The Tradfi market data would help crypto?

The past week has been relatively quiet, with the market supported by news of integration between major crypto companies and stock market leaders. Meta is implementing support for NFT technology on Instagram with Trust Wallet and MetaMask, while BlackRock, a major investment management company, will use Coinbase infrastructure to provide services to its clients. In a bull market, such news could send prices to new price highs, but in the current situation the market has remained within the USD 1–1.08 trillion capitalisation corridor.

At the moment traders are waiting for this week’s macroeconomic data (especially CPI) to get more information to predict the actions of the financial regulators.

Market conditions

The current period of price recovery is unique in the crypto industry, with Ethereum and its ecosystem tokens replacing BTC as the main driver of capitalisation growth. Also notable is the increased use of options in trading, a characteristic of the last two years in traditional financial markets, which has now also appeared in the crypto market. After a surge of open interest in options to USD 6 billion, ETN has surpassed BTC by more than 50%. A feature of this market positioning is the urgency of trading strategies — the strike dates for most contracts are limited to September, with a colossal dominance of call options. However, instruments with an execution date after the planned Ethereum Network Merger have the opposite dynamic — more put options and higher expected volatility, which could also indicate traders’ desire to hedge in the event of technical problems in the network or the onset of extremely adverse macroeconomic conditions.

Options market

Last week’s options block trades charts are very indicative of current market dynamics and expectations for future price movements.

For Bitcoin, there was a significant amount of put option trading at 20 000 and expiring at the end of August and October, which may well indicate that traders want to hedge against a possible fall in price in the fall.

For Ethereum, the large volume of call option trading for an expiry date at the end of the first quarter of 2023 and the strings of 3500 and 4000 is notable. Potentially, the choice of such a time horizon could include both the successful and final realisation of the Ethereum “merger” and an improvement in the macroeconomic environment, which could result in significant gains.