Key Takeaways

‍• US CPI came in at 9.1% versus the expected 8.7% last week

‍• While prices predictably fell, both BTC and ETH quickly recovered

‍• Flow data showed bias toward buying across all regions and coins except XRP

‍• Key question now is whether price rallies continue?

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Looking back

The event to watch this past week was the release of US CPI data on July 13th, which came in at 9.1% compared to the expected 8.7%. While a high print like this predictably sent asset prices reeling, BTC and ETH both quickly recovered, and have been on a tear since.

From the post CPI low of $18.95k, BTC rallied hard through the week to a high of $21.6k on July 17th. ETH saw an even more aggressive move higher over the same period, bouncing off $1,015 before settling into a range between $1,325 and $1,375 following several consecutive days up.

Futures basis remains largely unchanged, with 3m BTC basis still around +1.5%, and 3mth ETH basis around 1.0%, on the most liquid futures exchanges.  OTC lend/borrow activity remains thin, with interest predominantly in borrowing less liquid alts.

BTC futures basis has risen along with the sharp move higher, with the 3m basis currently sitting around 2.1%, up from 1.5% last week. In stark contrast, the ETH 3m basis has come off some, driven by the indicated September merge date, with the basis moving between 0.5% and 0.7% on major exchanges.

In the leadup to US CPI, vols rallied quite hard in anticipation, with 1 month BTC vols moving from 67% to 75%, and ETH 1 month going from 87% to 96%. Following the release though, vols experienced a fairly major crush, with BTC vols returning to the 67% level and ETH getting as low as 83%. Notably enough though, vol roared back as quickly as it dropped with BTC vol getting back up to 75% and ETH up to 91%, likely in anticipation of further rallies. 25 delta skew in both of the majors seems to be anticipating further movement to upside in the near term, with 1 month BTC skew coming off a weekly high of 15% for puts down to 9%, and 1 month ETH dropping from 15% to 4%. Something to note is that while long dated BTC skew remains mostly unchanged, long dated ETH skew has cratered, with 6 month skew briefly touching flat over the past week. While part of this could be a reaction to ETH’s monster rally over the past week, it could also likely be players positioning themselves to capture the idiosyncratic upside in ETH from the coming merge, which would explain the divergence from BTC.

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Looking ahead

Following the past week's surprisingly strong price action, particularly considering the CPI print, the big question is whether these new levels will hold, or if we’re about to experience an equally aggressive retracement. Another potential catalyst to watch out for is the upcoming ETH merge. Although the merge is not exactly imminent, as the market seems to have stabilized following the recent crypto crash, now may be the time when big players begin repositioning themselves to capitalise on a potential move.

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