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!
At the moment, Bitcoin (BTC) is trading at $30.3k (-2.29% in 7 days), Ethereum (ETH) is trading at $2.07k (-11.58% in 7 days), and the spread ETH/BTC is trading at 0.0683 (-9.53% in 7 days).
While BTC seems to have found a strong support on the $30K level, a major rotation in all the other digital coins is still ongoing. If macro keeps being hostile and the ETH merge does not materialise, we are going to see greater BTC dominance as ETH is likely to bounce back.
Bitcoin technical analysis
On the futures side despite the spot sell-off, the BTC Basis is holding particularly well, with the 3m basis on CME trading at a 2.07% premium. Excluding ETH, GRT, AAVE, and DOGE, all the other futures traded on FTX are now in backwardation. Should things get even worse, carry trades will be out of the game. Looking at the VPVR:
- Support: $30k (indicative)
- Resistance: $35k
Important to note is that as USDT decoupled on May 12, the funding rates on Binance and FTX flipped, as traders were getting long leveraged positions on BTC-PERP within FTX and short positions within Binance. This strategy left traders long USDT/USD to bet on the USDT re-peg, leveraging the positions with low funding and borrowing costs and greater liquidity and scalability.
Vol spikes during sell-off
On the options side I have been calling for long vol strategies for a month now, but I was not expecting something like this. BTC 3m ATM IV went from 56% to 100%, and the 3m skew went from 9% to 20%. The BTC ATM IV term structure is still inverted with short-term maturities trading at 77+ IV and the long-term ones slightly above 70%.
As most of the long vol positions outperformed, most of the traders unwinged their positions, and the market is now normalising. As spot prices have likely bottomed (at least in the short term), volatility has likely peaked. It is therefore time to short vol and let the term structure revert again.
Happy Trading!
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