The market looks like it’s long gamma with BTC being pinned around the 40k level as we await FOMC headlines tomorrow. We agree with Paul Tudor Jones that this coming FOMC meeting will likely have a binary market reaction.
Should the Fed remain dovish, cryptocurrencies would have the most upside potential until September at least. Especially given the overselling we’ve seen relative to other macro markets since the May CPI print (Chart 1). If they’re hawkish on Wednesday, then all bets are off and we would expect the market to revisit recent lows.
There seems to be a shift in interest from ETH to BTC in the last few sessions, with short-term BTC RV rising above 100% (Chart 2) versus that of ETH under 100% (Chart 3).
However, ETH IV is trading at 10–20% premium to BTC, which we expect the divergence to narrow in time to come. Makes sense to sell back-end ETH vols, trading above 110 % IV (Chart 4).
Risk-Reversal seems to be creeping back up as market is less fearful on the downside (Chart 5).
If we see a breakout of 42,000 BTCUSD, it has legs to go to 50,000 BTCUSD — projecting from the falling wedge breakout (Chart 6).