1/ The market looks like it's long gamma with BTC being pinned around the 40k level as we await FOMC headlines tomorrow. We agree with Paul Tudor Jones that this coming FOMC meeting will likely have a binary market reaction
3/ Should the Fed remain dovish, cryptocurrencies would have the most upside potential until September at least. Especially given the overselling we've seen relative to other macro markets since the May CPI print…
1/ BTC Implied Volatilities have been coming off steadily since it peaked the weekend before and is looking to move towards levels we saw at the start of May
2/ We are still cautious of potential BTC downside as the vol skew remains high with Puts being substantially more expensive than Calls
3/ We expect spot to trade in a range (short-term) with a slight bullish bias as frenzied leveraged longs have been washed out. We’ve seen significant buying & selling at 30,000 BTCUSD and 40,000 BTCUSD levels respectively
1/ We cannot stress enough the importance of holding 40k on a closing basis in BTC for all Crypto. Following our identification of the trend change earlier in the month we're now seeing Wave 3 take us from 58k to under 40k handle now
2/ In market cap terms this move has shed $400bn taking us back to the Fib handle that led the breakout in Feb.
𝗢𝘂𝗿 𝗽𝗿𝗲𝗳𝗲𝗿𝗿𝗲𝗱 𝗪𝗮𝘃𝗲 𝗰𝗼𝘂𝗻𝘁 𝗶𝘀 𝗻𝗼𝘄 𝘁𝗵𝗶𝘀:
3/ —𝟭. That this Wave 3 ends at 40k on month-end (possible stop hunt extension now as far as 36k intra-month) & we get a bounce for Wave 4 back up towards 50k first and possible 54k.
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..
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..
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
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.
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..
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..
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
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
1/ Right after a massive Friday Deribit month-end option expiry, Elon Musk released a cryptic (somewhat bullish) tweet, causing a huge squeeze higher in BTC price. This closed out a strange week in markets marked by social media-engineered squeezes in tickers like GME & DOGE.
On this 'Elon rally' BTC rose by $120bn in mkt cap on the tweet alone, roughly 2/3 of Elon's net worth before coming off highs but closing higher on the day - market seems to have priced in possibility that Microstrat's rocket scientist has won Musk over to the Bitcoin camp.
3/ For us Elon Musk's twitter has always been his crazy alter-ego and the tweet might be cheekiness more than anything. We treat it as near-term volatility spike similar to observations the last 2-3 weeks. We don't believe that it changes any medium-to-long term market dynamics
1/ The broad price puke from yesterday has been blamed on some negative headlines out of Biden's new "crypto unfriendly" administration. However, we think that the market was already due for a correction
2/ We've always been most worried about the US regulatory hammer from this new administration - but Yellen's & Powell's remarks on crypto regulation sounded less draconian than we had initially feared, although many observers seemed to have been taken by surprise by it
3/ We think this dip is largely the result of market positioning. Long crypto has been become a crowded consensus trade and a correction was bound to happen, the negative headlines were just an excuse for longs to unwind