Algorithma Crypto Weekend Musings - Eyes on Big Picture
Crypto market structure, capital flows, market movers & narrative
While markets have been choppy, and Elon has been at it again, keep your eyes on the prize here - forest for the trees. Don’t be an impatient trader. If there are no opportunities that excite you, you don’t HAVE TO put on a trade. There is no direction to the crypto market yet, since the crash of May 19th. Bulls and bears are struggling to gain any ground. We are in no man’s land, and Pomp covered it well here. Key takeaways this week from the article:
BTC is still rangebound between 32K-40K
Exchange flows have plateaued, no real directional trend
Stablecoins are waiting on the sideline
The perp traders that didn’t get wrecked over the last few weeks are waiting on the sideline (futures open interest and number of futures contracts is flat)
Selling is still mostly being done by younger coins
Long term holders still adding, offsetting selling from short-term holders over the last week
Retail buying heavily (possibly attracted by lower prices)
Bitcoin remains undervalued compared to the capital flows on-chain
On Chain metrics that we follow, are not showing any significant activity yet. BTC & ETH flows are also quiet, implying no major directional movement either way. USDT liquidity is minimal on the exchanges. We spoke about Tether burning 2 bn USDT few days ago signalling a lack of demand. A burn that hasn’t happened in the last 6 months. Definitely not bullish at all.
Implied volatility (IV) is still coming down but not that fast yet. So what does not all mean - we ar basically in no man’s land. $35K needs hold, and then $32K needs to hold, or we go lower. On the upside we need to comfortable cross $42K, stay there for a while, see uptick in unchain activity as well as exchange activity and ONLY THEN we go see $45K plus. Too many ifs and buts I guess. $50K, in that case becomes major resistance once we cross $45K. That will be around $3000 for Ether.
All in all. watch $35k, $42K, $45K and $50K. Till then have patience and don’t indulge in any over leveraged trades. This is not financial advise and you might b better placed to do something else. We are just giving our personal views here and may or may not trade as per above advise or change our stance at short notice as market moves.
On the options front - BTC skew is now just below zero. Options market price in a 30% probability of $42K and 20% of $32K by the end of the month. Down from 35% and 25% last week . $40K remains the crucial level for both puts and calls. Fear is clearly still there in the options world as well, but at the same time bets on OTM Calls in Q4 are seeing some interest. but like spot and futures above, we expect rallies to be faded and more downside as of today.
Enjoy the weekend and don’t forget to tell your family how much you love them. HODL your family, and HODL the coins you love.