QCP Asia Colour - 30 Oct 24

- The price action for Bitcoin has been nothing short of remarkable this couple of days, rising over 8% and breaking the $73k level. The robust inflow into spot ETFs, fresh monetary easing cycles across major economies, and increasing odds of victory for crypto-friendly presidential candidate Donald Trump have been positive catalysts.

- With swing states like Nevada and Pennsylvania potentially tipping the scales, Trump appears to be gaining traction in the polls. Next week will finally mark the conclusion of the presidential race. Will the "Trump Trade" continue or will there be an unexpected turn of events?

- This week’s spotlight is on Friday’s NFP report, a critical indicator of U.S. job market health, with consensus estimates around 110k — approximately half of the previous figure. As the final major data release before next Friday’s Fed meeting, the report is expected to lock in market bets for the Fed’s next move. Currently, markets are pricing in 1.6 cuts, with a 96.5% probability of a 25bps cut in November and a 75% chance of another 25bps cut in December.

- Additionally, this week includes earnings releases from five of the "Magnificent 7" stocks—Alphabet, Apple, Meta, Amazon, and Microsoft. Each is expected to post average earnings growth of around 19-20%, but surprisingly marking the slowest pace in six quarters. While the impact on equities remains uncertain, these releases will be key indicators to monitor for broader market sentiment.

QCP Weekend Summary - 2 Nov 24

Thursday's Core PCE data came in marginally higher than forecasted (2.7% YoY actual vs 2.6% YoY expected). On the contrary, Friday's NFP data delivered a downward surprise (12k actual vs 110k expected), causing the DXY to rebound and reclaim the 104 level.

Despite the weaker NFP print, US unemployment rate remains unchanged at 4.1%. The market's expectation of a 25bps November rate cut has now risen to 96.4% probability.

Equity indices closed Friday in the green after strong earnings from AMZN. US Treasury yield, which initially fell on a kneejerk reaction to NFP data, rallied to a four-month high as the market remain cautious of bond-buying into Election Week. Brent and WTI saw slight gains on reports that Iran was preparing a retaliatory strike on Israel.

BTC teased the ATH on Tuesday night, trading to a high of 73.6k in anticipation of election week. Despite how outstanding BTC has been performing in the entire week, ETH was relatively muted, failing to break through 2.7k levels.

These came on the backdrop of strong ETF inflows, with over 2.1bn of net inflows for BTC throughout the week. BlackRock's IBIT saw 872m worth of net inflow in a singular day, the largest ever since its launch in January.

Despite Bitcoin's dip below $69,000 on Friday, we continue to see significant interest in the market, with OI for both total BTC futures and BTC options staying heightened at $40.65b and $25.3b respectively (an increase of +24.20% and +36.76% compared to the start of Oct) .

Options market is trading BTC 7 day implied vols at 74.4%, substantially higher than the past 7 day realised vols of 41.4%, indicating a significant risk premium around the elections.

What to expect on Election Week

While Trump has been favoured as the next POTUS, bets on Trump have come off significantly from a 66% high on Polymarket, to 57% for Trump and 43% for Harris. Regardless of the outcome, we believe the Elections will be another sell-the-news action, replicating the Nashville Bitcoin conference.

QCP Asia Colour - 4 Nov 24

Harris and Trump are locked in a tight race as odds on Polymarket have moved closer to actual poll estimates. Polymarket odds are still in favor of Trump at 55% but have decreased significantly from 66% a week ago.

The sideways price action over the weekend and decrease in leveraged perp positioning (from 30b to 26B across exchanges) suggest that the market remains cautious.

So, is this the calm before a break from the multi-month range and push toward all-time highs? The options market definitely thinks so as we've seen an increase in topside positioning with substantial buying of end-Nov 75k Calls since last Friday. Election-date options positions are also rising with Friday implied vols >87 even as realized vols are at 40.

We expect spot to chop around this range until we get more clarity on the election results this week, where a Trump win is likely to cause a knee-jerk reaction higher, and vice versa if Kamala wins.

QCP Election Commentary - 5 Nov 24

The day has finally arrived. Across stocks, treasuries, and crypto, market anxiety is palpable ahead of what promises to be one of the closest U.S. presidential races in history.

