Are Crypto Bulls Ready to Charge? With Imran Lakha

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0:34Are the crypto bulls ready to charge? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Imran Laka, founder of Options Insight, and my colleague Ash Bennington is stopping by as well. Hi, gentlemen. Hey, Maggie. Good to see you. Good to see you both. So we're going to talk tech earnings. We've got some big ones coming out after the bell, some of the market dynamics that are happening under the hood, as well as NatGas. But we had to start with Bitcoin and what's happening in crypto because we've been seeing some huge moves. Ash, just fill us in on what's going on here. Maggie, we got some price action.

1:10Bitcoin currently trading at$33 ,800. It had written up as high as nearly$35 ,000. It's been a big year for Bitcoin. Year to date, We're up about 100 % on the year, up almost 30 % on the month. Yesterday, we had a breakout up 11 % in 24 hours. This was on some positive positioning in the derivatives market, and moreover, on the expectation of an approval for a spot Bitcoin ETF. Here's what happened, and especially what happened today. We're down about 3%. Why? Well, yesterday, there was speculation that Bitcoin's proposed spot BTC ETF from BlackRock was going to be approved. Why? There was an approval, an appearance, I should say, on DTCC's website.

1:52This is Depository Trust and Clearing Corporation. For folks who are in U.S. equity markets, you know they clear something over 80 % of U.S. equities. The expectation was that it was a done deal. That got pulled off today, hence the 3 % sell-off. I know this stuff gets really wonky and really confusing, but we've got a lot of price action, a lot of news flow in the space, Maggie. Yeah, I think when it comes to the regulation, that's not so confusing because everyone's kind of been looking at that. But, you know, unbelievable that we've seen that kind of move. That's a big move, 30 percent in one month.

2:27And if I'm not mistaken, I think it's the best performing asset across the board this year. We know it was one of Raoul's picks earlier, but let's sort of separate this because there is that regulatory story, which has fits and starts, as you just explained. But there is this feeling that the momentum is moving in that direction. But I sense that we think that there's a lot going on when it comes to some of the stuff you're watching, Imran. So kind of fill us in on how much you think that had to do with some of this price action and what we need to understand about what's happening there. By the way, somebody, I've got to check this, but our community is so smart and just on it.

3:05Oliver is saying Microsoft beat the high estimate, so the stock is up. So we're going to catch up with all that. Don't you guys worry. But let's talk about what you're seeing with Bitcoin, Imran. What's happening from your vantage point? Sure. So obviously, I'm all over the crypto vol market and seeing what's going on in options. And it's been pretty sleepy for a while, the crypto vol market. We reached implied vol levels in the 30s. Ethereum just couldn't move. It was realizing in the 20s. And Bitcoin was moving a bit more than Ethereum, but still wasn't doing a whole lot as we were trapped in that range between 25K and 31K.

3:40And then it all came a bit alive, not just this week, but last week, there was that kind of fake news story that came out saying that the ETF was done. And we jumped above 30K, and then it was denied, and we collapsed straight back down again. So the market kind of gave you a tell that the ETF approval was not priced in, that there was a lot of buying to be done if it does get approved. And it kind of gave you a warning shot across the bow. So you had a lot of options activity on the upside. People piled in, bought some upside in various expiries, short-dated expiries. And then when we got the news that BlackRock put their ticker up and thought it was effectively a done deal, and there's talk of them seeding the ETF or something like that, then we started to go again.

4:32And also from a technical perspective, when we broke through that 31.5K area that's been kind of holding the market all year, then the next technical level was pretty much 34K, and we went there in one shot. And then it also triggered a load of liquidations from people who have been selling optionality, systematically making decent money for most of this year. A lot of those short gamma players got liquidated. There's also some call overwriting strategies that get done in Ethereum and Bitcoin in pretty big size from the minor types who want to earn yield off their holdings. And a lot of those flows were getting bought back as well.

5:10So you just have a culmination of speculative call buying to chase that story, as well as buybacks of short positions. Yeah. So I love hearing the two combined, because I think you get a much fuller explanation of what's going on. And this is always why we love to have Imran on, because they're watching that part of the market. Same thing when we have Gem on, they're watching that part of the market that is sending all these signals. Imran, who was shorting? I mean, you do a trade, if it keeps paying you, you keep doing it until somebody pulls the rug, right? But who are the kind of people who are shorting Bitcoin?

5:43And are they likely to just put it back on again? Or has this sort of shaken them out in a more substantial way? So the thing about trading options is there's usually some sort of carry to harvest. So you get implied vol versus realized vol. Normally implied vol trades a little bit of a premium. And the idea is if you sell gamma and you actively hedge your position, you can capture some time decay. And that's been a very successful strategy in crypto markets this year because they haven't really moved that much. And there is a little bit of risk premium in there where the implies trade higher.

