Key Takeaways
Looking back
Despite some sharp price movement over the past week, crypto has failed to set a solid new trend in either direction, with BTC bouncing off $16,750, but failing to clear $17,450, while ETH has been constrained between $1,220 and $1,300. With BTC bouncing between either side of $17k, that seems like the level to watch, as the market continues to grind through this crypto winter. With CPI and the Fed rate decision coming this week, everyone is likely sitting, waiting, with bated breath for those macro numbers to hit, before positioning for the longer term in the majors. In the alts there was some weakness near the end of the weekend on the back of some lingering concerns regarding Binance’s financial position.
Our flow data showed a clear sell bias across the franchise, regardless of how the data was looked at. By region APAC was the outlier with balanced flows, while Americas had a slight sell bias and EMEA with a much stronger sell bias. A similar story occurs when looking at the coin data with a select few seeing two way trading, like BTC, UNI and AVAX, but many others, such as MAT, XLM, DOG, and XRP, experiencing heavy lhs flow. Finally, all client categories were better sellers over the past week except for banks, which skewed slightly towards the buy side.
Outside of the majors, Binance’s native token BNB suffered a sizable drawdown, an unsurprising outcome given the widespread FUD surrounding Binance. BNB opened the week trading at around the $290 level, before spending the next six days careening all the way down to $220. While it did bounce off that $220 level, and was able to claw back gains up through $240, the token certainly is not in a position of strength, which will likely continue as thorny questions regarding Binance remain..
In crypto specific news, lots of FUD (Fear, Uncertainty and Doubt) plaguing the market about Binance’s ‘Proof of Reserves’, and customer assets. According to DefiLlama, Binance saw a 7 day aggregate outflow of roughly 6.3 billion dollars worth of assets leaving the exchange, with a majority of withdrawals occurring on December 14th. While fears of insolvency may have produced some sell pressure, Uniswap volume and CEX inflows have remained relatively stable, hinting that cryptocurrency users may actually be holding their assets off exchanges, rather than selling via other venues.
Our data shows a week of fairly two-way flow, in contrast to prior weeks. Breaking out by region, there was a fairly even amount of buying and selling, with EMEA displaying a small bias to sell. While flow was roughly balanced in aggregate, looking at the client category data shows some interesting polarisation. Banks were incredibly strong buyers over this past week, while OTC brokers and crypto exchanges were much better sellers. Across our coin offering we saw fairly even order flow, with the exceptions of notable buying interest in DOGE and MAT, and heavy selling of SOL.
While the ETH basis has been relatively stable over the past week, there has been a slight drawdown in the basis for BTC futures on major venues. In ETH, the 1 month basis has remained firm at around -1.5%, while the 3 month basis has held a similar level around -1.5% to -2%. BTC on the other hand saw the 3 month basis grinding down to -1.5%, a move lower from the -0.5% to -1%, where it started the week at.
Despite a slight divergence in ATM vol moves between BTC and ETH options, both markets reflected the increasingly poor sentiment in their 25 delta skew. BTC 1 month ATM vols closed the week at 56%, somewhat higher than the 52% it opened at, while, BTC 1 month 25 delta skew is up from 18% to 22%. In ETH on the other hand 1 month ATM vol is actually down about 6%, getting as low as 64% by week’s end, even as 1 month ETH skew mirrored BTC, rising up to 20%, 6 points higher than the 14% level it started at. With skew higher across the board it’s clear that there’s no shortage of fear in this market, both the immediate fear of headline risk, and the continued fear of a worsening economic picture.
Looking ahead
With major economic events and releases in the rearview mirror, headline risk will be what to watch out for. Although Binance seems to have weathered the storm of withdrawals it was subjected to, as volume on the exchange continues to recover, the market is by no means out of the woods yet.
Besides that, expect crypto to continue trading on macro sentiment, which looks to be dour for the foreseeable future. Despite some cooling of the inflation data, the Fed has shown no signs of slowing their hawkish stance, with Powell signaling he’ll need more signs of improvement before reconsidering the current course of action.
All data sourced from our real time systems supporting global 24/7 crypto liquidity provision
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