1/ In the last 2 weeks the Kimchi premium returned with a vengeance reaching over 20% the highest level we’ve seen since 2017-18. While restricted travel is a major contributing factor to the arb, one cannot ignore the buying frenzy in the Korean retail market especially in Alts
2/ On some days crypto volumes on the largest Korean exchange have been larger than on the Korean equity exchanges! The frenzy has consumed all age groups - including the older 40-50s segment, something that could possibly draw increased regulatory intervention
3/ While the Korean market only accounts for roughly 2% of global crypto trading volumes today (compared to 7-8% in 2018) such retail fever in general tends to put a damper on topside price breakouts for the largest market cap coins especially BTC
4/ This pattern is typical during Alt-season as the small market cap tokens see gains in multiples day to day. Another key topic of interest is profit opportunities in crypto derivatives. A highlight in the last two weeks has been the futures/perpetual swap basis
5/ Clear evidence of outsized buying interest can be seen in the BTC futures curve - with fresh all-time highs in the 3m basis at well over 40% annualized. This massive contango is the steepest of any financial asset class out there by far..
6/ ..and has been attracting a lot of attention in the mainstream media with institutions especially keen to get in on the risk-free futures rolldown yield. This has caused further divergence between CME and native derivative exchanges
7/ CME being the largest regulated/traditional venue trades at a 10% annualized contango now compared to 43% on Binance for example. That leaves an incredible 30% annualized inter-exchange arb on an equivalent futures contract!
8/During 2020s Sep-Dec during the exponential bull run CME was consistently higher than other exchanges as institutional demand dominated flows. Leveraged buying on non-regulated exchanges now lead the market. On the CME front-month itself the parabolic support level has broken..
9/ This divergence is partly caused by the retail mania overshadowing the institutional side right now, but also because of institutional interest in the rolldown yield, aka cash & carry. As institutions deploy more to this trade on CME, retail players..
10/ ..find it hard to put this structure on in size due to the unlevered spot leg. Retail players are more inclined to lever up through the perpetual swap futures - where we are seeing the most sustained positive funding in history . This means that retail leverage typically a..
11/ ..leading indicator of market exhaustion is at highest levels since prior to the exponential move. In contrast spot volumes have continued to decline especially on institutional platforms like Coinbase. We're now watching the spot 55k level closely as our next bull/bear line
12/ This month's big crypto event is the Coinbase (CBSE) listing on Wednesday. Spillover from the hype over this listing can be seen from the huge moves higher in BNB and FTT in the past month. BNB is up more than 1500% since the start of the year!
13/ This is largely tracking the market cap of Coinbase - with BNB's fully diluted market cap topping $100bn today, trading very much in sync with CBSE. CBSE in pre-listing trading is up to a whopping $147bn valuation (based on CBSE/USD on FTX)
14/ The Coinbase hype within crypto, in terms of valuation & its domino effect on other markets, now sets Coinbase’s IPO up to be a key catalyst event. BTC has drastically underperformed the S&P 500 in the last month, and a successful Coinbase IPO is needed to bridge this gap
15/ However we're extremely wary that the IPO on Wednesday could ultimately reveal too much short-term froth in the system and begin the seasonal mid-month decline. This seasonal intra-month pattern we highlighted previously has been performing like clockwork this year
16/ A month-end bottom leading into a mid-month top followed by a correction, rinse and repeat. This intra-month top has now occurred on the 14th of the month twice in three months now, and we think Wed's IPO is setting up for that again
17/ More worrying this time is how Miners have been unusually HODLing their coin to the largest extent since the bull run began, not selling since before the March dip. While we've been building BTC & ETH longs since the Mar-end expiry anticipating the $60k BTC & $2k ETH break..
18/ ..the above reasons have made us turn again into trading mode, selling out our long calls and covering BTC spot long by selling the June & Sep 68k strikes. On ETH, we turn our long calls into spreads by selling the Jun $2800 strike
19/ While the lower implied vol made going long calls attractive, the steepness of the forward curve makes it expensive now especially on the longer tenors. However this doesn't mean we have turned bearish but rather believe the froth & current market dynamics do not favour..
20/ ..a further exponential move like the ones we've seen in Q1, and is currently being priced into the futures contango and call skew. Our favourite trade right now is locking in the Jun futures basis here at 44% annualized.

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More from @QCPCapital

30 Mar
𝙌𝘾𝙋 𝙈𝙤𝙣𝙩𝙝𝙡𝙮 𝙪𝙥𝙙𝙖𝙩𝙚 𝙚𝙣𝙙-𝙈𝙖𝙧

1/ This month's major move has been the volatility crush we saw into the big March quarter-end expiry on Friday, with 1m ATM implieds falling from well over 100% to just 65% now. This largely tracks collapse in daily realized vol
2/ ..as the consolidation in spot stretched into the expiry. March's expiry was the largest on record with a $6bn notional OI, and with a lot of positions well ITM/OTM much of them were rolled in advance - resulting in the high volume vol selling the last few weeks
3/ The market's huge long gamma position also kept spot heavily pinned - and case in point following Friday's expiry we saw the largest daily price gain since the 1st March bottom.
Read 15 tweets
15 Mar
QCP Market update 15 Mar

1/ We were a few days early in positioning for the mid-March reversal, as right after option expiry on Friday there was a leveraged-driven short squeeze that took out the prior highs in both the BTC spot price as well as total futures open interest.
2/ The fresh all-time high on Saturday above $60k, coupled with the closure of traditional markets that has recently kept BTC yoked, meant a hopeful chase by retail participants that took BTC to a high of $61,800 and driving the perp funding rate to the typically unsustainable..
3/ ..maximum 200% annualized level. The 3m futures basis as well jumped to all-time highs at over 35% annualized on this leverage retail buying. ETH as well, taking cue from BTC, failed just under the huge $2k spot level and we expect it to largely underperform BTC from here..
Read 10 tweets
10 Mar
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..
Read 18 tweets
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

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