Bitcoin Derivatives Rundown, The State of CryptoPunks

JUN 23, 2021 • 3 Min Read

Ashwath Balakrishnan + 1 other

Disclosure: Members of our team may own positions in assets mentioned in this report. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.

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Market Update

After closing yesterday 3% up after a wick below the current range low, BTC is currently up another 4.9% at the time of writing. Though BTC is leading the market, DOGE and SOL are the biggest winners of the last 24 hours, up 39% and 35% respectively.

Prepare For Volatility?

  • This Friday (June 25) marks the expiration of quarterly BTC and ETH options and futures. These events are typically referred to as a “triple witching.” However, since crypto doesn’t have index futures/options, it’s not the most accurate term.
  • Witching events tend to be a highly volatile as traders square off their positions close to expiry (especially the final hour before expiry), so brace yourselves for the possibility of volatility this week.
  • Looking at the distribution of options across strike prices, there are tons of out-of-the-money calls set to expire worthless and puts are concentrated between $28,000 and $40,000.
  • Almost 3,000 BTC worth of puts currently sit at the $36,000 strike price, so we may see that level defended if BTC continues to push higher over the next 2 days.

Traders Are Moving Back Into Futures

  • Futures volume on BTC has inched up to over $100 billion per day after weeks of fairly low trading volumes. While the spike isn’t extraordinary by any means, it’s a sign of increasing interest to take a position in BTC.
  • In the coming days, if BTC attempts to stage a relief rally, seeing futures open interest and volume rising in tandem would be a strong sign that the market is bullish. Keeping an eye on derivatives data is the key to unraveling market structure and sentiment.

Funding Turns Negative Again

  • Funding has been hovering between negative territory and zero since BTC’s price broke down. Increasing volume, as noted above, accompanied by yet another drop in funding implies fresh shorts in the perp market.
  • Consistently negative funding rates, however, have historically been signs of sentiment bottoming out. This is amplified by yesterday’s price action, where BTC briefly broke below its current range low but quickly shot back into said range.

CryptoPunk Diamond Hands

  • In other news, CryptoPunks have a seen a sharp decline in both prices and volume. From its peak earlier this year, the average transaction price for a Punk has reduced from over 50 ETH to just over 20 ETH now. Volume took a bigger hit, falling from approximately 25,000 ETH of weekly volume 1,500 ETH last week.
  • On the bright side, price hasn’t fallen quite as steeply as volume, which implies a lot of the current Punk owners aren’t sellers at this level. Despite the drawdown, the average sale price for a Punk is still up 2x from the beginning of this year and over 20x since 2020.

Notable Tweets

Open interest on Binance is soaring.

Yield Guild announces an IDO on Sushiswap.

Making sense of yesterday’s option flows.

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Ashwath Balakrishnan + 1 other