Bitcoin, Ether Slip on Safeguards Attracting Demand Amid sell-off for FTX Tokens

Cryptocurrency market leaders bitcoin (BTC) and ether (ETH) were relatively calm and faced selling pressure early Tuesday as FTT, the native token of crypto exchange FTX, nosedived to a 21-month low on lingering concerns regarding the balance sheet of trading company Alameda.

At 4:30 UTC, bitcoin was trading 4.3% lower on the day at $19,700, while ether changed hands at $1,480, representing a 5.5% drop, CoinDesk data shows. . FTX’s FTT token jumped 20% to $17, its lowest level since February 2021, extending last week’s 13% slide.

Options data shows renewed demand for bearish put options tied to bitcoin and ether. The shift in sentiment to the downside perhaps reflects investor concerns that the ongoing FTX-Alameda movie could lead to The Fall of Crypto Like Terra.

Patrick Chu, director of institutional sales and trading at crypto derivatives technology platform Paradigm, told CoinDesk: “We have noticed a renewed need for bearish protection following the associated negative news flow. to the FTT.

Chu added: “Short date deviations have turned in favor as we have seen bearish defense in both BTC and ETH with strong demand for late Nov/December expiry dates.”

A call option gives the buyer the right, but not the obligation, to purchase the underlying asset at a predetermined price on or before a specific date. Put options provide the right to sell. Deviation options measure the price for bullish versus bearish orders.

The controversy surrounding Alameda’s balance sheet began last week after CoinDesk reported that the trading firm holds large amounts of locked or illiquid FTX tokens, suggesting the two entities are close. unusually. (Alameda and FTX are sister companies).

Since then, FTT has dropped 40% and the exchange has seen massive withdrawals at an alarming rate.

“Most of the anxiety comes from FTX’s app (formerly Blockfolio), which has a generous ‘money program’ around ~5% up to $100k. As expected, a lot of capital. is being drawn, which some observers try to attribute to Ilan Solot, co-head of digital assets at London-based financial services platform Marex, said in an email.

“Moreover, the 5% rate (not far from the US rate) isn’t as severe as what Anchor or Celsius did. But we don’t have any visibility into currency repositioning. or liquidity mismatches (which doesn’t mean they don’t “don’t exist),” added Solot.

The chart shows renewed demand for put options.  (Amberdata)

The chart shows renewed demand for put options at a discount. (Amberdata)

Both the short-term and long-term bitcoin fundraising trends are down from zero this week. The one-week spread fell from -1% to -12%, the lowest since late September, according to digital asset data provider Amberdata.

In other words, the order is in demand again.

A similar pattern is observed in the ether call-put skew.

The one-week spread has shrunk to -20%, reflecting increased short-term trading demand.  (Amberdata)

The one-week spread has shrunk to -20%, reflecting increased short-term trading demand. (Amberdata)

The one-week ether buy order deviation has dropped to nearly -20%, showing the strongest bearish bias since mid-September.

Options traders’ expectations for price turbulence over the next week and month have increased. Ether’s seven-day implied volatility, or expectations of price movement, has risen to 98% year-to-date, a two-month high. The one-month index edged higher to a two-week high of 84%.

“The market seems to be panicking, due to the LUNA event not too long ago,” said Martin Cheung, an options trader from Pulsar.

Terra’s stablecoin UST and native token LUNA crashed in May, destroying billions of dollars in investor assets. The crash prompted several lenders, including C.

According to Solot, the problems of FTX and Alameda are unlikely to crash the market.

“FTX is a systemically important player in the crypto ecosystem, so any trouble or loss of trust – even if temporary – will have an overwhelming impact,” Solot said.

“That said, there’s less leverage in the system now, so it’s more likely that any trouble could be dealt with more easily – or at least the loss would be concentrated instead. because of the spread. Solot noted.

UPDATE: (November 8, 08:12 UTC): Add quotes from Ilan Solot of Marex and Martin Cheung of Pulsar Trading Capital and note the increase in implied volatility.


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