The institutional flow of capital was itching to get Bitcoin above $100K with two consecutive trading days of Spot ETF inflow levels last seen in November. However, derivatives markets weren't quite in the mood to join the party when BTC did eventually push past that level – BTC has entered a new regime where $100K is no longer a catalytical event for volatility or further rallies. Perhaps rightly so, as today's JOLTS report has sent risk assets back down again.
$100K Not Quite Enough to Move Derivatives Markets?
Much of the illiquid Christmas break saw Bitcoin’s spot price move sideways, with quieter activity in the wider altcoin market too. Yesterday marked the first real day back at the desk since that illiquid Christmas break, and it appears that the institutional flow of capital has been eager to lift the crypto market back up.
Bitcoin was briefly holding up above the $100K mark, following two trading days of incredibly strong net inflows. Last Friday, U.S. Spot ETFs registered inflows of $908M that were complemented by $978.6M of inflows yesterday. Inflows of this size are far above the $148.8M average, and were last seen in November, during the post-election exuberance. The ETH Spot ETFs also registered net positive flows of $128.7 MN – we expect that the recent spot rally has likely been driven by a return of institutional capital to the markets.
We also have noted previously that the upward repricing in spot price has not quite translated into a significantly more bullish sentiment in derivatives markets and we saw this today too – implied volatility levels are stubbornly moving sideways with no changes perceived. This emphasises the potential start of a new regime in derivatives markets, where the psychological barrier of $100K is no longer acting as such a catalytical event for volatility or further rallies – as it did in the period before Christmas.
Figure 1. One-Month At-The-Money Implied Volatility levels for BTC (yellow) and ETH (purple). Source: Deribit, Block Scholes
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