Market Deep Dive: Ethereum Surges, Bitcoin Declines Amid ETF Optimism

The performance of Bitcoin (BTC) was weak this week. It began by trading at USD 66,760 on Friday and has since declined to USD 64,500, with strong bids around USD 64,000 on Tuesday at the close of the US equity session.

Ethereum (ETH) outperformed BTC, opening at USD 3,467 on Friday; it is currently trading at USD 3,506, marking a +4.67% relative performance against BTC. This strength in ETH is driven by optimism surrounding the potential ETH ETF approvals by early July and the SEC’s decision to drop its investigation into ETH and Consensys.

Altcoins had mixed outcomes. Convex (CVX) surged over 100% following Michael Egorov’s CRV liquidation, while most altcoins remain deeply in the red. However, certain high-beta ETH plays like Lido (LDO), Ethereum Name Service (ENS), and Pendle (PENDLE) showed strong rebounds. I continue to believe that this is a smart and cost-effective way to leverage ETH positions.

In derivatives, ETH upside optionality consistently attracts strong bids, especially during dips. We observe robust put selling and call buying, maintaining 10-Delta Calls at 10v+ more than Puts on the back end of the surface. A significant entity recently built up USD 100M in upside optionality at the September 27th USD 4,000 strike price, paying USD 12M in premiums. Key levels for volatility traders in ETH are USD 3,200, followed by a massive net-long position at USD 3,000, with upside levels at USD 3,700 and USD 3,800.

BTC volatility is softer, making it interesting for relative volatility trades as ETH vol trades at 12v+ more than BTC. Similarly, wings and reversals are richer for ETH compared to BTC. Significant gamma levels for BTC are at USD 60,000, with strong put selling and some call buying at USD 95,000+ into year-end, as volatility remains relatively cheap. Overall, derivatives traders are betting on these being local lows.

US equities continue to reach all-time highs daily amidst low volatility, with the 7-day realised volatility in SPX at 9.01%. For comparison, USD/CHF is trading at 8.23% realised volatility. Whether driven by Mr Taiwan and his chips, US macroeconomics remains solid, and equities are benefiting. Outside of the US, the SNB implemented another rate cut, and we expect other G10 Central Banks to follow the Fed’s lead on the rate cut path. Next week’s economic calendar is particularly light, which should be favourable for crypto.

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