Key Takeaways

• Crypto trended lower as long positions were trimmed ahead of CPI
• SEC forced Kraken to close their ‘staking as a service’ to US investors
• NYDFS also ordered Paxos to stop issuing new BUSD
• Futures basis weaker in line with spot lower
• Vols lower with spot, again making nonsense of the bid for puts in risk reversals
• Market toying with supports at $21.5k and $1,500 as we approach key CPI data

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Looking back

Crypto spent the week playing catch up to the broader USD strength, which followed the big NFP number 10 days ago, but general sentiment was also clearly hit by regulatory pressure on different fronts.  Notably, Kraken and the SEC reached a settlement in which Kraken agreed to halt its on-chain staking services for US clients; and NYDFS ordered Paxos to stop minting new BUSD (Binance USD pegged stablecoin), which traded down to 0.9950 early Monday, and caused Tether to trade around 20bp premium to parity as traders rushed to switch.  

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On Thursday BTC broke out of the bottom end of the $22.5/$24k range it has been in for three weeks, although $21,500 support still holds for now.  ETH remains just above support in the wider $1,500/$1,700 range it has occupied for a month.  In general, it feels that short term players have trimmed length slightly ahead of the week’s big risk, US CPI data, which comes out tomorrow.

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Our flows over the past week have been fairly even, with some exceptions. Across coins BNB saw incredibly heavy selling by our client franchise, even as all other coins saw good two way trading. Similarly, banks were standout sellers when breaking the data out by client category. Finally, although the Americas saw even flow, EMEA was skewed to sell while APAC bought quite strongly.

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Futures basis has eased in line with spot prices; BTC March basis has fallen 1.5-2.5% on major exchanges, to trade around +3.5% and +2.0% respectively on Binance and Deribit.  Implied vols have sold off over the past week, again displaying strong positive correlation with spot returns.  March atm vol has sold off from 53% to 46%, perhaps offering a decent opportunity for punters who wish to take a directional bet over the data.

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Looking ahead

This week will be all about tomorrow’s CPI numbers, and on the back of that huge payrolls print, the market will be on the hunt for signs that the inflation slowdown is itself slowing, or worse still, reversing.  Given that BTC and ETH are looking as if they may go into the numbers sitting on key supports at $21,500 and $1,500 respectively, high inflation numbers could trigger a large move lower.   But given the hawkishness that has crept into consensus opinion since payrolls, one has to think that more benign numbers could trigger large buy flows.  Either way, it feels like we could have a big move on this data point.  Rents and used vehicle prices will be the keys to look for in core inflation, while petrol prices could be key in headline numbers.  

Buy/Sell Ratio by Category

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Buy/Sell Ratio by Region

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