Monday Alpha #31

TL;DR: This Time Actually Was Different

Author

Marty
November 18, 2024

Monday Alpha

Please note that Premia does not provide investment advice, and nothing herein should be construed as such. Anyone considering trading or holding derivatives or crypto assets should be aware that the risk of loss can be very high, and it is upon each individual to seek advice from an appropriate professional advisor.

TL;DR: This Time Actually Was Different

BTC ATM IV

  • 1W: 62.65%

  • 1M: 57.48%

  • 3M: 56.48%

  • 6M: 56.61%

  • Index Price: $92,300

  • DVOL: 59.19

ETH ATM IV

  • 1W: 68.96%

  • 1M: 64.57%

  • 3M: 64.26%

  • 6M: 64.49%

  • Index Price: $3,146

  • DVOL: 65.84

Note: Front-end lifted

This Time Really Was Different

Last newsletter we wrote "This Time Feels Different” played out perfectly. https://blog.premia.blue/p/monday-alpha-30 Front-end vols got hammered, prices increased, and chilling in spot played out well for any of our readers. Sure, you could have gambled on a memecoin, hit a home run… but you also could have gambled on a memecoin and lost it all.

We never try to give our readers strict advise to follow, just an overall update of current market conditions leaving the reader to make their own decisions. I’m sure you could of bot vol within the last 1-2 weeks, and depending on what you bought, you would have cashed. I saw a lot of people on X posting options PNL… This is quite rare that non options traders all cash… I would assume it goes back to a vol is meant to be sold regime here now.

Let’s give an example. If you bought front-end like weeklies on election week you most likely got destroyed, but if you bought Nov or Dec outright calls you cashed due to price increase. Put buyers destroyed.

I have seen a lot of euphoria on the time line, which is fair! We are here to bring you back to reality through the following 5-10 minutes of reading. Today, we will cover the vol crush and relevant market data. Buckle up pimps.

Trade Insights From Greekslive

We’re going to quickly cover the largest block trades taken through Greekslive the past 2 weeks. A lot more upside exposure put on as to be expected when we went +30,000 on Bitcoin in a week. One interesting trade is the short 300k strike, selling calls to moonboys. The premium is somewhat low for that high of a strike, and as always we don’t have a look into their complete portfolio… So maybe some rebalancing, margin clear up, or something of the like.

BTC & ETH ATM Implied Volatility

Front-end finally lifted for the election as everyone remembered OH SHIT THERE IS AN ELECTION THIS WEEK. I would’ve liked to see it more gradually climb instead of the week before, but it is what it is. As expected, front-end sharply sold off post election. The election results came fairly fast compared to other years, and there has been no dispute for days/weeks post election, making even long term vols flat. Again, front-end is now slowly lifting — something to pay attention to.

BTC & ETH Implied Volatility Term Structures

Just to quickly show and cover the whole IV term structure related to the section above. Front-end is still lifted compared to back-end.

Crypto 1-Month Returns

Green upon green

Some more green

Still green

From top to bottom we have large, mid, and smol market caps’ 1-month returns, with mostly all being in the green. Bitcoin is back, the king is back baby. ETH is lagging compared to rest of market, this is due to a lack of interest, memes moving to Solana, and no one wanting to pay major $$$ for gas.

There is a theory that people keep pressing, that ETH will make a comeback… IDK sounds like cope to me pimps… Check ANYTHING/ETH and you would have outperformed. The spotlight is not on ETH, but that doesn't mean it cannot go up… Maybe it just doesn't go up as much as the others. ETH is the home of purist DeFi and borrowing/lending while providing network security for others (L2s) to build on.

Total BTC & ETH ETF Flows and Returns

  • BTC ETF Flows: $27.53b

  • ETH ETF Flows: $191.1m

Still! Bitcoin is the clear winner here. It has reclaimed the crown. ETH TOTAL inflows just turned positive for the first time ever… A lot of people were unwinding the Grayscale trade which was in the billions… They bought ETHE at a discount, then took profit when ETHE turned to the spot ETF and the discount to NAV closed.

Moving forward, these large funds are looking at a juicy basis on ETH. I know I bashed ETH earlier, but there is hope… The current ETF does not include staking. This seems to be a flaw with the ETF, since the whole point of ETH is native yield. The ETF providers had to cut staking to get the ETF approved, but now the tides are changing. Bitwise just acquired a staking service, and I would expect ETH ETFs to start to refile and include staking.

Marty's Thoughts On The Future

The future seems bright with a regime change in the US, allowing for a more crypto friendly atmosphere. I have always said that being anti-crypto is being anti-innovation, and the whole USA is built on innovation. There are still laws and regulations around what is a security and what is a commodity at the base level, and this will not change, it will just expand. Memes and rug pulls will not be tolerated in the US. I am still doubtful that US retail gets access to perps too. Happy to be wrong. The regime shift is more around the legality and tax guidance changes that are to come allowing for more participants in the space.

There are still some structures that cannot invest in crypto products, so expect this to change as crypto is now in the spotlight. If there is a product for Blackrock (and their peers) to sell… They will sell the shit out of it.

I would expect to see more and more ETFs being listed in the future, not sure if they pick up volumes as much as we’ve seen with Bitcoin, but portfolio managers and funds will always build products and sell them to clients. Even if it’s not very large, there is always a risk appetite for niche products. By that I’m referring to the likes of SOL potentially getting an ETF.

Another thing to pay attention to is ETH ETFs starting to include native yield. This will be very attractive to some investors, increasing inflows. I mentioned earlier that Bitwise acquired a staking service just last week.

Lastly, I would expect crypto index basket products to gain more and more adoption and popularity over time. You could build options around these, and even more complex structured products.

The future does look bright. That doesn't mean ape memes blindly and be a gambler… If you made life changing money, take some off the table, set aside for those tax bills, upgrade your house, pay your kids school… don't be a retar dio and give it all back.

Thanks for reading pimps, see you this Wednesday on the Premia x Marty show, and Mon/Wed/Fri on the Eden show with the guys.

Recap:

  • Spot and chill would have been best for most participants

  • ETH ETF could start to include staking

  • Front-end vols are lifted, pay attention

  • Bitcoin is still king

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