Market Pulse (Week 23, 06/06/2022 – 12/06/2022)

Google search interest level for “Crypto” at a low: BTC and ETH move in lockstep. Options implied vols spiking again. ETH oversold on RSI – dare to catch a falling knife?

Chart(s) of the Week: Who Wants to Know?

• Prices are down. Trading volumes are down. On-chain activity is down. What else is down in Crypto? Google search interest (worldwide) for the term “Crypto” is also down. In a textbook case of behavioural finance animal spirits, interest in crypto appears to peak alongside prices (BTC and ETH), and vice versa. Google search interest in crypto is currently close to the low since January 2021 (a level of 100 is the peak popularity for the term during the timeframe shown, and 50 means the term is half as popular). 

Fund Flow Tracker

• Aggregated exchange balances of BTC and ETH both dipped during the past week. Net outflows of 10.6K and 26.0K were seen for BTC and ETH, respectively. BTC balance held on OTC desks also fell during the last week.

Derivatives Pulse

• Options implied volatilities (vol) for BTC and ETH are up compared to a week ago. 1-week implied vol as of 10 June stands at 66.7% (vs. 58.7% a week ago) and 89.1% (vs. 73.3% a week ago) for BTC and ETH, respectively. Over the weekend, vols have spiked even higher. Near-term macro risks are lurking, with U.S. CPI coming in higher than anticipated, and a U.S. Fed rate hike (50bps) expected on 15 June.

• The put-call ratio for BTC has levelled, while ETH’s continues to fall, potentially indicating some easing back in exposure hedging.

• Although put-protection is still in demand as indicated by the elevated option skews, which have climbed even higher over the weekend.

• BTC and ETH perpetual futures funding rates predominantly in positive territory, implying long positioning tilt.

• Asset managers’ net-long position in CME Bitcoin futures is coming down, while the other reportable group’s (which includes corporate treasuries) net-long position is increasing. 

• Leveraged traders are typically hedge funds and various types of money managers, including commodity trading advisors and commodity pool operators. The traders may be engaged in managing and conducting proprietary futures trading, and trading on behalf of speculative clients.
• The asset manager category consists of institutional investors, including pension funds, endowments, insurance companies, mutual funds, and those portfolio/investment managers whose clients are predominantly institutional.
• The dealer category consists of participants typically described as the “sell-side” of the market. These include large banks and dealers in securities, swaps, and other derivatives. The other reportable category consists of traders mostly using markets to hedge business risk, and includes amongst others corporate treasuries. 

Technically Speaking

• ETH is back to short-term oversold levels based on RSI, while BTC is approaching such levels. Although trading around a key macro risk event – U.S. Fed interest rate decision, 50 bps hike expected – which is upcoming in 2 days on 15 June, is not for the faint of heart.

Price Movements

News Highlights

• U.S. consumer inflation reached 8.6% in May, higher than market expectations, and printed the highest since December 1981. Markets reacted negatively due to fears that this will push the Fed to raise interest rates quicker.
• DeFi lender Celsius announced that it will pause withdrawals, citing extreme market conditions.
• Bitcoin ATM installations bounced back in June, after declining for the first 5 months of 2022.
• Galaxy Digital led a US$20M Series-A funding round for Skolem Technologies, an institutional-grade asset management and execution services provider for DeFi markets. Other investors participating include Point72 Ventures and Jump Crypto.
• American Express is adding its first crypto-linked credit card to its network, allowing users to earn back crypto on any purchases.

Catalyst Calendar

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