1/ The bullish force is strong throughout the crypto world. Once again we saw a post-month end rally pushing BTC from 50k support toward the 60k level. ETH has been even stronger making new highs daily in what seems to be an unstoppable rally into July’s catalyst event (EIP-1559)
2/ The driving force remains the same wall of money from traditional finance pouring into crypto. The lightspeed growth has been the fastest of any asset class in history - a $2.2 trillion rally in just 14 months from barely $100bn last year to over $2.3 trillion today
3/ This first exponential phase was largely beta, riding on the back of Fed QE-infinity money printing, which drove a full-on hunt for yield and dash for trash. Triple-C credit spreads for example, the worst of the junk, has seen a one-way compression to now equal..
4/ ..the 2007-boom record lows, particularly in a global economy that is hardly firing on all cylinders. Risk premiums are bordering all-time lows because financial risk right now seems to be non-existent with the Fed as the ultimate backstop..
5/ ..And crypto which sits at the far end of the risk spectrum has benefited immensely. Last week's FOMC meeting repeated the same dovish message, but after an initial ‘risk on’ reaction, risk assets saw a distinct lack of momentum and clear reversal thereafter
6/ We think the market is starting to price a hawkish change in stance into the Jun and all-important Sept meeting. We expect Fed speakers this week will set the stage for this shift in domestic stance & outlook, although worsening Covid situation will likely buy them some time
7/ Top 5 takeaways:

1. The Empire can strike back - USD is now a big risk to the crypto market & is beholden to the Fed. The crypto-sphere is inherently & perpetually massively short USD (against crypto assets) & any spike in USD funding or appreciation in USD value will..
8/ .. affect it greatly. The USD looks like it has found a lasting bottom here, with a monthly TD 9 marking the lows, but it still needs a strong rally to suck the steam from the crypto market. The building blocks are in place for a possible short squeeze this year..
9/ .. especially with the amount of unhedged USD-debt surging since the crisis, adding to the world's large outstanding USD liability. The trigger has to and will be the Fed.
10/ 2. Is ETH the new Gold? Not that ETH becomes the new safe haven, but rather that ETH does to BTC in the next 3 months what BTC did to Gold for the 2nd half of last year and Q1 this year. This means that ETH not just outperforms BTC, but also that BTC falls..
11/ .. into a long consolidation phase akin to the Gold consolidation of the past 9 months
12/ 3. Alpha will trump Beta going forward - If the Fed starts tapering discussions & the USD starts appreciating, then there will be a lot of alpha opportunities in the space as beta runs dry.
13/ This will likely be concentrated in the derivatives & Alt markets, where increased institutional adoption will mean increasingly exotic and liquid products.
14/ 4. Institutional infrastructure will still be built primarily around BTC this year, but Alt-derivatives (led by ETH) will see the biggest growth. This means BTC will still be our preferred venue to execute institutional strategies..
15/ ..but the Alt-market will be where we will spend most of our time developing markets. First up are Alt options, of which we will be launching a few of them en masse this quarter.
16/ 5. Overall we expect the BTC share in crypto to keep declining further - likely to the 2018 lows around 35%. By that time, we expect a mass discussion by BTC holders for a handful..
17/ .. of their favourite Alts to own as part of crypto diversification. As of yet this discussion hasn't perpetuated the mainstream BTC Hodler to a large extent thus far.
18/ In terms of trading - we think last month's $65k top will hold for an extended time, and $60k will form a significant resistance in the interim. We count 5 waves down from the April top, with a 3-wave correction thereafter, signifying an end to the year-long uptrend
19/ We still like our strategy selling Jun & Sep strangles of $40k puts and $64k & $65k calls respectively, but skewed towards selling the call side. We've also started selling covered calls on our overall BTC holdings to take profit on all within the $60-64k range.
20/ The first support level is $50k, followed by the daily TDST level of $47k which we bounced at last month. For ETH, today is the 9-13-9 daily top and we take profit on our long Jun calls following this sizeable rally. We see $3k as the first strong support level..
21/ ..and will keep holding our full long ETH position until a close below this level. Overall, we much prefer selling BTC vol and buying ETH vol & we find it puzzling that both implieds are trading in such lock-step when..
22/ the realized is beginning to diverge significantly and has done so time and again. Another strategy we like and have increasingly seen is selling BTC vol and taking the premiums in Alts, in line with our top views now.

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More from @QCPCapital

21 Apr
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..
Read 11 tweets
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
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

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