Amber Group Market Weekly Review 211206 | Insights on Bitcoin and Ethereum Markets, News Highlights

This article is authorized for repost by Amber Group

Digital Currency Market

Bitcoin and Ethereum Market Insights:

The dominance of ETH TVL continues to decline, with capital flowing out to ecosystems beyond it. Transaction costs on Ethereum are around $70, while on other chains, they are less than $1. In November, SOL rose by 3.1%, LUNA by 39.2%, and AVAX by 87.2%.

In November, Bitcoin fell by 7%, while the average historical return rate for November is 68.3%. Bitcoin's one-month annualized volatility is 62.7%, slightly higher than the year's lowest level of 58.6% in July. Strategies that involve longing volatility are becoming attractive.

As long-term Bitcoin holders begin to sell off, Bitcoin dropped by 16.98% last Saturday. $1 billion in open positions were liquidated, and perpetual contract rates briefly turned negative. BTC's market share did not rebound from this drop, indicating that funds flowed out of altcoins faster and did not go into mainstream coin markets. This demonstrates extreme bearish sentiment in the current market.

The recent hype around the metaverse and Web 3.0 narrative followed the market's downturn, with an average decline of 17.51%. We believe projects that can maintain TVL or have sustainable cash flow are more likely to perform well in a bearish market sentiment.

Market News and Highlights:

• The supply of USDC stablecoin has surpassed $40 billion, reaching a new all-time high.
• Anthony Scaramucci, founder of SkyBridge Capital, announced the launch of a $200 million cryptocurrency fund in the UAE in December 2021.
• According to the latest data, the total sales volume of NFTs on the Ethereum chain has exceeded $16 billion, setting a new record. At the time of writing, the total was $16,044,201,679, with 40,324,108 on-chain transactions.
• Astar Network successfully won the third parachain slot on Polkadot. Astar Network's predecessor, Plasm, was a dApp hub on Polkadot, supporting Ethereum, Web Assembly, and Layer 2 solutions like ZKRollups. Astar aims to be a multi-chain smart contract platform supporting multiple blockchains and virtual machines.
• German listed mining company and high-performance computing infrastructure provider Northern Data disclosed its performance report from the beginning of 2021, showing that the company's revenue has reached €180-220 million this year.
• Facebook announced on Wednesday its decision to revoke its long-standing ban on most cryptocurrency companies advertising on its services, allowing more cryptocurrency and blockchain ads on Facebook and Instagram.
• The total trading volume on NFT marketplace OpenSea has surpassed $12 billion, setting a new record, with $121.2 billion at the time of writing, ranking first in NFT market trading volume.
• Play Ventures launched the blockchain game fund Play Future Fund, committing to invest $75 million.
• Community-driven Avalanche ecosystem accelerator Colony completed a $18.5 million funding round, led by the Avalanche Foundation, with participation from Shima Capital, Hashkey, GBV Capital, Bixin Ventures, and others.

Options Market Insights

The BTC options implied volatility surged as spot dropped by 22% over the weekend. However, the high implied volatility did not last long. By Sunday night, implied volatility for various tenors had returned to below 90, indicating relatively low levels. The 25 delta risk reversal remains bearish. Put options at the same delta for expiry in one week are 10% more expensive than call options. This makes strategies that involve selling put options to fund buying call options more cost-effective. Additionally, put option strike prices are now lower than the average cost for many short-term traders, making them more attractive to bottom-fishing traders.

BTC ATM Implied Volatility:

Time Lapse ATM IV Term Structure:

Traditional Financial Markets

Last week, major stock indices fell as the Federal Reserve indicated a potential faster reduction in monthly asset purchases. On the other hand, the emergence of new COVID-19 variants may add pressure to global economic growth and lead to supply chain disruptions.

For the same reasons, the yield curve for government bonds flattened, with short-term yields rising and long-term rates falling. Federal Reserve Chairman Jerome Powell acknowledged that while inflation pressures are expected to ease next year, they have been broad-based and persistent enough to potentially prompt the central bank to consider accelerating the pace of monthly bond purchase reductions.

Despite disappointing non-farm payroll numbers, which added only 210,000 jobs in November, far below October's 546,000 and less than half of the analysts' general expectations, the market does not believe the Fed will alter its asset purchase plans and monetary policy as a result.