April 19, 2024

Crypto Options Analytics, April 21, 2024: Inflation, Gold's Surge, & BTC Stability

USA Week Ahead:

Tuesday 9:45 am - PMI
Thursday 8:30 am - GDP
Friday 8:30 am - PCE

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

On Tuesday, Powell spoke and mentioned that although inflation had come down significantly last year (especially in H2), current progress on inflation isn’t materializing as hoped.

He said that current rates seem restrictive enough and if inflation remains high, they will hold rates at this level for a while more (higher for longer). He also mentioned that should the employment situation worsen they have significant room to maneuver rates lower.

This makes the PCE release Friday, which is the Fed’s favorite inflation target, as something especially worth paying attention to.

The markets continue to reprice June FOMC towards a hold from 50% → 75% → 83% over the past three weeks respectively.

See the CME FedWatch Tool below.

Target rate probababilities for June 12, 2024 CME FED Watch tool

We had a massive market reaction to the Iran & Israel conflict on Thursday last week, which caused bond futures to relief rally on the event momentarily, a counter-trend move.

30 Year Bond

Gold continues to trend higher despite bonds trending lower. Gold volatility is also historically on the higher end of the range (despite moving lower w/w) at 18.51. This is currently matching SPX vol at 18.71. This high Gold volatility and divergence from real rates is somewhat interesting.

Chicago options CBOE Gold Volatility Index (^GVZ)

Chicago options CBOE Gold Volatility Index (^VIX)

Tech stocks (AI especially) dropped a lot Friday, this type of reaction could continue to bring VIX up even higher. The market seems uneasy here.

BTC bitcoin ETH ethereum SOL solana

BTC: $64,762 (+1.5% / 7-day)

ETH :$3,148 (+2.7% / 7-day)

SOL :$149 (+5.4% / 7-day)

Bitcoin delta-one products continued to deleverage last week.

The basis saw a continued grind lower and the perp funding on Deribit flipped into the negative territory for the first time in months.

Chart: 90-day futures basis

Amberdata derivatives Constant APR and Basis futures 90-day futures basis. Binance, bybit, bitmex, deribit, kraken, OKEX

Chart: Deribit Perp Funding

Amberdata derivatives Realized cumulative funding rate Deribit Perp Funding.

Chart: BTC ∆1 liquidation across venues

Amberdata derivatives BTC ∆1 liquidations across venues

Liquidation volume has also subsided.

This makes me think that a lot of the leverage in the market has been removed, allowing for the market to rebuild itself on better footing.

From a fundamental perspective, bullish Gold events have historically been bullish for Bitcoin as well (SVB, Ukraine, Israel, Fiat debasement). Given the current trend higher in Gold, I think BTC likely will follow now that leveraged positioning has reset.

Chart: Gold Finviz.com

Gold finviz.com

Chart: BTC finviz.com

BTC/USD finviz.com

The 60k-70k range might take some time to work through and given the lack of leverage in the market now, we could argue that volatility will drop, especially now that halving has passed.

Chart: 12-month RV cone

AD Derivatives Volatility Cone BTC

Realized volatility is near the maximum range of the past 12-months… so I wouldn’t be surprised to see it “relax”, while the implied volatiliy (below) is high compared to recent history.

Chart: ATM Implied Volatility

AD Derivatives ATM constant maturity BTC ATM Implied Volatility

Option ∆25 risk-reversal skew is recovering nicely for short-term options while the longer-term options have been consistently positive throughout the current turbulence.

Chart: ∆25/ATM risk-reversal

AD Derivatives Skew normalized by ATM IV constant maturity BTC

Overall, given the current volatility levels (both realized and implied) and the potential 60k-70k spot price ranging… my bias is towards short-vol structures here as opposed to long-vol in this environment.

Paradigm's Week In Review

BTC -1.99% / ETH -1.48% / NDX -5.86%

Bitcoin US dollar Binance

Paradigm Top Trades this Week 👇

Top 5 BTC structures and top 5 ETH structures on Paradigm

Weekly BTC Cumulative Taker Flow 🌊

AD Derivatives API Paradigm Weekly BTC Cumulative Taker Flow

Weekly ETH Cumulative Taker Flow 🌊

AD Derivatives API Paradigm Weekly ETH Cumulative Taker Flow

BTC Cumulative OI

AD Derivatives API Paradigm BTC Taker Cumulative Open interest

ETH Cumulative OI

AD Derivatives API Paradigm ETH Taker Cumulative Open interest

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BTC

ETH

The Squeethcosystem Report

Crypto markets remained active throughout the week, but little to show for on WoW returns. ETH ended the week -0.53% and oSQTH ended the week at -2.71%.

Opyn squeeth pnl and ETH PNL

Volatility

oSQTH IV found its way lower throughout the week ending in the 90s.

AD Derivatives Opyn historical implied volatility

Crab Strategy

Crab saw gains ending the week +1.65% in USDC terms.

Opyn crab strategy historical returns annualized

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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.