The "Trump trade"—encompassing long positions in the dollar, crypto, and bets on higher Treasury yields—has gained traction leading up to the election, buoyed by Trump's lead in prediction markets. However, a Harris victory could potentially reverse these gains, triggering significant market swings overnight.

The crypto market is currently pricing in a +/-3.5% in BTC spot movement on the election night itself. Yet, traders may be underpricing post-election risk: the current lack of volatility premium beyond the November 8 expiry suggests that markets expect a quick resolution, possibly underestimating potential delays or contested outcomes.

Volatility is almost certain...

Recall that in 2016, when Trump claimed a surprise victory, U.S. futures initially plunged before rebounding, with the two following days marking the most active trading of that half-year. Similarly in 2020, the race wasn't officially called for Joe Biden until four days later, causing trading volume to spike to a six-month high.

Possible Permutations

The outcome of the congressional races could be just as influential as the presidential result. A Republican sweep may indicate higher future fiscal deficits, likely prompting a more hawkish Federal Reserve—an unfavorable scenario for risk assets. Conversely, a divided legislature could lead to calmer markets and volatility tapering off.

Implications for Crypto

Currently, the options market shows balanced skew between calls and puts, with the desk observing heavy buying in both topside calls and downside puts over the past few days.

Nevertheless, Bitcoin continues to be viewed as a "Trump trade". BTC spot prices dropped amid significant outflows from spot ETFs on Monday, coinciding with a poll showing Harris's narrow lead in Iowa. As poll results begin to roll in tomorrow, we anticipate BTC spot to experience erratic swings.

Buckle up.

US Election Update

BTC hits 71,500 with Trump pulling ahead with 95 wins out of the 135 electoral votes counted so far.

US Election Update

BTC hits 73,000 with Trump closing in with securing 210 of the 270 electoral votes to win.

QCP Election Commentary - 6 Nov 24

What an incredibly eventful day! Just a few more votes for Trump, and the 2024 presidency is pretty much decided. Trump has maintained a lead in the polls from the start, and now it all hinges on Arizona, Michigan, Nevada, and Wisconsin. With over half the votes counted in these states, the scales are tipping toward Trump.

The dollar surged 1.2% to reach July highs of 105, with yields also climbing as markets anticipate stronger economic growth and increased fiscal spending. The 10-year Treasury yield rose by 15 basis points, while the 2-year added 8 basis points, signaling heightened investor expectations. Despite expectations for a decrease in rate cut probabilities due to Trump’s "friendlier" proposed policies, the market is still pricing in 1.8 cuts this year and 3 more cuts next year.

The crypto market has been on fire with BTC hitting all-time high of 75k after touching its previous record of 73.5k, set back on March 14. Since then, BTC has traded mostly within a tight range below 70k. Notably, BTC has now navigated three election cycles since its inception in 2009, each followed by rallies to new highs, with prices never dipping back to pre-election levels. We expect this bullish momentum to hold strong as we head into 2025.

QCP Asia Colour - 8 Nov 24

Unprecedented net inflows of $1.38 billion into BTC spot ETFs yesterday, coupled with optimism from Trump’s victory and a widely anticipated 25 bps Fed cut, have propelled BTC to $77,000 early this morning.

However, investors are beginning to pull back on some "Trump trades": the dollar has reversed much of its post-election gains, and Treasury yields have settled back into recent ranges after a brief whipsaw.

As markets consider Trump’s proposed 60% tariff on China and fiscal concerns like the rising national debt, we expect BTC to carry less risk premium compared to equities, potentially positioning it to outperform other risk-on assets.

This sustained bullishness in BTC could also create a feedback loop, with rising ETF inflows boosting BTC prices, which, in turn, attracts more retail capital and systematic fund buying as volatility declines.

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QCP Asia Colour - 11 November 24

- BTC continues to soar to record highs! Despite making new highs, vols have not reacted much as a result of large profit taking on long Calls. This means that the market was well positioned for this rally.

