Podcast Summary
In the final podcast episode of 2023, Jeff Anderson, the head of APAC at STS Digital, discusses the current state of the crypto market, potential trading strategies, and the future of altcoin options. The conversation also delves into the implications of the upcoming ETF decision and the potential for a bull run in the crypto market.
Key Takeaways
State of the Crypto Market
- Market Projections: Anderson presents a chart comparing the crypto market in 2020 to the projected market in 2023, highlighting the potential for positive spot volatility correlation.
- Volatility Levels: The current volatility levels suggest that the January 2023 contracts could be attractive due to their high implied volatility.
Trading Strategies
- Options Trading: Anderson shares a potential trading strategy involving buying the call wing and selling the underlying futures to take advantage of the expected increase in volatility.
- Event Risk: Anderson emphasizes the importance of considering event risk in the crypto market and suggests that owning some event risk could be beneficial.
ETF Decision and Its Implications
- ETF Decision: The upcoming ETF decision could lead to a significant market move. Anderson advises against getting too cute with trading strategies and recommends focusing on owning some at-the-money gamma going into the event.
- Bitcoin ETF Approval: Anderson believes that the approval of a Bitcoin ETF is a foregone conclusion and that it will happen soon. He expects a short-term price increase after the ETF approval, followed by a settling back to previous levels.
Altcoin Options Trading
- Altcoin Options: Anderson discusses the challenges of trading altcoin options, noting the non-normal distribution of price action and the need to be cautious. He mentions selling call options on altcoins as a popular strategy, particularly for clients with long-held positions.
- Structured Products: Structured products with embedded yield from selling options have also seen good uptake. Anderson expresses optimism about the altcoin option space and the potential for better liquidity and improved spreads.
OTC Market and Credit Risk
- OTC Market: The podcast discusses trading in the OTC market and the challenges of credit risk and lack of third-party solutions. Anderson mentions that structured products and OTC trades with clients make up a larger portion of trading volume than people think, estimating it to be around 5 to 10%.
- Credit Risk: Anderson warns against protocols buying calls on their native tokens and advises caution in such situations.
Sentiment Analysis
- Bullish: Anderson’s sentiment towards the crypto market is largely bullish. He believes in the potential for a bull run leading up to the spot ETF decision and sees the approval of a Bitcoin ETF as a foregone conclusion. He also expresses optimism about the future of altcoin options trading.
- Bearish: There is a note of caution in Anderson’s sentiment when discussing the challenges of trading in the OTC market and the risks associated with credit. He also warns against protocols buying calls on their native tokens.
- Neutral: Anderson maintains a balanced view when discussing the implications of the ETF decision. He expects a short-term price increase followed by a settling back to previous levels, suggesting a neutral long-term outlook.
