Key Takeaways

• Crypto majors were grinding higher in slow trading most of the week
• LTC again outperformed on hash rate all-time highs
• Futures basis tightened again in line with spot strength
• Vols continued to grind lower as BTC realised vols hit the 20’s
• China trade data out this week, then FOMC and US CPI next week

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Looking back

Crypto majors have ground higher over the past week without any clear impetus, making fresh post-FTX highs, as traders have started to focus slightly less on FTX/credit fears, and slightly more on macro, where benign data and the China zero-COVID policy U-turn have allowed equities to continue grinding higher last week.  BTC rallied from $16k to $17.4k and ETH from $1,160 to $1,300, before both gave back a few percent.  LTC again outperformed, rallying from $78 to $84 as hash rates continued to make fresh all-time highs.  

Our flow data again shows that our franchise had a strong bias to sell most tokens, with the notable exception of BTC which was fairly balanced.  We saw the strongest selling from the Western hemisphere, while APAC continued to accumulate.  

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Futures basis has tightened again in line with the moderate spot strength, with Binance Dec BTC futures traded up from a 1% (annualised) discount to a 0.5% premium.

Implied vols remain weak, with BTC Dec atm vols hovering around 47-48%, still a hefty premium to spot volatility which has realised only 25-30% over the past few days.  The market is pricing a large vol premium for 16 Dec (49%) over 09 Dec (40%) options, as we have limited macro data until the Fed and CPI next week.  

Looking ahead

With little macro data, trading conditions could remain very quiet this week, as the market waits for the Fed and CPI data next week.  A directionless market tempts players to get short gamma, and for those brave enough to do so at such historically low outright levels, the risk premium is indeed high.

But with equities running into resistance at current levels, and key data points coming out next week, one wonders whether owning some options might become the right play later this week.

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All data sourced from our real time systems supporting global 24/7 crypto liquidity provision

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