Market Update: 4 Nov 2021
BTC took a backseat this week with ETH and the major Altcoins leading the broad rally, making new all-time highs.
ETH printed a 4,671 high yesterday on the strong momentum we expected from observing ETH risk reversals two weeks ago. Naturally ETHBTC cross has outperformed.
[QCP 22 Oct update: “ETH risk reversals also remain heavily skewed towards calls indicating strong underlying bullish sentiment in ETH. We expect ETHBTC to perform well in the near-term.”]
SOL also made a new high today at 248 after rallying more than 30% this week!
SOL continues to be our strongest performing and fastest growing Altcoin vol book and we are looking forward to exponential growth as SOL option vault protocols like Friktion start to launch.
DOT also shot higher this week making a new high of 55 today. The catalyst was the successful approval by the Polkadot council to enable parachain registration and crowdloans on Monday. And of course the previous announcement that parachains will be ready to launch on 11 November.
Parachains are customisable blockchains that are integrated within the Polkadot (DOT) and Kusama (KSM) networks. Winning a parachain slot also grants projects eligibility to receive crowdloan funding, subject to the Polkadot Council’s approval.
AVAX made a new high at 81 today having gained momentum from the announcement of the Blizzard Fund, a 200M USD fund to foster early-stage development of DeFi platforms, NFT projects and other applications on the AVAX ecosystem.
BTC seems to be entering a consolidation phase, trading sideways with 58,250 as a near-term support level (Chart 1). This is causing further compression of realised volatility which is down to 60% for BTC (Chart 2)!
ETH realised volatility has also dropped to below 70%! This is causing implied vols to collapse (Chart 3), especially ETH with the front end implieds lower by more than 10% (Chart 4)! This has been great for our ETH short vega and short gamma position from last week.
[QCP 29 Oct update: “We’ve now turned short ETH vega and gamma given the elevated levels. And we are holding this against long vega and gamma in BTC and the Altcoins.”]
We are adding to this position of short ETH vega and gamma against long vega and gamma in BTC and Altcoins and with a nett short vega position. For a few reasons:
- In general, implied vols are still very rich relative to realised (Chart 5).
2. The ETH-BTC implied vol spread remains very high over 25% while the ETH-BTC realised vol spread is almost flat! This is a strong indication that ETH implieds are unnaturally elevated compared to BTC. (Perhaps due to continued fervour from Raoul Pal’s ETH shill).
3. ETH calls have been an especially good sell with the call skew dropping from 15% to 5% (Chart 6).
[QCP 29 Oct update: “…we think ETH calls are a decent sell here especially with the call skew at heightened levels.”]
4. The hype over the Bitcoin ETF seems to be cooling off significantly with the CME futures-over-spot premium dropping to the lowest amongst the exchanges now (Chart 7) and with CME open interest dropping significantly as well (Chart 8).
5. No surprises from the US FOMC meeting yesterday with a continued dovish tone (downplaying inflation concerns) despite the start of tapering.
We end this update with two landmark announcements made this week:
a. Siam Commercial Bank is the first bank ever to purchase a crypto exchange, Bitkub.
b. Commonwealth Bank of Australia will be the first bank to offer crypto directly to customers.
https://www.commbank.com.au/articles/newsroom/2021/11/CBA-to-offer-crypto-services.html
