August 4, 2023
The operatic rhythms of the media circus saw the attention of crypto markets flit from the weekend's high-stakes drama over CRV exploits and potentially vulnerable levels of collateralization to a fresh ruling in the Terraform Labs case. Eventually, the impetus for a sharp pop higher was found on Fitch's downgrade of the U.S. Government credit rating Tuesday evening, only to once more test 29k as regulatory headlines on Binance brought a momentary gut check on day-trader convictions.
As Fitch joined S&P in asserting that America's standing as a debtor had deteriorated on the back of repeated debt-ceiling purgatory and evident fiscal profligacy, a momentary respite in Tuesday's trade was punctuated by a compelling overture with a 2% gap in bitcoin that ultimately tested 30k.
Back-end vols initially stabilized as did longer-term basis, while gamma continued to trade with an offered tone despite the sudden pickup in realized volatility.
For many crypto stalwarts, what mattered most was the market's rational reflex to buy bitcoin on the back of Fitch's castigating reprisal of the "get your act together" admonition that fellow credit rating agency S&P had articulated over a decade ago. While treasury secretary Janet Yellen lambasted the adjustment as outdated and arbitrary, digital asset markets appeared to disagree, pushing the top cryptocurrency back to the all-important psychological threshold.
Since the downgrade, crypto derivatives flows would seem to suggest that players are upping the ante in their position, with put call ratios plunging below 0.5 and active interest among our franchise to lift front-month quarter delta calls and three-month 25 delta risk reversals, with a pronounced appetite for October upside in bitcoin which has witnessed 1000s of units of 34,000-38,000 strikes print from Tuesday straight through Thursday, even as mid-curve IVs softened.
Curiously, with upside tails prospectively fattening, more sophisticated players had no reservations to dump year-ahead meat and wings in the bitcoin curve, lobbing out chunky clips of 15-35 delta risk that were rationally digested. Meanwhile, year-end vega supply struggled to find takers amidst a flurry of strangle sales that carried over into Thursday flows, where heavy-handed execution put Dec bitcoin downside under the hatchet in blocks of 300x at a time, totaling over 1200 units of cumulative volume.
A chorus of debate continues to grow over the ills (or absence thereof) of the U.S. debt stock. With Bill Ackman announcing size shorts in the long bond just as establishment stalwarts have stood up to decry such skepticism, the narrative of virtually unchecked money supply growth (M2 is less than 5% below its all-time highs of a year ago) and sustained upward revisions to U.S. Treasury borrowing needs, appears to be fodder on which crypto markets are ready to chew with vigor.
Genesis Global Trading, Inc. and its global affiliates (collectively, “Genesis”) do not provide legal, compliance, tax or accounting advice. Genesis is a principal trading firm; it is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing this material, which cannot be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The information contained herein has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances, or requirements of any person, and it should not be the basis for making any investment or transaction decision. THE INFORMATION IS NEITHER A RECOMMENDATION TO ENGAGE IN ANY TRANSACTION NOR RESEARCH MATERIAL.
This material contained herein is confidential and may not be distributed in whole or in part to anyone other than the intended recipients. Unauthorized reproduction or distribution of all or any of this material or the information contained herein is strictly prohibited. These materials are incomplete without reference to, and should be viewed solely in conjunction with, the terms and disclosures set forth on the Genesis website, which are deemed incorporated herein.
The information provided in this communication does not constitute investment advice, financial advice, trading advice, or other advice. If any person elects to enter into transactions with Genesis, whether as a result of this material or otherwise, Genesis will enter into such transactions as principal only and will act solely in its own best interests, which may be adverse to your interests. Therefore, you are advised to make your own assessment of whether a Genesis service that you are considering is suitable for you and ensure that you have the necessary experience and knowledge to understand the risks involved in relation to those particular services, transactions or investments. Prior to entering into any transaction, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences. In this regard, by accepting this material, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice and our disclaimer as to these matters. By accepting receipt of this material, the recipient will be deemed to represent that they possess, either individually or through their advisers, sufficient investment expertise to understand the risks involved in any transactions or services discussed herein and that they have not relied in whole or in part on any of the information provided by Genesis in making such determination.
The trading of digital currency as herein described is an inherently risky activity. Digital currency does not benefit from the protections afforded by the Securities Investor Protection Corporation. A counterparty’s ability to enter into derivatives with Genesis depends on satisfying a number of regulatory requirements imposed on derivatives under the Dodd–Frank Wall Street Reform and Consumer Protection Act and applicable law.
Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers. These indications are provided solely for your information and consideration, are subject to change at any time without notice and are not intended as an offer to sell or a solicitation to purchase any financial instrument. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or economic measure. In preparing this material, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by us. Genesis does not make any representations or warranties, express or implied, as to the accuracy or completeness of the information provided herein. Any estimates included herein constitute our judgment as of the date hereof, are subject to change, may or may not be realized, and are not a complete analysis of every material fact. We and/or our affiliates may make a market in these instruments for our customers and for our own account. Accordingly, Genesis may have a position in any such instrument at any time.
Genesis and Genesis Trading are marketing names for certain businesses of Genesis Global Trading, Inc. and its global affiliates and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the marketing name used. Products and services may not be available to all counterparties or in all jurisdictions. Securities and digital assets are not deposits or other obligations of any commercial bank, are not guaranteed by any commercial bank and are not insured by the Federal Deposit Insurance Corporation. GGC International Limited is incorporated in the British Virgin Islands (“BVI”). Genesis Global Trading, Inc, a Delaware corporation, has been granted a Virtual Currency License by the New York State Department of Financial Services and is registered with the U.S. Securities and Exchange Commission as a broker dealer. Genesis Asia Pacific Pte. Ltd. Is a private limited company organized under the laws of Singapore. Genesis Global Capital, LLC is a limited liability company organized under the laws of Delaware. Genesis Custody Limited is registered as a cryptoasset business with the UK Financial Conduct Authority.
Sign up for crypto market analysis from the Genesis team.