July 14, 2023
Walking into the midweek session, crypto markets seemed set for further muted, if supported, meandering price action provided inflation figures continued to underwhelm; PPI printed at half of expectations. Meanwhile, despite ostensibly solid support at $30,000, bitcoin found itself pinned by presumptive government selling of another block of Silk Road tokens.
Yet Thursday’s most enthralling catalyst was neither macroeconomic data nor fears of heavy supply. Instead, a long-awaited judicial ruling on the status of Ripple jolted markets sharply higher just ahead of midday as players leaped into action and bid for a range of digital assets long plagued by the pall of potential ‘security’ branding.
Major exchange re-listings saw XRP lurch upwards by nearly 100% in a lurid fashion from ~$0.50 to ~$1.00. Meanwhile, ETH pushed once more above $2,000 as robust demand for optionality materialized via clips of meaty September and December options, suggesting that the incessant dealer derivation of longer vega on higher spot has come to an end, at least for now. Clips of $1800/$2200 and $1900/$2100 strangles for Q3 ’23 and Q4 ’23 quarterly expiries were paid aggressively, implying a rush to flatten short vega risk. At the same time, on the OTC side, our franchise saw fresh appetite for upside in beleaguered alts such as SOL, which witnessed gains of over 20% in a gappy, disjointed tape.
Other notable flows included BTC call strike roll downs by sharp directional players and buyers of ETH gamma ahead of the 40% level from cross-over names. Both were definitively validated by 5+% moves in majors over the afternoon before profit-taking saw BTC revisit ~$31,000, ETH sag towards $1,975, and XRP plumb $0.80.
More cyclically, the trend of persistently decreasing block volume in ETH compared to BTC could be stabilizing, particularly as ETH/BTC again bounced in a double bottom ahead of 0.0600. The saga of underperforming ETH volatility may also be facing a reset, particularly if the week's retest of $2,000 turns out to be something more than a representative example of another failed breakout. With skews remaining firmly in favor of calls, it is not unreasonable to expect at the money vols to perform if prices successfully pierce year-to-date highs. As the overall narrative impetus builds on the back of ETF filings, new venue launches, favorable regulatory resolution, and a potential macro tailwind of taming inflation, an apathetic summer for implied volatility could face more scorching conditions ahead.
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