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!
Now that the Bitcoin ETF craze is behind us, the price of BTC just reached a new all-time high: $68,527 on FTX. Note: this was after two weeks of no progress, where BTC was just floating around in the 60k-66k range. Bitcoin Futures Open Interest on CME has calmed down a bit: from $5.7bn on October 20th to $4.8bn on November 8th.
The BTC term structure is (once again) rather steep, and the relationship between Realised Volatility (RV) and Implied volatility (IV) is also expensive. The market is too enthusiastic about the potential for explosive BTC returns.
Option market dynamics
RV is materialising around lows for the year, making it the perfect scenario for shorting volatility (with straddles, strangle, and spreads, etc.). And this scenario is pushing investors to look for other coins with some volatility potential (to the upside, hopefully). This could cause some spot corrections in the short term due to rebalancing for Delta and Gamma.
The market seems to be well protected from both the downside risk and to ATH rejections. Levels to watch closely are $60K, $64K, and $70K, the latter of which could be the perfect hub for a gamma squeeze. Funding is stretched and everything seems ready.
Ethereum (ETH) spot prices are on a strong uptrend, with a new ATH of $4,841.7 on FTX, but in a form that is controlled and slower than the derivatives market would have hoped. This uptrend has caused short-term skews to flip from positive to negative as calls regain some favour.
Regardless of whether the term structure is in a steep contango, the RV/IV relationship is way too expensive, and I am expecting price corrections in the short term before any new explosive ATHs. Although it is a sad event for option premium buyers, this sort of controlled uptrend in spot prices feels like a solid foundation for high prices.
And now a brief mention of some other coins.
Altcoin correlation
We have seen correlations and spillover effects between some coins decrease this week due to some abnormal returns that a lucky few could profit from. It is important to distinguish between those that occurred as a result of rumours/projects (the ones that are here to stay...at least for a while) from those based solely on FOMO (it's just a matter of time).
For all of you who like trading the spreads, I expect some mean-reversions in the short term (up to 7 days). I personally am betting on the ratio between the following coins (buying the first, and selling the second):
- SUSHI/ZRX: currently $8.9412
- YFI/PERP: currently $1.8998
- LINK/ROOK: currently $0.1309
- BAND/LINA: currently $129.88
Happy Trading!
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