By Justin Chuh, Senior Trader at the regulated digital asset investment manager Wave Financial.
Bitcoin Price Dropped
Some of the new crypto market entrants are about to have their first taste of risk management. When combining fundamentals such as positive net inflows of BTC to exchanges, mixed with the previously mentioned technicals of lower high and lower low, we can ignore what large egos and influencers say, and see that a pullback was bound to happen. But we have to accept that those voices chirping around on social media aren’t helping and can actually make moves. This is healthy, but I think we all wish this didn’t happen.
BTC At-The-Money implied vol is back above 120% across the curve, last seen February as all of crypto was in price discovery mode. The most popular BTC options contracts are now the $40k and $50k puts, the next being $100k calls, but those are likely long dated and have been open for quite some time.
ETH Price Bullish Outlook
ETH is showing signs of weakness after a six-week win streak. ETH ATM vol is also back above 120% across the curve, but they were still priced in the 100s as recently as March. Contrary to BTC options though, ETH options aren’t concentrated in downside protection. The most popular contract is still the $5k call, and recent trade volume still looks heaviest in short term calls.
The support for BTC came in as expected between $44k and $42k. It may be no man’s land between that range level and $39k and $36k. ETH found support at $3,200, but demand might lighten as retail crypto investors learn more about other functional ecosystems that support DeFi and NFTs and start rotating. However, established hedge funds and institutions are now venturing into DeFi, and they’ll likely only trust and use the most stable protocols first, those running on Ethereum.
Most of the Proof of Stake smart contract platforms and scaling solutions such as ADA, DOT, and SOL, and MATIC fared well and moved counter-trend.