Market Update: 16 July 2021
We started the week with a sell-off in both BTC and ETH ahead of the June CPI print with the market fearing a high number. The inflation print came in at a very high 5.4% which saw the market sell off even more.
We’ve also seen general interest waning with spot trading volumes and perp/future open interest visibly declining across exchanges (Chart 1 & 2).
Naturally, vols have also been coming off (Chart 3 & 4), Our favourite short strangle trade has been performing well, with implied vols continuing to move decisively toward our target range of 55–65% (Chart 5).
Front-end vols have been hit the hardest, creating a very steep volatility term structure (Chart 6). This means the nearer tenors are cheap relative to further out. It makes sense to roll short July positions to September given the significant dip in front-end vols.
ETH price has been relatively weak compared to BTC and it’s interesting to note the ETHBTC cross has been following the Demark reversal signals quite closely, with ETHBTC price forming a top whenever the count reaches 9 and 13 (Chart 7).
A close lower today for both ETHUSD, ETHBTC and BTCUSD would see a Demark 9 buy reversal signal . ETH implied vols have been holding up better than BTC in the past two weeks and we expect ETH vols to perform well on any bounce here in ETH spot.
