We reported last week that the round-trip price action in the wake of the SEC action against Binance and Coinbase implied that the regulatory pressure was priced in. However, as the market was slow-rolling into the weekend, a major US crypto platform - Robinhood - announced that they would de-list SOL, ADA, and MATIC. This commenced a sell-off in those three tokens, which continued well into the Asian weekend, and at around 04:00 UTC turned into an avalanche of selling across the entire complex, taking multiple tokens down 25% or more at the lows. For most coins, the last 15-20% move to the lows was completed within 10 minutes or so..
BTC and ETH performed relatively well, down about 3% and 6% at the lows over the same time period, which both felt like sympathy moves. The larger move of ETH relative to BTC should be noted though: ETH has been less volatile in both directions for some time now, so either we have had a regime change in terms of realised volatility, or ETH is pricing in some risk of being labelled a security in the future. The poorer recovery of ETH (25% as opposed to 65% for BTC) since the sell-off implies the latter may be the cause.
Flows over the past week show an extreme preference for BTC (58.1% buyer) over ETH (47.8% buyer), perhaps significant given the abrupt turn lower in ETHBTC. Unsurprisingly, we saw the heaviest sell flow in the coins delisted by Robinhood, SOL (61.3% selling), ADA (62.9% selling) and MATIC (70.9% selling). We have seen strong buying in XRP (57.1% buying), DOGE (63.4% buying), and LTC (61.3% buying). By geography, our better sellers were from EMEA (66.2% selling) and our better buyers were from APAC (68.0% buying); Americas were fairly evenly split, implying a rotation out of coins designated securities by the SEC, into pure crypto currencies such as XRP, DOGE, and LTC, rather than an exit from crypto altogether. By client category, exchanges were our best buyers (68.6%), while banks were our best sellers (67.1%).
Interestingly, Binance BTC futures basis is higher on the week, marginally so for June at 6% (+0.5%) but more significantly for September at 4.5% (+1%) for September. It is a similar story in ETH, with the June basis unchanged at 4%, while September is +1% at 4.25%. These moves are not large, but since they are more pronounced in the back end, and given the spot price action, could be indicative of a change in bias from traders looking at longer time frames than the majority of the market: one to watch, for sure.
The options market has also demonstrated a potential change in tone from longer term traders. Firstly, implied vols feel much better bid, as if the oversupply of vega may have eased. The front ends of both curves are trading a premium to the mid-dates, implying a shortage of gamma as we head into the risk event of the week today and tomorrow. At the back of the curves, we have noted buyers of ETH vega, although flows remain mixed, but more importantly we are seeing fresh demand for BTC vega: last Thursday and Friday, for example a good 5-600 BTC of Dec 40k calls were bought, and we have also seen sporadic buying of Mar’23 50k calls, and also decent sized buying of ATM options for the same expiry.
US CPI today and the Fed tomorrow will dominate the macro headlines this week. There is a good chance these will prove to be non-events for a crypto market currently lacking both direction and participation.
However, given that a lot regulatory doom and gloom is now priced in, with the noted signals from the derivative markets of fresh demand, and with key supports at $25,000 and $1,700 holding firm for now, perhaps the risk of a big move over the next week would be to the topside.
All data sourced from our real time systems supporting global 24/7 liquidity provision
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