QCP Asia Colour - 9 December 2024

- The 4k and 100k levels are lines in the sand for ETH and BTC. The majors breached these key levels last week before trading lower for most of today.

- Looking at the tenor with the highest OI, 27DEC24, those levels coincide with the strikes with the highest OI: ETH-27DEC24-4k (90k contracts) and BTC-27DEC24-100k (16k contracts). So, will there be a squeeze higher if spot trades higher as dealers look to cover?

- We’re less inclined to think so. Just today, we saw takers taking profit on their long BTC-27DEC24-100k-C positions and possibly rolling them out to March (130k–150k). This indicates there should be ample supply of topside gamma. Furthermore, perp funding is flattish on Deribit and slightly higher than usual on major exchanges, making a flush to the topside less likely.

- Although we’re still structurally bullish, spot is likely to range here for the remainder of the holiday season. Historically, ETH does not usually put in a new all-time high until January of the post-halving year. This sentiment is also reflected in the options market, where ETH risk reversals are skewed toward calls only from January onwards.

QCP Asia Colour – 10 December 24

Bitcoin was rocked by $1.5 billion in long liquidations, plunging 3,000 points before rebounding off the critical 95k support. It now consolidates around 97-98k, leaving altcoins in its wake.

Yet, BTC and ETH spot ETFs are on an impressive streak, posting 8 and 11 consecutive days of net inflows, respectively. Riot Platforms is emulating MicroStrategy's playbook by issuing $500 million in convertible notes to buy Bitcoin. With a 0% coupon and strong demand, can anyone afford to stay on the sidelines?

Microsoft shareholders vote today on adding BTC to the balance sheet—a potential surprise to the topside if approved, despite the board's recommendation against it. Adding to the intrigue, Amazon shareholders reportedly push for Bitcoin adoption as a reserve asset.

With inflation data due, macro volatility has eased slightly amid political stability in France and Korea, while Asia rallies on China’s stimulus promises. BTC and ETH front-end vols remain elevated, skewed toward puts. A pivotal catalyst is needed to reignite momentum toward the 100k level.

QCP Asia Colour – 11 December 24

Bitcoin remained resilient at $97.5K, recovering from a modest 3% dip to $94.5K lows. The sell-off occurred shortly after Microsoft shareholders decisively rejected a BTC treasury proposal to allocate 1% of total assets into BTC as an inflation hedge.

Despite MicroStrategy Chairman Michael Saylor’s efforts to sway opinions, Microsoft maintained its stance, citing concerns over BTC's volatility.

MSTR, on the other hand, doubled down with another $2.1 billion BTC purchase last week—its fifth consecutive week of accumulation. This move signals strong support for downside movements and reinforces their $42 billion strategy, suggesting more acquisitions are on the horizon.

The crypto lobby has intensified its efforts against SEC Commissioner Caroline Crenshaw ahead of the Senate committee vote due to her alleged anti-crypto stance. The timing of Crenshaw’s vote is labelled by the Republicans as a last-minute effort to counter Trump’s agenda of reshaping the SEC into a pro-innovation, pro-business advocate for digital assets.

With the stage set for a high-stakes battle, the future of digital assets is at a crossroads.

QCP Asia Colour – 16 December 24

Yet another milestone: BTC surged past 106,500 during early Asian hours. Short liquidations totaling approximately USD151 mm over the past 12 hours fueled the rally, as an illiquid and complacent weekend (Deribit funding briefly turned negative) market squeezed shorts on the topside.

The BTC/Gold ratio reached an all-time high during the move, amplifying Bitcoin’s status as “digital gold” and cementing its position as an increasingly favored store of value over traditional gold.

MicroStrategy’s inclusion in the Nasdaq 100 added further momentum to market sentiment, with Michael Saylor hinting at additional BTC purchases, even with spot prices above 100k. This inclusion could trigger passive fund inflows into MicroStrategy shares, indirectly enabling the company to raise funds more easily for acquiring Bitcoin.

This week’s central bank meetings seem to be mere background noise for crypto, with BTC remaining firmly sentiment-driven. While highly unlikely, an extremely dovish Fed and Powell could still provide the push Bitcoin needs to climb even higher.

