Running to Stand Still

BTC is at $86.5k as I write, up 2.4% since last Sunday's close. It took the scenic route from $82.6k on Monday, before touching $87.2k on Friday. Friday was also US jobs day, with payrolls printing 29k for September against 90k expected, and BTC handed back the run after this, grinding higher into Monday.
Alts did pretty much the same thing, XRP covered 7.6 points between its low and its high to finish up 0.1%, HYPE covered 8.1 to finish down 1.1%, and BNB covered 7.6 to lead the majors at 2.8%.

Things were mixed in broader markets, gold dropped 2.7% and was the worst asset on the board, while the Nasdaq 100 added 0.9% and the S&P 500 finished flat. The wires pinned gold's second straight weekly loss on a stronger dollar and Treasury yields at their highest since 2002. BTC beat gold by more than five points on the week and realised half as much again in volatility doing it (32% annualised against 21% on hourly closes).

Weekday volumes across the six crypto assets averaged $36.9bn on two spotlight venues, Binance and Hyperliquid. Friday was an exception to that, printing $48.4bn as vol picked up.

Over on Binance BTC and ETH liquidations came to about $432m, down a third from $647m the week before, though four separate days still cleared $50m. Those are minimums, because Binance's liquidation feed is a throttled lower bound per second.

Naturally Friday accounted for $148m of it, with $55m of shorts liquidated in the 04:00 UTC hourly window as prices rose, later on longs gave up nearly $25mn after 18:00 UTC.

The fall in volume was concentrated in three names, with BTC weekday volume down 5.5% and ETH and HYPE flat, while XRP is down 39%, BNB 28% and SOL 16%. That is a different market from the one we were describing a fortnight ago.

Net taker flow on Binance spot was negative all week, with BTC taking $514m of net selling and ETH another $160m since Monday (taker side only, on one venue). Prices went up anyway, more on that in the spotlight.

Three things happened this week that I think tell the same story in the end. Spot was net sold, prices went up regardless, and in BTC options skew moved while the level of vol didn’t. I took two vol snapshots, one on Sept 27 at 12:00 UTC and another on Oct 4th, BTC moved about 0.4% between these two dates. ATM implied barely budged either, at roughly 34% for the 30-day fixed tenor on both days, and the curve still slopes upward.

The week's move in options was in skew, where the seven-day 25-delta risk reversal went from 0.38 vol points put-side to 1.71 call-bid. Essentially the front of the curve stopped paying up for downside protection and started paying up for upside expsoure. The 10 delta moved even more, so the far upside went bid harder than the near. The 30-day sits at zero and the 60 and 90-day are still put-side, so the flip did not carry past a month. That isn’t that surprising as major market events in November make pricing risk outside the 30-day a lot harder.

It looks to me like someone was buying far-out-of-the money options, lottery tickets essentially, on the front week rather than the market repricing risk. Flow supports this, as Binance spot took over $500m of net BTC selling over the week while price finished higher, so somebody was paying up somewhere and it wasn't in size on the biggest spot venue in crypto. 

The cheapest way to own a bounce without owning the downside is to buy front-week calls, and that is the part of the curve that moved. Whether that is what happened is still inferred from two snapshots and one venue's taker flow.

The other side of that trade isn't being paid much for it. Implied sat below realised at 30 days on both snapshots, by seven points a week ago and under three now (i.e. option sellers are collecting less than the asset has been moving). The front week is tighter, at 31.3% implied against 32.7% realised over the seven days to the snapshot. Selling gamma here means selling below what the asset has actually been doing, and Friday is a decent illustration of what that can cost.

There are two caveats on reading those together. This is trailing realised against forward implied, so it is a rough check rather than a carry calculation, and the 30-day realised is from daily closes while the seven-day is hourly.

The fair objection is that realised is falling, from 46% in mid-September to 36.5% now, so the surface is pricing a calm-down that is already underway. The chart shows how that fall arrived though, with the 30-day figure holding near 40% through Friday and then dropping 3.5 points on October 3rd, which is an older session leaving the window rather than this week getting any quieter. My read is that the surface has priced more calm than has turned up.

The minutes of the last Fed meeting land on Wednesday and will be read for how close the September hike was to being a one-off. Wednesday is also the first day of Token2049, so it might be one to keep an eye on. While half the industry is waxing lyrical in Raffles, the market could well deliver a reality check.

For crypto the main thing to watch is whether the front-week call bid is still there after the Fed minutes. It is a seven-day position by construction, so it either gets paid this week or it decays. The October 9th expiry settles at 08:00 UTC on Friday, so the minutes are the last major scheduled event it is exposed to.