A message from Agoric

Bitcoin dipped below $63,000 as Mt. Gox selling pressure reared its head again. BTC had tested a return above $65,000 during Asian trading hours before slipping 3% as a wallet associated with Mt. Gox moved nearly $3 billion worth of bitcoin, likely as part of its creditor repayment plan. The defunct crypto exchange began repaying its debt on July 4, with traders concerned that recipients will immediately dump their coins, dragging BTC's price down. Bitcoin fell to around $62,500 in the mid-European morning before recovering to over $63,500, 1.6% higher than 24 hours before. The broader crypto market as measured by the CoinDesk 20 Index rose about 1.55%.

Spot ether ETFs could begin trading in the U.S. next Tuesday, a source familiar with the matter told CoinDesk on Monday. SEC officials told one issuer that the regulator had no further comments on the recently submitted S-1 filings and that the final versions needed to be submitted by Wednesday, another source said, adding that the funds could then be listed on exchanges on July 23. Ether saw gains of 7.3% on Monday, outpacing bitcoin. ETH is sitting at around $3,410 at the time of writing, an increase of 2.2% in the last 24 hours.

Ether ETFs could see inflows of around 30%-35% the level that bitcoin products experienced, according to a research report by Citi. That level gives a range of $4.7 billion to $5.4 billion of net inflows over six months, the report said. The inflows and the beta of ether returns relative to such flows could be lower than the analysis suggests, the bank said. “One reason is that while ETH may offer diversification benefits in the long-term, given its different and more extensive set of use-cases, this is currently not the case,” analysts wrote. They added that investors may split their prospective allocations for crypto investment between bitcoin and ether ETFs, rather than allocate additional funds specifically for ether. The lack of staking in the ETFs could also hamstring inflows.

The impending debut of spot ether ETFs in the U.S. has investors scrambling to the options market to hedge or protect existing market positions from price swings.

Implied volatility, or options-derived market expectations for price turbulence over a specific period, has ticked higher across timeframes, according to data sources Deribit and Kaiko. That's a sign of increased demand for options or derivatives offering protection against price swings.

The hedging activity has been more pronounced in short-term contracts, as evidenced by the recent relative richness of implied volatility determined by options contracts expiring on July 19 relative to those expiring on July 26.

The pick-up in hedging activity in ether is consistent with the uber-bullish expectations from the spot ether ETF traders, however, the present market mood and ether's bullish positioning are significantly more measured than bitcoin in early January, suggesting low odds of a post-debut sell-the-fact pullback.

- Omkar Godbole