- With BTC's break of key resistance and it's multi-month range, the market is certainly in a state of euphoria. Perp funding is very elevated and basis yields are at 7-month highs. While we remain structurally bullish, we are cautious of any pullbacks especially from leveraged washouts. Historically, such spikes in basis yields have not lasted very long either.

- In the near term, we expect spot to chop around these levels and vols to soften even as we anticipate this week's macro events. Key events this week are: US CPI (Wed), US PPI (Thu) and Powell speech (Fri) where we'll get more clarity on the expected 25bps rate cut in December.

QCP Asia Colour - 12 November 24

Since the election, gold has declined by 5% while Bitcoin has surged by 30%, signaling a shift as Bitcoin gains traction as "digital gold." This movement appears increasingly structural, with capital reallocating from traditional safe havens like gold into BTC.

Bitcoin’s market cap, now at $1.73 trillion, recently surpassed that of silver but remains well below gold's $17.5 trillion. If even 1% of capital from gold were to flow into BTC, it could propel Bitcoin to around $97k, highlighting the potential upside as this narrative continues to solidify.

With BTC just below the critical $90k level, the end-November basis has surged to over 18%, accompanied by strong interest in far-out calls at 110k and 120k strikes. This trend points to heightened demand for margin and leverage as investors position for further breakout potential.

QCP Asia Colour - 13 November 24

BTC has entered "a new phase" after nearly breaking the 90k mark, solidifying its position as a treasury asset increasingly held by corporations, governments, and institutions. Record-breaking demand for BTC ETFs is setting the market on fire, with a massive $2.28 billion flowing in over just three days. Following last week's U.S. election, BTC ETFs raked in $1.8 billion, starting this week strong with another $1.1 billion in net inflows. It’s clear: the market is adjusting to BTC’s new highs, and the demand has never been hotter.

On the other hand, memecoin activity ramped up as well. DOGE skyrocketed Tuesday night, building on its post-election rally after Trump announced the formation of the Department of Government Efficiency, referred to as “DOGE.” Tesla’s Elon Musk and former Republican candidate Vivek Ramaswamy will lead the new department, with plans to "dismantle government bureaucracy, slash excess regulations, and streamline federal agencies." DOGE jumped nearly 20%, trading at $0.37 by early morning after briefly touching $0.43. The meme coin has surged 153% since election day, outperforming Bitcoin’s 30% rise, and recently overtook XRP to claim the sixth spot by market cap.

Today’s focus is on the release of CPI and core CPI, anticipated to hold steady at 0.2% and 0.3% for October, with annual CPI projected to rise by 2.6%. Markets are pricing in a final rate cut for the December meeting with a 70% probability, but today's CPI, upcoming PCE on November 27, and potential policy shifts from Trump could all impact the Fed's ultimate decision.

QCP Asia Colour - 14 November 24

BTC refreshed all-time high during last night’s New York session, rallying to a peak of $93,480. The move came after US headline and core inflation matched expectations at 2.60% and 3.30% respectively. Market is currently pricing in 82.5% chance of a 25bps cut in the upcoming December FOMC meeting.

As of this morning, crypto up has pushed the global market cap of crypto above $3 trillion, above its 2021 peak of $2.77 trillion.

Where are we going from here?

In view of Bitcoin’s impressive rally since the US election, our view is that $100,000 – $120,000 may not be too far off. As we prepare for the next move up, it is important to note the following trends and risk factors:

- Implied vols have been falling on the move up as many large players were positioned for it and sold calls into the rally. With each new high, our desk observed market is selling calls and buying puts to hedge their downside risk

- Market remains extremely leveraged especially in alts. Heavy leverage buying has pushed perp funding up to 50-100%, especially for alts. The risk of deleveraging may be quite significant.

We believe that the underlying strength in BTC represents a systematic shift in the market in anticipation of Trump’s return to office. His idea of launching a strategic BTC reserve and rotation from Gold to BTC, provides a strong narrative that keeps BTC prices supported.

QCP Asia Colour - 18 November 24

While BTC and ETH traded sideways over the weekend, SOL outperformed both majors as it rallied ~17% from Friday's lows. It does seem like SOL and other altcoins are starting to gain some traction especially with a pro-crypto Trump administration. So is alt-coin season around the corner?

