SOL Supply Dynamics Improved, BTC Correlations Suggest Changing Market Dynamics
Gox Risk Overblown
In a piece in late April, we noted a high likelihood that Mt. Gox repayments would begin toward the end of May or in early June. On Tuesday, the transfer of nearly 142k BTC, valued at approximately $9 billion, from Mt. Gox wallets to an unknown address generated a bearish market reaction. This transfer, likely part of a plan to repay creditors by October 31st, began in the early Asian morning hours. The immediate market response featured Bitcoin dropping to a low of $67,680 after reaching a high of over $70,000 on Monday. Concerns about potential selling pressure from such a large amount of BTC caused traders to pull back risk.
In any other market, we would say that this supply is “priced in,” but this is crypto, and the market is not always as efficient as others, as information disseminates to different participants at differing rates. Thus, it is worth assessing the near-term risks, as 142k BTC equates to roughly 20% of daily volume across all exchanges.
Given that we are still mid-cycle and those receiving their BTC in-kind have been in the market for a very long time (high-conviction, long-term investors), and the funds that purchased BTC claims are likely hedged, we think the near-term selling pressure from these coins will be less than ...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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