Recurring market commentary on what's happening in the crypto markets, summarized by the Crypto Broker team at Crypto Finance AG.
Market commentary
Good Morning!
Overall, the market has been trading in a tighter range. Bitcoin (BTC) moved from 33'000 USD to 36'500 USD and back to 33'000 USD again. Ethereum (ETH) outperformed BTC during the entire week and the spread between the two gained nearly 10%. It is now trading at 0.062.
Despite it having been a rather calm week, the traded volume has not decreased and has remained stable. Funding spreads are trading neutrally to slightly negatively, and the term future premium has not changed a great deal across the board either. In general, the open interest in derivatives is showing a similar picture as the previous week, and this is more or less not going to change as long as BTC trades between the important support of 30'000 USD and the resistance of 40'000 USD.
The ALT/MID and SHIT Indices have slightly outperformed BTC this week. The implied volatility decreased slightly over the course of the week, and BTC 1 month ATM Vol is trading at 91.7%, while ETH 1 month Vol is trading at 104.3%. The derivatives exchange Deribit launched the Implied Volatility Index on BTC and ETH (DVOL) in the 1st quarter of 2021, and is planning to extend their product offering with Volatility Futures for both coins.
The DVOL Index expresses the simple exposure to pure implied volatility and uses the implied volatility smile of the relevant expiries to output one number that gives a gauge of the 30-day annualised implied volatility. An identical and comparable product in the traditional financial market is the CBOE Volatility Index VIX, which is a real-time market index representing the market’s expectations for volatility over the coming 30 days.
In other news... Additional countries in Latin America have also announced to follow the path of El Salvador and introduce bitcoin as a legal tender. In general, digital currencies hold a great deal of potential for increasing financial inclusion in developing countries. Digital currencies, including CDBCs, could reduce transaction costs and allow more economic activities in emerging market economies across the globe. Easier access to alternative digital currencies is likely to increase the volatility of domestic money supply and the exchange rate. It also means an increasing risk of rapid shifts of liquidity out of the physical currency, eventually also in less stable countries.
Happy trading!
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