There’s Signs of Life…

In November, the market was flooded with crypto-positive news (such as Trump building an administration something similar to a crypto Avengers and discussions around a strategic Bitcoin Reserve). However, the recent lack of pro-crypto news has meant spot prices have largely been at the hands of macro drivers in the short term — which as of late, haven’t been great for risk-on sentiment broadly. 

Yesterday’s CPI for the U.S. print, however, did push Bitcoin through $100K again, a level it held until early morning today and now is trading just shy of. It wasn’t the headline annual inflation which moved Bitcoin or risk-assets – markets expected headline inflation to rise to 2.9% from 2.7% and that’s exactly what they got. It was core CPI, however, which rose 3.2% in December against the expected reading of 3.3%, where it had remained stuck since September. The month-on-month core CPI rose 0.2%, marking a divergence from the 0.3% expected rise of the past four months, and together this buoyed risk-on assets.

When taking the CPI and PPI data for this month together, it certainly isn’t enough to flip a hawkish to dovish switch just yet for the Fed. However, the response from risk-assets immediately following the release suggests that markets were relieved to see that inflation had not reaccelerated. BTC shot up instantly, as shown in the chart above, and both the SPX and NDX closed the day higher. However, we do note that a headline figure of 2.9% is still a far cry above the Fed’s 2% inflation target. 

Following the move-in spot after the CPI release, skew levels for BTC and ETH jumped at the front end and reversed their tilt from OTM puts towards calls for short-tenors.

Implied volatility for all OTM calls for short expirations also ticked up, as seen below, demonstrating a further bullish sentiment. It also marks a change from the previous week where vol smiles were leaning towards puts at short tenors. As mentioned, with a lack of other catalysts to drive prices, both spot and derivatives markets are being moved by macro winds in the short term, while longer-tenor options remain steadfastly bullish.

This shift towards calls can also be reflective of an increase in sentiment in options markets, which now align with futures implied yields and perpetual funding rates – both showing consistent bullish sentiment for the short term.

As we would expect, altcoins have been considerable beneficiaries of this positive move. XRP in particular is currently at $3.3, nearing its all-time, a level last seen back in 2018. There is also news that Litecoin’s S-1 has received comments from the SEC suggesting that it could be the next U.S. digital asset to receive crypto ETF status … that is if the Solana ETF filings which are due to be reviewed before the end of January don’t get there first. 

Finally, in other altcoin-related news, Pyth Network, a data distributing protocol has expanded its offerings with the launch of a new oracle ‘Lazer’ which focuses on optimising latency and will be compatible with the Ethereum Virtual Machine (EVM) and Solana Virtual Machine (SVM) environments.