What a week! Let us try to sum things up a bit…
At the time of writing, $BTC is trading at $31,486 (-16.48% in 7 days), $ETH is trading at $2,379 (-14.5% in 7 days), the ETH/BTC spread is trading at 0.07539 (+2.27% in 7 days), $SOL is trading at $69.57 (-18.98% in 7 days), and $LUNA is trading at $30.55 (-64.22% in 7 days!).
The total crypto market capitalisation has fallen to its lowest level in ten months. Over the course of the week, $230B left the crypto space, resulting in a global market cap of $1.5T.
Here are some recent event news worth mentioning:
– On May 4th, as soon as Powell said “75bps isn’t something FOMC is actively considering”, $BTC flirted with the $40K resistance level.
– On May 5th, the BoE stated that UK inflation could reach 10% in Q4, that GDP would likely be -1%, and that we would see full year contraction in 2023. $BTC neared the upper $35K resistance level.
– On May 8th, UST de-pegged for the first time and it traded as low as $0.9821. $BTC traded at $33K and $LUNA at $60.
– On May 10th (early CET hours), the UST de-peg continued and was trading as low as $0.6018. At the same time, $BTC bridged $30k and $LUNA touched $23.48.
We have written many articles in the past about the TERRA protocol and the principles of its native stablecoin UST and native token LUNA. You can have a read here.
An algorithmic stablecoin is nothing other than a pegged currency managed by a protocol/foundation instead of a government. Due to this, it is often hard to keep the peg.
To understand the story better, have a look at this thread.
And here are the Luna Foundation Guard (LFG) Reserves.
On the $BTC spot side:
During the week, our trading desk was skewed on the sell side, with a Buy/Sell Ratio of 0.19:1. Starting at 12pm CET, our clients starts buying with many limit and market orders as the market found support at $30k.
From a statistical point of view, $BTC returns are distributed around the mean with fat tails and skewed on the left side. Thus, today we might see a rebound – but not as much as we lost yesterday.
We saw huge volumes in the market around $30k, thus calling a support (at least a local support).
Looking at the Volume Profile Visible Range (VPVR):
– Support: $30k
– Resistance: $35k – $38k
On the BTC Futures side:
On May 7th, BTC Futures Open Interest (OI) on CME doubled, but the positioning of both Market Makers (MMs) and Funds is still not clear.
Despite the spot rally, the bases did not really move as they are almost unchanged WoW.
On the BTC Options side:
The vol market reacted quite drastically to the spot moves, with the front end of the implied volatility rallying from 60% to 90%, and the back end from 61% to 69%, thus inverting the ATM term structure.
As negative correlation vol/spot continued, skews inched even higher (1m skew from 9% to 15%) as the market is looking for downside protection.
Also, as DOVs and short-vol strategies keep being popular, it is worth looking at the maturities and the open interest profile as a vol rally is likely to squeeze many players.