1/ All-time highs all around this week with BTC and ETH trading to 69,000 and 4,868 respectively, taking total crypto market capitalisation above $3 trillion.
2/ The bullishness has not been exclusive to crypto with major equity indices also trading at record highs this week; S&P500 at 4701, Russell at 2442, NASDAQ at 16359.
3/ There seems to be a melt-up across global markets with participants chasing topside on the back of positive earnings and in anticipation of global trade reopening. We expect this broad bullishness to perpetuate in the near-term.
4/ BTC price has no doubt been supported by the upcoming Taproot upgrade (likely to be activated by the end of this week or early next week). This is the largest upgrade since SegWit in 2017 and will improve a whole string of key functions.
5/ We are keeping long BTC into this major event.
Even a surprisingly high US CPI number earlier today saw a bullish reaction from BTC!
6/ We could be entering a phase where BTC is caught in a positive feedback loop where both ‘risk-on’ and ‘risk-off’ headlines see significant price increases. Effectively, BTC is seen as both a macro risk asset and also an inflation hedge.
7/ In ETH, the ‘Raoul effect’ perpetuates with large open interest in ETH calls (Chart) and elevated implied vol levels in the March tenor.
8/ This has resulted in a super steep ETH vol curve in the front end (Chart). We are buying back our short tenor ETH option shorts and rolling them towards Dec or longer to take advantage of the steepness in the curve.
9/ Our ETH short gamma and vega position has a real winner with the front end vols collapsing and the whole ETH curve softer (Chart). We are holding on to our ETH short vega.
10/ Realised volatility remains low across the board in spite of the new highs and we think implied vols will continue to soften under these conditions.
11/ Our position is BTC neutral, ETH short vega against long vega in SOL, BCH, DOGE, ADA, LUNA, AAVE (new!), DOT (new!), TRX (new!) and overall short vega still. And also long spot across the board.
12/ On a side note, we’ve been seeing a material increase in Defi options trading. This week alone we traded $250 million in notional. We think this is a core segment of Defi 2.0 and we’ll be publishing a deep-dive research piece on this in the coming weeks.
13/ Some Altcoin highlights:
SOL made new highs of 260 on Saturday as we headed into the Breakpoint conference this week.
14/ ALGO perhaps will have a similar pump as we head into the Decipher conference on 29 November.
(sidenote: Our CIO @dariussitzl will be in Miami and then New York for the week so feel free to DM if you’d like to catch up in person)
15/ KDA has gone up more than 2x in the past week. We don’t see any particular catalyst for this other than a slew of social media hype.
[KDA is a hybrid private and public blockchain and the only proof-of-work blockchain that does not consume more energy as it scales]
16/ BCH has crossed above the 700 pivot level and a further move higher could potentially form a golden cross on the charts (50DMA crossing above the 100DMA). (Chart)
17/ LRC has gone up 600% in the past two weeks on the back of rumors that GameStop is building a NFT marketplace powered by Loopring technology.
18/ side note: [LRC is built on the ETH network, and touts itself as being open-sourced, allowing anyone to build non-custodial, order book-based exchanges.]
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1/ Hello from Miami! Point-form summary this week with some insights from our meeting with Paul Tudor Jones. 👇🧵
2/ - Our short vol view on BTC and ETH from last week has worked very well. Both BTC and ETH vols have dropped around 5-10% (week-on-week BTC price remains at 56,000 level).
3/ - We turned long a massive amount of gamma from the month-end expiry on Friday. Gamma realised very well because of the knee jerk reaction to the Omicron headlines as well as Powell’s recognition of high inflation and indication of an accelerated taper.
1/ Since our last update on 10 November. BTC went from a 69,000 high to a 58,638 low today (-15%) and ETH has gone from a 4,868 high to a 4,108 low today (-15.6%).
A series of negative factors could be the reason for this sell-off. Here’s a quick timeline. 🧵
2/ 10 November: Shock US inflation print at 6.2%, the highest since November 1990, creates a ‘risk-off’ sentiment across global markets. How long can the Fed continue to claim inflation is transitory before being forced to take corrective action?
3/ 12 November: The SEC rejects VenEck’s proposal to launch a physical Bitcoin ETF.
1/ Held in Singapore last week, the Asia Financial Markets Forum hosted by @business, featured Senior Minister Tharman Shanmugaratnam, major bank CEOs, top hedge fund managers and us! (representing the crypto community)
1/ As expected, BTC is taking a breather after being stretched at new highs (67,000). ETH tested the previous high (4,385) and has come back off as well. BTC has broken below 60,000 and ETH has broken below 4,000.
2/ Despite this quick dip from the highs, the market feels relatively calm and perhaps even slightly optimistic that this is just a dip before a larger rally into year-end.
3/ In vols, besides a spike in front-end ETH vols, there has been no significant reaction to this move. In fact, the market remains optimistic with risk reversals still skewed to the call side (Chart)
The BTC ETF approval by the SEC and successful launch of the Proshares ETF ($BITO) has fueled a strong rally in BTC beyond the 64,900 previous high to a new all-time high of 67,000. 🧵
We remain optimistic but are cautious about downside risk for the following reasons:
1) Leverage levels in the market are very high.
Futures aggregated Open Interest exceeded 400k BTC notional (Chart). This is close to 431k BTC notional OI at the previous all-time high.