QCP Asia Colour – 17 December 24

It's becoming increasingly difficult to find reasons to be bearish on Bitcoin's spot price. However, the options market offers a note of caution, with a continued skew toward puts over calls even as spot continue to make new highs—perhaps signaling a preference for hedging rather than aggressively chasing the rally.

VanEck projects a "medium-term" peak for the crypto market in Q1 2025, placing Bitcoin's target at $180k, buoyed by sustained bullish sentiment.

Adding to this optimism, the Financial Accounting Standards Board (FASB) has adopted fair value accounting for Bitcoin and other digital assets, allowing companies to reflect fair value gains directly in their net income—a game-changer for corporate treasuries holding BTC.

With a supportive regulatory environment driving the rally, this could spark a cross-asset feedback loop, where firms holding BTC in their treasuries find it easier to raise funds—potentially fueling institutional demand for BTC in a non-linear fashion.

QCP Asia Colour – 18 December 24

The last Fed meeting of 2024 happens tonight and despite the festive Christmas season, we see little cause for celebration. The Fed is expected to cut rates by 25bps at this meeting and release the final dot plot of the year.

We anticipate tonight's statement and dot plot to carry a slightly hawkish tone, reflecting US inflation stabilizing above the Fed's 2% target and a robust labor market. Expect the statement to remain non-committal for the path of rate cuts in 2025, emphasizing the difficulties of accelerating rate reductions. Meanwhile, the dot plot is expected to telegraph 3 cuts for 2025.

While we don't foresee the Fed meeting carrying much weight, liquidity across all markets have slowly decreased. This could result in gappy moves, potentially leading to large liquidations.

The technical outlook for BTC also appears cautious, with BTC printing an evening star on the daily timeframe and exhibiting bearish divergences.

Don't get shaken out of your positions if a drop occurs. With 2025 poised to be a potentially bullish year for crypto, particularly with Trump in office, staying the course may prove beneficial.

QCP Asia Colour – 19 December 24

The hawkish FOMC triggered a sharp selloff across all risk assets. Nasdaq plummeted 3.56%, S&P 500 dropped 2.95% and BTC declined 6.13%.

While the Fed's 25bps cut was expected, the source of panic can be attributed to the dot plot which was revised lower. Due to persistent inflation, the Fed now projects 2 rate cuts for 2025 compared to the market’s consensus of 3 rate cuts.

BTC fell to a day low of 98,800 during the Asia session with multiple altcoins suffering losses of at least 10% as the market saw US$258.6 million worth of longs being liquidated.

While it it easy to blame the selloff on the Fed’s hawkish cut, we believe the root cause of the morning’s crash to be market’s overly bullish positioning. Since the election, risk assets have enjoyed an impressive one-sided run, leaving the market extremely vulnerable to any shocks.

QCP Asia Colour – 23 December 24

After last week's washout, spot continues to chop sideways as approach the festive holidays. While this may seem like a quiet week for markets, all eyes are on the massive expiry this Friday, where almost $20B notional across BTC and ETH options will expire. This represents almost half the total OI on Deribit.

Will we see the typical quarter-end vol selloff post expiry? We believe it's quite possible especially if spot continues to range here and as option sellers continue to roll their shorts out. Unlike most option sellers who have to wait for collateral to be released post-expiry, Call buyers would have likely already rolled most of their positions. However, if BTC manages to break 100k, vols are likely to hold firm.

Meanwhile as BTC continues to struggle below 100k, we could also see alts start to play catch up again. A similar trend was observed a month ago where BTC was trading around these levels and ETHBTC bounced off 0.032 support. With BTC dominance still at 58%, we are closely watching for a significant drop below this level to confirm a rotation into alts.

QCP Asia Colour – 24 December 24

What Santa Rally? The anticipated rally failed to materialize as Mt. Gox moved $49.3 million in BTC, triggering a selloff to 92.5k—a 14% drop from last week’s all-time high—before a rebound to reclaim 95k. Sentiment appears to be softening, with liquidity drying up toward year-end and spot ETFs seeing their third consecutive day of outflows yesterday.

MicroStrategy announced another BTC purchase of $561 million at an average price of 106,662, marking its seventh consecutive week of buying. However, this represents its smallest purchase in recent weeks, prompting questions about its appetite at these levels.

