Markets are moving fast after surprising labor data and shifting Fed expectations, but not all assets are reacting the same way. Gold is rallying, crypto is diverging, and volatility indicators suggest some big moves could be coming. What does this mean for traders and investors over the next few weeks? Learn more in this week's derivatives newsletter:
Wednesday 8:30am - PPI
Thursday 8:30am - CPI
Friday 10:00am - Consumer Sentiment
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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.
After last Friday’s NFP payroll data, rate odds repriced themselves massively towards further cuts.
This drop in interest rate expectations helped fuel a market rally higher in risk-assets, although there was a surprising divergence from crypto prices.
The non-farm payroll data came in at +22k for August vs +75k expected. The June data was also revised down from +14k to -13k while July was revised up from +73k to +79k.
The June number is the first negative print since 2020. The job market has been especially weak since May 2025 after the liberation day tariffs were announced.
(Click here for full report)
The household survey, which is how the unemployment rate is determined, has been surprisingly resilient. Although the unemployment rate ticked higher from +4.2% → +4.3% this is still a historically low unemployment rate.
This divergence between payrolls and the unemployment rate was addressed by Powell during the Jackson Hole speech. The current running theory for the divergence is that immigration policy is reducing worker “supply” while the worker “demand” is also being reduced due to cautious hiring by businesses waiting to understand the impact from tariffs.
Therefore, the HH survey is reflecting the offsetting effects, while the non-farm payroll data is reflecting the lower “demand” side of the equation.
The Fed, now seemingly more concerned by the labor markets vs inflation, is expected to cut rates multiple times by EOY as a result of the poor payroll prints.
(Click here for a link to the CME FedWatch Tool)
We can see that the next rate cut has moved into guaranteed territory for the Sept. 17th FOMC meeting.
Last week there was a 14% chance of no-cuts, today the no-cut probability is 0%.
The odds for 50bps point cuts through the October 29th FOMC meeting are now at 71% compared to 48% last week.
What’s particularly interesting is the current “bad news is good news” for risk-assets theme… this is due to lower rates being priced in ahead of time.
The current VIX complex is at YTD lows while positioning in the VIX futures complex is extremely short by historical standards in the CFTC “Commitment of Traders” reporting.
Chart: Finviz.com (VIX fututures & COTs positioning)
Another item to look at in the VIX futures complex is the spread between CASH Vix vs the front month futures. (The steepness of the Contango)
Chart: 5y - CASH Vix (minus) Vix Front Future (tradingview.com)
This relationship is currently “middle of the range”… but now look at the differential between Sept and October futures (VIX front - Vix 2nd) and the pricing starts to look extreme…
Chart: 5y - VIX Front (minus) VIX 2nd (TradingView.com)
It looks like cash is fair compared to Sept… but Sept is extremely low compared to October futures.
A very important note about the September VIX future is the Sept 17th Expiration, the same day as the FOMC rate decision.
This makes me think the VIX futures for September have priced away risk while October could be ugly… A theme to keep in mind for Risk assets in my opinion.
Although long Sept upside (via cheapy options) is cool too.
My base case scenario is that October will be wild… based on what I’m seeing here in VIX and the idea that markets are pricing in rate cuts NOW… but once those cuts are already priced in, the safety net is gone for risk-assets.
Lastly, next week we have important inflation data coming. PPI on Wednesday and CPI on Thursday.
Inflation is currently the unknown variable for the rate path equation. Trump is doing a good job keeping energy prices down but that might not be enough to contain inflation… and without a credible Federal Reserve mandate inflation expectations can cause havoc.
For Crypto inflation would be a boon (at least that’s the thesis) but risk-asset pain would hurt crypto. It’s hard to know what side of the equation leads prices and when.
Clearer macro trades on my radar are VIX for October themes and bonds for October (rate cuts + risk-off could be good for the unloved asset class)
BTC: $110,142 (+1.2% / 7-day)
ETH: $4,272 (-2.3% / 7-day)
SOL: $200.09 (-0.3% / 7-day)
Gold +3.5% week-over-week while BTC +1.2% w/w
GVZ = 18.30
DVol = 37.83
The relentless rise in GOLD is something to pay attention to and the relatively lower performance in BTC (Digital Gold) is interesting as well.
Today, with $3640/oz Gold, the total market cap of GOLD is about $24T. BTC’s market cap sits at $2.2T (9% of Gold).
I still believe BTC trades as a mix between gold + risk-asset. Given the current VIX level, there are good combinations to be execute here…
Something like +BTC Delta with +VIX Delta as a BTC “risk-asset” factor hedge.
Outright Gold as the signal.
Chart: BTC 180-dte ∆25 RR (pro.amberdata.io)
The BTC 180-dte ∆25 RR has dipped into negative territory (-0.99%) for the first time in years. GLD’s similar expiration ∆25 RR-Skew is +0.80%.
This differential signals to me that “risk-asset” investors are owning BTC and selling calls against holdings.
A thesis that’s inline with structural decline in BTC volatility as well.
Chart: BTC ATM Volatility (pro.amberdata.io)
The risk-off component of this market is likely to continue to give SOL and ETH head-winds, until ETH can finally get above the $5k threshold into ATH territory.
The next couple of weeks are likely to be choppy below the $5k level as a result.
This makes the term structure trade interesting imo.
Chart: ETH Term Structure Richness (pro.amberdata.io)
Comparing the BTC and ETH term structure richness levels (above), we can see that ETH is hanging out in the 1.00 “Flat” TS category… This makes ETH short-term implied look a bit pricey, but why?
I don’t think buying the short-end vol is very interesting here and a diagonal, delta neutral structure, would be a decent “consolidation” play for ETH.
Something like sell the Sept 26th ∆25 call and buy the Oct 31 ∆25 call is a pretty forgiving structure if things go wrong… AKA cover on a break/close above the $5k level.
This is a small “single” type of trade, with clearly defined rules and time decay collection as ETH puts in a base.
Chart: ETH Spot (finviz.com)
Back to the “Why” of the flat ETH term-structure…
Since the late August rejection of the $4,900 price level on ETH, the option market has been trading demand towards the put side.
Flipping the ∆25 RR-Skew into persistent negative territory.
I read the flat term structure (short-term vol elevation) as driven by downside protection.
You can see dealers net short gamma around the $4,000 -$4,200 zone.
All these themes coincide with what I’m seeing in macro…
There’s a bit of “risk-off” risk in the near term after the “rate repricing rally” and we’re seeing the divergence emerge between BTC and GOLD.
ETH is even more saddled with risk-on flows than BTC and any risk-off move could hurt ETH a lot.
Traders are buying ETH downside protection, with prices right below ATHs, there’s an easy “line” to trade against (5k).
Short Diagonals are a low risk play.
Long BTC and Long VIX is interesting too… but a bit more dirty to manage.
Derive also announced its new API broker program for extensive fee rebates.
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.
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