Buyers On Strike

Last week, we discussed our immediate-term cautious approach to the crypto market, highlighting recent geopolitical tensions, tax-related selling, negative fiscal flows, and the persistent rise in real yields as reasons for a more risk-averse positioning (albeit relative, as holding 7.5% in cash and the rest in crypto is hardly considered risk-averse in most circles). This uncertainty has persisted into this week, evidenced by what we consider an apparent “buyer's strike.”

One of the clearest indicators of this buyers' strike is the 7-day moving average in ETF flows, which has turned slightly negative.

Additionally, there has been a decline in CME open interest and average trade size, suggesting that larger, institutional market participation has waned in the past couple of weeks.

Also, the apparent drawdown in implied volatility, as demonstrated by the Bitcoin Volmex Implied Volatility Index (BVIV), suggests a lot of selling of volatility, meaning that most traders are expecting both upside and downside to be capped in the near-term.

This does not necessarily indicate a strong long-term bias in either direction. Rather, as we outlined last week, we believe the market is in a wait-and-see mode for next week when the Fed meets an...