Macro Market Update July 3rd, 2022

Last Week Recap

• Prior weeks relief rally move has been fully retracted this past week.
• Month/Quarterly options expiry expected impact to be seen this coming week from funds redemption.
• Bitcoin suffered its worst month since 2011
• Increased caution around CEX’s as Sam Bankman-Fried expressed, “Some exchanges are secretly insolvent”
  • Source:https://www.forbes.com/sites/stevenehrlich/2022/06/28/bankman-fried-some-crypto-exchanges-already-secretly-insolvent/
• Voyager Digital temporarily suspends all trading, withdrawals, and deposits.
  • Source:https://www.coindesk.com/business/2022/07/01/voyager-digital-temporarily-suspends-all-trading-withdrawals-and-deposits/
• Grayscale Bitcoin Trust Trades 35% Lower Than BTC Price After ETF Denial
  • Source: https://decrypt.co/104194/grayscale-bitcoin-trust-discount-btc-price-etf-denial
• El Salvador’s President buying another $1M BTC after a $60M loss in previous buys, and Michael Saylor, CEO of MicroStrategy, also announced a new $10M BTC buy after seeing a $1.3B loss in previous buys

Source: https://decrypt.co/104275/el-salvador-president-nayib-bukele-more-bitcoin-after-losing-60m

Legacy Markets

• VIX still remains sub-30 levels coming off of the prior week's relief rally. With the US holiday, we may see some hyperactivity in the tradition markets coming Tuesday, which may bring us back to 30+ levels.
• Lows are still to be seen as local lows until further clarity from FED is present.
• With staying in these higher levels, it appears to be a ticking time bomb as to when the larger volatility will be coming in.

Open Interest & Funding Rates

Current exchange OI is still not very telling as it's quite flat and trading parallel to BTC. OI continues to decrease at a slow pace which is expected as the slow grind of BTC continues. There is not much liquidity to really squeeze at this point, so we may see a larger decrease in OI this week with funds redemptions taking place from month/quarter-end OTC expiry.

BTC Weekly View

• BTC continues to trade in this post cascade range and is starting to tighten, which typically calls for a larger move on the 2w chart, as we can see historically.
• The 21/50 moving average cross is approaching, which typically brings in larger volatility, this aligns with our VIX review as well.
• 17.6K is where the next downside level is, holding that level is important, as if we do not, we may see a larger cascade with BTC trying to bottom and seek a new low. Max pain appears to be 14-10k, but the first thing is to watch how it holds at the 17.6k levels.

ETH Weekly View

• ETH follows a similar pattern as BTC. We are tightening at this lower range, and it looks like a larger move is on the way. 21/50 MA cross is approaching here as well, so expected volatility to arise.
• Expected similar fund redemption on ETH as we enter the new week post month end, quarter end options expiry.

ETH/BTC

ETHBTC continues to maintain levels from the larger ETH liquidation sell-off. All eyes are really on BTC right now to find a proper bottom structure. While BTC is attempting to do so, not much larger ETHBTC impacts should occur. A lot of the larger sell-off came early with ETH on the stETH liquidations. Expect ETH & BTC to move in tandem.

TOTAL2 - USD Market Strength

The market cap is still holding above 2017 ATH. A significant amount of money has outflown out of crypto in the past few months. The expectation is for a continued decrease of market cap but at a slower rate. We are starting to get much closer to a true bottom. If BTC can get a stronger relief bounce off of this coming sell pressure, the structure looks positive for some at least better relief in the interim.

TOTAL2BTC - BTC Market Strength

The structure still holds for potential ALTBTC break out on a BTC bounce. Being focused on USD, BTC pairs should trade well in effort to maximize BTC exposures at these more attractive prices.

SH*TPERP/ALTPERP

• Continued hold of money rotation expanding in the more risky holdings. Not much change from last week, which makes sense due to the way BTC traded, retracting the prior week's move.
• Expect a larger sell-off of risky assets if another capitulation event occurs, which would most likely break this rest support range.
• For now, expect the range to hold with BTC potentially testing lows again this week.

*SH*TPERP/ALTPERP is a measure of speculative risk. When SH*TPERP outperforms ALTPERP, it shows a measure of speculation in the market, which shows how much risk people are willing to take at a certain time.

Summary

• US Holiday July 4th, Stock Market is Closed. Expect some abnormal price action during these hours carrying out to daily close.
• CEX’s insolvency rumors starting to increase could be a trigger for another cascade paired with funds redemption selling.
• Upcoming US CPI (13Jul22) & FOMC (27Jul22). Based on BTC volatile bear px action last month around these meeting dates, we see value in a calendar spread structures (short nearby vol < 13Jul22, long longer-dated vol > 27Jul22) to benefit from expected near-term range-bound / longer-term volatile px action.
• May see a relief bounce on July 4th to put in the weekly high, which appears to be a bull trap set up. Expectation if that does occur is to be followed by a large sell-off on July 5th, post US Holiday.

Macro Market Update July 3rd, 2022