“Crypto Week”

Daily Updates:

• For the first time in its history, Bitcoin has surpassed the $120,000 mark, and is now currently trading at $122.1K – bringing the largest cryptocurrency by market capitalization up more than 30% year-to-date. 
• That’s compared to the 6.67% return of the S&P 500 over the same period of time, 8.61% return of the Nasdaq-100, 19.24% return of the only $4T market capitalization company, Nvidia and finally, the 28.54% YTD return of gold. 

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• Bitcoin’s rally comes amidst the start of what a Congressional committee has dubbed “Crypto Week”, as starting this week, the House of Representatives is set to debate and vote on a series of crypto bills aimed at creating a clearer regulatory framework around the governing of digital assets. Bills that are set to be considered include the CLARITY Act, the GENIUS Act, and the Anti-CBDC Surveillance State Act. 
• The US Senate has already passed the GENIUS Act, a bill that is designed to establish guardrails on crypto stablecoins and their issuers. The Anti-CBDC Surveillance State Act would prohibit the Federal Reserve from issuing a central bank digital currency, and the CLARITY Act seeks to establish a clear line between the jurisdiction of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for regulating digital assets.
• We covered some of the major crypto bills currently being discussed in the US, and in other major jurisdictions here. 

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• BTC’s move higher has been driven by the confluence of a number of tailwind factors. Expectations for rate cuts from the Federal Reserve which boost risk-on assets and concerns over the ever-growing fiscal deficit of the US government are supportive macro factors. We covered how these factors may support BTC in a previous report here:

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“That suggests the other forces contributing to the rise in the 10Y treasury yield such as fiscal deficit concerns, rising term premia and the ‘Sell America’ narrative may have had some benefit for BTC.”

• On the demand side, we see continued moves from public companies to increase the Bitcoin held on their balance sheets, whether that be via raising equity or issuing convertible debt to buy crypto.
• Earlier today, Metaplanet, one of the largest corporate bitcoin holders outside of North America, announced an additional purchase of 797 bitcoins, bringing its total holdings to 16,352. We covered how demand from institutional buyers would be one major supporter of price here: 

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“The halving is a supply side tailwind that has historically benefited Bitcoin. The other side of that equation is demand: alongside the halving, previous cycles also witnessed a new sea of investors providing tailwinds to demand.

In this cycle, the fuse in the box appears to be institutional players.”

• The move to another new all-time high has seen the at-the-money implied volatility of a 7-day BTC option increase from 30% on the weekend to a current level of 38%. While in the past 24 hours, short-tenor volatility has jumped more than 8 percentage points, BTC’s term structure of volatility still remains upward sloping. 
• Short-tenor volatility smiles have skewed further towards OTM calls, which now carry a 5% premium over OTM puts. 

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• ETH has also moved higher in the past 24 hours, currently trading above $3,000, though has moved by a smaller percentage compared to BTC. Despite being up 19% over the past month, the second largest cryptocurrency is still down 9% YTD. 
• A jump in short-tenor ETH options has flattened ETH’s term structure of volatility as all options trade with a volatility premium between 64 and 66%. 
• Volatility smile skews across the term structure are skewed towards OTM calls as traders look to seek further upside exposure – that skew towards call options is most apparent in 7-day ETH options which briefly carried a volatility premium of more than 10% – the highest in over a month. 

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• The rally in US equities last Friday came to a halt as President Trump increased his tariff pressures, with the S&P 500 closing -0.33%. Last week, the President increased levies on certain Canadian goods to 35%, and even tested the waters with a higher universal baseline tariff on countries of 15 to 205%, from the current 10%.
• Since then, Trump has now declared a 30% tariff rate for Mexico and the European Union, making the announcement in two letters posted to his social media platform. The rates will be effective August 1. 
• As often seems to be the case, Trump did leave the door open for a negotiation: “If you wish to open your heretofore closed Trading Market to the United States, and eliminate your Tariff, and Non-Tariff, Policy and Trade Barriers, we will, perhaps, consider an adjustment to this letter”. 
• European Commission President Ursula von der Leyen responded in a statement that the EU “remain ready to continue working towards an agreement by August 1” and “At the same time, we will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.”

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• The Royal Government of Bhutan has moved 512.84 BTC ($62.6M) to Binance over the past 4 days in six transfers. This follows a 137.25 BTC move to the same Binance deposit address two weeks ago, and a $33M deposit in November.
• Bhutan’s sovereign wealth fund, Druk Holdings & Investments, still holds 11,411 BTC valued at approximately $1.4B, which is more than 40% of Bhutan’s gross domestic product.

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• Nasdaq-listed SharpLink Gaming (SBET), a digital marketing and iGaming software firm,  added 16,374 ETH (~$48.85M) to its corporate treasury on Sunday.
• This follows a 21,487 ETH ($63.7M) purchase on Friday, July 11, according to Arkham data.

This Week’s Calendar:

Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes