GM to a quick Market SitRep! 🎄

TLDR;

1. This week is a continuation of the previous one, from last week our expectations have been confirmed.

2. There is only one added macro catalyst on Dec 26th causing heightened volatility, no other.

3. BTC price remains range-bound with thin liquidity during the holiday season.

Weekly continuation

The market dynamics observed last week, as detailed in SitRep CW 51, have persisted into the current period without significant deviation. This week represents a direct continuation, augmented by a select factor.

Wintermute

Wintermute continued operation as usual, their liquidity provisioning implied ongoing OTC/spot activity, thus supporting depth in the majors. The FUD has since calmed.

Nonetheless our observations from last week seem to continue, on-chain and in alt-outflows we can still see de-risking taking place entering the holidays in most of the western world.

The result of this environment is thinner holiday liquidity, without explosive moves.

Consolidation - Still here

Still here and as deep as expected. As expected, the Crypto market stays muted and compressed, while the outer cohorts of risk assets bleed first and continuously, while we remain short, and BTC dominance climbs.

Exactly the lower-risk rotation we flagged.

Japan - Yen Carry Trade

The Bank of Japan raised rates to 0.75%, and the impact is considerably softened due to persistent wide differentials (U.S. FED at 3.50%-3.75%), leading to a soft landing. There was no considerable unwind noticeable in TradFi markets, and Crypto barely got affected yet. A soft landing, with long term implications only.

AI Narrative

Continued gradual pressure, but no radical unwind expected. As forecasted, Crypto feels the correlated risk-off, but benefits from capital seeking alternatives when growth stays controlled.

Derebit options expire

While the upcoming week features thin trading volumes from Christmas and NYE closures, on December 26th, we expect heightened volatility due to Derebit options expiring: A record of $28.5B ($23.6B BTC and $3.8B ETH notional).

The consensus for the Max Pain price is at ~$96k to $100k for BTC. This is an often misunderstood number, it does not mean $96k would get reached by BTC. The dealers hedge, and gamma exposure drives buying to neutralize deltas. This can push prices upwards temporarily, although the mentioned thin liquidity may limit impact.

The Max Pain mechanism can act as a magnet, but the contained chop makes a brief swing towards $90k-$92k more likely, if any. Thin liquidity dampens and pins us near the current levels.

There are no other overriding macro catalysts this week.