Crypto Markets Daily Dec 26 2024

All is Calm, All is…

Yesterday BTC ranged at the $98K level before briefly touching $99.9K – we didn’t get everything that we asked for on our Christmas list as it now changes hands closer to $95K. Most of the market is back to a sea of red – within the top 10, only two coins are green on the day – USDT and USDC, make of that what you will. Interestingly however, we notice that the same tokens we mentioned in yesterday’s daily comment (recall these tokens being some of the stronger performers post U.S. election) are some of the worst performers in today's session so far: HYPE (Hyperliquid) is down 15% today, HBAR and ONDO down 11% and SAND is down 10%.

In reflection of this relatively across the board subdued activity, BTC and ETH’s vol term structures are virtually unchanged from yesterday – we still see a slightly flatter shape for BTC, with a minute increase in implied vol at shorter tenors (the lighter yellow to the darker yellow), and a similarly flat shape for ETH.

The pullback in BTC spot has seen skews move towards neutral at short tenors, a move that appears to have been signaled earlier in the week. In fact, BTC’s volatility smiles started reducing their skew toward calls even as BTC rallied during the early hours of Monday morning. This adjustment in market positioning suggests traders may have anticipated the recent retracement, reflecting a more cautious outlook despite the earlier bullish momentum.

Historical post-halving performance shows this cycle is still following its predecessors (though slightly underperforming), Spot ETF’s have at seemed unable to resist piling into BTC this year (as has MicroStrategy, even more so than any other institutional ETF participant). But while traditional markets are quieter over the break, we would not discount crypto signalling any larger macroeconomic event in this period. Without any obvious macroeconomic data releases expected until the new year, it’s unexpected macro news that we are on the lookout for as likely drivers of volatility.