury support it’s fiscal budgets. The market quickly responded to that news. Gold and Stocks rallied substantially due to these remarks. 

Chart: (GC Gold Futures, ThinkOrSwim) 

Chart: (ES S&P Futures, ThinkOrSwim) 

Fed governor Waller, a Trump appointee, is expected to be a candidate for Fed Chairman after Powell term ends in May 2026. This makes his opinions matter even more. 

This week we have another trove of Fed Governors speaking throughout the week, along with the Beige book on Wednesday. 

What could be super explosive for Crypto is Jerome Powell’s congress testimony on Wednesday and Thursday. 

Given all the action in crypto recently, I expect questions about Crypto to be asked and Powells responses could definitely move the markets. 

Lastly, we have the Employment numbers coming out on Friday. 

Overall, a lot of action this week!

BTC: $62,940 (21.5% / 7-day)

ETH: $3,473 (+11.8% / 7-day)

SOL: $131.01 (26.3% / 7-day)

Bitcoin spot prices had a massive +20% gain last week! 

This is no small feat considering a +20% gain on a $50k asset is a significant gain in absolute dollar terms. 

Chart: (Streamlit Futures Liquidation Heatmap)

Early in the week, Bitcoin spot prices quickly rallied through $60k right up to $64k in the span of a few hours. We can see shorts were promptly liquidated causing a short-squeeze rally. 

Then longs were quickly squeezed out due to a cascading crash from $64k → $59k in the space of minutes. 

Since then, spot prices have consolidated near the highs. Binance traders are building leveraged OI with a liquidation floor of around $61k. 

We can see small shorts currently being liquidated as Bitcoin approaches the local high of $64k. 

Chart: (BTC IV vs RV, 7dte)

We can see that option vol. tried to dip over the weekend due to consolidation, but now took a U-turn higher. 

Bitcoin all-time highs are approaching (about $69k) and the best quote I heard all week was “selling all-time highs in Bitcoin seems like a boomer move.” 

Agreed! Market Max-Pain right now isn’t a Bitcoin pull-back, in my opinion. 

Most people are not invested in Bitcoin (or any crypto) and watching this rally from the sidelines IS THE Max—Pain. 

I think we continue higher!

The halving cycle still continues to be the BTC narrative. This is expected to occur in April of this year. 

A supply issuance drop combined with one of the best performing ETFs in history is very bullish for this “fixed supply” asset. 

Then mix in the MicroStrategy INDEX EFFECT and you really have compounding demand.

From a volatility perspective, it seems like overall volatility can move higher too. 

Chart: (Volatility RV cone, 5yrs)

Looking at the Realized volatility cone of the past 5-years, we can most RV is below median range. 

Hedging volatility risk, at least somewhat, using call spreads is likely a smart move, given the ∆25 RR-Skew (as a % of ATM vol) is near 5-year highs. 

Chart: (Bitcoin RR-Skew/ATM IV 60dte) 

TL:DR - Don’t sell ATHs. Vol probably goes higher. Use CallSpreads if you want to hedge some of the IV risk. 

Paradigm's Week In Review

BTC +20.17% / ETH +11.85% / NDX +1.92%

Paradigm Top Trades this Week 👇

BTC Cumulative OI

ETH Cumulative OI

Weekly BTC Cumulative Taker Flow 🌊

Weekly ETH Cumulative Taker Flow 🌊

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The Squeethcosystem Report

Crypto markets had quite a week. ETH ended the week +8.74% and oSQTH ended the week +17.90%.

Volatility

oSQTH IV remained active this week, trading over +125 and remained over 100% to close the week.

Crab Strategy

Crab saw declines ending the week -1.88% 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.