June 8, 2023
This week's sweeping regulatory pronouncements saw crypto realized volatility begin to rear its head. After seeming months of coiling in an ornery, reptilian rip-rap price action, the successive Monday and Tuesday swoon-soar tandem on the back of Binance and Coinbase headlines prompted consternation, head scratching and, if nothing else, a recognition that the asset class remains habitually prone to lurid gaps in price action.
From higher beta alts to majors, most cryptocurrencies shed 5-10% prior to Tuesday's news, with limited follow through in the immediate wake of the Coinbase headlines hitting the tape, and many tokens swiftly recovered much, if not all, of those gains within 24 hours.
That resounding rebound higher in gappy, syncopated sweeps, which took Bitcoin all the way back through 27k seemed to invalidate banal perceptions that a full frontal barrage of enforcement actions on the asset class could yet be a catalyst for further downside.
Ex post facto, it seems that an array of factors from technicals (support at 25k and 1800 in majors), to volatility market dynamics (particularly large open interest ahead of the 30 June expiry) essentially won the day, dictating that the lows held and another pause at unstable equilibria is in store.
In the wake of those oscillations, a modicum of incremental demand for gamma surfaced at the 40% level as spot swings amounted to a cumulative ~10% round trip in ~24 hours, justifying far more severe break evens than are priced in to near-dated straddles.
Vega, however, met continued apathy as the last of the late-breaking vol sales by programmatic overwriters saw back end IVs sag with nary a bid inside even as BTC squeezed from 25500 to 27000, with ETH scratching at 1900 having paused methodically $100 lower seemingly hours earlier.
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