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QCP Capital

21 Apr, 11 tweets, 4 min read

1/ As expected we saw 14Apr Coinbase top we positioned for that bled into a deleveraging weekend selloff that smashed through both parabolic & channel trendlines. Our favorite trade last week was short Jun futures basis at 40-50% annualized implied premium looking to cover at par

2/But even we weren’t expecting > $10bn worth of leveraged liquidations on Sunday that caused the massively violent backwardation. The sharp dip brought front-month Apr futures close to -50% annualized implied discount with Jun futures a -25% discount on Deribit & -40% discount..

3/ ..on Binance where the bulk of liquidations took place. We've since very quickly bounced back to roughly 20+% premium for Jun-a much fairer value but still a good resell in our books. We’ve also been happy to sell close calls into the mid-month top last week..

4/ ..primarily 68k Jun (~70 delta then) to capture the overly steep contango and call skew. Following the weekend's move, we've seen the expected shift towards a very expensive put skew, this time however in the unusual circumstance of a collapsed front-end vol curve.

5/ We think the market probably has it right this time in terms of pricing a low daily implied in the near-term. Although the trend break has indeed wrecked a whole lot of technical damage to the chart we're still of the opinion that it means upside is more capped than before..

6/ ..but we don’t see a full downside melt-down just yet. Support levels we like are 50k holding into month-end, and 40k into quarter-end. On the topside 60k into month-end and 65k next month will be levels to watch. In the meantime we’re happy to keep fading any overvaluation..

7/ ..we see in the derivatives market. For now we revert to selling strangles on the longer dates - 40k & 80k into Sep, and taking this spot retracement opportunity to scale into 60k end-apr calls expecting this correction to persist into month-end.

8/ For us to change our view we're watching 3 things:

1. US ETF approval process (news on concerns/delays)

2. Regulation hammer from Yellen's Treasury & SEC (sooner than people expect but to what extent BTC & ETH vs. Alts/Exchange tokens?)

3. Start of FOMC taper (soon as Q3)

9/ Finally as GBTC continues bleeding into a new record 18% discount now on the back of 36 straight days of outflows despite continued suspended share creation and now their own share buybacks as well..

10/ ..we wonder how long before holders begin clamoring for a share redemption program (GBTC will sell BTC) and whether this will come before any US ETF is approved.

11/ Full update here qcpcapital.medium.com/market-update-…

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More from @QCPCapital

QCP Capital

@QCPCapital

12 Apr

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

Read 21 tweets

QCP Capital

@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

QCP Capital

@QCPCapital

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

QCP Capital

@QCPCapital

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

QCP Capital

@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

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

QCP Capital

@QCPCapital

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

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