6:16So every single week, people come and sell very short-dated optionality, and that's worked well for them. Problem is now with this explosive move and going to new year-to-date highs, and there's just no stability, right? I mean, Ash even said, we pulled back 3%, 4 % from the local high because they've removed the ticker now. So we don't know where the next equilibrium point is going to be. So you kind of need the dust to settle for at least a week or two for Bitcoin to establish its new range, pretty much tell us if that 31, 32K area is going to now act as support. And then we now have a new range of something like 32 to 36K.

6:56And once the market kind of feels that that is the new range, then you're probably going there to see a bit more appetite come back to sell short-day adoptionality. Yeah, that's so interesting. By the way, I'm going to jump around a little bit. So stay with me, everybody. Microsoft stock is up 4%. Of course, they haven't done the call yet. So let's watch. That's been a game changer in some cases from that early reaction. Thank you, Iceman Oliver, is what they're calling him in the chat for that. Ralph just put, Ralph said, I think many people in this chat are the types to short Bitcoin. Thank you.

7:27But he mentions something that I think would be great to get your sense on. Ash, let me just ask you first, though. We had a lot of people kind of leave the crypto space because it just was sort of dead in the water, not moving. And everyone referred to it as crypto winter. I've got to think just in the sort of the things that you're paying attention to, the chats out there, that this is going to sort of get the juices is flowing again. Well, it sure seems to have when you look at the price action, Maggie, and it's great to listen to Imran talk about this as a tactical perspective from the trader's perspective.

8:01I tend to look a little bit more long term and there's some strategic indicators that there are some significant tailwinds here pushing the space forward. You mentioned this a little bit earlier on the regulatory side, legal, regulatory and compliance. Some cases coming out very favorable for the crypto space. Just last week, we had two favorable omens happen in the legal sphere. Number one, SEC dropping charges against some of the executives, civil charges that have been filed against some of the executives at Ripple. And perhaps more important, not making a key filing deadline to appeal a decision to oppose the new Bitcoin spot ETF.

8:37I know this stuff gets a little bit complicated, but big picture, Maggie, what this looks like to people who watch the space from a sort of 50 ,000-foot view is that there are regulatory tailwinds pushing the space forward. And as you point out, Maggie, those of us who've been in this space have been through, I don't know, three, four crypto winters for me. So you do see this volatility. You see these sort of periods of interest and then periods where the enthusiasm and the cash flow ebbs. Yeah, but when you've got that kind of return, very interesting. So, Imran, Ralph's point was Bitcoin options are still not super liquid.

9:13Is that something people need to think about? Well, it depends where you trade them, right? I mean, if you trade them on Deribit, which is a crypto native exchange, you do 90 % of the market share, it trades in billions of dollars. So there's a lot of liquidity there. But the problem is US investors are frozen out of Deribit. So they have to use things like proxies, like MicroStrategy, for example, is a decent Bitcoin proxy. It's got very high correlation. Obviously, they've got a load on their treasury. That's something I got some of my US clients into last week, saying MicroStrategy call spreads were setting up well.

9:48So there are ways to access. I mean, the BITO ETF volumes have been increasing. The CME volumes have been increasing. They're still not really comparable to Deribit. But there are ways to access crypto auctions liquidity. You just kind of need to know where to look. Yeah, good stuff. And we've got an advisor in Canada, John, saying he's been recommending it. He thinks within the next year, he's going to see most RIAs in the US doing the same. So really interesting peak. Maybe, Ash, a perfect time because from the feedback we had from clients and subscribers and parts of our community, even in that crypto winter, so many people were asking, listen, even if I got burned in the first round, I need to understand this more.

10:33I need to really sort of not just shoot from the hip and wrap my head around this. So we're coming out with the Crypto Academy. Yeah, we've got an incredible community here who's participating in this with us. And we want to just do some of the broad, big picture education pieces around this because it is so different from capital markets, from the technology side, from the way it trades. So we're doing that crypto academy to bring people up to speed who are interested. And by the way, I know this is Real Vision Daily Briefing. We don't want to get too into the weeds in crypto. But if you're interested in hearing more about this, come join us on Real Vision Crypto and Real Vision Crypto Pro.

11:04Yeah. Yeah. So we will be giving more information because even if you weren't in it before, Imran, I saw in your note, you were talking about some of the other things we're going to get to, but for right now, the setups, the place I want to be deploying my capital is in crypto. So you just look at it agnostically across, it looks like where you're seeing the best setups. Is that right? Yeah, yeah, exactly right. Because I look at cross-asset vol and whilst crypto was boring, It was boring. So there was nothing to do there. So like in my crypto weekly that I write every week, I was like, yeah, no trades this week, no trades this week, nothing to do.

