This week was marked by bullish momentum in the crypto market, largely driven by expectations around upcoming US elections, new regulatory approvals, and major institutional flows. BTC made significant strides, coming close to the key $70,000 level, but faced challenges in breaking through.
Macroeconomic Overview: The broader market context for this week was shaped by optimism around potential policy shifts tied to the US elections, as well as institutional developments in the ETF space. The approval of Bitcoin ETF options trading on the NYSE, combined with significant fund inflows into BTC ETFs, underscored the growing appetite from institutional investors. The trend suggests that interest in Bitcoin is shifting from just spot trading to a more sophisticated derivatives market, which could provide liquidity and depth to price action moving forward.
Bitcoin dominance is nearing 59%, its highest level in years, indicating a continued focus on BTC amidst broader market uncertainty. Meanwhile, macro factors like the Bank of Japan maintaining dovish monetary policy and a rally in the USD/JPY provided further risk-on sentiment globally.
Crypto Market Dynamics: Bitcoin experienced a rally to $69,000 early in the week before facing resistance, failing to cross the psychological $70,000 threshold. Nonetheless, institutional demand remained strong, with inflows into BTC ETFs totaling $203.3 million on Friday. The rally was bolstered by several factors, including support from pro-crypto sentiments surrounding both US presidential candidates, adding to optimism around regulatory conditions for the sector.
Ethereum, while playing catch-up to BTC, saw periods of outperformance, although it still lags behind Bitcoin in its performance for the month. ETH rallied 11% compared to BTC’s 9.6% last week, though it’s yet to clear its July highs. The divergence between BTC and ETH has been noted in options markets, with implied volatility skew now favoring calls, suggesting optimism for a continued rally in both assets. However, ETHBTC continues to hit new yearly lows, as market participants prefer exposure to BTC during heightened macro uncertainty.
Key Trades and Market Activity
● BTC Structures:
○ There was notable activity in BTC options this week, with strong buying interest in calls, particularly for longer-dated options like the 28-Mar-25 120k strike. This signifies that traders are positioning for a potential move to new highs, with a growing appetite for long-shot, upside plays.
○ The options desk also saw a mix of custom strategies and risk reversals being traded, including notable bear risk reversals for June 2025. This indicates a level of caution among market participants, with some hedging downside while others look to capitalize on the upside potential. The upcoming expiry of $4.2 billion inBTC options on October 25th, with a max pain price of $64k, is adding pressure as traders adjust positions ahead of expiry.
● ETH Structures:
○ In the ETH market, activity was balanced with both calls and put calendars actively traded. Large call calendars, such as the 1-Nov-24 2900/3100, were bought as market participants looked to take advantage of any break above key resistance.
○ There was also a focus on downside protection, with puts for 29-Nov-24 being sold, indicating some traders see limited downside in ETH at these levels. The divergence in flows between BTC and ETH highlights a mixed sentiment, with ETH lagging slightly despite recent gains.
Outlook: Looking ahead, the key macro focus is the upcoming US elections, with a potential Trump victory seen as favorable for crypto markets. Both candidates are viewed as more crypto-friendly compared to the current administration, leading traders to anticipate continued positive momentum regardless of the outcome. Current betting odds on Polymarket indicate a 62% likelihood of a Trump victory, adding to the optimism.
The market is also closely monitoring the impact of newly approved BTC ETF options on the NYSE and Nasdaq, which are expected to drive retail participation in the derivatives space. This could lead to increased volatility in the near term as investors use options to speculate or hedge ahead of key events, such as the US election and upcoming NFP data.
Despite the general optimism, there is caution around the potential selling of seized BTC and ETH by authorities, which could weigh on prices if executed. For now, BTC’s dominance and continued inflows into ETFs provide a solid backdrop for a potential move higher, with $70,000 as the next key level to watch.
In summary, the week saw strong institutional interest in crypto, particularly through BTC ETF inflows and options trading activity. The upcoming US elections are a significant factor influencing market sentiment, with both Bitcoin and Ethereum approaching key resistance levels. Traders are preparing for a potential breakout, but are also hedging against downside risks, creating a delicate balance of optimism and caution as we move into a critical period for the markets.
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