The Derivatives Magazine #2

The Derivatives Magazine #2

After the impressive price spike in major crypto assets associated with the Federal Reserve meeting and the “Lunar” epic, last week was a much calmer one. Overall sentiment remains bearish – despite the horizontal movement of the crypto market, asset prices are in a global economic downturn.

Opportunities for short-term arbitrage persist in the futures market. The funding rate differs between exchanges and ranges from -4% to +10%, signaling that the trading balance has not yet stabilized. It is also worth noting that according to the analytical service laevitas, trading activity over the weekend has declined significantly – another signal of the traditional markets’ increased influence.

Coinglass data

Against the backdrop of record liquidations the week before last, recent days have been much smoother. With a few exceptions, the average volume has not exceeded 100 million a day, which is the standard average for this market.

According to Futures Trading Commission (CFTC) weekly data, the number of large traders continues to grow, with most of the increase in open interest coming from the Leveraged Funds category, with positions rising from USD 140 million to USD 310 million. Other categories of professional participants reduced their long positions or left them almost unchanged. Such statistics indicate the attractiveness of current price levels for increasing positions, which could signal a short-term correction and entry of BTC prices into the range above USD 30 000.

The options market is relatively calm, the gvol analytical service reported that the main activity was buying nearby call options with a strike price of 32 000 and actively hedging with puts between 25 000 and 29 000 in the short term.

In contrast to BTC, Ethereum is generating much more interest and activity among traders. The expected move to PoS consensus adds intrigue and could potentially be a significant driver of value growth. For now, the Ropshtein test network is ready for the “merge” of the two blockchain versions into one. Accordingly, the main dilemma now is whether and when it is better to enter the position – after the transition has already taken place on the main network, or in advance. A popular strategy last week was to buy call spreads at 5000/5500 with an execution date in 2023 or 4000/4500 with an execution date in December – as a possible way to balance entry with the expectation of a successful PoS transition and a corresponding price increase.

Right now the market is calm, but things could change significantly at any moment. Upcoming events that could affect the situation are the central bank meeting in mid-June (Fed – 15 June, Bank of England – 16 June, ECB – 9 June) and SEC decision on Grayscale Trust application to launch a spot ETF. The planned consolidation of Ethereum test networks in June (targeted for June 8) should also be taken into account. Until then, the market will be relatively calm, if no surprises similar to the Terra(LUNA) ecosystem collapse occur.

This overview was prepared by the analytics department of the Biqutex crypto derivatives exchange