Market Update: 21 Jul 2021
Roller-coaster price action in the week so far, starting with a slide lower on Sunday from 32,450 highs in BTC . The move down started in Asia afternoon and seems to have been triggered by one or all of the following factors:
i. Large movements of coin onto exchanges (presumably to sell)
ii. Punchy prints of BTC put options in Dec 20k & 22k strikes (bearish signal)
iii. Largest GBTC unlock (16,240 BTC)
Consistent selling in both spot and futures persisted into Monday and Tuesday along with several more large prints in BTC and ETH Dec put options, pushing BTC to a low of 29,301 on Tuesday.
However, BTC and ETH showed tremendous support at the 29,500 and 1,750 levels respectively. The QCP desk spent a greater part of the day selling a serious amount of delta on both (from taking the other side of the large option prints) but these levels held firm!
To support these personally tried and tested support levels, a BTC close around 31,000 today would potentially form a powerful double Demark 9 & 13 buy reversal signal (Chart 1). Additionally, there is potentially positive event risk tonight with upcoming “The B Word” conference that will feature several notable crypto bulls.
Leaning on the above reasons, we are now short-term bullish to the topside against the 30k region triple-bottom with strong bullish divergence (Chart 2). In addition to this, the market is short gamma to the topside — a break above 35,000–36,000 BTCUSD could trigger a quick short squeeze towards the 40–42k range top.
In the vol market, the downside fear was short-lived as we saw front-end vols spike on the spot move down but back-end vol remained relatively stable (Chart 3). The promising bounce off the lows this morning reaffirms our 30–40k range view in the medium-term. Implied vols should continue to trickle down as a result.
In our previous broadcast, we made the call to roll short front-end vols further out to September to take advantage of the curve steepness. This would have worked well as front end vols have spiked since (Chart 4). Now we see the most value in reducing duration and selling July and August strikes.