Thread by @QCPCapital

1/ #bitcoin has been trading heavy this past week.

On Thursday 18 November, with BTC trading just above 60,000, a ‘sharp hedge fund’ bought a huge chunk of BTC and ETH calls (bullish). 👇

2/ The desk took down about 1,000x of BTC and about 25,000x $ETH of December calls. And we expected a rally given the size of the flow.

However, significant selling pressure continued, pulling BTC below the 56,000 level into Friday close.

3/ After Friday expiry, we saw a relief rally which extended over the weekend bringing BTC back up towards 60,000.

4/ Again, this rally was short-lived as selling pressure resumed right on the dot in Asia morning, possibly indicating an institutional player (who might have switched on a spot selling program at the start of the work week).

5/ Monday night in Asia saw yet another rally attempt on Powell’s renomination headlines. For the third time, the rally was quickly faded with heavy selling dragging BTC to a new local low of 55,415.

6/ On this move down, ‘sharp institutional’ players were rapidly buying puts and selling calls in March for both BTC and ETH (bearish). The same 'sharp' guys did the same thing on 16 November, before BTC dropped below 60,000.

7/ We took down about 600x of BTC risk reversals and about 6,000x of ETH risk reversals. This was a good take-profit on the ETH calls that we had sold on the heightened March vols caused by the ‘Raoul effect’.

8/ The market is clearly nervous about the constant selling pressure in spot. Backend vols have gone up about 4% in BTC and 5% in ETH (Chart 1). Risk reversals also remain convincingly skewed to the downside (Chart 2 & 3).

9/ So far, the selling pressure has effectively capped every rally. The question is whether it will lead to a downside break.

10/ We are betting that the market will consolidate instead of breaking lower. So we are taking the opportunity to short vols in BTC and ETH as well as take profit on our downside risk reversal position and flip to a topside skew.

11/ With that said we have protection in place from long wing positions (far strikes) collected from yet another record setting week in Defi options.

12/ The short vega position in BTC and ETH runs against long vega in the Altcoin vol book, which has been growing larger and wider as the Defi vaults rapidly increase the range of Altcoins available.

13/ $AVAX and $ROSE have had standout rallies this week, making new highs at 147 and 0.4663 respectively.

ROSE has been particularly impressive as it has rallied in the face of a large token unlock that doubled the circulating supply.

14/ $ALGO had a shock spike on Thursday, trading to almost 13 USD in Korea! This happened on the back of ALGO’s listing on Upbit Korea.

15/ It quickly traded back below 2 USD but we do expect a slew of positive headlines as we head into the Algorand Decipher conference in Miami next week.

(@dariussitzl & @eugenekyj of QCP will be at the conference and there for the week if anyone wishes to catch up in person)