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Our weekly crypto derivatives analytics report dives into the current state of crypto, macro events and trading signals from spot trading volume, futures, options and perpetual contracts.
The crypto market experienced a week of optimistic narratives at the NTC Nashville conference, followed by the launch of ETH Spot ETFs. However, this was soon followed by a sharp sell-off, underscoring crypto's position as a 24-hour macroeconomic indicator.
On Aug 2, 2024, the weaker-than-expected nonfarm payroll report triggered a strong sell-off across crypto assets, alongside other risky assets. However, this latest downturn hasn’t yet seen the same degree of forced deleveraging or elevated volatility levels that have accompanied double-digit crashes in the past.
In summary, the crypto market has once again demonstrated its sensitivity to broader economic conditions by quickly reacting to disappointing jobs data. Yet the impact of this latest pullback appears to be more muted as compared to previous major sell-offs in the crypto space.
Please check out some of the report’s highlights.
Compared to perps open interest, futures open interest remained quite stable throughout last week's sell-off, despite a surge in trading volume, suggesting futures investors had unwound their leverage following the Nashville event.
Open interest in the perpetual swap contracts of both BTC and ETH shows a rapid decline that correlates with the sell-off in spot prices. This suggests that traders have rushed to close leveraged long positions during the sell-off, causing trade volumes on Aug 5, 2024 to reach their highest levels for the month.
Of the two, ETH’s markets have suffered more, with a stronger reduction in open positions. This corresponds to its drastic underperformance in spot price during the sell-off, despite the launch of its ETFs just over a week ago on Jul 23, 2024.
Volatility has spiked as a result of the swift sell-off in the spot market, but we haven’t seen implied volatility rise to the same extremes. This suggests that options markets are currently slow to price in further choppiness ahead. Indeed, BTC volatility expectations have risen only as high as levels last seen in July. While inverting swiftly at the front end, the dislocated shape of the term structure isn’t as extreme as in previous sharp spot market moves, such as the highly leveraged positions that built up ahead of January 2024's BTC Spot ETF launch, and has flattened somewhat during the recovery.
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