July 21, 2023

Desk Commentary - The Thirteenth Step

Rounding out the third week of the third quarter, crypto majors failed to make anything resembling a decisive move, with sloppy, if not entirely dispassionate, trading marking in the back half. Front-end vols continued to sag, leaving the market awash with significantly higher gamma, all else equal, at the $30,000 and $1,900 points, with no material progress in either direction of the Ripple ruling.

A lurid slide from ~30,400 to 29,600 similarly could not catalyze any substantial demand for shorter-dated optionality, and 1month-1year at the money IV spreads eclipsed 13%. The collective upshot of such dynamics, which has also been reinforced by market chatter, client dialogue, and industry-wide analytical work product, is that it's more a matter of 'when' than 'if' a constructive trajectory for cryptocurrency prices will resume. From larger participants in options markets who seem happy to hold on to relatively more expensive longer-term lower-delta instruments to recently announced VC raises by marquee crypto players, pricing and prognostications seem geared to the fourth quarter of 2023 and beyond, with a resurgence in more fundamental narratives driving price action in names like LINK and renewed excitement swirling for once-moribund defi tokens. Bloomberg Insight special reports on crypto have once more highlighted the beneficial 'S Curve' dynamic of inflection points in adoption rates and the concurrent capacity for geometric returns in digital assets as a function of Metcalfe's Law1. Even Larry Fink, in the past weekend's CNBC interview, concentrated on more secular trends, lamenting the multi-year depreciation of the dollar and waxing eloquent on the capacity of cryptocurrencies to 'transcend' such vicissitudes.

Yet with overnight implied volatilities sitting at ~25% in BTC and the July monthly expiry, which also includes the FOMC decision, languishing just over 30%, few seem particularly concerned about the potential for variance on a compressed horizon. Risk asset markets, particularly for tech stocks and other high beta equities, remain supportive as the NASDAQ nears all-time highs and even troubled COVID-era darlings such as CARVANA find fresh, enthusiastic backing.

In that vein, the texture of the options tape for tenors at or inside 1month remains decidedly offered. Top-of-book interest to sell as much as 15,000 units of ETH through mids served as a testament to the degree of apathy on the gamma front. By contrast, determined bids for September and December risk reversals (buying ~34,000-35,000 strike calls vs. selling 27,000-28,000 strike puts) in BTC served as a reasonable gauge of an ascribed distribution over the coming months. Given that the clock is now ticking on both a response from the SEC on the barrage of spot-based ETF filings, which were submitted to the Federal Register this past week, as well as a potential ruling on Grayscale's petition, such structures offer appropriate gearing for positive outcomes on either front, while selling out of downside protection that, as of now, few seem to feel is warranted.


1. “Metcalfe's Law is a concept used in computer networks and telecommunications to represent the value of a network. The law states that a network's impact is the square of the number of nodes in the network. For example, if a network has 10 nodes, its inherent value is 100 (10 * 10). The law also suggests that as a network grows, its value grows much faster than its user base.

Robert Metcalfe, the inventor of Ethernet, proposed the formulation of network value in terms of the network size (the number of nodes of the network) in the 1980s. The law was later named Metcalfe's law.

Metcalfe's Law is one of the foundational principles of network economics.”

Written By

Gordan Grant

Managing Director, Trading and Sales


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.

Market Insights

Sign up for crypto market analysis from the Genesis team.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Market reviews subscription sculpture