Adjusting to a Post-FTX World
Adjusting to a Post-FTX World
A couple of weeks ago, we discussed several critical risk vectors remaining in the market and provided our take on each matter. Our near-term view was that it was more likely than not that most of the contagion from the implosion of FTX had been sifted through, but due to the unknown status of Digital Currency Group, investors might not be getting paid enough for any risk assumed in the immediate term. Fast forward to today, and we are still waiting for a resolution to the DCG saga. We offer a brief update on DCG below, but for the most part, we discuss the shape of the market nearly a month removed from the downfall of FTX.
Everyone Had the Same Idea
We were not the only ones who took a less active approach to the market over the past couple of weeks. Following the exit of one of the largest market makers in crypto and the freezing of billions in customer deposits in FTX, we have understandably witnessed markets become devoid of volume.
Below we can see that the 7-day moving average for $ETH volume across all exchanges is at its lowest in recent history. While some of this inactivity could be attributed to the holiday last week, the primary driver is likely a lack of participation due to uncertainty and the recent incineration of invest...Reports you may have missed
LESSONS FROM OPEC We have witnessed a significant market panic partially related to formerly locked BTC hitting the order books. The major sources of supply include:Mt. Gox – 141,686 BTCUS Government – 8,100 BTCGerman Government – 50,000 BTC At current prices, this would equate to over $12 billion in supply. This threat, combined with an inhospitable macro backdrop (rising DXY, higher rate expectations, hawkish Fed), has brought BTC down to...
LDO Risk/Reward Looks Good Here, Immediate-term Macro Picture Still Uncertain (Core Strategy Rebalance)
FLOWS AND SENTIMENT STILL SUBDUED Last week, we received a better-than-expected CPI print, but the DXY continued to move higher due to global weakness and a hawkish Fed. We discussed the risks appearing in the metrics we use to gauge sentiment and flows. The overall lack of follow-through in the crypto market was evident. Volumes, net ETP flows, the Coinbase discount, stablecoin market cap trend, and search interest for key...
OVERALL, IT WAS A GOOD CPI/FOMC DAY As any market observer knows by now, CPI came in remarkably cool yesterday. May CPI data was soft across the board, with headline inflation at 0.0% M/M vs. 0.1% expected and core inflation at 0.2% M/M vs. 0.3% expected. The unexpected data fueled a violent rally across all risk assets as rates fell, and the futures market started to price in additional cuts,...
STX Remains Compelling Beta Exposure, Miners to Outperform in Lower Rate Environment
RATE EXPECTATIONS MOVING LOWER Last week, we discussed how rate expectations were a barrier to crypto moving higher and that we anticipate continued non-recessionary but soft economic data will help spur flows. Fast forward to this week, and we have seen a cool manufacturing PMI, a soft JOLTS report, and a services PMI in which the price component was below market expectations. The remaining important data for this week includes...
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