Welcome to another edition of Qume Market Mondays!
Since our last update, Bitcoin has been on a bullish ride. With new support levels of $7500+, Bitcoin has made a near-complete recovery from the major price crash in early March.
With Bitcoin halving on 12 May, BTC price is expected to rise significantly following up to the event.
In the last two days, significant selling of upside calls above $10,000 strike in June and September has lowered implied volatility of options as such. Volatility is now at the average level over 90days pre-March crash.
May and June options are pricing in 3–3.5% moves daily which is lower than what BTC is realizing. Now is not a bad idea to buy out of the money options rather than spot or futures as a lower risk to express a long position going into the halving.
Bitcoin’s 30-day volatility index has continued to decrease over the week, falling from 4.5% to the now 4.1% levels.
Halving’s effect on BTC prices is expected to spike the volatility indices as well.
Funding rates have favoured both longs and shorts this week. However, in magnitude, negative funding rates were still higher.
Perps for most of this month have been trading at discount with price recovery in effect, except last Monday when it was impeded due to the oil market crash.
Market volumes have been significant this month and have helped in the quick recovery.
Consequently, open interest among crypto exchanges has been on the rise as expected. BitMEX and Huobi have absorbed nearly 50% of all new money in the derivatives market and we expect it to increase even more for the next 2–3 weeks.
Despite significant volatility in the markets, arb opportunities are compressed within 10–30BPS in the derivatives market.
(Source — data.bitcoinity.org)
Circuit breakers — Make or Break Crypto?
Extremely volatile market activities in the early March has once again sparked debate in the crypto community on the utility of circuit breakers in crypto. While volatility has been part of crypto since day one, the volatile conditions of traditional markets during this coronavirus pandemic have only served to further the problems.
The idea that has divided the community is decentralization and free markets versus the immediate need to protect investors and make crypto mainstream.
While the proponents argue that the uniqueness of access to 200x leverage in the crypto derivatives market makes circuit breakers crucial against protection from black swan events, the other side upholds the idea of free markets and the core philosophies of Bitcoin.
Data Sourced from www.skew.com
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