Analyzing Crowded Trades To Glean Insights About the Crypto Market

Understanding the concept of “crowded trades” – where net positioning becomes skewed in one direction and the market consensus is focused on one particular outcome – is a time-tested skill in risk analysis and trade idea generation. But that skill can be especially difficult in crypto markets, which do not have the same indicators as traditional financial markets.

But Gemini's latest crypto analyst report released with research firm Praxis Veritas, "Analyzing Crowded Traded To Glean Insights About the Crypto Market," shows how studying options and futures market indicators, spot bitcoin and ether ETF flows, and social media sentiment can reveal insights about the market.

Here are a few takeaways from the report:

• Long BTC positions remain well-entrenched, focused on the key USD 100,000 level into year-end: In options markets, bitcoin calls continue to command an implied volatility premium over puts, especially as we focus on the year-end period and beyond. According to data from Derebit, significant open interest has been built up around the $100,000 strike. Most of the near-term put activity is focused on the upcoming US presidential election.

• The market has built up a significant long Solana bias, with sentiment around its ecosystem outpacing its competitor Ethereum: Open interest on Solana futures now generally rank third after bitcoin and ether, while funding rates on perpetual contracts have skewed toward positive values over time. This is consistent with a market that has generally favored long positions over shorts.

• Ethereum flows and positioning are neutral in the context of 2024’s overall crypto performance: Ethereum’s underperformance has been one of 2024’s most striking trends. While on a rolling 30-day basis, bitcoin saw persistent net outflows from exchanges for the majority of the year, ether had numerous periods of net inflows into exchange. Spot ether ETFs have experienced net outflows of around $550 million since inception, a significant divergence from the spot bitcoin ETF launch.

Onward and Upward,
Team Gemini

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