Are we in alt szn?

The recent rally has gotten the market excited about the potential start of another alt szn. Whilst we are happy to look at some short-term tactical plays, we are taking a more cautious approach

All smiles at the Hong Kong Web3 Festival as BTC powers above $30k and ETH above $2k

• It’s been a while since our last piece — with the Easter break followed by the massive Web3 Festival in Hong Kong (TDX Strategies Founder & CEO at the Web3 Festival)
• The vibes have been great in Hong Kong and so has the price action in crypto markets as BTC breaks through the $30k level for the first time since June 2022
• While BTC appears to be stalling at the $30,100 support/resistance level, ETH has cracked through several technical levels since the completion of the Shapella upgrade

ETH has $2,200 in sight and then blue skies? (Souce: TradingView)

• With BTC Dominance seemingly peaking at the 49% level, we are hearing loudening cries of ALT SZN!

BTC Dominance may have peaked for now (Source: TradingView)

ETHBTC ratio rebounding strongly and could break out of its downtrend (Source: TradingView)

• On the macro side, we’ve had in-line CPI data and weaker than expected PPI. Banking crisis is “so yesterday” with the U.S. 3-month yields back above pre-Silicon Valley Bank collapse levels

U.S. yields have recovered post SVB collapse (Source: CNBC)

• Meanwhile, the market is pricing in another almost-certain 25-bp interest rate hike at the May FOMC meeting in two weeks time, after which the market expects the Fed to pause and then observe

Source: CME FedWatch

• So back to the original question, is this alt szn?
• U.S. corporate earnings season is underway and with no major economic releases until the FOMC, it is possible we get a mini-alt szn over the next 1–3 weeks
• This is by no means a replay of the 2021 alt szn - we are hardly at that stage of the cycle, however, as long as ETH holds $2,030 support, the conditions are set for a potentially decent pump in alts
• In this scenario, we transpose our favourite short plays on the way down to become our favourite high-beta alt szn plays, such as MATIC
• We would prefer to trade this potential move via optionality for better risk management and well-defined maximum loss, for example:

MATIC 2-week $1.25/$1.35 call spread with spot currently trading at $1.17

MATIC: approaching resistance? but this is alt szn (Source: TradingView)

• XRP is another interesting candidate after a quiet start to April, following a stellar performance in March. The desk would be happy to quote up some upside calls there
• Alternative, if you want to stick to the majors and would like at least some participation in this party, check out ETH 05-May-2023 $2200/$2400 call spreads for a decent payout ratio
• Keeping in mind that these are purely short-term tactical plays with well-defined risk-reward and maximum drawdown. We are not advocating YOLO leveraged longs in alts by any means
• The move, if it eventuates, could be short and sharp — and that would again give us a great window of opportunity to implement some downside hedging strategies on long portfolios
• The downside skew on BTC is again close to the lowest levels we have seen for more than 12 months and levels at which we are happy to implement some downside protection, especially if we have another significant leg up

BTC skew at around lowest levels since 2022 (Source: TDX Strategies)

• Finally, we leave you with a clip from SEC Chair Gary Gensler’s testimony on crypto regulation which can be best described as “squirm” and “stutter” (SEC Chair Gary Gensler on whether Ether is a security)