Crypto Markets Daily Jan 03 2025

BTC and ETH have stabilised after brief rallies, with BTC rangebound and ETH holding near $3,500, while ADA has surged 10% to $1.06, decoupling from the broader market. Implied volatility has dipped across shorter tenors but remains elevated longer-term, with ETH showing a sharper decline in demand for upside exposure. Market sentiment remains cautious, influenced by ETH Spot ETF outflows and separately, selling pressure from SUI's token unlock.

Crypto

Derivatives

DeFi

Macro

Stabilising Sideways

After yesterday’s brief rally pushed BTC north of $97K from $92K, spot price is currently chopping sideways again, overall rangebound between $90k- $100k. ETH spot price is a mirror of that move too – rallying yesterday to shy of $3,500 and now holding steady at a level slightly lower.

XRP’s rally has also tapered off moving only +1.5% (24h) and also stabilising at ~$2.40. In comparison, ADA (Cardano's native token) has continued to outperform up to $1.06, +10% (24h) and decoupled from the market. With highs this year of $1.30 and overall highs in 2021 of $3, this movement can be considered a recovery in price as bullish optimism lingers in this market. ADA, although with a strong roadmap and development history, movements are heavily driven by day trading style undertones, with momentum built by “breakout prices” and “expert predictions” which could explain the decoupling. This can cause price swings in the market both ways.

For both ETH and BTC, moves have also been met with a crater down in at-the-money implied volatility levels at all tenors. In an efficient market, this would translate to less demand for optionality, however over a longer timescale, ATM volatility across the tenors remains high and rangebound reflecting the overall consistent demand. See this below.

Figure 1. BTC At-The-Money volatility for selected tenors. Source: Deribit, Block Scholes

Figure 2. ETH At-The-Money volatility for selected tenors. *Source: Deribit, Block Scholes*

Interestingly however, that drop in implied vol across both majors was met with a different response in skew levels. As the following two charts show, BTC’s put-call skew ratio remains largely unchanged at the longer tenors, and only a slight drop at the shorter tenors.

Figure 3. BTC skew for selected timestamps. *Source: Deribit, Block Scholes*

In comparison, for ETH, we see a more marked decline in skew across all tenors, reflecting a dropping demand for upside exposure. This comes following the ETH Spot ETFs registering net outflows of $77.5M yesterday.

Figure 4. ETH skew for selected timestamps. *Source: Deribit, Block Scholes*

Interestingly, SUI which experienced a token unlock on Jan 1st, is now down -2.5% (24h) and -1.4% (7d), a possible reaction of the downward pressure exerted by the unlocked tokens reaching the market as theorised here. Although SUI unlocks tokens every first of the month, the market conditions at this unlock were especially quiet putting more focus onto this news and increasing the impact of selling on the market price.

In Defi, Aave, a liquidity protocol specialising in supplying, borrowing, swapping and staking has reached a new milestone for 2024, with $35 billion in net deposits over the year. This pushes Aave to be the largest DeFi protocol. Interestingly, Aave and Compound seen below both experienced higher aggregate liquidations across the last 2 weeks as BTC tumbled from glory ($107k) and ETH had a downturn in spot price with the smaller cap cryptos trending down with it.