Crypto.com Alpha Navigator Quest for the month September

in this month's latest issue of Alpha Navigator, our institutional-focused report for the month of July by our official partner Crypto.com.

• Macro View: Fed Pushes Back at Jackson Hole

• Derivatives Pulse

• Derivatives Pulse (cont.)

• Fund Flow Tracker

• Fund Flow Tracker (cont.)

• Pair Trader: BTC vs. ETH

• Pair Trader: ETH vs. ADA

• Pair Trader: SOL vs. DOT

• Event Driven

Macro View: Fed Pushes Back at Jackson Hole

• Market sentiment was buoyed by a lower than expected U.S. inflation print in early Aug and hopes that rate hikes would be slowed. However, this was quickly dampened by Fed Chairman Powell’s speech at Jackson Hole, in which he warned of “some pain” to come for the economy. Now, all eyes are on the European Central Bank to also send a clear signal with another rate step (decision on 8 Sep).

• While the Ethereum Merge (expected in mid-Sep) could be considered a positive idiosyncratic catalyst for crypto, it could also potentially be a sell-the-news event, and some signals from the derivatives market are implying caution (see our Derivatives Pulse section below).

Derivatives Pulse

ETH skews (puts minus calls) dropped sharply in July when developers announced a soft target date of mid-September for The Merge, as traders placed their bets on a price surge by dumping puts for calls.

However, skews have been rising since then, as puts are being bid up—perhaps a sign that traders are looking to manage risk of an ETH reversal.

Derivatives Pulse (cont.)

The futures annualised rolling basis (3-month) for ETH and BTC plunged at the end of July 2022, with both breaking new lows in negative territory, potentially implying cautious sentiment and short positioning tilt (e.g. for hedging).

Derivatives Pulse (cont.)

ETH perpetual futures funding rates have been printing negative since mid-August, potentially implying cautious sentiment and a shift of demand to the short side.

Fund Flow Tracker

Aggregated exchange balances for both BTC and ETH reached new lows, potentially implying strengthening investor inclinations to hold.

Fund Flow Tracker (cont.)

BTC balances held on OTC desks continued to drift down over the past month.

Pair Trader: BTC vs. ETH

• BTC (Price: US$20,308.8, MCap: US$389.1B, Volume: US$27.7B). ETH (Price: US$1,555.1, MCap: US$187.4B, Volume: US$16.2B).

• This trade has been playing out since our last issue, as ETH outperformed BTC. The price ratio (BTC price divided by ETH price) is now driven down to the 1-standard deviation (SD) floor band.

• The Merge is drawing nearer (estimated in mid-Sep 2022). However, ETH has already surged substantially from its lows in June. Any delays would potentially be detrimental, given the high expectations surrounding this event.

• Market-neutral pair trade (i.e., long one and short the other) on price ratio touching standard deviation bands.

Pair Trader: ETH vs. ADA

• ETH (Price: US$1,555.1, MCap: US$187.4B, Volume: US$16.2B). ADA (Price: US$0.45, MCap: US$15.3B, Volume: US$668.7M).

• Price ratio (ETH price divided by ADA price) is at the 1-standard deviation (SD) ceiling band.

• It’s been a tale of two upgrades, with positive developments in Ethereum’s Merge contrasting with Cardano’s Vasil hard-fork running into bugs and delays - however, a 22 Sep 2022 date has been recently announced for Vasil.

• Market-neutral pair trade (i.e., long one and short the other) on price ratio touching standard deviation bands.

Pair Trader: SOL vs. DOT

• SOL (Price: US$32.4, MCap: US$11.4B, Volume: US$1.0B). DOT (Price: US$7.2, MCap: US$8.4B, Volume: US$471.5M).

• Price ratio (SOL price divided by DOT price) is currently at the 1-standard deviation (SD) floor band.

• Solana is working with Jump Crypto to improve software efficiencies.

• Acala’s AUSD, the first stablecoin in the Polkadot ecosystem, broke its peg following a hack.

• Market-neutral pair trades (i.e., long one and short the other) on price ratio touching standard deviation bands.

Event Driven

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