Cumberland is commenting on the recent volatility and potential opportunities to take advantage of it.
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The month of March started off with a rapid selloff on the Asia session on Thursday from 23.5 -> 22.5 followed by muted price action. The hourly realized vol has decayed to ~46 & 51 for BTC & ETH respectively over the last 5 days. This is in line with the 47.5 & 53 implied vol for the month of March.
Important events to note this week are Powell’s testimony later today and the employment situation by the end of the week. Stocks have started the month on a strong note due to a global economic rebound in Feb with the backdrop of a patient Fed, insisting on a gradual hiking path for the rest of the year.
Crypto specific events include Shanghai update for ETH, which is firmly in mid-April now, as well as the looming auctions of FTX, Voyager, Celsius and Gox coins, and regulatory headlines – Binance, Signature, Silvergate, Grayscale and Ripple are all in the crosshairs this month.
Given the stacked event calendar, both macro and crypto specific, gives good reason for a purchase of April-28th ATM straddles in both BTC and ETH for prices of $3475 and $265 for the 22.5k and 1550 straddles. This is roughly a 50% and 57% vol representing a 2.6% and 2.9% daily break-even.
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