11:41And then as we started to see crypto decorrelate from equities and equities were selling off and crypto was actually rallying, right? We saw end of last week, crypto was up 3 % on Friday and stocks were getting sold into the weekend. And it was starting to show you a little bit of a sniff that this is where you want to be sort of opportunistically putting some upside on. So that's what we did. And it basically paid off. So it's good. But what was really interesting for me was on Monday when we were breaking out, we took out 31K and we moved to 34K. The call skew, which is a difference in call option vol versus put option vol, peaked out earlier.

12:24It peaked out when we were first breaking. And then when we went to that new high, you actually saw it come down, which I found was a little bit fishy. It was like basically almost the options market saying, OK, the move's priced in now. And we kind of now are expecting some sort of pullback. Whereas if you look at Ethereum, which has been lagging Bitcoin massively, and you look at the Ethereum Bitcoin cross that's been trading down to June 22 lows, that skew has flipped aggressively to calls and it's stayed there. So the call skew in Ethereum has gone really big relative to Bitcoin, even though Bitcoin's led the rally.

13:00And that's kind of the options markets forward looking way of saying the ETF is kind of priced in now. OK, maybe we're going to grind a little bit higher in Bitcoin. But the real focus now is, is an Ethereum ETF going to come? And is Ethereum going to have this massive catch up trade, which the option market is starting to try to price in? Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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14:32It's super interesting. I've got a couple of questions coming through, but Ash, I know you've got to go do something else. I'm going to cut you loose, but thank you so much. You can tell from the big smile on your face that you're super excited about all this. So we love it. And always a pleasure to join you here, Maggie. All right. Thanks so much. So Imran, Oliver has a question before we move on to tech, because I got to get to that because it looked like maybe Google Alphabet disappointed. How much of this move do you feel is the expectation of the Bitcoin ETF? I think you just said quite a bit of it was approval versus true investors in Bitcoin.

15:03And maybe it doesn't make a difference. Yeah, I mean, I think it's crypto natives and it's speculators trying to front run the institutional flows that they expect to come when the approval actually happens. So I don't think it is necessarily a lot of real money buying. I think it is people positioning ahead of that real money buying that's expected. And they basically, you know, the closer we get to the approval, the more it gets priced in. So just like we had the fake news last week, priced a bit in, consolidated, but ended up at a higher level. Now we've got this event, which again, isn't a done deal, but the market kind of thought it was.

15:43We've ratcheted higher, we're going to consolidate, but we're probably going to consolidate at a higher level. So every time we get one of these type of events, we price it in more and more. Ultimately, where we end up, who knows, right? Maybe we'll push as far as 40K. That's what some people are calling for. I couldn't tell you. But the idea is that will be the crypto market pricing it in early. And then over the course of the next God knows how long year or two, as institutional money comes in via these new vehicles, that will then support those flows. And the speculators will at some point take profit on that and get out of it.

16:19Yeah, going to find a different kind of trade. So I think this is so interesting. And again, I think this really reinforces why we all need to make sure that we understand what's happening here. And it's not just a siloed world, which we feel really strongly about on the education side of it. So again, if you are an RV member, you know what to do to get to the Academy. So now it's just going to be crypto is going to be part of that. There's a series that Artur and everyone is working on. The first has already dropped with Raoul, sort of setting it up. The others will be coming out. If you are not an RV member, this is usually you have to be to access the Academy.

16:59This we're opening up for everyone to be able to access. You've got to go through the signup process. Um, but there's a way for you to be able to come aboard on this. Um, and who knows, maybe you'll end up an RV subscriber, but to make sure everyone's armed with the knowledge and we don't have a repeat of people just gunning in, chasing speculation and not really understanding what's going on. Um, everyone feels really strongly about it. So super excited. You could go to our website and Brian will put the links in all over the place so that you can find it. But so Imran, Paul asking, and this is the kind of thing I think this time around, we're going to get a little bit more nuanced here.

17:40What position size do you recommend to your clients? We're talking about now a time when people are really rethinking about what diversifying portfolios mean. Everyone who comes on keeps talking about how 60-40 is broken. We need to rethink that. And so there's lots of options that are being considered. Of course, digital is just one of them. But what do you can you even answer that without knowing more specifics about the risk and the client? It's a dangerous question to answer because we don't give financial advice. Right. We give education. We give examples of what we're doing with our own capital.

