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This week saw the market rudely reversing the Trump crypto boost with BTC price retracing from the post-speech high of 70k to almost 60k this morning.

Reasons for the correction

  • The market was hit by significant BTC supply right after the weekend. Coincidence? US Government (~28,000 BTC), Mt. Gox distribution (33,960 BTC), Genesis creditor distribution ($1.5b USD worth of BTC & ETH).
  • Mining difficulty reached an all-time high after a 10.5% jump in mining difficulty which would naturally put pressure on miners to sell.
  • Bearish macro sentiment from the high unemployment print (4.3% actual vs 4.1% expected) had spillover effects on crypto with increased anticipation of recession down the road. VIX crossed above 28 today, the highest print since the regional banking crisis in Mar23.

What are we seeing in the options market?

While BTC risk reversals saw a bearish flip from +7% to -9% in the front-end as the market scrambled to buy downside gamma, BTC and ETH vols hardly moved. Front-end BTC ticked up from 45% to 48% while the back-end did not move. This is surprising given the action in VIX.

We see this as the crypto vol market indicating expectations for price volatility to settle down into the summer in spite of the jumpy price action we’ve seen in the last few days.

Perhaps the trade then is to be defensive and ride out the rest of Q3 with a zero-downside strategy and high coupon yield.

BTC RANGE ACCRUAL

  • Coupon Rate: 16% pa in USD if BTC/USD fixes at-or-within Coupon Range (57,500 to 66,500), 0% otherwise
  • Maturity: 1NOV24
  • Coupon Frequency: Weekly from 16AUG24
  • Full redemption 100% of USDC at maturity.
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Disclosure: The authors of this content and members of Nansen may be participating or invested in some of the protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Nansen does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Nansen at any time without notice. Nansen accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.