Welcome to the weekly Ouroboros Flows and Positioning Chartbook, a weekly compendium dedicated to providing a balanced view of the most noteworthy charts. None of the following is financial advice.
The View: We continue to stay bullish, premised on 1) the ETH ETF and 2) a turning point in inflation. However, would advocate taking some risk off into the next FOMC given i) heavier positioning now and ii) the wall of worry around inflation not entirely gone yet. The ETH ETF got approved since our last chartbook. Odds of an ETH approval went from close to 0% to being approved As a result, ETH quickly repriced from below $3K to $4K with OI approaching the highs.
- We are bullish ETH and as a result ETH beta alts (eg. ETHFI). - We remain bullish our high conviction bottom-up picks such as $FTM, $RLB and $CHZ but remain cognizant that attention in those are now being spread to ETH. However, we think attention will return to these names post the ETH ETF listing. - We think that there is still a good degree of upside in ETH, with actual ETF flows to able to add at least $1-2K to ETH's price. - Similar to BTC's ETF fractal we think there will be dips to be bought into. For eg. macro prints/events before the S1s are approved. - The S1s are expected to be approved between early to mid-June. During the same period, we will see several inflation sign posts (31 May Core PCE and 12 Jun Core CPI) as well as an FOMC (13th June). This could be a period where we see positioning unwind. Note that OI in ETH is close to an ATH. - We are also careful to extrapolate the price action of BTC during its ETF approval onto ETH. We remain cognizant of the fact that the macro backdrop then went from pricing in no rate cuts to six rate cuts. It was an extremely dovish backdrop for BTC. - All that said, ETHBTC is likely an easy PvE trade and we'd be buyers on dips. Given its liquidity, it would likely be as easy destination for real money allocators. Especially against the backdrop of potential BTC sell flows from Mt Gox (~$9bn) and Genesis (~$1.1bn).
Coins We Like: We like $ETH, $ETHBTC, $FTM, $CHZ and $RLB. - $ETH and $ETHBTC (ETF) - $FTM (Sonic) - $CHZ and $RLB (Euros 2024 + Copa America + CHZ Dragon8 Upgrade)
TradFi Macro
We think the recent inflection in the inflation print has provided the markets with some respite and could see continuation.
Post Mar, the bad inflation prints have been a source of worrying entering FOMCs. The market has been selling off into FOMCs. We dont think the recent positive print is sufficient to help the market entirely overcome its concerns and expect the same trend. However, we would be buyers of such a dip.
Think the lows are in. US2Y tried pushing past 5% into the recent FOMC but the Fed's persistent dovish messaging has seen it retrace. Don't see the US2Y revisiting 5% anytime soon unless we have another hot CPI print.
US10-US2 coming off alongside US2Y being directionally down suggests that the macro community is less concerned now with inflation being sticky and is now more pro-risk.
S&P and crypto resumed its uptrend post global liquidity's decline stopping.
US M2 YoY, an indicator signalling tops and bottoms is still up.
Crypto Macro
BTC dominance coming off as a result of ETH's recent rally.
Stablecoins market cap still holding highs. Healthy.
Since mid-Mar stablecoin dominance has been rising (risk-off), this is now coming off again. For a sustained risk-on, we'll need to see continuation of this.
The bid has recently switched from spot driven to perp drive. Positioning is getting heavier with ETH OI close to an ATH. We remain cognizant of this. Would advocate trimming risk this week into the next FOMC.
Flows and Positioning
Funding of top OI coins. Funding getting elevated amongst memecoins.
Alt coin open interest in $ climbing towards the highs.
Alt coin funding rate above neutral but still palatable.
Speculative positioning in TradFi (CME futures) mid of the range.
Options
BTC ATM implied vol around the same levels.
BTC front-end is still cheap. Options traders feel more certain about further out prices than nearer term. Good opportunity to buy some front-end puts if you are near term bearish.
With 25-delta skew negative, puts are now still cheaper than calls. However, 1W 25-delta skew increasing significantly, puts getting more expensive
ETH ATM implied vol normalised again after spike from ETH ETF announcement.
Implied volatility term structure increasing the past week. Folks betting on price action post ETF listing?
ETH 25-delta skew still negative. Puts are now cheaper than calls.
BTC On-Chain Metrics
MVRZ z-score now at 2.56. Market tends to peak above 6.5 z-score
Small holders send into exchanges (zoomed out). Pico tops and bottoms tend to be marked by large volume of sends into exchanges followed by a reduction in sends.
Large holders send into exchanges (zoomed out). Pico tops and bottoms tend to be marked by large volume of sends into exchanges followed by a reduction in sends.
Miners continue to sell.
Protocols / Chain Metrics
Arbitrum, Base and Optimism continues to be preferred destinations for stablecoins.
