Research Summary
The report discusses the current volatile environment for Bitcoin (BTC) and Ethereum (ETH), with both cryptocurrencies experiencing choppy price movements. Despite short-term uncertainties, the long-term outlook remains positive due to increased adoption and significant developments in the crypto industry. The report also highlights potential headwinds, including regulatory scrutiny and macroeconomic factors. It further analyzes the realized volatility, term structure, and dealer gamma positioning for both BTC and ETH.
Key Takeaways
Choppy Environment for BTC and ETH
- Short-term Uncertainty: BTC and ETH are experiencing choppy price movements with spells of selling pressure that have not resulted in significant downside breaks.
- Long-term Optimism: Despite short-term uncertainties, the long-term outlook for both cryptocurrencies remains positive due to increased adoption and significant developments in the crypto industry.
- Potential Headwinds: The report highlights potential headwinds, including regulatory scrutiny and macroeconomic factors that could impact the crypto market.
Realized Volatility and Term Structure
- Realized Volatility: The realized volatility for cryptocurrencies has returned to the mid-20s, with ETH’s volatility surpassing BTC’s due to a breach in the 1600 support level.
- Term Structure: The BTC term structure has moved higher across the curve, driven by protection buying up to November 2023. ETH’s term structure, however, has not received as robust a bid.
- Vol Spread Shifts: The ETH/BTC volatility spread is displaying a consistent downward trajectory across its term structure, even as ETH shows some superior realised performance.
Dealer Gamma Positioning and Strategy Compass
- Dealer Gamma Positioning: BTC dealer gamma continues to manifest a negative trend, with dealers predominantly holding short positions. ETH dealer gamma remains relatively unchanged.
- Strategy Compass: The report suggests that buying calls may be a good strategy given the low vol levels and spot near the bottom of the range. However, it also warns of potential downside risks.
Actionable Insights
- Monitor Regulatory Developments: The report highlights the importance of keeping an eye on regulatory developments, as they can significantly impact the crypto market.
- Consider Volatility: Investors should consider the volatility of BTC and ETH when making investment decisions, as both cryptocurrencies are currently experiencing choppy price movements.
- Assess Market Trends: The report suggests that assessing market trends, such as dealer gamma positioning and term structure, can provide valuable insights for investment strategies.
