• After a wobble pre-Fed comments, crypto prices recovered and ended July strongly
• Powell relieved markets by stating future rate rises would be data dependent
• Resistance levels at $25k and $1,800 are holding so far; with cycle highs around $24,666 and $1,792
• ETH/BTC cross remains in focus, challenging key resistance at 0.073
• Futures basis is higher, possibly implying the return of retail participation
• Options markets have been active for BTC calls, and ETH vols remain high
• First major data since last week’s Fed rate rise this week, with PMI’s and then NFP announcements
Crypto was volatile last week due to a nervy risk sell-off pre-Fed announcement, and then enjoyed a strong rally in the wake of Powell’s change of tune, confirming that future rate increases would be data dependent. ETH peaked around $1,792 on Thursday, and BTC topped out around $24,666 on Saturday.
Flow data this week shows that our clients had a continued preference to buy BTC over ETH. In other coins, we saw strong selling again in XRP, and strong buying in DOT, AVAX, and EOS. In terms of geographical breakdown, APAC clients were our better buyers, and EMEA clients were better sellers. Broken out by client category, we saw better buying from funds and banks, and better selling from crypto exchanges.
Futures basis has finally moved, after a long period of flat-lining. BTC basis has risen from 1.25% to 2.25% at the 1 month tenor, and from 1.75% to 2.75% at the 3 month tenor, driven primarily by BTC borrow demand waning. On the OTC lending side, altcoin lending supply has begun to pick-up again, and stablecoin borrow demand has begun to return.
Options markets have been quite interesting again. BTC vol was predictably pumped going into the Fed with the curve flat at 75%, but sold off hard afterwards as a seller of Aug $25k calls sold aggressively into the spot rally, pushing 1 month IV down to 68% in short order. On Friday, with spot continuing to rally, and DOV auctions closing at the weekly lows in vols, a fresh buyer came in to buy the same Aug $25k strike, pushing Aug ATM vol back up to 73%, and Aug 25del r/r down from 7 to 5 vols for puts. ETH vols have seen relatively less flow this week, although their standout feature remains the premium to BTC of around 25 vols.
Recently traders have been largely ignoring any economic data except price/inflation announcements. This week will be different, and traders will be keenly watching for Manufacturing and Services PMI’s (Monday and Wednesday respectively), and Non-Farm payrolls and the unemployment rate (Friday).
Crypto bulls believe the buying (on the back of Powell’s pivot) has legs, and are looking for breaks of $25k in BTC and $1,800 in ETH, in which case, targets will be set at $28k and $2,300 respectively. Bears feel this recent bullishness is just a Powell-inspired relief rally in a bear market, and recent highs are technical failures, which will result in moves back to the old ranges in which we were active since mid-June.
The common denominator is that most market participants are trading tactically, and neither group is looking to position medium to long term, while the macro outlook remains difficult to read.
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