1/ The violent sell-off on Saturday saw BTC trade to 42,333 lows, a hefty 39% drawdown from 69,000 highs. ๐งต๐
2/ The result of weekend illiquidity against a risk-off overhang from Omicron fears, inflation concerns, the possibility of an accelerated taper and also weakness in the Chinese stock market.
3/ The China factor stands out for us as funding rates on Chinese-dominated exchanges like Huobi, OKEX and BYBIT continue to be very negative in spite of the bounce in spot off the lows.
4/ This indicates persistent selling out of China. In contrast, funding rates in other exchanges normalised very quickly.
5/ The immediate trigger for risk-off in China was Didi announcing the intention to delist from the NYSE on Thursday 2 December raising concern that the China Securities Regulatory Commission (CSRC) was pushing Variable Interest Entities (VIE) to drop their listings in the U.S.
6/ More bad news followed with China Aoyuan and Sunshine 100 both missing their respective bond repayments.
7/ In spite of the shock sell-off, vol markets remain relatively calm. The knee-jerk spike in implied vols was faded very quickly (Chart) and the vol term structure reverted to an upward sloping one (Chart). This indicates no heightened fear or panic in the near-term.
8/ With the persistent negative funding in Chinese exchanges, we reckon a push higher in spot could actually trigger a short-squeeze. Care the topside!
9/ Fortituously, we won 100% of the puts in the Defi options vaults on Friday ahead of the dip (more than $300 million total notional mainly from Ribbon.finance and Thetanuts.finance). We were able to take profit on a chunk of it when vol spiked briefly.
10/ We remain long gamma and are struggling to realise it with a relatively tight spot range in the last two days.
11/ On a broader level, we have been buying up tails (far strikes) as we head into 2022. We expect a tricky macro environment going forward. This increases the potential for extreme and violent moves like the one we just saw.
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1/ Hello from Miami! Point-form summary this week with some insights from our meeting with Paul Tudor Jones. ๐๐งต
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 Powellโs 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. Hereโs a quick timeline. ๐งต
2/ 10 November: Shock US inflation print at 6.2%, the highest since November 1990, creates a โrisk-offโ 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 VenEckโs proposal to launch a physical Bitcoin ETF.
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.
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)