18:15So really, you know, it's going to be personal preference. Right. But as an example of what I do, you know, I run an options portfolio cross asset. And, you know, we layered on some some call spreads in MicroStrategy last week. And we sized it in a way where, you know, the delta exposure we had to MicroStrategy was in the five to eight percent range. So it wasn't massive. Right. But because MicroStrategy then rallied 30 percent, I mean, we made 200 basis points in three days. So we got we got very lucky with our timing. But that's the idea. You know, you've got to know. And in terms of how much premium we spent, you know, we sized it out to January expiry.

18:55We spent like 150 basis points of premium. And so we had made peace with the idea of how much that could lose us in the next sort of three months. Right. So if you're using options, it's a lot easier and safer because you kind of know what you're spending. You know the duration of the options and you know how they're going to bleed away if nothing happens. and you know what your max losses are. So I always like to use options for high octane type trades like microstrategy that can move ridiculous amounts. But yeah, outside of that, the whole sizing question is a very broad question and it really does depend on everyone's individual circumstances.

19:29Yeah, I like that you said that though because we just had somebody say, this is now gonna be about risk management, right? It's never been more important in the idea that you have to sort of have that constantly just given the backdrop that we're operating in. And I mentioned the Academy. Of course, Imran is a big presence on the Academy doing a whole thing on options if you need more information on that. And you're also doing you do live seminars and you're doing one this weekend. Is that right, Imran? Yeah, we've got one of those, the intermediate live options course coming up on Saturday. So we have different courses we do, beginner, intermediate, advanced.

20:07The intermediate is kind of getting in the weeds on the Greeks, really kind of showing how options behave due to delta, gamma, vega, theta, et cetera. And then talking about some of those vol surface dynamics like skew and term structure that kind of give you some early indications sometimes in how a market might want to move and where the tail risk, the perception of tail risk lies. Because that's kind of what skew tells you, right? It's kind of the options market way of telling you what the perceived tail risk in an asset is. And when you see that thing switching from one side to the other, there's information in that.

20:41We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

20:53Yeah, which is always, yeah, which is key and why we love having you guys on. Brian will drop the info for that as well. Okay, so let's make the transition with this question. is Bitcoin, let's do Bitcoin and ETH, some of the bigger cryptos, are they still trading as a risk asset in lockstep with the NASDAQ, or are they decorrelated now? No, no. The correlation has dropped off massively this year. It's been much more driven by crypto specific news than general macro. For those who watch it regularly, it's very evident that that's the case. That doesn't mean it won't recouple at some point, but that's not been the main driver.

21:33at all. It's been anything about, yeah. Super interesting. I think that's one of the interesting things for people in that space, right? Because it hadn't been the case, and that was really frustrating for people. So now that that's happening, I think that's going to be super interesting. So when we're looking at tech, what are your thoughts as we head into this heavy earnings period now, especially for megatech? We mentioned Microsoft and Google out after the close. It looks like Google not as exciting to investors. But generally, how are you feeling about some of these big tech names? Yeah. So I mean, for these two that were due today, there were implied moves of about 4%, 4.5 % in the options for this week.

22:17And to me, that felt a little bit low. If you look at Tesla and Netflix last week, they were implying something like 6 % and 8%, and they ended up delivering 8 % and 16%. So they knocked it out of the park in terms of the implied move. So I think because there's so much action in the single stock option space, and there's so many large volumes going through, people are really like, they enjoy trading options on these tech names, on these mega cap tech names, because it's in vogue right now. I think a lot of the moves are overshooting. So the fact that that was only a full handle, And if you look back at some of the past earnings moves on these names, 4 % is not difficult for these names to do on earnings.

22:59So I thought it was probably a bit cheap. But I also thought that, you know, if you look at earnings season so far, stocks are getting punished for misses much more. So you're seeing the average move when they miss is quite bad relative to past earnings seasons in recent history. So I thought the odds of a bigger move was probably if they miss and they're to the downside, because positioning is still there, right? People still do own these mega cap techs. They've been the place to hide. The MAG7 has led the market. So people do still own them to some extent. So if they were to miss, then people might throw in the towel a bit, and you see a bit of an exit out the door like you've seen in some of the other names that have missed so far in earnings.

23:40So my thoughts were probably cheap at the margin, just the implied move. But if we get a big move, it's likely to come on the downside. Yeah. Yeah, and we are seeing Google down 5 % after its earnings report. You sent over, in your note, there were some great charts about market breadth. It seems like you feel like the market, even though the market's been pretty resilient, that it's been holding up the equity market, it sounds like you feel like some of what's happening underneath the hood is a little worrying. Yeah, I mean, the market breadth is pretty dire. It's kind of gone below. So if you look at percentage of names above their 200-day, it's gone below the lows that we saw in May and in March.