Historically, we've seen altcoins outperform whenever the majors consolidate after a significant rally as profits rotate into smaller-cap coins. BTC's dominance is around 60% now and it will probably need to be around <58% to signal the start of altcoin season.

Investors might not be ready to fully rotate into altcoins just yet as BTC does seem to have more legs to go before that 100k milestone. As we anticipate pro-crypto policies from the Trump administration and more rate cuts, we won't be surprised to see altcoin season in full swing in the coming months.

Despite having nett ETF outflows last Thursday and Friday, BTC still looks relatively well supported and institutional adoption remains strong. Earlier today, Japan's Metaplanet announced plans to purchase more BTC from funds raised from its bond sales, following the likes of MicroStrategy. Seems like predictions of BTC at 100k aren't a pipedream anymore as the political and institutional stars start to align.

QCP Asia Colour - 19 November 24

NASDAQ will begin listing options on BlackRock's BTC spot ETF (ticker: IBIT) today. This marks a significant milestone for the Bitcoin derivatives market, as derivatives for traditional assets often grow to be 10-20 times the size of the underlying market cap.

This development is poised to attract a new wave of institutional investors who face restrictions on accessing native crypto options markets like Deribit. These investors are likely to focus on generating yield on their long-term spot ETF holdings, potentially leading to further compression of implied volatility.

This mirrors the trend of institutions using MicroStrategy as a proxy for Bitcoin exposure. Q3 13F filings revealed that institutional holders of MicroStrategy surged from 667 to 738, with Vanguard increasing its holdings by nearly 16 million shares—a staggering 1,000% jump.

Amidst all this positivity, Goldman Sachs is also planning to spin off its digital asset platform, further highlighting the growing integration of crypto into traditional finance.

The December 100k strike continues to hold the highest concentration of open interest. With spot finding its footing above 90k — evidenced by implied vol flies dropping 1 point from last week — we believe this could provide the foundation BTC needs for a move higher.

QCP Asia Colour - 20 November 24

Is crypto finally becoming a key part of macro? The options market for BlackRock's BTC spot ETF (IBIT) made a strong debut, trading an astounding 73k contracts within the first hour on Tuesday with a bullish call-to-put ratio of 4.4:1. This activity places IBIT among the top 20 most active non-index options, underscoring the growing institutional confidence in Bitcoin as a mainstream asset class.

This market response is likely to attract new investor cohorts and enable diversified trading strategies, which could help reduce both volatility and downside risk, solidifying Bitcoin’s place in mainstream markets. Other BTC spot ETFs such as the Grayscale BTC Trust (GBTC) and Fidelity Wise Origin Bitcoin Fund (FBTC) are expected to have options listed soon.

On the other hand, Trump’s Cabinet picks are turning heads, especially with crypto-friendly names like Elon Musk, chosen to lead the newly created Department of Government Efficiency (DOGE), and Pete Hegseth, nominated for Secretary of Defense. Hegseth, a vocal advocate for Bitcoin's decentralized value, has even pledged to hold, not sell, his Bitcoin holdings.

With Republicans securing control of the Senate, most nominees are expected to sail through confirmation. Trump aims to finalize his Cabinet picks by Thanksgiving, just a week away. These selections highlight an alignment between the new administration and the growing influence of digital assets in policy and finance.

QCP Asia Colour - 21 November 24

Bitcoin reached a new all-time high of $97,900 this morning, following last night’s rally. The surge was driven by growing optimism for crypto, fuelled by headlines emphasizing Bitcoin’s increasing importance in the corporate world and rising capital inflows into the asset.

1. MicroStrategy is expected to raise $2.6 billion to purchase more Bitcoin, with MSTR surpassing a $100 billion market cap and topping US trading volume last night.

2. Several corporate treasuries are following the likes of MicroStrategy by adding Bitcoin to their reserves, with Acurx Pharmaceuticals reported to have purchased up to $1 million worth of Bitcoin.

3. There has been overwhelming buying of January calls as we approach the Trump inauguration rally.

What’s Next?

