Research Summary
The report discusses the recent rally in bitcoin prices, driven by speculation around spot bitcoin ETF approvals and exacerbated by the net short gamma positioning of option market makers. It also highlights the decline in the ETH/BTC cross due to the market’s focus on bitcoin ETFs and the lack of a strong fundamental narrative for Ethereum. The report further notes the improvement in liquidity for the entire crypto complex in October, with a significant increase in daily average trading volume for bitcoin and ether.
Key Takeaways
Bitcoin’s Rally and ETF Speculation
- Bitcoin’s Recent Surge: The report attributes the recent surge in bitcoin prices to speculation around spot bitcoin ETF approvals. Despite the iShares Bitcoin Trust ETF ticker (IBTC) appearing on the Depository Trust & Clearing Corp.’s (DTCC) website having no bearing on an ETF’s approval, it sparked market speculation, driving up bitcoin prices.
- Role of Option Market Makers: The net short gamma positioning of option market makers likely exacerbated the upside move in bitcoin prices. As the BTC/USD price broke above $32,000, market makers were forced to buy bitcoin to remain delta-neutral, reinforcing the move higher.
Ethereum’s Decline and Lack of Strong Narrative
- ETH/BTC Cross Decline: The report notes that the market’s focus on spot bitcoin ETFs has driven the ETH/BTC cross down for its fourth consecutive week to new yearly lows. This decline is despite technicals suggesting a possible mean reversion.
- Lack of Strong Narrative for Ethereum: The lack of a strong fundamental narrative for Ethereum is constraining the ETH/BTC cross’s potential for recovery.
Improvement in Crypto Liquidity
- Increased Trading Volume: The report highlights a sharp improvement in liquidity for the entire crypto complex in October. The daily average trading volume for bitcoin and ether (across spot and derivatives globally) rose to a total $47B compared to $31B last month.
- Role of Bitcoin Futures: A significant part of the increased trading volume is attributed to bitcoin futures volumes, specifically perpetual swaps but traditional futures as well.
Actionable Insights
- Monitor Bitcoin’s Momentum: Given the recent rally in bitcoin prices, it would be prudent to closely monitor the momentum in the bitcoin market, especially in light of the speculation around spot bitcoin ETF approvals.
- Assess Ethereum’s Position: With the decline in the ETH/BTC cross and the lack of a strong fundamental narrative for Ethereum, it would be beneficial to reassess Ethereum’s position in the market.
- Consider Liquidity Improvements: The sharp improvement in liquidity for the entire crypto complex in October, particularly the increase in bitcoin and ether trading volumes, should be taken into account when making decisions about crypto investments.
