Research Summary
The report discusses the recent surge in Bitcoin and Ethereum prices, driven by factors such as clear signals for BTC Spot ETF, Deribit Margin Model adjustments, and under-allocated Crypto Funds. It also highlights the role of risk management, forced short closure, and vast profits in this rally. The report provides a detailed analysis of the market movements, including the impact of various trades and strategies.
Key Takeaways
Market Dynamics and Key Trades
- Initial Market Movements: The report notes that the first signs of the rally were seen on Sunday, with Ethereum (ETH) reaching 1625. Bitcoin (BTC) and ETH found buyers on CME open+APAC, with BTC touching 31k and ETH 1.7k by the European Open.
- Opposing Flows in BTC Options: Despite the initial rally failing at 31k, there was a total of $10m of premium that flooded the market with Gamma via profits taken in Oct31k+Nov30+31k Calls. These entities did not appear to roll profits.
- Upward Momentum: The report highlights that upward momentum was building, with BTC spiking from 31.5 to 34k within minutes and ETH from 1.7 to 1.8k. This retrace back to 32.5k/1750 just fueled another move to 35k/1850.
- Impact of Short Covers: The report notes that large short-covers had to be executed, contributing to the market volatility. On ETH Nov1.7k+Dec1.9k Call covered 60k. On BTC Oct32+34k, Nov29k, Dec 30k x5k.
- Role of Long Options: Long options held on to their profits as long as they could, before rolling or dumping. Those that rolled included Dec 34-40k, Dec35-40k, Nov33-35k x6.5k. Those that dumped included Jun27k + Dec36k Calls x4k (DSOB).
Actionable Insights
- Monitor Market Dynamics: The report suggests that market participants should closely monitor market dynamics, including the impact of various trades and strategies, to understand the factors driving price movements.
- Assess Risk Management Strategies: The report highlights the importance of risk management in volatile markets. Market participants should assess their risk management strategies and adjust them as necessary in response to market movements.
- Consider the Role of Short and Long Options: The report notes the role of short and long options in market movements. Market participants should consider the potential impact of these strategies on market dynamics.
- Investigate the Potential of Crypto Funds: The report mentions the role of under-allocated Crypto Funds in the recent rally. Market participants should investigate the potential of these funds and consider their role in their investment strategies.
