CRYPTO MOVERS AND PRICES
The broad-based crypto rally was cooling this morning but on balance, the space remains positive. Litecoin is the best performer in the Top 10 followed closely by bitcoin (BTC).
CRYPTO STORY OF THE DAY
Yesterday's broad-based crypto rally was the first significant injection of volatility since March. While there has been margin and leverage demand, we’re far from levels we would consider, “speculative frenzy.” We recap some of the notable dynamics that have emerged.
What began as an ethereum (ETH)-lead rally quickly became BTC-lead after BTC traded decisively beyond USD 10,000. Ultimately, BTC made highs in the range of USD 11,400, which is an approximately 25% gain from early last week and a 185% rally from March lows. ETH, at its highs around USD 333, is up about 45% since early last week. In the last few weeks, 1-month realized volatility on BTC had touched below 25% which at times was actually lower than S&P 500 index realized vol over the period. We had pointed out that the last time there had been a similar dynamic in crypto was during the post-2017 price lows in early 2019.
With crypto such a new sector, it’s often difficult to rely on historical precedent to make predictions. That said, if there was ever a relationship that could be relied upon in the space it's that periods of hyper-low volatility are usually followed by massive vol spikes. If we look at leverage dynamics, while such measures have begun to increase, they are far from frenzied levels. Lending rates for USD on Bitfinex, for example, have been consistently below 10% annualized. When rallies begin to look exhausted such measures can be close to 50% annualized. Ultimately, the current up-move looks as healthy as we've seen in some time combined with what we've previously described as a backdrop of bullish fundamentals.