Alpha Hunt — August 12

Crypto markets have made a 180 degrees U-turn versus previous months, outperforming pretty much everything whether you’re looking at month, quarter, or year-to-date. The question now is whether this could be a dead cat bounce or whether we’re looking at a new all-time high (ATH) soon. However, multiple signs point towards a sustainable rally, for now…

Macro

This week we saw the release of July’s Consumer Price Index (CPI) stateside. No big surprises versus estimates at 5.4% year-on-year — it appears the spike has stalled as of now. Treasury yields have dipped slightly for short unwinds, reflecting concerns that the Federal Reserve tightening is overdone. The dip is also supportive of risky assets like crypto and equities.

Source: ZeroHedge

Positioning

BTC’s +11% rally month-to-date has been primarily driven by spot buying, despite endless regulatory FUD and lack of overheated signs in the derivatives market. Fundamentally, this has been catalyzed by broadening institutional offerings, which focus largely on BTC and filling for the role Grayscale used to occupy — albeit more quietly.

Noteworthily, the increase in perpetuals or futures open interest (OI), alongside funding rates, is reverting to base rates. This is a stark contrast to the past few months and a strong indicator for a bullish return. While long leverages are picking up, it’s still nowhere near the extreme levels seen in May. This means that the rally is “on the leg” for a further run.

Options — ETH Bullish Sentiment Is Back

Since the occurrence of Ethereum London Hard Fork, ETH implied volatility (IV) term structure has gone into contango, while steeper OTM call-put skews are observed further out in time — indicating heightened bullish sentiment in the longer-term.