Volatility Weekly

Volatility Update, 12/08/23

BitOoda Crypto Market Report

Michael Tauckus
Key Takeaway #1

Mid-week prices surged above $44k in BTC and $2,250 in ETH

Key Takeaway #2

Ethereum market, the focus was on more upside call buying in the December and January expirations.

Key Takeaway #3

Data suggests a shift in trader focus from BTC to ETH

Key Takeaway #4

The breach of this level on Sunday night forced many market makers who were short in this area to cover deltas due to their gamma profiles

The bullish momentum continues! Bitcoin, Ethereum, and altcoins are all on a continued upward trajectory as we approach the year-end, with the major cryptocurrencies experiencing gains of 14.1% (BTC) and 13.2% (ETH) for the week. Today, both markets are trading just slightly below the year-to-date highs established on Wednesday. Implied volatility shows a mixed picture, with BTC implieds holding steady while ETH sees a 3% increase in the front month, tapering to a 1% increase in the back months.

It's worth noting that market participants had been anticipating a year-end rally since as early as Q1, evidenced by substantial buying in the December $40k strike for BTC, which stands as the single largest open interest strike on the board. The breach of this level on Sunday night forced many market makers who were short in this area to cover deltas due to their gamma profiles. As emphasized in previous reports, forced liquidations and negative gamma hedging in an illiquid market during rapid movements can prove significantly challenging and often add more fuel to the fire. Some may argue that the offsetting long gamma positions should act to counter some of this volatility and this argument has some validity. However, once rallying through the key resistance level of 40k, smart paper waited patiently, as the market ripped to 42,000 before stepping in to unwind some length. We saw selling in the Dec 40k calls as well as the Dec 39 ,000/41,000 call spread as paper rolled strikes further up the curve. In the Ethereum market, the focus was on more upside call buying in the December and January expirations.

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The bullish momentum continues! Bitcoin, Ethereum, and altcoins are all on a continued upward trajectory as we approach the year-end, with the major cryptocurrencies experiencing gains of 14.1% (BTC) and 13.2% (ETH) for the week. Today, both markets are trading just slightly below the year-to-date highs established on Wednesday. Implied volatility shows a mixed picture, with BTC implieds holding steady while ETH sees a 3% increase in the front month, tapering to a 1% increase in the back months.

It's worth noting that market participants had been anticipating a year-end rally since as early as Q1, evidenced by substantial buying in the December $40k strike for BTC, which stands as the single largest open interest strike on the board. The breach of this level on Sunday night forced many market makers who were short in this area to cover deltas due to their gamma profiles. As emphasized in previous reports, forced liquidations and negative gamma hedging in an illiquid market during rapid movements can prove significantly challenging and often add more fuel to the fire. Some may argue that the offsetting long gamma positions should act to counter some of this volatility and this argument has some validity. However, once rallying through the key resistance level of 40k, smart paper waited patiently, as the market ripped to 42,000 before stepping in to unwind some length. We saw selling in the Dec 40k calls as well as the Dec 39 ,000/41,000 call spread as paper rolled strikes further up the curve. In the Ethereum market, the focus was on more upside call buying in the December and January expirations.

Despite the substantial move in spot prices, there was a notable absence of a significant increase in implied volatilities. Apart from the initial short delta covering, there appeared to be little panic in the market. A year ago, a move such as this likely would have likely resulted in vol appreciating 20% or greater. This may be signaling the maturation of the market and the increasing involvement of institutional players, contributing to a more sophisticated trading environment

Mid-week prices surged above $44k in BTC and $2,250 in ETH. Notable activity involved size buying in the BTC Jan 42k/50k call spread, as well as short term put spread buying in both majors. There was continued profit taking in BTC along with persistent call buying in ETH. These flows pushed the ETH/BTC implied vol spread out to roughly a 5% ETH premium. Data suggests a shift in trader focus from BTC to ETH, indicating a potential upcoming period of outperformance for ETH in the coming weeks. Currently, money is entering Ether futures at a faster pace than Bitcoin. Over the last five days, the notional open interest in the CME’s ETH futures contract has surged by 30% compared with a more modest increase of 19% in BTC.

As we approach next week, traders and miners should consider protective options following the rapid rally we’ve seen in the past 5 weeks. This week will be the 10th consecutive week of inflows into crypto investment products. While today’s non-farm payroll report had little impact on the markets, we could be in store for more volatility next week with CPI, PPI and the FOMC rate decision on tap.

Notable Headlines

Bitcoin Surge Blasts $170M in Bearish Shorts as BTC Price Targets $48K
https://www.coindesk.com/markets/2023/12/06/bitcoin-surge-blasts-170m-in-bearish-shorts-as-btc-price-targets-48k/
Sam Altman-backed crypto startup Meanwhile seeks to raise $100 million for bitcoin private credit fund
https://www.theblock.co/post/266555/meanwhile-bitcoin-private-credit-fund-sam-altman-crypto
Robinhood Launches Commission-Free Crypto Trading App in Europe
https://www.bloomberg.com/news/articles/2023-12-07/robinhood-hood-launches-zero-fee-crypto-trading-app-in
First Mover Americas: Bitcoin Hits $42K for First Time in Over a Year
https://www.coindesk.com/markets/2023/12/04/first-mover-americas-bitcoin-hits-42k-for-first-time-in-over-a-year/
VanEck's proposed spot bitcoin ETF gets 'HODL' ticker in new filing with SEC
https://www.theblock.co/post/266755/vanecks-proposed-spot-bitcoin-etf-gets-hodl-ticker-in-new-filing-with-sec
Bitcoin Halving Is Poised to Unleash Darwinism on Miners
https://www.coindesk.com/business/2023/12/08/bitcoin-halving-is-poised-to-unleash-darwinism-on-miners/
Latest rally has all of crypto wondering if it's still early to the party
https://www.theblock.co/post/266075/are-we-early-bitcoin-rally
Bitcoin Dips as U.S. November Job Growth of 199K Tops Estimates
https://www.coindesk.com/markets/2023/12/08/bitcoin-dips-as-us-november-job-growth-of-199k-tops-estimates/
Dimon Says He Would Shut Down Crypto If He Had Government Role
https://www.bloomberg.com/news/articles/2023-12-06/dimon-says-he-would-shut-down-crypto-if-he-had-government

