Crypto Markets Daily Nov 26 2024

Bitcoin trades 5% lower on the day, pausing its relentless charge towards the key $100K figure at least for now. So too have altcoins paused their outperformance of BTC, retaining their correlation on the way down after outperforming BTC on the way up over the last week. Derivatives markets have reacted at short tenors only as of yet, with increased put buying causing a strong bearish skew rather than a fall in the implied volatility of short-tenor calls. Donald Trump revives fears of stronger tariffs after his pick for Treausry secretary dialled them back yesterday, and attention turns to the Fed as November's meeting minutes are released ahead of a toss-up decision in December's meeting.

Crypto

Derivatives

DeFi

Macro

Altcoin Season On Hold

BTC trades 5% lower on the day, after spot ETFs recorded their 3rd-worst day since launch with net outflows of $435.3M yesterday. MicroStrategy announced that it had “acquired approximately 55,500 bitcoins at an average price of approximately $97,862 per bitcoin” in a filing on Monday. This takes their total BTC holdings to nearly 2% of the supply mined so far. The pullback saw a big reaction in BTC derivatives markets – Data show that open interest for end-of November $100K calls were certainly pared back as early as last week.

Figure 1. Open interest of BTC-29NOV24-100000-C contract on Deribit, measured in number of contracts. *Source: Deribit, Block Scholes*

However, the impact of the pullback over the last 24H does not show up in the same open interest data as strongly, and while the move looks particularly drastic for short-term expiries, anything longer-dated than 2 weeks remains stubbornly bullish.

Figure 2. BTC 25-delta call-put skew at several constant tenors. *Source: Block Scholes*

And the increased skew towards OTM puts in short-tenor options is a result of higher demand for OTM puts, not a result of widespread call-selling. This indicates that traders are not giving up their upside exposure, and instead are positioning themselves against short-term pullbacks – as reflected in the still-strong open interest of the $100K strike at the Nov 29 expiry.

Figure 3. Implied volatility smile for Nov 29, 2024 expiry recorded on 2024-11-25 13:00 UTC (blue) and 2024-11-26 11:36 UTC (yellow) snapshots. *Source: Block Scholes*

The wider altcoin market has pulled back significantly with “large-cap” alts almost universally down: Solana and XRP are down 8% and Cardano is down 12%, although the “alts with fundamentals" basket of 2020 / 2021 cycle favourites are still positive. The hardest hit have been select memecoins – Peanut the Squirrel is down 30% over the last week, and similar moves have been seen in Popcat, BONK, dogwifhat, and PEPE. Instead of continuing their rally into a promised altseason (where altcoins temporarily dislocate from BTC and rally despite a pullback in BTC) they are still moving with a relatively high correlation to major tokens, albeit with a steep beta.

More volatility in macro too – yesterday we commented on Trump’s Treasury pick which seemingly calmed the markets and pulled the DXY back. Today, the dollar is rallying again – after Trump took to social media to announce a 25% tariff on all goods entering the U.S. from Mexico and Canada, and an “additional 10% tariff, above any additional tariffs” on Chinese goods (although this appears to be less than the 60% he promised on his election campaign).

Attention turns to the Fed again this week too – November’s meeting minutes are due to be released today and tomorrow we get a further PCE read. Markets expectations are currently split for the Fed’s decision on Dec 18 – pricing in only a 59.6% probability of a 25bps cut, down from 74.6% exactly one month ago.