Desk Commentary: In(ter)ference

The modus operandi in crypto optionality has developed an increasingly fetid fragrance as May wears on with no meaningful breakout in majors and as one macro data point after another magically comes in on or near the screws.

The midweek session of 10th May saw a smidge softer CPI nearly ignite a renewed impetus to push above stiff resistance at 28000, blowing through offers with bitcoin spot settling in near 28250 and ether at 1875 as the New York morning wore on.

Leading up to Wednesday’s data release, the market saw plays to purchase breakout exposure with flows such as socially sized 26th May 20-delta downside in bitcoin and a flurry of cumulatively chunky clips of ether 28th July 25 delta calls, followed by inquires from directional players in month-end 30,000 strikes. But true to form, owing to one catalyst or another, ranges have thus far been respected both pre- and post-Powell, and the latest session proved the rule: a violent $1500 mid-day drop in bitcoin punctuated a palpable sense that external forces may continue to send cryptocurrencies reeling in a diabolical rendition of deus ex machina.

With the vacuum plunge lacking other plausible alternative extenuations, crypto intelligencer Arkham released a report that Silk Road bitcoin wallets had been activated, presumably prefacing another heavy-handed liquidation as was seen in early March and late April. It remains to be seen whether on-chain sleuths can attest to this latest slide as a public sector trigger-pull. Still, it’s now become something of an established pattern that bitcoin dumped on the market from federal coffers is often (if not always) a dip which, ever since the earliest days of the infamous auction in which Tim Draper loaded his bags, should be bought. Yet the abbreviated action from 28300 to 26800 and back to 27700 in practice left little time to strap on material risk. The tape did, however, evince punctual, high-conviction (and high-alpha) punts on Friday 28000 puts followed by a barrage of 26500 and 27000 strike sales as spot firmed up off the lows, with gamma struggling to find buyers at the 50% price point, even with a 5% move in less than an hour.

Meanwhile, other asset classes have tended toward comparative tranquility with limited exceptions as sometime crypto-correlates cling to key levels ($2000 in gold, $25 in silver, and $75 in crude).

With macro storm clouds on the horizon in the form of a looming debt-ceiling standdown, an imminent migrant inundation on America’s southern border, another Ukrainian offensive, a hot-button election in geopolitical swing-state Turkey, and a smoldering sectarian conflict in Sudan, the stage seems set for more surprises to come this quarter. It’s an altogether fitting time for a scathing appraisal of the prospects of any possible return to fiscal rectitude by the U.S. government from macro legend Stanley Druckenmiller, who espoused a hard money bent to his own portfolio, with length in gold and silver apparently complementing his past praise for bitcoin.

In that vein, the Genesis trading desk has seen stalwart crypto-native interest in longer-dated lower-delta bitcoin wings as, among other things, a hedge for unknowns, both known and unknown, in something of an affirmation that the abovementioned assumed toxic cocktail of events would seem to make the case that there have been worse times to long volatility at cyclical lows.

Disclaimer

Genesis Global Trading, Inc. and its global affiliates (collectively, “Genesis”) do not provide legal, compliance, tax or accounting advice. Genesis is a principal trading firm; it is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing this material, which cannot be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The information contained herein has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances, or requirements of any person, and it should not be the basis for making any investment or transaction decision. THE INFORMATION IS NEITHER A RECOMMENDATION TO ENGAGE IN ANY TRANSACTION NOR RESEARCH MATERIAL.

This material contained herein is confidential and may not be distributed in whole or in part to anyone other than the intended recipients. Unauthorized reproduction or distribution of all or any of this material or the information contained herein is strictly prohibited. These materials are incomplete without reference to, and should be viewed solely in conjunction with, the terms and disclosures set forth on the Genesis website, which are deemed incorporated herein.

The information provided in this communication does not constitute investment advice, financial advice, trading advice, or other advice. If any person elects to enter into transactions with Genesis, whether as a result of this material or otherwise, Genesis will enter into such transactions as principal only and will act solely in its own best interests, which may be adverse to your interests. Therefore, you are advised to make your own assessment of whether a Genesis service that you are considering is suitable for you and ensure that you have the necessary experience and knowledge to understand the risks involved in relation to those particular services, transactions or investments. Prior to entering into any transaction, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences. In this regard, by accepting this material, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice and our disclaimer as to these matters. By accepting receipt of this material, the recipient will be deemed to represent that they possess, either individually or through their advisers, sufficient investment expertise to understand the risks involved in any transactions or services discussed herein and that they have not relied in whole or in part on any of the information provided by Genesis in making such determination.

The trading of digital currency as herein described is an inherently risky activity. Digital currency does not benefit from the protections afforded by the Securities Investor Protection Corporation. A counterparty’s ability to enter into derivatives with Genesis depends on satisfying a number of regulatory requirements imposed on derivatives under the Dodd–Frank Wall Street Reform and Consumer Protection Act and applicable law.

Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers. These indications are provided solely for your information and consideration, are subject to change at any time without notice and are not intended as an offer to sell or a solicitation to purchase any financial instrument. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or economic measure. In preparing this material, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by us. Genesis does not make any representations or warranties, express or implied, as to the accuracy or completeness of the information provided herein. Any estimates included herein constitute our judgment as of the date hereof, are subject to change, may or may not be realized, and are not a complete analysis of every material fact. We and/or our affiliates may make a market in these instruments for our customers and for our own account. Accordingly, Genesis may have a position in any such instrument at any time.

Genesis and Genesis Trading are marketing names for certain businesses of Genesis Global Trading, Inc. and its global affiliates and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the marketing name used. Products and services may not be available to all counterparties or in all jurisdictions. Securities and digital assets are not deposits or other obligations of any commercial bank, are not guaranteed by any commercial bank and are not insured by the Federal Deposit Insurance Corporation. GGC International Limited is incorporated in the British Virgin Islands (“BVI”). Genesis Global Trading, Inc, a Delaware corporation, has been granted a Virtual Currency License by the New York State Department of Financial Services and is registered with the U.S. Securities and Exchange Commission as a broker dealer. Genesis Asia Pacific Pte. Ltd. Is a private limited company organized under the laws of Singapore. Genesis Global Capital, LLC is a limited liability company organized under the laws of Delaware. Genesis Custody Limited is registered as a cryptoasset business with the UK Financial Conduct Authority.

© 2022 Genesis Global Trading, Inc. All rights reserved. “Genesis”, the Genesis logo, and other Genesis trademarks and service marks referenced herein are trademarks and service marks of Genesis and are used and registered throughout the world.