Short-Term Bearish - Crypto Market Update - 2-5-25

Momentum signals, expected moves, cross-asset correlations

*|MC_PREVIEW_TEXT|* Hello my tasty friends, please find our crypto market update below. Tariffs. The market certainly didn't like Trump's tariff announcements Saturday as Bitcoin got rocked while alts were worse. ETH was down around 30% at one point, but the negative reaction seems to be short-lived, at least for now.   Perps. Crypto often front-runs equity vol, especially on weekends when it's the only market trading and subsequently the only place to lay off risk ahead of the US futures open. It can get wildly volatile during these less than liquid times when prices move against leveraged positions in the perpetual futures market. Perps are subject to auto-liquidations which can feed on themselves and push prices to short-term extremes. This was on full display Sunday night as an estimated $2 billion in positions were liquidated.    If you've got some powder ready and an iron gut for volatility, these moments can present an opportunity. In hindsight you could have bought ETH at 2,200 Sunday, with it back around 2,800 today. Not a bad trade, though it's still down about 20% on the month.   Hold the range. When these big downside moves materialize, I always run through my dashboards to see if anything has changed. To that end, it hasn't. There's been a bit of a rotation from alts into BTC given it's a lower vol exposure (see BTC dominance and BTC vol vs ETH), but generally speaking I think we're simply seeing a correction in leveraged positioning, where everyone has been on one side of the proverbial boat. Find me a bear among the onslaught of bullish announcements after the election!    BTC remains very range bound (since November), and has traded well enough as the week has progressed. Short-term momentum has shifted from bullish to bearish, but the long-term trend remains in place.  Following this weekend's sell-off, short-term (daily) price momentum has flipped to bearish across the board. We continue to believe this is an immediate-term correction within a bullish trend, but will keep a close eye on these price momentum signals. Should this signal change on the weekly timeframe, it's likely an indication we are transitioning into a bearish market environment where we're less keen to buy dips.  Implied volatility has contracted considerably for bitcoin and ethereum, with implied volatility premiums coming in against realized for both. IV ranks are also moving towards the low-end of the range.  Expected moves have naturally tightened up given the lower volatility, but we should caution that these ranges are pricing in a series of lower highs and lower lows versus prior weeks. This aligns with the short-term bearish momentum signals we're seeing.  Little to no change to cross-asset correlations w/w. - See commentary from last week below. More volatility in the short-term and/or a VIX above 20 could quickly send BTC back towards the low end of the weekly range, towards the mid 90s. Relative performance (weekly): ETH/BTC  -7%  SOL/BTC  -7% SOL/ETH  -0.1%   The tastycrypto Show: Mondays & Wednesdays from 4:30pm - 5:00pm Central BAG BATTLES: Mondays on the OTC Live Show from 11am - Noon Central LIVE on YouTube | LIVE on X | LIVE on tastylive Contact |  Blog  |   Learn If you no longer want to receive our communications, please click here. tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. and tastytrade, Inc. Neither tastylive, Inc. nor tastytrade, Inc. are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved, including volatile market prices, illiquid market conditions, lack of regulatory oversight, market manipulation, and other risks. tastylive, Inc., 19 N. Sangamon St., Chicago, IL 60607, United States