Analytical review. Weekly 08.11.2021

Looking at the trading dynamics, this season for crypto market reminds of spring when everything is in bloom rather than autumn when you need to prepare for winter. The calendar and the economic cycle missed each other unambiguously. Crypto market capitalization broke another historic record and was $ 2.86T, which is 7.7% more than last week.

Bitcoin traded in the range $ 60 000 — $ 63 000 for most of the week, but over the weekend made an impressive leap upward, reaching a new all-time high of $ 67 000, with a futures contract with a late March execution date trading at more than $ 70 000, creating an excellent opportunity for arbitration.

The dynamics of ETH trading were more progressive, and since the beginning of the week, it has gradually grown, reaching a new record of $ 4 750.

The balance of deposits and withdrawals of cryptocurrencies last week signaled about a possible growth. The size of withdrawals from exchanges has reached the levels of 48 000 BTC and -950 000 ETH. Together with the influx of tether to exchanges, this is one of the strongest signals, historically confirming more than once that rapid growth is expected.

In the stablecoin category, there is strong competition between USDT and USDC. While the generation of new USDT tokens is stagnating, USDC continues to be issued, and has already reached a volume of more than 33 billion USD. Within the Ethereum network, their volumes are almost equal. Over the past week, the influx of stablecoins has been split between cex exchange Binance DeFi, curve and Uniswap protocols. Previously, the standard situation was slightly different — the distribution of new funds fell mainly on centralized exchanges. The changing situation indicates the growing role of defi infrastructure in the use of market liquidity.

In the open interest market for BTC futures, we can see a slowdown in the growth of trading volumes, which lags behind the situation in the spot market where the price has sharply risen. This situation is not quite typical for the market — usually the growth of the rate coincides with the growing volumes of derivatives trading. A possible explanation could be a change in the structure of demand for BTC, or the local accumulation of BTC on the part of a large investor.

The dynamics of ETH futures trading coincides with the growth in the spot market rate, which indicates a more organic and stable price growth.

The US House of Representatives voted to pass an infrastructure bill that contains a controversial tax reporting requirement for cryptocurrencies. From now on, according to the law, people will have to report on transactions with cryptocurrency. At the same time, not a single amendment (most of which was proposed in the summer) in the new law was implemented.

Grayscale Investments, known for its Grayscale Bitcoin Trust (GBTC), has applied to register the Grayscale Future of Finance ETF (ticker: #GFOF) to enable investors to invest in the US and non-US securities of blockchain technology companies and mining. The fund is a passively managed ETF that will track the Bloomberg Grayscale Future of Finance Index.

With the spread of the digital yuan in China, the power of the “big brother” will reach a new level. The number of Chinese CBDC users has already reached 140 million. Digital RMB operators can open four types of e-wallets for customers. The least privileged only needs a phone number, so it will be anonymous even for PBOC. The daily transaction amount for holders of this type of e-wallet will be limited to 5 000 yuan, while the annual limit will be 50 000 yuan. The most privileged e-wallet will need to be opened at a bank branch by presenting an ID, and there will be no transaction limit.

Bitcoin’s Taproot network update is expected this week. This is the first major code update for the first cryptocurrency since the SegWit update four years ago in 2017. Taproot consists of three Bitcoin Improvement Protocols (BIPs) that will improve privacy, improve smart contracts, and reduce the cost of online transactions.

Mayors of the two most crypto-friendly cities in the United States — Miami and New York, bet on which of them is the most crypto enthusiast. Francis Suarez (Miami) tweeted that he will receive his next paycheck entirely in Bitcoin. Eric Adams (New York) retorted that he will receive the next three salaries in Bitcoin, and also added that New York is about to become the crypto capital of the United States.

The open interest for options with the execution date on November 26 was 36 499 BTC. The most popular levels for this execution date are Call 70 000, 80 000, and 90 000, and the volume of Call options exceeds Put by more than 3 times, which indicates an undoubtedly bullish mood of traders.

For options with an execution date in December 2021, the open interest rate increased by 2.1% and was 87 517 BTC. The ratio of Call and Put options remained unchanged. Changes in the situation for this date are generally minor.

The growth rates of open interest for March options now look very modest — 3.3%, reaching 19 748 BTC. Any significant increase is observed at the level of 150 000 for Call options.

At global levels, total activity rose by 6.5% to 187 188 BTC. The gap between Call and Put options narrowed slightly. The main increase fell on the levels 54 000, 55 000, 56 000 for Put options, 70 000, 80 000 and 120 000 for Call options

For options with the expiration date on December 31, the open interest level increased by only 2.1% and was 571 445 ETH. Any noticeable increase is observed at the 7000 and 9000 Call levels.

Trades on options with execution dates in the first quarter of 2022 increased by 5.3% to 290 007 ETH. The gain was distributed evenly between the Call and Put options. The trading volume for Call options is still more than 7 times higher than that for Put options.

As for the level of general interest, after the fall of the last week (due to the expiration of the October options), it recovered by 6.7% and was 1 424 547 ETH.

PRO MODE

In addition to the standard parameters of market analysis, such as the volume of open positions in futures and options available to a wide range of readers, under the new PRO MODE subheading, we provide an overview of a number of market parameters that require special expertise or experience.

MarkIV for short term BTC options (via Derebit&GVOL info)

The spot price was in a narrow corridor for the biggest part of the last week, which allowed some traders to hedge their positions by buying put options. At the moment, the volume of trading in put options has grown significantly, as many market participants use this mechanism to fix the price level and insure against price reversals.

Options Trading map

Based on the trading map of last week, the main volume of interest fell on put options at 50 000, 55 000, and 60 000. Execution dates are short and medium-term — the end of November, December, and January. Among call options, execution levels traded more in the 60 000 -72 000 range with short (November) execution dates. The general picture of trading at the moment shows that traders are actively strengthening the positions of the reached price levels, and creating a basis to compensate losses in case of a price reversal.

MarkIV for short term ETH options

There are no major changes in the short-term and medium-term ETH options market so far. Continuing expectations of a rise in the rate continue to accompany short-term hedges using put options.

Options Trading map

Call trading volumes declined, while put options are trading at the same level as before. For call options, a key level of 5 500 is formed for contracts with expiration dates in late November and late December. Put options with expiration dates in December are currently trading more actively at the levels of 3 200 and 2 500, while short-term put options are concentrated in the range of 3 900–4 300.

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