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Trump’s appointment of dollar bear Stephen Miran to the Fed Board pushed September rate cut odds to 89%, lifting gold and BTC. But with CPI and PPI data due this week, that narrative could change quickly. In crypto, ETH surged 25% as sentiment, open interest, and funding rates all flipped bullish, sparking aggressive call buying in the options market. Dive into the full story and what to watch next in this week's Amberdata Derivatives Newsletter:
USA Week Ahead (ET):
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Tuesday 8:30am - CPI
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Thursday 8:30am - PPI
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Friday - Trump will meet with Russian President Vladimir Putin in Alaska to negotiate an end to the war in Ukraine
*various Fed governors speak throughout the week*
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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 the US and crypto markets got a boost on the back of a new Fed Board appointee.
Fed governor Adriana Kugler said that she will leave about six months before her term was set to end.
Trump announced adviser Stephen Miran would fill the short-term vacancy. Stephen Miran is a dollar bear who believes a weaker currency is good. Gold up, BTC up.
This temporary replacement will end on Jan. 31st and Powells chairman term ends in May 2026, although Jerome will stay on the board until 2028.
In many ways this is a free trial for Trump with Miran as his list for the next chairman is currently around 10 people. The debate is still open and Scott Bessent is helping advise the next chairman pick. Bessent himself said he wants to remain at the US Treasury.
Given the dovish board nominee and the poor jobs report for July, the CME FedWatch Tool currently shows the probability of a rate cut in September at 89% (up from 66% 30-days ago).
Next week we have two more important inflation releases with the CPI on Tuesday and the PPI on Thursday. Although the market thinks a rate cut is a forgone conclusion, there might be “higher-for-longer” SEPT FOMC repricing trade around the the CPI release.
If inflation surprises and comes in hot, I could see rate cut odds quickly reduce for September as Powell remains in charge today and he has an incentive to defend the perception of Federal Reserve independence.
The other big potential for market moving news will be the Trump & Putin meeting in Alaska on Friday Aug 15th. Let’s see if there’s any progress towards a resolution around the Ukraine/Russia war.
So far, the articles I’ve read in the media seem skeptical.
My current understanding from those articles is that Putin is only offering a cease-fire for territory in eastern Ukraine. The problem here is that Putin has previously violated a lot of previous cease-fires and the Europeans want to ensure remaining Ukrainian territory is protected with “Iron-Clad guarantees” such as NATO membership.
NATO membership would implicate the West to send troops if the cease-fire is broken (at least that’s my understanding). So in a way the stakes become higher.
That being said, I think any positive or negative headlines are sure to move the markets, so we’ll keep that in mind for Friday’s trading session.
BTC: $116,680 (+3.5% / 7-day)
ETH: $4,248 (+25.5% / 7-day)
SOL: $182.12 (+14.6% / 7-day)
Crypto Options Overview
Being long ETH today is my base case scenario.
I continue to view BTC as the risk-on + “digital gold” mix, while ETH is more a risk-on (web3 / Tech) pure play.
First, let’s consider some basic back of the envelope valuation math. Today, NVDA is worth $4.4T, while the ENTIRE crypto market cap (that’s over 18,000 coins put together) is worth only $4.00T.
Let me restate this a bit differently.
Global Credit markets including M2 are about 4x the size of global equity markets.
1 equity (granted, the biggest) NVDA is worth more than all 18,000 crypto currencies combined.
And the NVDA chart looks bullish itself.
Given the successful ETF inflows and now the approval for 401(k) investment into crypto, where it’s estimated that total retirement assets sit around $43T in the US about $9T in 401(k) specifically, I can’t imagine we’re anywhere near a “top”.
BTC itself is still a long especially as gold continues to rally higher… but looking at the ETH/BTC ratio chart, it looks to me like ETH prices are finally reverting towards relative strength.
We can also see that futures open interest and funding costs for ETH are confirming this shift in sentiment as well.
Total ETH notional OI has drastically exceeded the previous highs seen in December of 2024 (when prices were about the same). While the chart below also shows the 30-day futures basis finally starting to pick back-up.
Today 30-day futures basis is around 8.50% after being relatively low most of this year.
Breaking away from fixed funding costs (futures basis) to floating funding costs seen in the perpetuals market, we can see that funding for ETH is now in lockstep with BTC funding rates.
Notice how until now (YTD) total funding costs between ETH (dark blue) versus BTC (orange) had been extremely divergent.
With everyone sidelined from ETH and sentiment being completely in the dumps, there remains a lot of room for ETH to catchup.
Immediate targets are $5,000 (breaking into new ATH territory) and around $7,200 (given the mid-range ETH/BTC price of 0.06 with BTC around $120k)
From a volatility perspective being long Gamma (short-term options) or long Vega (long-term options) is a good trade… Nothing cute, just some outright exposure makes sense to me.
Look at the historical implied volatility for ETH.
Today we’re around 75%… but a catchup move could easily rally with 100% volatility, a middle of the historical range level.
Although today’s vol environment is different than 2021 (when ETH implied volatility hit 200%)
Looking at the block volumes being execute on Deribit via Paradigm, we can see the pros loving the $4,000 calls a lot.
The top 7 trades of the past week show lots of upside exposure for ETH via call spreads and outright call buying.
The top trades alone accounted for about 125,000 contracts or $550m notional exposure to ETH.
If we look at raw premium exchanged on Deribit (including block trades) we can see a huge jump over the past 3-weeks.
TL:DR → Long ETH upside optionality.
- Asset is relatively cheap in BTC terms.
- Volatility isn’t expensive.
- Sentiment and momentum is likely at the beginning of a positive shift (not at the tail end).
Paradigm Top Trades this Week
BTC Cumulative Taker Flow
ETH Cumulative Taker Flow
BTC Cumulative OI
ETH Cumulative OI
BTC
ETH
- We see a large build-up of puts on Derive for ETH, with the P/C ratio sitting at 0.82. Most of this open interest is equally distributed on the August 15, 29, and September + December boards.
Chart: derive.xyz/amberdata (ETH)
- For 29 August, we see a large clustering of puts on the 3800, 3200, and 2000 strikes as traders gear for a rocky month.
Chart: derive.xyz/amberdata (ETH)
- For BTC on the 29 Aug expiry, we have puts distributed primarily at the 100, 90 and 80k strikes.
Chart: derive.xyz/amberdata (BTC)
- Surprisingly, we still see ETH skew for the 14 and 30 day tenors slightly positive, sitting at +1.5 and +3% respectively.
Chart: derive.xyz/amberdata (ETH)
- Monthly ETH vol holds steady around 66% while BTC monthly vol has slowly trended down to 32%.
Chart: derive.xyz/amberdata (ETH)
Chart: derive.xyz/amberdata (BTC)
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.
