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Is there a sentiment change in Crypto-Land?

January 30th, 2022
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Market Update for the Week Ahead

Welcome back to The Juice everyone, where we glance at the Crypto and Stock markets via alternative methods, such as Options Flow and Social Sentiment. A big reversal was underway on Friday led by Apple earnings, but will it last? Let’s dig into the options market and see what it’s telling us.

 

Markets - Overview

Earnings were kicked off this week with names like Microsoft reporting strong numbers. Markets then dipped on another round of inflation and interest rate fears. This is nothing new and has been the same carousel we’ve been riding since late 2021. However, what happened next will shock you! Apple reported a (yet another) beat on earnings Thursday after market close, which triggered a rally come Friday morning.

Here were some of Friday’s top gainers out of popular household names. You know it’s going to be a good day for markets when even Peloton is up 7%.

 

Other names finally seeing some positive price action were many of the holdings in the ARK ETFs. Let’s glance at the ARKK chart real quick.

ARKK is down roughly 55% from the highs back in 2021 and has given up nearly all it’s pre-covid gains. With that kind of performance it’s not uncommon to see many “traders” attempting to make a mockery of Cathie Wood and her “buy the dip” strategy. It’s difficult to say what direction the market is headed right now, but we all know that bulls make money, bears make money, and pigs get slaughtered. How much more downside could possibly be left after a 55% decline in her high-beta ETF and while many of the individual holdings are down 60-80%.

Cathie has continued to pound the table that her funds will grow exponentially over the next several years. Only time will tell if she’s on the right side, but in my opinion after such a large decline the path of least resistance seems to be up.

 

Markets - News

We all know about, and are frankly sick and tired of hearing about, the market risk related to inflation and interest rates. At this point it’s almost better to just rip the band-aid off and shock markets with a 50 bps rate hike, but we are no Economists here.

The other risks we see beginning to unfold are with Russia and Ukraine. We don’t want to get too political in this newsletter, but there could definitely be some market-moving news should things progress further and things start to escalate.

In other news, Justin Bieber himself has become a “bored ape” NFT hodler. This is also riding off the recent news of Eminem purchasing one for his collection. NFTs...what a time to be alive.

 

Is the Crypto-Smash over?

The world of crypto was flipped upside down recently as many coins saw drawdowns in the 25% range or more. Even store of value coins like Bitcoin (BTC) and Ethereum (ETH) saw a major pullback. In fact, after trading at $68k just a couple months ago Bitcoin nearly reached sub-30k while ETH also flirted with the $2,000 price level.

What’s unusual was seeing crypto prices trade in parallel with markets on the way down. It seems fear has been creeping into all the different markets with all this uncertainty, but is the tide about to turn in the crypto space? VIG has recently began to include social sentiment for Stocks and Crypto, a powerful indicator for any trader or investor.

Social momentum was at the core of the Gamestop hype and also with many alt-coins, aka "Shitcoins", that trade almost primarily on sentiment. If you aren’t at least glancing at the social sentiment behind many tickers or crypto currencies then you are already one step behind. Let’s break it down. 

What are we seeing right now? Here are the social stats for Bitcoin.

Last week there was a large spike in chatter for Bitcoin (BTC) and many other names. What happened on that day was BTC made some (pretty extreme) new lows around $34k.

 

A look at Ethereum (ETH) will show a similar social chart where chatter spiked on the dip.

Momentum in Crypto currencies may be picking up again after everyone and their dog just got rugged. Let’s see what happens with the markets next week while we keep an eye out for the next catalyst.

 

Options Matrix - Custom Scans

Friday’s session was a massive day for the bulls. If there’s one thing that bears don’t have on their side it is time. As the market begins to accept that the lows are in it could show signs that we may begin our next leg up. That’s why many bear markets or corrections happen so swiftly and un-expectedly.

Let’s look at some scans to see where the action was. The rally was powered by tech so lets dive into the Nasdaq Moon Calls:

Nasdaq Moon Calls

Here we are seeing names like AMD, TSLA, and INTC getting hammered with call volume. TSLA is in a category of it’s own, but AMD and INTC are about to partake in a generational tailwind with the semi-conductor industry. After being somewhat resilient through this down-turn, but still being down in the 20-30% range, call-buying in these names was picking up steam. Some strikes were trading at over 40,000% the 10-day average volume.

 

Roaring Kitty Calls

One of our favorite scans, the Roaring Kitty Calls that actually shows a lot of household names and thus also many that are on our personal Watchlist(s). The most obvious one from this scan was NIO that was getting plastered with call-buying at multiple strikes. NIO is another extremely popular name that made it’s way to the top in 2021 with the help of social hype and sentiment. A popular company with a solid product that once traded over $60 per share is now down to $20. Will it rebound?

 

Summary 

That’s all for today’s alpha. Join us next week and be sure to keep an eye on the VIG platform as we are working on a few major (life-changing) updates and don't forget about the Daily Fantasy Stock & Crypto Games as we have a full lineup again this week! Get in the game!

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