1/ today's #bitcoin sell-off has nothing to do with turkey 🇹🇷 banning the use of crypto in payments. at all.
it's the tail wagging the dog i.e. derivatives
traders were highly levered long going into the $COIN listing which everyone expected to be a catalyst for $BTC 🚀
it's the tail wagging the dog i.e. derivatives
traders were highly levered long going into the $COIN listing which everyone expected to be a catalyst for $BTC 🚀
2/ remember that leverage in crypto is EXPENSIVE AF.
cash borrow rates in crypto are now 20 – 40% while bitcoin borrow rates remain very low at 2-3%, highlighting the massive demand for cash borrow!
cash borrow rates in crypto are now 20 – 40% while bitcoin borrow rates remain very low at 2-3%, highlighting the massive demand for cash borrow!
3/ coinbase listed. BTC moved, but not enough.
traders need volatility to profit. when volatility doesn’t materialize and cash funding is expensive, traders tend to close out positions
so those longs get unwound, cuz it's too EXPENSIVE to keep them open.
traders need volatility to profit. when volatility doesn’t materialize and cash funding is expensive, traders tend to close out positions
so those longs get unwound, cuz it's too EXPENSIVE to keep them open.
4/ there's also a very real opportunity cost of capital at the moment. there are some amazing trades that can be put on w relatively low risk and very juicy return.
traders aren't ideologues.
buy the rumor, sell the news. $COIN didn't push the corn, so traders dip.
traders aren't ideologues.
buy the rumor, sell the news. $COIN didn't push the corn, so traders dip.
5/ so what's the take-away here?
one - bitcoin markets are very much driven by derivatives. funding rates, implied vol, and open interest are important to monitor. spot follows futures -> tail wags dog.
two - there isn't enough leverage, and cost of capital limits capacity!
one - bitcoin markets are very much driven by derivatives. funding rates, implied vol, and open interest are important to monitor. spot follows futures -> tail wags dog.
two - there isn't enough leverage, and cost of capital limits capacity!
6/ three - banking sucks! tradfi institutions who want to move in size simply can’t move fast enough because wires / ACH takes 3+ days, so there’s a real disconnect btw crypto MMs who use USDC / USDT and tradfi trying to wire USD (cute!)
u miss 100% of the arbs u can't fund
u miss 100% of the arbs u can't fund
7/ just sharing because i see a lot of really bad takes and confusion re: correlation / causation MSM reporting and honestly, it's offensive.
market structure matters, a lot. it's all we think about at @CoinSharesCo. hmu if you wanna grind on it some more.
market structure matters, a lot. it's all we think about at @CoinSharesCo. hmu if you wanna grind on it some more.
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