Pent up demand taking the spotlight and we look into a key bullish indicator flashing for BTC in options skews.
BTC faced a busy week after a tweet claiming that the SEC had approved BlackRock’s iShares Spot Bitcoin ETF turned out to be false.
Interestingly, the reversal post the revelation only brought it back down to $28,500 where it continues to be hovering around at time of writing. Certainly, the pent up demand for such an institutional-grade offering has been long in the works, and at least, this event showcases the consensus of such offerings coming sooner than later.
LOOM faced a huge pump seemingly from interest in the Korean retail space, gaining over 950% since September while climbing to the top trading volume on a Korean exchange. A selloff has quickly ensued with the coin trading almost back to earth, reversing more than 70% of its gains. Reports of more movement of the coins to various exchanges could indicate that the dump may not yet be over.
Solana ($SOL) caught headlines amidst the FTX trial, with an FTX estate address staking over 5.5mil SOL on Oct 13. Notably, this is only a small portion of FTX's holding in SOL. In September, $1.3bn of SOL had been approved for sale by a United States court.
Render ($RNDR) gained up to 10% to break $1.90 this week, following lagging interest in one of the largest projects focused on leveraging AI. Generative AI tools such as ChatGPT has seen significant interest in 2023, with investments in the space more than quadrupling this year so far.
Overall Market
above is the BTCUSDT price chart
As discussed last week, the BTC price broke above the downward trendline (the red line) and retraced. The red trendline would act as the first support, and the green box would act as the strong support if the BTC price went lower.
As shown above in the orange circle, BTC retested the trend line and resumed up. The price action confirmed the downward trend breach, and we should see upward movement from here.
When the US market opened this Monday, October 16, Cointelegraph reported that the SEC had approved the BlackRock Bitcoin spot ETF. BTC soared over 10% to $30k in a few minutes after the news was widely spread on social media. BlackRock confirmed that the approval news was false right after, and the BTC price quickly retraced back to the $28k level.
Our OTC desk believes that the SEC approval on the Bitcoin spot ETF will come in the first quarter of 2024, before the BTC reward halving. And the approval will include multiple ETFs instead of only the BlackRock ETF. The approval of the Bitcoin spot ETF will bring trillions of dollars from the traditional finance sector to the crypto space and strengthen its growth.
Options Market
The above table shows the 25-delta skewness in BTC and ETH options.
What’s certainly interesting to note but not completely unexpected is that skews have quickly turned positive for BTC this week (see last week's note here https://www.binance.com/en/feed/post/1304970) after the moves we saw on the false news on the Bitcoin Spot ETF approval. A positive skew indicates traders willing to pay more for calls as opposed to puts, reflecting a bullish sentiment for the asset.
The observation that even false news (after being identified as false) can drive positive sentiment surely indicates markets acceptance of the Spot ETF’s imminent arrival and the expected inflow of institutional money to the space.
The desk expects to see shorter term expiries catch up and continue the trend in the weeks to come.
ETH seeing a similar move to a positive skew should not be ruled out yet at this point given that it could see similar piqueing of interest on more potential institutional inflows.
Macro at a glance
Last Wednesday (2023-10-11)
US PPI reading in September was reported at 0.5% month-over-month, higher than the estimated 0.3% but lower than last month’s 0.7%. Core PPI reading was reported at 0.3% month-over-month, higher than estimated 0.2% and last month’s 0.2%. The rebound in PPI readings indicates that it is still early to take the victory lap in the inflation fight.
UK GDP was reported at 0.2% growth in August, as expected. The UK economy showed improvement after the 0.6% GDP contraction in July.
Last Thursday (2023-10-12)
US CPI reading in September was 3.7% year-over-year, higher than the estimated 3.6% and same as last month’s 3.7%. Core CPI reading was 4.1%, lower than last month’s 4.3%.
US initial jobless claims continue to be in the low range, reported at 209k instead of the estimated 210k. It suggests that the US labour market continues to be tight.
Last Friday (2023-10-13)
China’s consumer prices were flat in September y/y at 0%, undercutting estimates of a 0.2% increase. Core inflation, excluding food and fuel prices, was up 0.8%, continuing the same trajectory and in line with August.
Wednesday (2023-10-18)
China Q3 GDP grew faster than expected by 4.9% y/y, though down from the previous quarter’s 6.3%.
The UK continues to face stubborn inflation with CPI printing ahead of expectations at 6.7% in September, the highest amongst the developed economies. This leaves the door wider open for further rises in interest rates, u-turning some expectations that peak rates had been reached.
Convert Portal Volume Breakdown
The above table shows the volume breakdown of our Convert Portal.
Stablecoin to crypto volumes took a positive turn this week, rising by almost 4% to 26.7%. The positive sentiment especially in BTC is likely to continue in the short term at least.
Consequently, most of this volume share was taken from Crypto to Stablecoin flows, falling from a high of 44.4% last week to 38.5% this week.
Stablecoin swaps picked up slightly to 14.4% up from 9.7% the week before.
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