Key Takeaways

•  BTC and ETH traded lower last week to remain largely range bound
•  ETH was able to move higher, reclaiming the $1,700 level
•  General bias towards buying last week, especially in EMEA and amongst banks
•  ETH saw highest volume traded across all coins, suggesting positioning ahead of the merge and a potential fork
•  Focus will be on US CPI this week, especially following Friday’s strong NFP

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Looking back

This past week saw both majors lower from the prior week's strong rally, with ETH then performing slightly better. BTC has been range bound, bouncing between $22,700 and $23,400, with a brief dip down to $22,475, while ETH was able to move higher off of the weekly low of $1,570 to reclaim the $1,700 level.

Our franchise flow data shows a general bias towards buying this past week. Breaking it down by region, Americas had fairly balanced flow, while there was strong buying in EMEA. Similarly, across all categories of clients, flow was either balanced or skewed towards buying, with banks showing a strong bias towards buying. Across coins, clients were strong buyers of XLM and AVAX, while EOS and DOT were fairly heavily sold. Although clients seemed to prefer buying BTC over ETH’s more balanced flows, it’s notable that over the past week ETH saw the highest volume traded among all coins.

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As seems to be a general theme in crypto of late, the market moves to note for futures were contained entirely to ETH, as BTC remained fairly stagnant. BTC 1 month and 3 month futures basis are nearly unchanged on the week, at around 3% and 3.3% on major exchanges respectively.

The ETH basis on the other hand has seen a sharp move lower, with the September futures trading as low as $10 below spot, and December down all the way to $40 below spot. As there’s been some chatter from major ETH miners regarding a potential fork around the merge, the market could be entering into a synthetic borrow by selling the future and purchasing physical ETH to take advantage of that. If a fork does occur, and we end up with regular ETH as a proof of stake coin, in addition to a forked proof of work ETH, holding physical ETH would entitle you to the forked asset, which could potentially be quite valuable.

The divergence in narratives between BTC and ETH continues to be reflected in the options market, although admittedly not as sharply as with the basis. BTC’s grinder of a week has sucked the life out of short term vols, with 1 week vols trading 9 points lower, from 73 down to 64. In the back dates though 3 month and 6 month BTC vols are up 1 vol and 1.5 vols respectively. Overall, it feels as though the market expects BTC price action to continue being muted. The BTC 1 month 25 delta r/r is down to about 5 vols for puts from a weekly high of 7, suggesting that there’s not any particularly strong expectations on direction in the near term. On the other hand, while ETH short term vols have fallen some, from 98 to 93, the 3 month is up 7 vols to 104, likely a bet on some potentially exciting movement surrounding the merge.

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Looking ahead

The tone of the coming week will almost certainly revolve entirely around US CPI this coming Wednesday. Following a massive expectations-beating NFP result last Friday, a high CPI print might spur the Fed into more aggressive action than what was originally expected.

Less immediately pressing than CPI, but beginning to loom larger on the horizon, is the upcoming ETH merge. Contention from some major players in ETH has already apparently spurred traders into action, as seen in the term futures basis, and I would expect any related news to have an outsized impact on markets, particularly as we get closer to the merge itself.

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