Alpha Hunt — July 23

The past week has been confusing for the bulls and bears — and we hold strong arguments on both sides of the fence.

Arguments for the Bulls:

  • With Goldman Sachs releasing pro-crypto client surveys, institutional narrative has clearly improved.
  • Elon Musk’s sudden U-turn on Bitcoin, Ether & Doge
  • Private market clearly not giving up, with monster valuations
  • BTC and ETH jumped by 1.65% and 1.96% respectively on July 25

Arguments for the Bears:

  • Massive put buying flows around $20,000 region; the put options expire in December
  • Push for stablecoin regulations by Yellen and Jerome Powell
  • On-chain exchange inflows don’t look positive — inflows hit the lowest in July 2021

Derivatives Positions Potentially Bullish

Funding rates, the de facto retail sentiment indicator, have been remarkably negative, while price is rebounding. Spot vs. futures Cumulative Volume Delta (CVD) offers better visibility — on aggregate, spot has been buying alongside futures traders shorting the rip.

Will we see prices move further upward? Perpetual short covering pressure could amplify any upward moves. This is on top of short-term options gamma being negative, around $35,000 level.

To sum it up, short-term directional risk-to-reward ratio is skewed upside.

DeFi is Growing Up

It appears to be the stress-test season for the DAO governance model. First, we had Uniswap with its DeFi Education Fund, widely perceived as a shortcoming of DAO governance.

Shortly after, we saw SushiSwap with its controversial proposal, which brought VC playbooks into the spotlight.

These appear to be growing pains for DeFi protocols — and the attempt to influence outcomes is ultimately bullish for their long-term survivability.

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