Crypto Markets Daily Dec 31 2024

Crypto markets move sideways yet Bitcoin has found footing at the $94K mark, and ETH is ranging around $3.4K. Despite MicroStrategy's acquisition of 2,138 BTC for $209M, significant outflows in Spot BTC ETFs ($377.6M) have maintained downward pressure, contributing to a cautious sentiment reflected in BTC skew. Short-term volatility smiles lean towards downside protection, but longer tenors signal optimism, with expectations for price increases after the New Year.

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Sideways is the New Up

It certainly feels like that... in the short-term at least. After days of spot slowly declining, Bitcoin has found footing at the $94K mark, and ETH is still ranging around $3.4K. The rest of the market isn’t faring much better either – amongst layer 1’s and the market as a whole actually, Sui is one of the top performers with its SUI token up 4% today, a movement which can be attributed to usual market volatility in an overall sideways market.

As we have seen throughout this cycle, bearish price action hasn’t stopped Michael Saylor’s MicroStrategy who acquired 2,138 bitcoins at an average price of $97,837 during the period between December 23, 2024 and December 29, 2024. This equates to a total cost of approximately $209M which, given the strong outflows of the Spot BTC ETF products within the same period (outflows of $377.6M), wasn’t enough to counteract the downward pressure on BTC’s price from ETF net flows.

Figure 1. BTC spot (yellow) against Microstrategy BTC purchases (red) and BTC Spot ETF flows (blue). *Source: Farside Investors, Bitcoin Treasuries, Block Scholes*

BTC’s volatility smiles are showing an increasing divergence between short and long tenors as the chart below shows. On the front end, all tenors are skewed towards OTM puts as traders look for downside protection. However, when we look at the 1-month and 2-month tenors, we see this balanced out with a noticeable preference for upside exposure.

Figure 2. Volatility smiles for BTC at 1-week (yellow), 1-month (orange) and 2-month (red) tenors. *Source: Deribit, Block Scholes*

To break it down we see shorter tenors, 7d and 14d respectively, tethering between a neutral position and a slight negative skew towards puts. This follows from yesterday, a level of caution of where btc is heading in the short term. This chart paints an overall optimistic outlook, little movement till the New Year (no crash expectations of BTC looming) and an expected rise in spot price over a longer timeframe. The preference of call skewed long tenors remains resilient.