Interestingly, despite the slide, there was no notable rush to cover gamma, with front-end vols staying subdued. Ahead of Friday's Mega Expiry, the market appears primed for volatility, with vol flies elevated at +2.0—indicating it has yet to find its footing.

With traditional markets winding down with shortened hours or closures, Bitcoin’s 24/7 nature could serve as a key outlet for views on extraordinary events. For instance, BTC/KRW recently reflected market responses to President Yoon's martial law declaration. Hence, we remain cautious of potential gap moves.

QCP Asia Colour – 30 December 24

As expected, we saw the typical quarter-end post-expiry vol selloff as vols are 2-3 vols lower since Friday's record-breaking expiry.

Although BTC is consolidating near the bottom of the 1-mth range and is flattish returns on the month, both BTC and ETH performed decently in Q4: BTC is up 48% while ETH is up 30%. However it may be a little premature to sum up the quarter for now. Just yesterday, Saylor posted his BTC purchase tracker again which could signal another round of imminent purchases, supporting prices further.

Despite the possibility of another round of purchases, we are skeptical of any New Year fireworks especially with funding healthy. January's average returns (+3.3%) are relatively similar to December's (+4.8%), and we could expect spot to remain in this range in the near-term before things start to pick from Feb onwards.

Options flows are also reflecting similar sentiments with frontend vols drifting lower and risk-reversals most bid for Calls in March, partly due to significant March (120k-130k) Calls bought last Friday.

QCP Asia Colour – 31 December 24

BTC spot has been notably gappy due to thinner liquidity. Any upside recovery over the past couple of days has been capped by persistent selling pressure.

Momentum in BTC has clearly fizzled as the year ends, with $1.8 billion of net outflows from spot ETFs since Dec 19 and a noticeable slowdown in MicroStrategy’s BTC purchases.

The weak price action in crypto mirrors broader market sentiment, with the S&P 500 and NASDAQ logging their third >1% drop in eight sessions as markets price in heightened uncertainty around global trade heading into 2025.

Q1 2025 Outlook

Despite a lackluster finish, BTC will close the year up 120%, outperforming globally stocks and gold. For 2025, while optimism surrounds crypto-friendly regulations post-Trump inauguration, we think the key catalyst may come in January as institutions readjust asset allocations.

With BTC now broadly adopted by a broad spectrum of institutions—adding university endowment funds to the list this year—allocations are likely to increase, strengthening Bitcoin dominance, stabilizing spot movements, and shifting volatility dynamics closer to equities. Expect stronger demand for downside puts for hedging and more covered call selling on the topside.

QCP Asia Colour – 6 January 25

A positive start to the week as BTC managed to inch closer towards the 100k mark, staring down the hefty sell wall yet again. This is the level which saw increased selling pressure in December.

So will BTC break 100k again? The first time this key level was broken, on 5-Dec, funding skyrocketed above 60%. However funding levels remain healthy this time round and we do not anticipate a squeeze higher in the near-term. Unlike previously, it's also quite unlikely we get any Trump-related catalysts till after his 20-Jan inauguration. Frontend vols have also remained soft with a relatively neutral skew which indicate a similar sentiment.

With no crypto-specific catalysts on the horizon, focus will be on the first US jobs report of the year this Friday (10-Jan). However expectations for Fridays NFP will be firmed up through the week with the release of JOLTS job opening numbers and ADP on 7-Jan and 8-Jan respectively.

QCP Asia Colour – 7 January 25

What's a QCP Tuesday Colour without mentioning MicroStrategy? The company has purchased another 1,070 BTC at an average price of ~$94k. This follows news that they are raising up to $2 billion through perpetual preferred stock.

Bitcoin is trading at a premium on Coinbase as spot pushes above $100k for the first time in two weeks. This coincides with spot ETFs returning to net inflows, as ETF issuers mostly trades and custody with Coinbase. This trend may suggest institutions are increasing their 2025 Bitcoin allocations, as mentioned in our commentary on 31st Dec.

Waves of favorable regulatory narratives continue to support the spot market. In Canada, pro-crypto politician Pierre Poilievre is now favored to replace Justin Trudeau as the next Prime Minister, according to Polymarket.

