Market Recap — Jan 4, 2022

BTC

Bitcoin tested support, once again, sweeping the recent lows at $45,650. Today marks the eighth time we’ve tested the range lows since the Dec 6 selloff, and so far the reaction is pretty consistent with previous attempts to break down, although a retest of the lows on Dec 17 would give me more confidence to start looking for longs. Heard a few stories of large shorts getting placed at the range lows looking for a cascade lower, but so far all attempts were bought.

Interesting note from Will Clemente: 1 month implied volatility on BTC ATM options are hitting lows not seen since April (the 3 and 6 month charts are identical) while futures open interest is back near recent highs. It looks like one of these markets will be caught offsides pretty soon…

1 month BTC ATM implied vol — Deribit
BTC futures open interest leverage ratio

ETH/BTC

ETH/BTC bounced off the range low / 4H demand at the end of December and has broken through the midrange after chopping around for a few days. I think a retest of 0.8140s would be a healthy place to look for longs into the range high / 4H supply. ETH/BTC is one of the really interesting stories after EIP-1559 since there is now a more apples to apples comparison between ETH and BTC, but an even greater theme here is the continued migration of capital away from holding BTC and more towards building web3. Yes, Ethereum has serious scaling challenges, but my medium term bull bias is firmly intact once we break out of this range.

ETHBTC 4 hour chart

REGULATION

I think one of the primary narratives of 2022 will be regulation. At the moment, there is no clear path on who will eventually have oversight as several federal agencies are vying to take “ownership” of the crypto space. However, unlike the SEC and it’s vocal commissioner, the CFTC seems to be taking a bit more thoughtful approach…

Meanwhile, if there was ever a case that prove the value of true decentralization, this recent story involving Tether may be it. To be clear, I’m not anti-regulation, but this does make the case for decentralization fairly explicitly.

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