Market Data #14

TL;DR: One TikTok Campaign Away, ETHE Discount To NAV Widens, Basis Remains High, April Seems "Cheap”

Author

Marty
March 25, 2024

Gm Anons, the alpha is free on Mondays.

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TL;DR: One Tiktok Campaign Away From Fireworks

BTC ATM IV

  • 1W: 69.86%

  • 1M: 74.70%

  • 3M: 79.04%

  • 6M: 81.41%

  • Index Price: $69,861

  • DVOL: 75.39

ETH ATM IV

  • 1W: 71.16%

  • 1M: 74.63%

  • 3M: 80.76%

  • 6M: 81.05%

  • Index Price: $3,577

  • DVOL: 77.06

Marty’s Thoughts: Overview

Disclaimer: I wrote this earlier this morning, prices and vol handles have moved, I will put most of the ideas and thoughts here and keep the info under the charts short.

The only things on my list of things to watch are… Options on the current Spot ETFs, and the ETH ETF.

Let's start with the easy one first: ETH ETF. I'm happy to be wrong here, but ETHE — Grayscale product — premium is dropping quickly. Currently sitting at a -20% discount, it was at a -8% discount at the beginning of the month. With an ETF approval this premium will go to 0 instantly. I am not 100% certain of a ETH ETF denial or push, but this is a big indicator of a push. If you wanted to take the other side of the trade, you could purchase ETHE and wait for an approval for a free 20% gain at current prices.

ETHE Premium

Into the second thing on the list, options of the Spot BTC ETFs. The decision to approve options on the ETFs has been pushed by the SEC, it's not a matter of if, but more when these options get approved. Let's go through the scenarios.

  1. Options get approved, institutional vol sellers come in and hammer vol into the depths of hell, BTC becomes a 20v product, but continues to climb up and to the right forever.

  2. Options get approved, institutional vol sellers come in and try to hammer vol into the depth of hell, retail notices this, a TikTok campaign or equivalent comes and we squeeze all the Alabama Gamma there is to be squeezed pushing price quickly, and then scenario one comes into play at some point.

What happens between now and options on the ETF? No clue. Halving and presidential election year, vol climbs then gets crushed post events, recovers quickly, and we continue into the end of the year higher in price than we are now. That would be my perfect scenario, though I'm not sitting here trading directionally.... December vol was cheap at 50/60/70, currently it's sitting at 80… and if this is a 100v product there is still more to go.

As we look into the next event — the halving in April — April expiry feels "cheap” in the high 70v handle, one would expect 80-100+ at or near the event. As people pile in with uncertainty, vol climbs. Post halving, IF ETF inflows are still as strong as they have been then this just becomes a simple supply and demand play. Not enough supply and more demand, price goes up.

I’m not a macro genius, but I can sure larp as one. Overall it seems like the FED is going to do everything in its power to pump markets into election time to make current party seem like the best President the world has ever seen, for better chances of re-election. Though there is a long way between now and November. I would expect large drawdowns and please watch your margin and leverage pimps.

Weekly Insights From GreeksLive

Over the past week, the Greeks.Live Block Marketplace has had a wide range of trades come across the tape. At number 1, a 75000/80000 May Call Spread is a simple way to express upside interest post halving. You also had BitGo CEO on air last week saying "80k by May". I thought that his statement sounded a lot like financial advise, and not sure how BitGo compliance let that one on air… but here we are. Aside from the Call Spread, most of the trades have expressed downside interest, maybe as a hedge as the market has been on up only mode.

Overall trading volume on Greeks.Live has been increasing month over month! For those seeking advanced trading tools such as Dynamic Delta Hedging, please check them out.

Implied Volatility Structures

As I mentioned, April feels "cheap” at 76. With the Halving and ETH ETF announcement in May, you may want to take a look at the April expiry.

IV's across the board have risen from the depths of the low vol regime hell last year. BTC is a 100v product with no options on Spot ETF yet, and a halving event coming up… Feels a little calm before the vol storm. Expecting vol to climb into the event, with a crush after.

Annualized Basis BTC & ETH CME

Just a quick look into crypto majors Basis. It’s a fairly simple trade, hold spot and sell the dated future. Basis trade is an easy trade to execute and hardly have to manage. This type of trade would have a fixed payoff, a trade one would put on to profit regardless of price direction. When basis gets into the 20% you can see it get hammered down by traders.

Recap:

  • ETHE Discount To NAV Widens

  • Basis Remains High

  • April Seems "Cheap”

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