Crypto Markets Daily Dec 27 2024

The illiquid Christmas period continues as the S&P 500, Nasdaq, and Dow Jones barely moved yesterday. U.S. Treasury yields on the longer-end of the yield curve did ease slightly however, with 10Y tenors dropping in yesterday's session. After 4 consecutive trading days of strong outflows, the Spot BTC ETFs finally recorded net inflows of $475.2M. Derivatives metrics largely reflect the same sentiment as they did yesterday with BTC and ETH's at-the-money volatility term structure largely unchanged. Both majors' volatility smiles indicate continued cautiousness in the short-term with long-run expectations for a continuation of the bull-run.

Crypto

Derivatives

DeFi

Macro

Liquidity Lulls

As we have seen so far in the illiquid Christmas period, Thursday’s TradFi performance was another quiet one. The S&P 500, Nasdaq, and Dow Jones all barely moved as market participants seemed eager to hold their positions as is before the New Year. U.S. Treasury yields on the longer-end of the yield curve did ease slightly – 10-year yields recently rose to their highest this year since May, peaking around 4.64%, following Chair Powell’s more hawkish outlook on 2025. However, as the chart below shows, whilst the 2Y maturities have stayed flat, 10Y tenors dropped in yesterday’s session.

Figure 1. U.S. Treasury Yield Curve across various maturities, with a colour gradient indicating progression over time (lighter red for earlier dates, darker red for more recent dates). *Source: U.S. Department of the Treasury*

Russian Finance Minister Anton Siluanov stated on Russian television that domestic companies are increasingly embracing bitcoin and other digital currencies for international payments, as a means to bypass Western sanctions. Siluanov stated that "as part of the experimental regime, it is possible to use bitcoins, which we had mined here in Russia" and such transactions should be further “expanded”. This follows comments from President Putin earlier in the month that questioned who can regulate or ban Bitcoin.

On that note, after a brief dip in the early morning of today where BTC fell from $96K down to $94K, it is currently trading around $95.6K. ETH is slightly up on the day too, though prices across the market are largely subdued – if TradFi isn’t looking to make any bold moves before the year closes, it appears the crypto players aren't either.

After 4 consecutive trading days of strong outflows, the Spot BTC ETFs finally recorded net inflows – and they were relatively large too, at $475.2M. Unlike many of the previous cases of strong inflows where it was BlackRock’s IBIT leading the charge, this time the buying was largely from Fidelity’s FBTC and the ARK 21Shares Bitcoin ETF. Investors didn’t shy away from Ethereum either – Ether Spot ETF funds managed to pull inflows of $117.2M, continuing on the positive net flows we’ve seen all week so far.

Derivatives metrics largely reflect the same sentiment as they did yesterday. There is very little difference in BTC and ETH’s at-the-money volatility term structure. At shorter tenors, implied vol levels for BTC have slightly dropped, but the overall shape is flat. For ETH, implied vol levels have dropped slightly for all tenors. See this in the chart below.

Figure 2. At-the-money implied volatility for BTC (yellow) and ETH (blue) at 2024-12-27 11:14 UTC (darker colours) and 2024-12-26 11:00 UTC (lighter colours) snapshot. *Source: Deribit, Block Scholes*

Both majors' volatility smiles at 1-week tenors and 3-month tenors paint a similar message of the cautious-neutral stance, with ETH’s vol smile just slightly more put-skewed than BTC’s. But further ahead, for the 3-month tenor, the market is widely more hopeful for a continuation of the bull-run.