QT, We Hardly Knew Ya
It might not “technically” be QE, but QT is Over
A common refrain among Bitcoin advocates has been “short the banks, long BTC.” Over the past couple of weeks, we have seen the closest manifestation of this trade since the inception of the Bitcoin network.
There remain apparent concerns about the health of the US banking system, specifically related to the duration mismatch issues plaguing traditional banking institutions and depositors' resulting willingness (or lack thereof) to hold their uninsured deposits in regional banks.
Silicon Valley Bank ($SIVB) realized a loss on their securities available for sale due to purchasing too many low-yielding, long-dated bonds for their liquid portfolio and needing to roll their book into higher-yielding assets.
Unrealized Gains Losses on Bank Balance Sheets:
Now, with the understanding that the FDIC will back any deposits with a bank that is qualitatively deemed a “systemic risk,” we are witnessing reasonable trepidation around keeping deposits at non-GSIB banking institutions. The equity markets broadly continue to be weighed down by these fears of systemic banking failures.
The Fed has responded to this banking crisis by creating a new Bank Term Funding Program (BTFP) to offer loans of up to one year to banks and o...Reports you may have missed
CORE STRATEGY Most of the risks that prompted us to turn cautious in early February still persist, so we believe it’s right to remain patient. However, the near-term (2–4 weeks) setup is starting to look compelling for a tactical rally as sentiment is miserable, liquidity conditions are improving on the margin, a lot of risk has already been priced in, and we’ve seen serious capitulation and deleveraging. All eyes will...
MSTR Reloading Presents Opportunity for Bounce, But Broader Picture Remains the Same
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CORE STRATEGY With lingering trade war talks and robust economic data dissuading a dovish Fed pivot, we think the potential for downside volatility remains elevated. While regulatory developments and institutional adoption continue to bolster the medium- to long-term outlook, no immediate “good news” seems likely. Nevertheless, we still expect crypto to outperform this year. Until we see flows return to crypto, raising cash/trimming altcoin positions appears prudent (BTC dominance higher)....
CORE STRATEGY With the looming threat of an escalating trade war and economic data robust enough to discourage a more dovish Fed stance, we believe the upside risk for the DXY and yields has increased in Q1. Moreover, the market remains highly volatile and headline-driven, inhibiting the crypto market from gaining meaningful momentum. While regulatory developments are a key medium- to a long-term tailwind for crypto, it is unlikely that...