OTC Desk Market Update: April Halving?-?Is This The Next Catalyst in?Crypto?
Welcome back to our weekly market update! Here are the top things we’ll be paying attention to this week:
Macro
Strong Job Growth in March?
U.S. job creation in March easily topped expectations in a sign of continued acceleration for what has been a bustling and resilient labor market. Nonfarm Payrolls (NFP) increased 303,000 for the month, well above the estimate for a rise of 200,000 and higher than the downwardly revised 270,000 gain in February, the U.S. Labor Department's Bureau of Labor Statistics (BLS) reported Friday.? Unemployment Rate Edges Lower? The American unemployment rate edged lower to 3.8%, as expected, even though the labor force participation rate moved higher to 62.7%, a gain of 0.2 percentage points from February. A broader measure that includes discouraged workers and those holding part-time positions for economic reasons held steady at 7.3%.?
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Broad-Based Job Gains?
Growth came from many of the usual sectors that have powered gains in recent months. Health care led with 72,000 new jobs, followed by government (71,000), leisure and hospitality (49,000), and construction (39,000). Retail trade contributed 18,000 while the "other services" category added 16,000 new jobs.?
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Implications for the Federal Reserve?
The strong labor market data will be closely watched by the Federal Reserve as it considers its next moves on monetary policy. Stocks rose and Treasury yields increased following the report, as the data suggests the Fed may need to keep interest rates higher for longer to tame inflation. The Fed is aiming to guide inflation back down to its 2% target, though most measures remain above 3%.?
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Crypto Market Overview
Implied and Realized Volatility
Realized volatility in crypto has fallen off of a cliff, with Bitcoin's (BTC) volatility plummeting from 80 to 50 and Ethereum's (ETH) from approximately 100 to the mid-50s over the last month. This decline in realized volatility starkly contrasts with the relatively stable implied volatility over the same period. This has led to a transition into positive carry in the options market, making conditions attractive for gamma sellers to come back, given the reduced volatility.?
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The anticipated mid-April Bitcoin halving is being priced in as a volatility event, reflected by sustained richness of implied volatilities relative to realized vol. Furthermore, the nonfarm payroll data helped bring some relief to markets going into the weekend by beating expectations, after what had been a largely negative week for digital assets.?
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Term Structure and Skew
Term structure shifted lower from a week ago in both BTC and ETH, reflecting the collapse in volatility over the last month. The demand for options before the halving has distorted the curve around the April to June expiries, leading to a more flattened curve.?
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Elevated put skew, especially in weekly expiries, highlights market participants hedging downside risks due to worsening technicals. This trend is more pronounced in Ethereum, where the demand for puts has escalated due to weaker price action and a less bullish narrative, in contrast to Bitcoin, where a more constructive narrative around the halving remains.?
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Options Flows and Positioning
Volumes declined this week, with both Bitcoin and Ethereum volumes down over 20%. The expiry on April 26th emerged, characterized by hedging activities on behalf of market makers and a mix of bullish and bearish positioning on behalf of traders. There is still substantial interest for out-of-the-money calls for long-term positions, with traders positioning themselves at the $90,000 and $100,000 USD strikes in preparation for the Bitcoin halving despite short-term volatility.?
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Ethereum flows were dominated by put buying from the $3,600 to $3,100 USD strikes. The activity in put spreads and in-the-money puts suggests monetization and rolling down in response to the market's movement.?
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Dealer gamma positioning is negative in Bitcoin, particularly at the $70,000 USD strike making it a key level for a potential gamma squeeze if we are trading around that level come monthly expiry. Ethereum's dealer gamma remains positive, suggesting a more stable outlook.?
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As always, our team is here to assist you and provide services tailored to your specific needs. If you would like to discuss these topics further, we invite you to book a meeting with our team.
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To schedule a meeting, please visit?NDAX OTC | Bitcoin and Crypto OTC Trading Desk?or contact your OTC representative directly. We look forward to assisting you on your investment journey.??
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Disclaimer: This article is not intended to provide investment, legal, accounting, tax or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.