With BTC holding firmly above the 97k mark, it's now closer than ever to that 100k milestone. Throughout the week, our desk observed aggressive demand in March and June Calls, signalling investors' long-term bullish sentiment for next year.

BTC spot ETFs have extended their winning streak to three days, with a total of $1.84 billion in net inflows during that period. The BTC ETF has been the biggest driver of additional capital into Bitcoin this year, with US-based ETFs accounting for $29.4 billion in net flows.

As we continue to see strong demand for BTC alongside further easing of monetary policy by global central banks, BTC prices are likely to remain supported as we approach the end of the year

QCP Asia Colour - 25 November 24

Crypto dipped lower yesterday as more than 100m worth of BTC and ETH positions were liquidated across exchanges. However, both are still trading comfortably above their key support levels (95k and 3200).

Even with the retracement over the weekend, backend vols remain relatively elevated. The market seems to be expecting BTC to trade sideways until December as attention shifts towards ETH in the near term. ETH risk reversals remain heavily skewed in favor of frontend Calls, while BTC Calls seem to be more bid only from 27DEC24 onwards, driven by the potential impact of Trump's pro-crypto policies which are only likely to take effect later next year.

As we mentioned last week, there could be a gradual rotation from BTC to ETH and other alts if BTC keeps rejecting 100k. In fact we are already starting to see this play out as BTC dominance dropped from 62% to 59% over the past week.

Despite consistently strong spot ETF inflows and impressive IBIT options skewed in favor of Calls, BTC seems to be fighting an uphill battle given the huge 100k sell wall. So will it reach its 100k milestone any time soon or will attention gradually shift to alts?

Just today, Michael Saylor hinted at purchasing even more BTC. MicroStrategy's purchases definitely fueled BTC's post-election breakout so the market is surely waiting to see if another purchase will take BTC to six-digits. If it does, we wouldn't be surprised to see BTC squeeze higher and altcoins to take the backseat for a little longer.

QCP Asia Colour - 26 November 2024

Bitcoin has slipped below 93k since our last commentary, with over $430 million in long liquidations. This decline coincided with spot ETFs ending their five-day streak of net inflows, recording a $438 million outflow on Monday, while MicroStrategy dropped another 4.4%.

The pullback follows MicroStrategy’s record $5.4 billion Bitcoin purchase last week. With U.S. holidays approaching and no immediate catalyst to push prices higher, BTC’s path to the symbolic 100k level has stalled.

ETH implied volatility has shifted sharply toward puts over calls, reflecting similar sentiment in BTC as the market takes a breather. Growing concerns about downside risks may intensify, particularly with tonight’s FOMC minutes and Wednesday's PCE data on the horizon.

However, to put things into perspective, this isn’t an excessive pullback. Bitcoin is merely retracing to levels seen early last week. The market had become extremely overbought since the election with excessive leverage, making a pause inevitable.

QCP Asia Colour - 27 November 2024

Bitcoin appears to have found a comfortable spot above the $93K mark as the holiday season nears. Meanwhile, MicroStrategy’s stock took a 35% hit after its recent $5.4 million BTC purchase at $97,862 per BTC went underwater. Despite this, MSTR found support at its 20-day EMA, holding session lows and signaling potential support above $350.

After BTC’s dip, ETH is staging a comeback, gaining over 4% yesterday while BTC dropped 1.5% at the same time. The market is shifting flows to ETH, as evidenced by a 13% surge in the ETH/BTC pair to 0.0366 from its post-election low of 0.0318. ETH even outperformed the broader CoinDesk 20 Index, which rose just 0.5%.

Wall Street achieved record highs after President-elect Trump nominated Scott Bessent as Treasury Secretary, lifting market sentiment. The Dow surged 439 points (+0.99%) to 44,860, while the S&P 500 broke the 6,000-point mark, and the Nasdaq Composite index gained 0.75%.

Bessent outlined his “3 Arrows” strategy for the U.S. economy, targeting a 3% budget deficit by 2028, 3% GDP growth, and an increase of 3 million barrels in daily oil production. Bessent’s market-friendly approach and potential willingness to moderate Trump’s tariff policies fueled optimism, driving a broad rally across markets, with risky assets leading the charge.