Monday Alpha #36

TL;DR: Welcome To Chop City.

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: Welcome To Chop City

BTC ATM IV

  • 1W: 60.19%

  • 1M: 57.03%

  • 3M: 58.72%

  • 6M: 59.44%

  • Index Price: $100,666

  • DVOL: 59.60

ETH ATM IV

  • 1W: 71.55%

  • 1M: 66.841%

  • 3M: 68.54%

  • 6M: 69.45%

  • Index Price: $3,102

  • DVOL: 68.29

Note: Check front end.

Marty's Thoughts / Recap

Two weeks ago, during the dip (yellow circle below), we wrote the "Reality" or "Chop City" newsletter, where I included my boomer rant and even mentioned that it might have been a pico bottom. Turns out, it was. We saw a sharp reversal, with ETH spot prices climbing $500, BTC even more, only to return to the same levels two weeks later. Welcome to Chop City: majors stuck in the same range, while memecoins were obliterated.

Over the past two weeks, we saw Trump assume office, launch a crypto working group, and Deepseek news hit the market. If you were trading the news and managed to move quickly, there were big wins. But if you were banking on follow-through from any of the headlines, you got chopped to bits. It was a wild ride… Trump launching memecoins, BTC swinging 5-10% within hours, and still no sign of a US BTC strategic reserve (yet). Honestly, last week aged me 25 years at minimum.

People need to remember that we ran up from the mid-60ks to over 100k in a matter of weeks. A lot of the good news was front-run, and much of it is already priced in. BTC wasn’t the first thing Trump signed an Executive Order on; remember that the average American, or any regular person, really doesn't care about crypto. In the sense that no one cares, we’re still early. Crypto has grown large enough that institutions can no longer ignore it, and they’ve found products they can profit from. That’s why institutions are here.

When it comes to onboarding more users into crypto, the path forward isn’t entirely clear. The most effective way might be to get people using crypto without them even realizing it. I don’t believe the future lies in everyone holding their own keys, with 1000 chains, and acting as their own bank. While there will always be a segment of users who prefer that approach, the majority of people value the perceived "safety" and "security" of traditional finance. I use quotes because, as we know, institutions can blow up and rinse their customers, which self-custody could theoretically prevent, but that’s not the world we live in, nor is it what most people want.

We discussed this topic with CryptoISO on the stream two weeks ago. We agreed that platforms like Coinbase (or equivalents) will serve as the gateway to DeFi for the average user, often without them even realizing they’re participating in DeFi. Interestingly, the day after our stream, Coinbase announced a partnership with a borrowing/lending protocol to offer BTC-backed loans. This is just the beginning, with many more integrations likely to follow this model.

A quick note about Brazil: I attended a panel last year featuring a top crypto lawyer in Brazil, who highlighted an important regulatory point. The Brazilian regulatory body does not allow institutions to offer services or derivatives to retail customers without the appropriate licenses. Products like ETFs and futures can be accessed through regular brokers, but services like those offered by AAVE currently cannot reach Brazilian retail customers directly. I always pick on AAVE, but it's a good example.

For AAVE, this would require either establishing a Brazilian entity with a local office, obtaining their own licenses, or partnering with a licensed entity to offer such services. The licensed entity would act as the customer-facing party for legal purposes. In this case, the user wouldn't control their keys. For example, we’ve seen Circle partner with NuBank and BTG to provide USDC services to Brazilian retail customers.

Aside from SaylorMoon and a few smaller players following suit, no major entity has adopted the Bitcoin reserve strategy. Even the U.S. government has only taken a preliminary step, forming a working group to explore the idea of a digital asset reserve. They’re not buying more Bitcoin (yet)… they’re simply having a roundtable discussion on how to move forward. This will most likely look like the US will hold seized assets instead of continuing to auction them off. The U.S. digital asset balance sheet currently sits over $20 billion USD. While this is a positive shift, it’s far from the grand narrative many Bitcoiners envisioned… “THEY’RE GOING TO GO OUT TODAY AND BUY 1 MILLION BITCOIN!”

So far, we’ve seen no significant follow-through from major players indicating they’re ready to hold Bitcoin on their balance sheets. As for price, it’s not that momentum is entirely gone, but much of the good news is already priced in. That’s why we aren’t at the $150k levels many were expecting.

Reminder: As I always say, Bitcoin is just another asset class, and over time, it will continue to rise against fiat.

Where does that leave us? Simple answer: on the chopping block.


From top to bottom, 2-week returns in large caps, mid caps, and small caps. Where do we even start? In my last newsletter, I highlighted it was preservation mode; today, markets are all over the place. Majors are mostly green over the last 2 weeks, and memes continue to be sold off. One interesting thing for me into 2025 I would like to see is staking on the ETH ETF, and with LDO up 27% in the last 2 weeks, it's just something to pay attention to.

I'm not sure who the official partner would be for staking, but this ties back into the above point: the user won't even know they are using DeFi. They will be in an ETH ETF that gets native yield, but in the back end, it's DeFi. With native yield, the growth of structured products can continue to increase and allows for an offering that is much more robust for these institutions to sell to clients. That native yield part allows for the creation of various payoffs you cannot build unless you have that fixed reward rate.

Even though the reward rate is around 3%, you can build structures like a Principal Protected Note (PPN for short) that allows you to offer the customer upside returns with no loss of their initial principal amount. Crypto natives and retail investors hate this stuff; they don't understand it, nor do they care for it… BUT this will be eaten up by TradFi, they love this kind of stuff.

Quick chart dump below;

Funding is overall reset, besides HYPE. Anyone doing this funding play? Buy spot HYPE, sell Perp, collect funding which token is on the chopping block.

Europoors are in control of price returns the last month.

Basis is dwindling this month, now sitting around 10%, from a high of 16ish%.

For the past month, Friday has been our big winner in terms of average return by day, with Sunday being our biggest loser. People buy on Friday with hype going into the weekend — just in case something happens, futures open is on Sunday, and if nothing happened, it gets sent back down.

Charts from Velo Data: https://velodata.app/

Interesting week of trades. Seem to be all the same type and sizing leading us to believe it was from the same entity. I don't think I have ever seen anything like this on GreeksLive ever before where one shop is in control. Super short duration, it will be interesting to see next newsletter if this type of play continued from the same shop.

Wrap up

The AI bubble is getting popped by Deepseek. The space got shaken over the weekend, sending ripples through the market as people question how a small team with a small budget can outcompete US companies that are raising and spending billions to achieve less impressive results. This news is new, so it will be a developing story we will cover over the next couple of weeks/months. We will spend some time researching it more before we put out an article or make it our main talking point for the article.

For the week, you want to pay attention to Wednesday's FOMC announcement, the US GDP on Thursday, and PCE on Friday. This week is indeed… a BIG WEEK. Whatever news comes out this week will guide these markets until the end of March when the next FOMC meeting comes.

Welcome to the chopping block.

If you are interested in learning the basics of derivatives, please check out the current edition of the academy here: academy.premia.blue. We will spend time on the next iteration of the academy making it more practical with how-to tutorials on creating various payoffs or hedging different scenarios. If you would like to see a specific article, please reach out, and we will include it on our to-do list!

Thank you to all the readers who make this newsletter possible; we are sitting at about 4000+ email sign-ups, with thousands of readers every two weeks. As for the Options Talk Show, if you or someone you know wants to be a guest, feel free to DM me; we are booking out until April 2025 already!

Recap:

  • Coinbase and institutions are retail access to DeFi

  • Structured Products Are Coming

  • Chop City, Keep Surviving

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