TA Tuesday: Crypto markets remain choppy with sporadic fireworks

At the time of writing, $BTC is trading at $29,321 (-3.58% in 7 days), $ETH is trading at $1,980 (-5.2% in 7 days), and so the ETH/BTC spread is trading at 0.06754 (-1.67% in 7 days).

The week was marked by choppy price actions as the market re-assessed risk and position imbalances. There were some fireworks here and there, which were mainly driven by rumours/news, and some tokens bounced back (notably: $FTM +23%, $LRC +14%).

Looking ahead: two major US events will occur this week:
1. PMI data on Wednesday
2. PCE inflation data on Friday

The market is seeìng higher inflation numbers, which coupled with negative – or near zero – interest rates on safe heaven currencies (e.g. CHF) is causing the demand for USD to increase: USD Currency Index (DXY) went from 96 on January 2022 to 104 on May 14. It is now at 102. Should it take a greater pullback, crypto will benefit as well.

I still think that real inflation numbers are way worse from the ones of the CPI, and I believe that the interest rate market is largely underestimating the real impact of tighter monetary policies. We could therefore see the 10y US Gov Yield well above 3%.

On the $BTC spot side: spot has been range bound, but as realised vol dropped, the BTC market cap dominance went from 40% on January 1, 2022 to 44.78% as of writing.

As the price action is not clear yet, volumes dropped as traders are opting to watch events decouple.

Looking at the VPVR Profile:
Supports: $30k and $20K
Resistance: $35k

On the derivatives side: while futures trading is unchanged WoW, the vol space has moved in an interesting way.

As the $BTC spot price seems to be unable to hold $30k, the ATM IV term structure is currently flat and trading at 70% IV.

The market is TOO well protected for downside risk, and I really think that traders are now overpaying for low strike puts as the 3-month 25 delta skew is still trading at 15%.

In my mind, being bullish in the medium-term makes it reasonable to sell OTM put, profiting from a lower skew while accumulating a bit.

Looking at the open interest profile outside of the put calendar spread, the short-term strikes sold at $25k and $26k, which has led me to believe that market makers have a positive gamma. And this means we could find a major support here.

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