Crypto has been in a holding pattern around recent highs all week, meaning it has lost momentum. The Fed took the middle ground, raised 25bp, and crypto sold off a little but quickly reversed from the range lows. Then towards the end of the week, we had a fresh banking wobble out of Europe with bank equities taking big hits, but again crypto showed no immediate reaction. XRP has had a strong run, rallying around 20% from 39c to 47c, with the bulk of the move coming on Tuesday, after optimistic posturing about the SEC case.
Client flows have again favoured BTC (50.6%) over ETH (46.7%), and showed decent buying of LINK , XLM, and AAVE, with good selling of LTC, AVX, and XTZ. Clients were better sellers of XRP with 52.2% of flows. By region, EMEA were net sellers, with Americas and APAC net buyers. By client category, buying came from retail and OTC brokers and exchanges, while selling came from funds and banks.
Basis has continued to climb steadily on crypto native exchanges; for example June futures for both ETH and BTC on Binance are trading at 4% annualised premia, up from 2.5-3.0 area a week ago. CME BTC contracts remain extremely elevated, indicating a strong preference to be long amongst regulated institutions: March futures are trading at 18-20% annualised premium, and April at 10-12%. With USD rails into crypto in short supply, one would expect these term premiums to remain volatile and highly correlated to spot, as new money struggles to find an entry point, meaning that fresh length must be financed with the limited leverage currently available within the crypto ecosystem.
Options markets have remained active despite the range bound spot market. We have seen large players taking profit, but also rolling long vol positions out and up, implying that although some feel the market may have done enough in the short term, others are increasing capital allocation to a bull run in 2023. As a result, front end vols and call skew have softened, with Apr BTC ATM ~60vol (down ~10 from highs) and r/r ~1.8 for calls (down ~4 from highs); while the back end remains elevated, with Dec BTC ATM ~61.25vol (down ~1.5 from highs) and r/r ~4.0 for calls (down ~0.5 from highs).
Data this week is a little sparse until Friday, when we have EU HICP inflation data for March, Chinese PMIs for March, and US PCE deflator for February. The US data is backward looking so probably less important. On HICP however, markets will be on high alert for higher than expected core inflation, which could give markets a negative read. In the meantime, traders will be watching bank stocks and other areas of the financial system form more signs of stress. In crypto, slow money remains long, but fast money has turned shorter, so we could be due a pullback of sorts. The market will probably buy the dip this side of the 25.2/26.0 support area. To the topside, 28.5/29.0k remains critical resistance to the continuation of this rally, so we can expect plenty of stops and fast moves higher through there. Good luck!
Buy/Sell Ratio by Category
Buy/Sell Ratio by Region
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