Market remains sideways, traders bet on further consolidation

DEJAVU — we’ve been here before, and we’re likely to stay here for a bit longer too

• Crypto markets continued to move in the tight 30–35k range last week, with low volume trading failing to test any further support/resistance. Sentiment remains mixed, 30–32k holds as a solid support and 35–36k continues to cap any short term moves higher. Whilst crypto twitter is quick to be excited that this consolidation (tightening range, bolli bands closing in) means we need a big move either way, at the moment I disagree, and think that market activity continues to suggest we are likely to spend even more time in this range
• Personal view is that we are likely to stay in this range possibly for another 4–6 weeks, and it’s likely that we will touch range low/high in the meantime, which will likely get retail VERY EXCITED despite no further market direction being gained
• Unfortunately $DOT and $KSM continue to be victims of the risk-off attitude in crypto. However, we’ve seen in the past week how quickly alts can pick up speed even in a bearish “BTC” market, look at AAVE and other DeFi tokens, and also the action in NFTs picked up some more momentum as AXS rallied over 300% since June

Option Market — volatility continues to drop off, traders betting on more consolidation

• Options market continues to suggest we stay in this range for some more time — 30k-40k strangles have seen the most demand lately, effectively betting on staying in the current range and also going short implied vol
• Implied vol has fallen from levels of 125% in Apr/May to now lows of 75%. Despite this being crypto, I think vols can this low for a little while longer, and options market is suggesting that even bullish players are still keen to hedge their risk with puts around 30k. If we see vol starting to tickup and more interest in calls then it would be a positive sign of market sentiment shifting. However, options continue to show how range bound the current mood is
• ETH is seeing more bullish interest, with skews ticking up more so than BTC after the June selloff, although overall puts still seeing the majority of current demand. This means that the demand for calls on ETH is greater than BTC. Generally options market is still quiet and as unexciting as everything else

(Implied vol has been consistently trading lower, reflecting the boring sideways market we’re in. Bigger traders still selling vol here, expecting market to continue to consolidate, end of July expiry will likely be inbetween 30–40k)

Futures funding + basis

• Futures basis continues to remain tight, showing the lack of demand for spot. Again, this is just one indicator to observe for market sentiment, but it will be important to track when we do start to see a break of this current range and if the indicators also shift to reflect the price action. Currently we are in a relatively bearish market, with the indicators continuing to reflect that
• A similar story when looking at perp funding, with rates being consistently negative since May now, again reflecting the lack of demand in the derivs market

Macro Markets — itchy feet as we continue to set new all-time-highs

• After seeing new all-time-highs for the past few weeks, equities took a breather as the Fed came out to comment that growth and therefore inflation expectations may not be aggressive as first thought
• Market quickly reacted by bonds rallying (Yields selling off to sub 1.25% on US 10 yr), equities dipping, riskoff shift spreading to commodities as brent/metals took a small step back too
• However, the bullish sentiment quickly returned with SP500 and Nasdaq seeing a super strong rally to end the week to set new ATH. Even rates ticked back up, with the 10yr taking back strong support to close the week 1.35%
• This back and forth will likely continue for the foreseeable future as record high equities battle against a FED that are trying their best to pretend like they know what’s going on… is inflation transitory? or is it deflation? etc
• This coming Thursday we will see the US CPI print for June, a number that the entire market will be watching. Whilst it could be anti-climatic, any significant surprise in either direction will likely cause a market reaction considering how strong risk-on assets have been over the past year. Any rally/sell off in risk will likely follow on to crypto, so keep an eye out for the sensationalist headlines!

(One thing to note is that volume remains pretty low despite the strength in equities)