Crypto markets are quiet as traders assess the damage and consequences of recent loan liquidations, bail-outs, and pending bankruptcies. Despite many calling for BTC to outperform on the way back up, due to a continuation of flight to quality, in fact the reverse has happened. It appears the market is still nervous of further BTC liquidations, a risk which does not hang over the alts. Consequently, majors have remained range bound with an underlying bid tone in low volume trading: BTC traded mostly within $19,750 / $21,750 all week (major resistance at $22,750); while ETH trended all week to a Sunday high around $1,280 (major resistance at $1,300). Some alts have recovered remarkably well, with SOL (+20%), MATIC (+30%), SHIB (+35%), DOG (+25%), UNI (+35%) amongst the better performers.
Our flow data this week shows that our buyers have again come primarily from APAC and EMEA clients, with America’s clients marginal sellers. By client type, our main buyers have been banks and funds, with other clients showing no strong bias. Broken out by coin, we have seen a bias to buy BTC (52.6% buyers) and to sell ETH (52.7% sellers); and in alts we have had strong buying of SOL, LINK, UNI, AVAX, and XLM, and strong selling in XRP, LTC, ADA, and DOT.
Futures basis in BTC has recovered on most exchanges, with 1m basis recovering from -1% to +1% on most major exchanges, but the OTC lend/borrow market remains very quiet.
Implied vols have softened considerably over the past week, with 1 month BTC ATM volatility dropping 10 vols to 80%, and the equivalent in ETH down 15 to 95%. Risk reversals may be trying to tell us something more interesting. While mid curve riskies have stayed bid at around 12 vols puts, the very front has come off hard, with 01 July 25delta r/r trading only 5 vols puts, and 15 July only 10 vols puts. Clearly there is some urgency amongst traders to hedge against the risk on a break higher through the aforementioned resistance levels.
The market will focus primarily on US core PCE numbers for May, out on Thursday this week. Judging by the market’s reaction to the CPI data on 10 June, any indication that core inflation has peaked already would cause interest rate expectations to fall and risk assets to rally. In crypto, traders will continue to focus on credit risks in the market, and the probability of more liquidations on spot price weakness.
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