Disclosures

Purpose This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda .io. Analyst Certification Michael Tauckus, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Conflicts of Interest This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation. General Disclosures Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or through http on or ://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information. The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. BitOoda Technologies, LLC is a member of FINRA. “BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc. Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda

The bullish momentum continues! Bitcoin, Ethereum, and altcoins are all on a continued upward trajectory as we approach the year-end, with the major cryptocurrencies experiencing gains of 14.1% (BTC) and 13.2% (ETH) for the week. Today, both markets are trading just slightly below the year-to-date highs established on Wednesday. Implied volatility shows a mixed picture, with BTC implieds holding steady while ETH sees a 3% increase in the front month, tapering to a 1% increase in the back months.

It's worth noting that market participants had been anticipating a year-end rally since as early as Q1, evidenced by substantial buying in the December $40k strike for BTC, which stands as the single largest open interest strike on the board. The breach of this level on Sunday night forced many market makers who were short in this area to cover deltas due to their gamma profiles. As emphasized in previous reports, forced liquidations and negative gamma hedging in an illiquid market during rapid movements can prove significantly challenging and often add more fuel to the fire. Some may argue that the offsetting long gamma positions should act to counter some of this volatility and this argument has some validity. However, once rallying through the key resistance level of 40k, smart paper waited patiently, as the market ripped to 42,000 before stepping in to unwind some length. We saw selling in the Dec 40k calls as well as the Dec 39 ,000/41,000 call spread as paper rolled strikes further up the curve. In the Ethereum market, the focus was on more upside call buying in the December and January expirations.

Despite the substantial move in spot prices, there was a notable absence of a significant increase in implied volatilities. Apart from the initial short delta covering, there appeared to be little panic in the market. A year ago, a move such as this likely would have likely resulted in vol appreciating 20% or greater. This may be signaling the maturation of the market and the increasing involvement of institutional players, contributing to a more sophisticated trading environment

Mid-week prices surged above $44k in BTC and $2,250 in ETH. Notable activity involved size buying in the BTC Jan 42k/50k call spread, as well as short term put spread buying in both majors. There was continued profit taking in BTC along with persistent call buying in ETH. These flows pushed the ETH/BTC implied vol spread out to roughly a 5% ETH premium. Data suggests a shift in trader focus from BTC to ETH, indicating a potential upcoming period of outperformance for ETH in the coming weeks. Currently, money is entering Ether futures at a faster pace than Bitcoin. Over the last five days, the notional open interest in the CME’s ETH futures contract has surged by 30% compared with a more modest increase of 19% in BTC.

As we approach next week, traders and miners should consider protective options following the rapid rally we’ve seen in the past 5 weeks. This week will be the 10th consecutive week of inflows into crypto investment products. While today’s non-farm payroll report had little impact on the markets, we could be in store for more volatility next week with CPI, PPI and the FOMC rate decision on tap.

Notable Headlines

Bitcoin Surge Blasts $170M in Bearish Shorts as BTC Price Targets $48K
https://www.coindesk.com/markets/2023/12/06/bitcoin-surge-blasts-170m-in-bearish-shorts-as-btc-price-targets-48k/
Sam Altman-backed crypto startup Meanwhile seeks to raise $100 million for bitcoin private credit fund
https://www.theblock.co/post/266555/meanwhile-bitcoin-private-credit-fund-sam-altman-crypto
Robinhood Launches Commission-Free Crypto Trading App in Europe
https://www.bloomberg.com/news/articles/2023-12-07/robinhood-hood-launches-zero-fee-crypto-trading-app-in
First Mover Americas: Bitcoin Hits $42K for First Time in Over a Year
https://www.coindesk.com/markets/2023/12/04/first-mover-americas-bitcoin-hits-42k-for-first-time-in-over-a-year/
VanEck's proposed spot bitcoin ETF gets 'HODL' ticker in new filing with SEC
https://www.theblock.co/post/266755/vanecks-proposed-spot-bitcoin-etf-gets-hodl-ticker-in-new-filing-with-sec
Bitcoin Halving Is Poised to Unleash Darwinism on Miners
https://www.coindesk.com/business/2023/12/08/bitcoin-halving-is-poised-to-unleash-darwinism-on-miners/
Latest rally has all of crypto wondering if it's still early to the party
https://www.theblock.co/post/266075/are-we-early-bitcoin-rally
Bitcoin Dips as U.S. November Job Growth of 199K Tops Estimates
https://www.coindesk.com/markets/2023/12/08/bitcoin-dips-as-us-november-job-growth-of-199k-tops-estimates/
Dimon Says He Would Shut Down Crypto If He Had Government Role
https://www.bloomberg.com/news/articles/2023-12-06/dimon-says-he-would-shut-down-crypto-if-he-had-government

Disclosures

Purpose This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda .io. Analyst Certification Michael Tauckus, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Conflicts of Interest This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation. General Disclosures Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or through http on or ://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information. The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. BitOoda Technologies, LLC is a member of FINRA. “BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc. Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda

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