An overview of the trading activities on the cryptomarkets. Studies on traded volumes, supply and demand situations, as well as periodic technical analysis of the most important crypto-currencies and indices, including the perspective of professional Traders.
Technical Analysis
Good Morning!
As of writing, Bitcoin (BTC) is trading at $38,800 (+0.17% in 7 days), Ethereum (ETH) is trading at $2,550 (-0.82% in 7 days), and the ETH/BTC spread is trading at 0.06584 (-1.04% in 7 days) as the rotation in BTC continues.
The price action of cryptocurrencies, as well as of Traditional Finance (TradFi), continues to follow the developments of the Russia-Ukraine conflict and its links (sanctions, etc.). The rejection of the EU Proof of Work (PoW) ban resulted, as expected, with no affect on prices at all, as most of the miners are not based in Europe, but in the US and Asia (excl. China). Additionally, a ban would have resulted in a first "strong" move from the West against cryptocurrencies.
Bitcoin technical analysis
The highlight of the week will be the Fed's meeting on Wednesday. Aside from the rate hike (most likely 25bps), statements made on the future moves of the Central Bank will affect the short to medium term of many asset classes.
- The price is still between $35k and $45k (as of February 2022)
- Oscillators (RSI, CCI, etc.) are neutral
- Moving Averages and Ichimoku clouds are favorable to selling
- The 30-day correlation and the 30-day beta with the Nasdaq (NASDAQ: QQQ) are trending lower: 0.27 and 0.11, respectively
Derivatives dynamics
- The leverage (both long and short) is not back yet
- Open interest has remained nearly identical since February 2022 ($13.9 billion)
- The term structure is in a tight contango with long-term futures (January-23) on CME trading at an annualised premium of 4%
- Funding rates continue to be nearly flat across all locations
The demand for short-term options continues to be high as traders are quickly hedging from immediate surprise risk. This is causing the front-end of the term structure to float in a range of 15 vols (60% to 85% Implied Volatility (IV)) week over week (WoW). The back-end of the curve is seeing parallel upward movements, and has remained nearly flat on several calendar days, and is now trading at 75% IV.
Realised volatility continues to flirt with the upper 75th percentile for average measurement windows with no volatility premium, and (again), I see no reason for volatility to calm down. The open interest profile highlights, once again, the support at $40k and the resistance at $45k. A break of these two could lead us to test either $30k (support) or $50k (resistance).
Happy Trading!
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