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Crypto Derivatives Q3 2019 Review

Wednesday 2nd October 2019

Quiet before the storm?

Bitcoin didn't have the best quarter - consolidating around the psychological $10k level & currently indicating down 25%.

Most assets are well in the green this year

Bitcoin is still up 100%+ but had an alarming September - so did Gold.
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Who said Bitcoin was too volatile for traditional markets?

Oil was in the spotlight this month!
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Gold has been a key story this year as central banks pivot globally towards easing

We are watching the gold / digital gold narrative closely.
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Institutional interest did not last in Q3 following record sessions in June at the CME

It seems like activity peaked when Libra was in the spotlights in June / early July with open interest halving since then.
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Bakkt launched last week with timid volumes - ~$1mln trading a day

Commercial hedging activity occurring on the platform will be key to watch to take advantage of physical settlements.
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From a price action perspective, Bitcoin traded in the $8k - $12k range the entire quarter

We did cross $10k quite a few times!
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BitMEX open interest tried to break out from $1bln on three distinct occasions

All were good sell signals in hindsight.
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Over the quarter - total longs liquidated ~$5bln vs shorts $2bln

When open interest gets large, shorts seem to have a stronger hand as they might be less leveraged.
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Bitcoin moved on average 4.15% daily over the quarter

Trend appears to have redeveloped.
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Implied volatility drifted lower before spiking last week as we sold off

Pricing in a 4.63% daily move over the next quarter - slightly higher than bitcoin volatility in Q3.
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Probability of making new highs repriced lower as vol and spot came off

Now seeing bitcoin > $20k by end of March at only 5% probability - the bulls took a hit!
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Options market continues to develop - CME announced it will launch the product in Q1 next year

This quarter - options traded on average $35mln notional a day.
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Ether had another challenging quarter

Down nearly 50% and coming back dangerously towards the $100 level.
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Ether and Bitcoin are still very correlated on a daily basis

A sign of poor market internals which never really disappeared since 2018.
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It's not all bad for altcoin markets

Ether recently bottomed relative to Bitcoin.
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Volumes have also been picking up after a period of calm

Especially noticeable in ETH/USD.
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It's worth watching DAI

As Ether gets closer to the $100-$150 range ~50% of total supply would be at risk of forced liquidation.
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DeFi growth held steady

Compound did well this quarter relative to competition.
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We announced our $2mln seed round last week

The round was led by London-based FirstMinute Capital, with participation from Kleiner Perkins, Seedcamp, Kima Ventures and QCP Capital.

skewAnalytics. launched -with Professional accounts coming soon

Providing market participants with a radically improved overview of crypto markets.