However, It won’t be smooth sailing into January, as structural risks loom. The U.S. Treasury debt ceiling reinstatement is projected to be reinstated mid-month, requiring the Treasury to adopt "extraordinary measures" to fund government expenditures. This could trigger market volatility as discussions around the issue intensify.

QCP Asia Colour – 8 January 25

Bitcoin has retraced to the $95K support level following hotter-than-expected US job data. JOLTS job openings surged to 8.1 million, surpassing the 7.74 million forecast. The unexpected strength in the labor market fueled risk-off sentiment, triggering a sell-off in risky assets as long-term bond yields spiked.

Bitcoin's sharp price drop resulted in approximately $206 million in liquidations within an hour. The risk-off ripple effects extended across other financial markets, particularly equities, with the Nasdaq and S&P 500 showing signs of weakness, hovering around 21.2K and 5.9K, respectively.

Bitcoin ETF inflows have plummeted by 94%, dropping to $52.9m from $987m. BlackRock's IBIT stood out as the sole BTC ETF to record a significant inflow of $596.11m, while ARK and 21Shares’ ARKB led outflows, with $212.55m exiting the fund.

All eyes are on this week's FOMC and NFP releases, which are expected to further influence Bitcoin's price trajectory. With market anticipation building, we believe Bitcoin's pullback is merely a pause, setting the stage for a bullish rally as Trump's inauguration fuels optimism.

QCP Asia Colour – 9 January 25

BTC rebounded last night to $95.2K after successfully retesting the $92.5K key support. However, the outlook for BTC remains bearish during early Asia session today after news of US government selling their stash of seized Silk Road BTC broke out.

Crypto prices continue to be weighed down by macro headwinds, as last night’s Fed Minutes revealed an increasingly hawkish stance. The Fed indicated that they will slow down the pace of rate cuts given that the risks of inflation have increased. Yesterday’s ADP employment survey also added to macro uncertainty, showing a slowdown in both private sector hiring and wage gains. This heavily contrasted with Tuesday’s JOLTS jobs openings which painted a stronger labour market.

On the options front, the curve has steepened across all tenors with Mar-Jun spread widening by 1.5 vols, and Jun-Dec spread rising above 1 vol. The desk continues to observe selling pressure on front-end vols with 17Jan ATM options priced 3 vols lower from last night.

With US markets closed today, we expect prices to remain weak as BTC consolidates between $92K and $95K. A break below $92K could bring the $90K figure into view.

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QCP Asia Colour – 13 January 25

Is inflation back? The US economy is certainly showing signs of overheating with Friday's scorching NFP print of 256k, obliterating the forecasted 164k. After last week's macro data, rumors of any imminent rate cuts have gone up in smoke as equities have tumbled lower. Potential Trump-era tariffs have also ignited more inflation fears.

Despite the macro headwinds and lingering Silkroad fud, crypto seems to have found some footing as $91k and $3100 supports still remain intact for now. Implied vols are also at relatively modest levels and drifting lower, with only a slight Put skew on the frontend persisting until after Trump's inauguration.

Although the vol market hasn't reacted much, crypto isn't out of the woods just yet. The macro storm cloud still looms with PPI (14 Jan), CPI (15 Jan) and Unemployment Claims (16 Jan) on the horizon, potentially adding fuel to the fire. As the US economy heats up, this week could be a real test for crypto to step up as an inflation hedge

QCP Asia Colour – 14 January 25

The global market has caught up with the recalibration of the Fed rate cut outlook. The 10Y yield surged to 4.8%, its highest since late 2023, with markets now pricing no rate cuts until October. Equities futures opened 1.5% lower, sending Bitcoin below $90k before a steady recovery to above $95k.

What’s Next?

Key PPI and CPI data are on the horizon. We think potential surprises could come on the upside, as markets begin to adjust to the reality of a prolonged higher-rate environment, with some even entertaining the possibility of a rate hike.

The momentum in rising yields could test financial market resilience. In crypto, cautious sentiment is evident in BTC options flows, with puts rolled below the key $90k support. Front-end vols and flies remain elevated, while the VIX stays high at 18.68 - suggesting volatility to persist through January.

