Market Mondays 09/16/19

By Shreyas Chari (@ shreyaschari on twitter)

Bitcoin 30 day/7d returns are 0.11%/-0.9% so its safe to say it’s been a low volatility environment. Apart from a quick move below 10k and back up there has not been much movement. Realized volatility looks therefore like this:

NVT signal has worked off its July highs and retraced well with little pullback in price which shows resilience:

Active addresses, median transaction fees, mining profitability all are on a lower cycle and are staying in the bottom percentiles of the year

Arbitrage boundaries are also quite compressed between 5–15bps at most with the exception of Exmo as can be seen here, indicating no regional supply/demand imbalances:

Derivatives mkts have also been noticeably quieter with Bitmex doing 1/5th of its average volumes ($1B vs 4–5B).

Notably though in counterpoint to this, the bid offer spread for $10M USD on derivatives exchanges has reached the tightest spread. Bitmex is at 22bps, with Deribit and Others at around 2% plus. To put this in context, over the past 3 months, Bitmex has been around 45bps and the others around 5–6%!

Markets getting tighter on low volumes usually does not happen in traditional finance so either the liquidity is illusory or crypto is maturing!

The expiration of August futures did cause a large amount of Open Interest to recede and it is slowly building up again. It is obvious positions had not been rolled as much and volatility is directly correlated to Open Interest. We would watch this to get any understanding of where the market goes in the near term. To us, possible catalysts may be the Sep 23 launch of Bakkt futures. It will be interesting to see if they have volumes similar to Binance ($170M in week 1).

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