Key Takeaways

• After another week of range-bound trading, the SEC sued Binance on Monday
• Most cryptos fell hard, with majors dropping 5-6%
• On Tuesday the SEC sued Coinbase, but BTC and ETH recovered back to mid range
• Futures basis offers few clues; vol markets are over-supplied
• Traders assessing impact of regulatory action on liquidity; CPI and Fed next week
  

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Looking back

Last week the market was flat-lining around $27k in BTC and $1,875 in ETH. Then on Monday the SEC charged Binance with operating an unregistered exchange for securities, amongst other things, and BTC dropped 6% to $25.5k, where it sat for approximately 24 hours. During this time the SEC also charged Coinbase with something similar, before BTC rallied back to $27k.  ETH never even got to last week’s lows, bottoming out at $1,780 before rebounding to $1,875. It has to be said that the price in the majors implies that the SEC action was expected and priced in. Even for the coins listed on the SEC/Binance charge have not dropped that much, for example (with week-to-week changes) BNB (-10%), SOL (-2%), ADA (-7%), MATIC (-9%), FIL (-4%) and ATOM (-5%).  

Flows over the past week have been more balanced between BTC (50.8% buyer) and ETH (49.5% buyer).  We had good selling for LTC (61.0%), DOT (58.2%) and BNB (79.3%); good buying of DOGE (56.7%), ADA (59.5%), LINK (59.9%), and AAVE (58.2%).  By geography, we had good buying from APAC and EMEA; and by client category we had strong buying from banks and exchanges.

Futures basis is marginally lower on the week, with BTC futures on Binance implying 5.5% (-1%) for June and 3.5% (-1%) for September.  Deribit and CME bases are essentially unchanged.  

The vol market has continued to be pummelled by an over-supply of vega, particularly in ETH, where overwriters continue to roll shorts forward, flattening the curves and keeping a lid on the back end. With the large moves early this week, market makers, who have been comfortably short gamma for a while, now feel short, so are looking to cover front end option shorts.  As a result, on the week, BTC atm vols for June are up 1 vol, while September atm vols are down 3 vols. In ETH the impact is slightly different, because ETH keeps realising a low level of volatility, meaning there is even less demand for the gamma, so here, week-on-week, Jun vol is unchanged, while Sept atm vol is down 5 vols.

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Looking ahead

There is not much economic data of great significance to come before the Fed next Wednesday.  China inflation data is due this Friday, but in reality macro traders are now positioning for US CPI next Tuesday and the Fed next Wednesday.  Crypto traders, meanwhile, are still monitoring the impact of regulatory action against Binance and Coinbase. In that context, the recent price action is interesting and perhaps informative. For almost a month, BTC has been stuck mostly in a well defined $26.0k-$27.5k range, with one trip on each side of the range, firstly to $28.5k in late May, and then to $25.5k this week. The fact that both highs and lows of the range have now been broken, and yet here we are back at mid-range, may mean we are in for another few quiet weeks.

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Buy/Sell Ratio by Category

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Buy/Sell Ratio by Region

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All data sourced from our real time systems supporting global 24/7 crypto liquidity provision

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