Still, there’s hope for a catalyst. Reports suggest Trump may sign executive orders on day one, addressing “de-banking” and repealing a contentious crypto accounting policy, which could provide a boost to the market.

QCP Asia Colour – 15 January 25

We're less than a week away from the inauguration of the 47th US President, Donald J. Trump. In a manner reminiscent of 2017, Trump has found a way to shake global markets even before officially taking office on 20th January.

Inflationary fears continue to spook the US market. The US job market remains robust as NFP surprised higher last week (+256k v +165k exp.). While CPI appears to be moderating above the 2% target and despite PPI coming cooler, market participants still expect December's CPI to come in higher than the previous reading.

Trump has widely publicized plans to impose tariffs on trading partners, mainly China, driving inflationary fears higher. Contrary to expectations of blanket tariffs from the outset, it now appears the new administration will gradually introduce tariffs on selected imports.

Plagued by the specter of inflation, bond yields have started to creep higher once again. Markets are now pricing only two cuts in 2025 and 2026 (the latest Fed Dot Plot had projected four), and the 10y and 30y US Treasury yields are approaching the 5% level.

As Treasury yields headed higher, equity markets suffered a scare as the S&P500 threatened to break below $5800. BTC followed suit, dropping briefly below $90k.

The macroeconomic environment doesn't look conducive for risk assets right now given the recent developments. However, one bright spot is that Trump's actual policies often differ significantly from his public rhetoric. Inflationary fears may not materialize as severely as markets anticipate.

For crypto, the Trump administration features crypto friendly personnel. Rumours that Trump will enact wide-ranging and crypto-friendly executive orders provide a short term tailwind, potentially supporting prices.

Expect heightened volatility before and after the inauguration as markets digest and adjust to a new term under Trump. We maintain cautious of the downside as the $90k level in BTC has been tested numerous times. Equity markets also appear fragile, and with bond yields globally moving higher, it can spell messy and gappy moves all around.

QCP Asia Colour – 16 January 25

Global markets rallied last night after a weaker-than-expected CPI report eased fears of rising inflation. BTC jumped 4.13% to a high of $100.8K before stabilising just below the $100K milestone. The same level of optimism was also seen in equities as S&P 500 rose 1.83% and Nasdaq gained 2.27%.

Both BTC and ETH spot ETFs experienced healthy inflows yesterday with BTC spot ETFs recording a staggering $723.20 million worth of inflows. The swift recovery in inflows reflects strong institutional demand and suggests an exciting outlook for crypto.

On the options front, BTC JAN calls dominated the market yesterday as traders adopted an increasingly bullish view, snapping up contracts with strikes ranging from $100K to $110K. This is a promising sign as we head into March which currently holds the highest concentration of open interest at the $120K strike. Given all this buzz, could altcoin season be around the corner?

With BTC dominance plummeting from 58.6% to 57.4%, altcoins are expected to outperform as profits rotate into ETH and other altcoins. For confirmation of altcoin season, BTC dominance will need to break below the support at 57.3% while hovering around the 100K milestone.

QCP Asia Colour – 20 January 25

It's inauguration day and in the lead up to today, the incoming leader of the free world launched a market-leading coin with a valuation exceeding $10B, named after himself. The global reach and speed at which $TRUMP surged signal a paradigm shift in capital formation as crypto becomes increasingly mainstream.

Could this be the catalyst that drives the anticipated alt-coin season? Launching $TRUMP on SOL proves to be a significant endorsement of the chain, making it plausible that the SOL ETF could gain approval much earlier than expected. With increased media exposure from similar launches, retail inflows are likely to come streaming in.

Apart from memecoins, BTC appears poised to break higher with funding exceeding 65% on Deribit. Saylor added fuel to speculation with a tweet yesterday, sharing his trademark "Saylor Tracker" which usually signals another round of buying, and a cryptic message, "Things will be different tomorrow", creating additional suspense on Trump's Day 1.

The launch of Trump's memecoin appeals not only to the retail memecoin moonshot masses, but also to major institutions as it solidifies the president's pro-crypto stance. This week, institutional investors are on the edge of their seats, awaiting concrete pro-crypto policies that could significantly influence the future of the economy. The global ripple effects of this clear US "green light" for crypto adoption have yet to fully materialize.