Monthly market wrap-up: August 2022

Market Take: A crowded short

Several signals suggest that the crypto sell-off is getting overextended in the short term. Further, long-term metrics indicate that the time is ripe to initiate a more aggressive incremental BTC accumulation strategy, despite the horrendous macro backdrop.

Short term

Futures trade in backwardation, and funding rates have stayed negative for two weeks. Additionally, perp open interest is on a vertical trend in notional terms, sitting at all-time highs. The hedging train is going full throttle. Further, the short BTC ETF exposure has reached a new all-time high, while long ETFs experiences outflows. Not included in this report, but also worth mentioning: options skew still suggest that a majority of BTC options traders are focused on downside protection. Everyone is hedging, and the short-trade seems crowded when gauged through historical lenses.