Flow Analysis

Bitcoin remained a sideways market within 60/64k until just this morning in Asia, when we finally broke out, making a high so far around $65,680. ETH was dragged up to an all-time high at $4,740, but it was actually BTC flow driving the move, which is a change in tone from the past few weeks. The cross has backed off a little but still above 0.072 for now (recent high 0.075). Outside the majors, DOT and SOL have both made fresh ATHs, and BNB is threatening to do the same, currently close to $700.

Our flow report again shows a stronger bid side bias for ETH (55.6% buying) over BTC (51.7% buying). Outside of these two, we have had strong buying in ADA and strong selling in DOG. Broken down by client type, the main buying bias has come from crypto exchanges and from banks. And by region, we see all three regions sharing the burden.

BTC futures had a quiet week - until today - with total traded volumes only $275bn, with spot stuck in a sideways channel, although spot has broken up this morning, so perhaps this will change now. Open interest (BTC futures) remains elevated at $24bn, and basis has moved gradually higher through the week, and taken another large leg up here in Asia this morning. Deribit December basis, for example, was up from 14% to 16% the past week, before jumping above 18% on the spot breakout. This basis strength suggests participants retain a strong commitment to ATHs in BTC. The ETH uptrend remains intact as we continue to see fresh ATHs. Volumes have been a little lower but not dramatically so, and open interest remains elevated at $12bn. Basis has also trended higher over the week. The Okex ETH quarterly future, for example, began the week at 15%, settled around 18%, and has now spiked to 22%.

Implied vols are lower in the back end: BTC March ATM vol is down to 90% from 95%, while the equivalent ETH contract dropped from 130% to 118%, and the March 15k strike - which has previously traded up to 150% - is now trading around 131%. The vol sell-off mostly happened in the early half of last week, and with spot now breaking up decisively, this could be a good opportunity to cover short call-side vega, or enter fresh length. We expect vols to rally alongside spot from here up, as cash longs re-cycle profits into less risky option positions, and/or buy puts as insurance. Take the 31 Dec 90k BTC calls, trading at 86 vols, just 2 or 3 vols over ATMs. This is an exciting strike: if we are trading anywhere near 90k in the next month or so, vols should be considerably higher, and this option also gives the holder the ability to lock in partial profits ahead of the magical 100k level.

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