The Great U-turn

Chart of the Day

On Thursday, the Russian government announced its decision to recognize and regulate cryptocurrencies as a form of currency. On the back of this, BTC rallied to approach the $45k level, and although it has since come down, the number 1 crypto by market cap is still currently holding its gains above the $43k level, and is also trading well above the 100 hourly moving average (as of the time of writing). What happens next will be most crucial though, as a rising channel has been formed with a support near the $44k level on the hourly chart, where a successful break above said support level will likely extend BTC's upside gains, while a failed attempt may likely send BTC to retest its former support near the $42k region. In a similar vein, ETH has now stabilized above the $3,100 level after witnessing a 2.4% gain over the last 24 hours, whilst most major altcoins have also flipped green from yesterday's market-wide downside correction on the back of 1-3% gains within the same timeframe. However, investor behavior in the futures and options markets seem to be misaligned with the bullish narrative currently dominating the spot market. For one, the existence of negative premiums suggests that many investors may not be sharing the spot traders' confidence with regard to the crypto market's future movements. For another, when we look at the activities within the options market, although the skew curves of options expiring in the near-term did respond (albeit not to a large extent) to the current price rally, those of the far-month options have actually not exhibited any significant changes at all. This inconsistency in skewness seems to suggest that the upward momentum that the crypto market is currently experiencing may very well be a short-lived one, as extant macro data reveals that there may not be as much investor confidence when it comes to the long-term trajectory of said crypto market.