Flow Analysis

Crypto markets have been characterised by low volumes and sideways trading over the past week, not unusual following the event we saw nine days ago. BTC has traded within a 47-52k range since. BTC futures market data illustrates the issue: average daily volume for the eight days since the crash was $40bn, down from $50bn the eight days prior to the event; and open interest which was elevated for the entirety of November at $23-26bn has dropped to $16-17bn. ETH outperformance has come a little off the boil, although the ETHBTC cross is still within trend, and sitting on technical support around 0.081/0.082.

Our flow data once again shows better buying of BTC (54.3%) over ETH (49.6%), and, interestingly, we have also seen good buying in the majority of coins we trade. The only coins where we saw meaningful net selling bias were DOT, ADA, and BNB. Broken out by client category, the better buyers have been exchanges (61.0%) followed by funds (57.0%), while the better sellers were banks (55.9%) and family offices (54.0%). Regionally the better buying was done from APAC and EMEA.

Interest rates have recovered from their lows right after the crash, with longer-term borrowing coming into the market early last week to take advantage of the lowest implied rates for a couple of months. After bottoming out at around 0-2% (excluding the spike lower during the crash itself), annualised basis for Dec futures has bounced to trade in a 4-8% range over the past week. March basis, which had dropped to 6% post-crash, recovered to 9%, but sold off mid-week at 7%. Most perps are currently trading at a small discount to spot, as they have been since the 4th December crash.

Implied vols remain elevated as they have been for a few weeks, trading a good 20 vols above realised volatility, indicative of the risk aversion currently impacting the market. BTC vols are essentially unchanged on the week, with Dec’21 in the low 80 vols, and Mar’22 at 89 vols. ETH is a similar story with Dec at 103% and Mar’22 at 111%, both unchanged. BTC riskies were very bid last Monday after the crash, but have cooled a little as opportunistic market makers moved in to cover short call positions expiring in Q1 next year. BTC Dec 25 delta riskies have dropped from 8 to 4 vols for puts, and Mar’22 from 4 to 2 vols for puts. ETH 25 delta riskies have moved the other way in Mar '22, from 2 calls to flat, probably just because the Mar 15k strike is drifting off the radar as time moves forward and the market focuses more on risk management into year end.

While last week's US CPI print had the market quite worried, in the end we didn't move much despite a rather high number, probably largely due to the fact that equities found their feet again. However, this week we have the Fed FOMC, and it is possible they will announce plans to finish asset purchases by end-Q1, which could imply a rate rise during March. With equity markets back at highs, China and Russia sabre rattling, Omicron still adding to uncertainty, and year-end liquidity in play, there are many reasons not to buy crypto right now. Or perhaps that's all priced in already, and we will look back on this period as having been a great buying opportunity.

About B2C2

B2C2 is the crypto-native liquidity provider across market conditions.  450+ institutions globally, including agency OTC desks, aggregators, banks, exchanges, FX brokers and hedge funds, rely on B2C2’s full service offering for 24/7 access to the crypto market.

Since it was founded in 2015, B2C2 built its technology, products and services to meet the evolving needs of diverse institutions.  Continuously innovative, B2C2 is trusted by clients to find solutions to industry challenges, such as creating the first crypto ISDA Master Agreement in 2018.

Acquired by Japanese financial group SBI in 2020, B2C2 remains a standalone company, headquartered in the UK, with offices in the US and Japan.  B2C2 OTC Ltd. is authorised and regulated by the UK’s Financial Conduct Authority (FRN 810834).  For more information, please visit https://www.b2c2.com

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