Elon Musk “breaks up” with Bitcoin on Twitter, China shuts down Weibo accounts of crypto influencers, traders and miners
Markets spent most of the week in constructive consolidation as Bitcoin (BTC) and Ethereum (ETH) approached $40k and $3k respectively and appeared to be on the verge of breaking out technically before an Elon Musk Tweet on Friday featuring the Bitcoin symbol and a broken heart emoji put an abrupt end to the rally
Weekend reports out of China suggesting key crypto players’ Weibo accounts being shut down led to further weakness in the market as BTC prices dipped again below $35k
News of El Salvador recognizing Bitcoin as legal tender is a significant milestone although it failed to ignite a price rally
We expect prices to consolidate within the recent range and are cautiously optimistic of an eventual break out on the upside with funding rates at near zero suggesting market is not overly-leveraged on the long side
In terms of flows, we are seeing continued rotation out of BTC-heavy portfolios into ETH with clients targeting to move towards an equal-weight allocation between BTC and ETH (as well as some clients looking to go overweight ETH and DeFi plays)
There was also strong interest in outright bullish ETH structures with several clients trading ETH Linked Contracts as well as buying call spreads in good size. Contact the desk for ideas and pricing.
On Crypto Regulatory Landscape, it is reported that the Monetary Authority of Singapore (MAS) has recently received over 300 requests for payments and crypto exchange licenses (including Alibaba and Google).
While the MAS is the speeding up the application process, those who have already applied are granted exemption to handle activities related to digital assets. Such companies can continue to offer specific payments and trading services while being reviewed by the MAS.
Volatility & Skew
Implied volatilities drifted steadily lower throughout the week as the market consolidated and Deribit’s DVOL index dropped briefly below 100
However, Elon Musk’s Tweet and the subsequent selloff took DVOL back above 100 yet again as the market continues to be jittery
Short-term skew is still relatively steep although they have come off from the highs seen recently
With growing anticipation over EIP-1559 and ETH 2.0, bullish ETH structures continues to be the theme and we have been trading 7-day ETH Linked Contracts with an APR of over 125%
Given the steepness of short-term skew on BTC, we traded some short-dated put ratio as a low-cost downside hedging strategy
Maximum profit if BTC closes at $33k on 11-Jun, but beware there is potential to lose money on this trade if BTC drops below $31k. Contact the desk to find out more
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