Option Whales, GBTC Discount Recovers, Binance's New Rules

JUL 28, 2021 • 4 Min Read

Ashwath Balakrishnan + 1 other

Disclosure: Delphi Ventures and 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

Today marks the 8th straight green daily candle for BTC and ETH. We’re seeing glimpses of aggressive buying on the tape as spot bidders finally show up to the party. Only eight of the top hundred coins by market capitalization are in the red today (per CoinGecko), which lines up with today’s sudden push out of “fear” on the Fear & Greed index.

The Speculators are Back

  • Just two days after we noted a large increase in BTC option volume and open interest, the market doubled down and pushed even higher. On Jul. 26, over $1.2 billion of options contracts traded hands, with the vast majority coming from Deribit.
  • We’ve seen an increase in traders taking directional bets in the market (which we’ll get to in a second), and with an increase in activity a few days before July’s options expire, we’re going to see BTC either trend harder to the upside or chop everyone up inside a 10% range.

Barrage of Call Option Purchases

  • The whale call buyer from Monday is back, and this time they’re buying up $42,000 and $44,000 calls that expire on July. 30 and Aug. 6. The buyer bought over $50 million in options, executing the trade in multiple clips of 75-100 BTC.
  • Other traders followed suit in an attempt to ride this whale’s coattails, so it seems fair to assume that some large players are positioning themselves for another squeeze up — a theory corroborated by Sam Trabucco of Alameda.

  • With this revival in speculative activity and the trend reversing on short/mid time frames, realized volatility (actual volatility) is on the rise too. As a result, implied volatility (the volatility level that options writers price options with) has jumped up as well, making options slightly more expensive across the board.
  • Simply put, it’s probably smart to gear up for more volatility and potentially choppy price action.

GBTC Discount Recovers

  • Since the 23rd of February this year, the GBTC premium flipped negative and has struggled to recover due to reduced market demand for GBTC, this has rendered the previously popular arbitrage trade to be unprofitable. The latest batch of GBTC unlocks also exacerbated fear among investors that GBTC unlocks would negatively impact BTC prices.
  • The final batch of GBTC unlocks have cleared, causing the GBTC premium to recover significantly from a 15.5% discount on the 15th of July to a discount of just 6.67%, possibly a signal that investors are confident in BTC’s recent recovery.
  • This is likely an effect of significantly reduced sell pressure (unlocks are done) and demand for cheaper, locked-up BTCs by longer-term holders.

Impact of Binance’s New Rules

  • Yesterday Binance announced new withdrawal limits for non-KYC accounts. And it’s a lot, lot lower than it was previously was.
  • Binance is the clear leader in terms of exchange volume, but making the exchange more regulatory compliant and less open to speculators could impact its market share.
  • Binance’s share of exchange BTC withdrawals is still at normal levels, but is much higher than other exchanges because, well, Binance is a lot bigger than other exchanges.
  • But all in all, there doesn’t seem to be a major impact on volume or an exodus of customer assets from the exchange.

Notable Tweets

Tokemak’s DeGenesis event (token sale and bootstrapping) is live.

A great summary of Hasu‘s podcast with MEV Intern.

An overview of yesterday’s Senate hearing.

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Ashwath Balakrishnan + 1 other