Signs of Seasonal Market Exhaustion

SEP 21, 2021 • 4 Min Read

Disclosure: Delphi Ventures has invested in BTC, ETH, SOL and AVAX. Members of our team also hold ATOM. 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.

Key Takeaways

  • Q1 tends to be a poor quarter for BTC, while Q2 usually brings about positive performance. This year was the opposite, with a stellar Q1 and a poor Q2. But that hasn’t stopped the inevitable September seasonality from throwing a wrench in the bulls’ plans.

  • Earlier this month, the Sept. expiring futures contract had run up so much that it was offering investors the best basis opportunity on the market. In hindsight, it’s clear this was a sign that the market was getting overheated in the short-term. Shorts executing basis trades weren’t able to keep up with apes longing Sept. futures contracts.

  • Regarding the volatility skew for options expiring on Dec. 31, the implied volatility of strikes near current price are fairly flat, and the tails are even with a slightly more aggressive skew towards the right. This is almost the perfect skew structure and implies that the option market still has a balanced view on markets over the mid-term.

  • L1 season has taken a short pause in light of recent market movements. With that said, ATOM and AVAX are holding quite well, up 84% and 82%, respectively, since the low on Sep. 7th. SOL is, surprisingly, the worst performing L1 over that time horizon, which is unexpected given the strength it had well into Sept. If this was indeed a dip and not a dead cat bounce, then it wouldn’t be surprising to see ATOM and AVAX continue to lead the L1 sector. Typically, coins that held up strongest during a correction see a commensurate amount of strength as they bounce.

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