Alpha Hunt — September 16

Apart from volatility in altcoins, it hasn’t been an overly exciting week in crypto. With BTC and ETH up by 2% and 5% month-to-date, prices finally appear to be range-bound. Is the market in a wait-and-see mode?

Talking Macro

Although the U.S. inflation rate has flatlined from its skyrocketing pace, it also showed no signs of abating; consumer price index (CPI) in August was up by 5.3% year-on-year (YoY). With real yields at the outlier levels and less taper pressure from the U.S. Federal Reserve (for now), there is still a large upside potential for inflation-hedge assets: crypto.

Source: Ecoinmetrics

Short-Term Caution Warranted

September is historically the month for weak price performances, especially for the blue chip cryptos — BTC and ETH. So while the macro picture in the long run is bullish — traders would do well by being less aggressive on their buys till month-end. The caveat, of course, is that the dynamics for ETH are different today with EIP 1559 burn mechanics.

Frothy Layer-1 — Is Sentiment Running Ahead of Reality?

With the price of BTC and ETH performing boringly, the same can’t be said for the Layer 1 projects — with Fantom’s FTM and Solana’s SOL leading the way. If the past few months have been anything to go by, with the right catalyst, we could see capital rotation into a different segment of the industry. 

Derivatives Signaling Big Move in Longer-Term

Backed by the collapse in short-end realized volatility, BTC’s implied volatility (IV) is currently in full contango mode. The silver lining here is that such extended periods of low volatility tends to be followed by — you guessed it — outsized price movements.