1/ A positive start to the week with BTC bouncing off the lows from the previous week. There has been widespread stabilization in global markets with positive macro sentiment ahead of the Fed meeting next Thursday. This improved sentiment is a result of the..
2/..recent run-up in US nominal yields appearing to lose momentum at a key technical level on the back of soothing comments from FOMC governors last week. Increasingly, BTC has seen a stronger correlation to risk markets since the start of the year, which itself is being driven..
3/ ..by expectations around the Fed and its impact on real rates. Any further decline in nominal yields will no doubt be a major positive all round, but we have our eye out longer-term for the extremely key 2% nominal level in the US 10 year..
4/ ..which we expect will be key to every financial market this year. Not only does this represent an important psychological & technical turning point, but crucially also the positive/negative long-run real rate level as per the Fed's 2% inflation target.
5/ With BTC still tethered to risk markets, we will probably have to wait till after the Fed meeting next week for a big move either way. In the meantime the range market should persist - and its possible that BTC goes on to test the underside of the broken trendlines at $55k..
6/ ..with an upper limit at $57k before coming off again. On ETH the key topside level will be $2k. Our playbook now is that a further extension could happen in the next day or two before coming off on Thursday and Friday into the weekend
7/ ..but at $54k here we are in the upper reaches of the range already. The weakness we're expecting from late-Thu into early-Sat is in-line with what we've seen the last 2 weeks since the Feb top..
8/ ..in which weakness around the Friday option expiries have been a clear standout - and if indeed option related then likely to persist into month-end. With this extended range persisting, implied volatility has continued coming off very meaningfully..
9/ ..as has the put-call skew - which had been elevated as traders rushed to buy downside protection in the last week of Feb. We had been holding off buying downside vol anticipating this rebound, but will now be looking to take off the $48k end-Mar call we own..
10/ ..and swap it for a long $54k end-Mar put for roughly half the value. This March-end will see the start of the 4 month-end Supermoons this year, and as a cheeky play we like owning volatility around those dates.
11/ One asset that has really had its shine taken off this year has been Gold, which is now down 12% in 2021 alone. While the short-term correlation with BTC has been in deeply negative territory for a few months now, the longer-term correlation as well is heading..
12/ ..into negative territory as more investors start looking to BTC as their macro hedge instead. In times of stress though, BTC would have nowhere near the liquidity of Gold..
13/ ..and we could see the fortunes of the latter pick up sharply then. For us we're watching the incoming parity level of 1 KG of Gold to BTC, where if reached we expect much talk around this to build in the financial media.
14/ Finally we have been seeing a persistent discount in GBTC and even ETHE, that has swelled to double-digit negatives over the course of last week, with GBTC hitting up to -15% at its worst.
15/ While fundamentally such a negative discount doesn't make sense considering costs around security & custody, without a share redemption program in place there really isn't any direct impetus for this spread to close..
16/ ..and it could persist considering the many arb investors with a long Grayscale position and the negative carry implications that position carries. For now there doesn't seem to be any lasting knock-on backwardation effects on other markets..
17/ ..with the BTC futures basis dropping quite dramatically last week to almost flat even as spot recovered, but that has now bounced back again as new leverage positions are added to to the market.

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More from @QCPCapital

15 Feb
1/ It was exactly a year ago today, on Valentine's day 2020 that the market topped and eventually bled into the March 12th Black Thursday sell-off.
2/ A lot has changed in the year since - one of the most important being the unprecedented amount of liquidity global central banks have pumped into the system, single-handedly lifting every financial asset to record proportions Image
3/ We have witnessed the largest and swiftest asset price inflation in world history, and with it also the biggest disconnect between markets and the real economy in modern times
Read 26 tweets
5 Feb
𝗤𝗖𝗣 𝗠𝗮𝗿𝗸𝗲𝘁 𝗨𝗽𝗱𝗮𝘁𝗲 𝟱 𝗙𝗲𝗯

1/ Another consolidation week in BTC, as ETH continues grinding higher on yet another Defi wave and a massive increase in speculative leverage ahead of Monday’s CME ETH futures listing
2/ The ETH futures open interest has increased 300% in just the past month and 50% in the past week alone, and we are now at $6bn OI even before CME opens for trading
3/ To put this ETH OI in perspective, we never got past $6bn in BTC OI in all the many years of futures trading, even with CME, until November last year when all the traditional institutions became involved
Read 15 tweets
31 Jan
1/ Right after a massive Friday Deribit month-end option expiry, Elon Musk released a cryptic (somewhat bullish) tweet, causing a huge squeeze higher in BTC price. This closed out a strange week in markets marked by social media-engineered squeezes in tickers like GME & DOGE.
On this 'Elon rally' BTC rose by $120bn in mkt cap on the tweet alone, roughly 2/3 of Elon's net worth before coming off highs but closing higher on the day - market seems to have priced in possibility that Microstrat's rocket scientist has won Musk over to the Bitcoin camp.
3/ For us Elon Musk's twitter has always been his crazy alter-ego and the tweet might be cheekiness more than anything. We treat it as near-term volatility spike similar to observations the last 2-3 weeks. We don't believe that it changes any medium-to-long term market dynamics
Read 20 tweets
22 Jan
QCP Market Update 22 Jan

1/ The broad price puke from yesterday has been blamed on some negative headlines out of Biden's new "crypto unfriendly" administration. However, we think that the market was already due for a correction
2/ We've always been most worried about the US regulatory hammer from this new administration - but Yellen's & Powell's remarks on crypto regulation sounded less draconian than we had initially feared, although many observers seemed to have been taken by surprise by it
3/ We think this dip is largely the result of market positioning. Long crypto has been become a crowded consensus trade and a correction was bound to happen, the negative headlines were just an excuse for longs to unwind
Read 15 tweets

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