Downtrend resumes as hedgers return ahead of CPI data

In this week's Crypto Insight I discussed...


We flagged in last Friday’s crypto vol dashboard rundown that the last little pop in BTC spot looked like a textbook C-wave in a 4th wave correction and it was quite likely that the sell off would resume shortly, hence our calls for adding to hedges using risk reversals. It still looks very likely that the downtrend doesn’t reach a conclusion until nearer to 10k, if we vol adjust to what the likely equity market bottom could be.


Last week Ethereum’s testnet Sepolia successfully merged with its Beacon chain. This was effectively the second “practice run” for the transition to Proof of Stake and went off without any issues. There is a 3rd run coming in 3-4 weeks which will merge the Goerli testnet which if successful should set up the main event and give more clarity on exact timing. This will likely be seen as a bullish catalyst.


Key BTC on-chain takeaways from Glassnode this week:

1) Long-Term Holder Spent Output Profit Ratio (LTH- SOPR) looks at the price sold / price paid for coins hodled for over one year to quantify realized losses. LTH-SOPR under 1 means long-term holders are realizing losses and is currently at 0.67 - indicating a locking in of a 33% loss

2) Long-Term Holder Market Value to Realized Value (LTH- MVRV) looks at the ratio between market cap and realized cap (last time coins moved on-chain) to quantify unrealized losses for coins hodled for over one year. Moving down to 0.86 indicates that, as a group, LTHs are holding an unrealized loss of -14%.

3) LTH-Capitulation Tracker combines…


Realised vols in crypto moved down to recent lows as large moves dropped out of sample and intra-day vol remained subdued. Implieds, however, after an initial puke into the weekend, have since bounced strongly as spot has retraced the rally and CPI approaches.


Short dated call demand in July 20k – 25k strikes but taken profit already. Strangle sellers 19k/24k in front end and small in Sep.

Dec 22 25k/30k call spread buyers for long term bulls.

ETH trades of note...

Dec22 1300/2400 call spread in 7k

Sep 3500/10000 Call ratio 1 by 10, looks like a roll down of premium from a legacy trade.

Filmed on on Tuesday 12th July 2022.

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