Crypto Strategy

QUICK RECAP First and foremost, we would like to extend a Happy New Year to all our clients and subscribers. The past year was indeed eventful, marked by banking crises, significant court victories, and BlackRock's foray into the sector – truly a remarkable journey. Our Core Strategy, though it lagged behind the King, performed well. This was particularly supported by the strong performance of our altcoin basket in Q4. We...

LET IT FLOW As we approach the holiday weekend and the final week of the year, which is typically marked by lower liquidity due to many stepping away from their desks, one might expect to see a dialing back of risk and a slowdown in trading volumes. However, contrary to these expectations, most data suggest animal spirits seem poised for a rally through the New Year. CME futures data, the...

OI RINSE TO START THE WEEK This week the crypto market started off with a bang, marked by a liquidations-driven downturn on Sunday evening. The perpetual futures market witnessed a low liquidity liquidation cascade that wiped out approximately $2.7 billion in open interest across all cryptoassets, according to data from CoinGlass. At the time, we perceived this event as a normal cleansing of overleveraged weekend positions and viewed any immediate...

CHALLENGING THE ACCUSATIONS OF FROTH Amidst the recent sharp rally in the crypto market, investors who weathered the prolonged bear market are understandably cautious, keeping a close watch for any signs of excess. Despite the violence in the most recent rally, we believe it's too early to declare the market as overbought. Our assessment is based on several factors:Perpetual futures data indicates a relatively modest level of long speculation, especially...

RATES DUE FOR A BOUNCE (MAYBE) As the crypto market continues to exhibit strength, and despite eradicating one of the market’s biggest unknowns in Binance just last week, it remains essential to be aware of near-term risks. Recently, the bond market has experienced a significant rally, and there's been a notable decline in the DXY. Combined with nominal stimulus in Asia, these factors have contributed to a substantial increase in...

BINANCE RISK MITIGATED One of the most significant idiosyncratic risks in the crypto market has been the uncertainty surrounding Binance and potential action from the Justice Department against the world's leading exchange. Earlier this year, we anticipated that any disciplinary actions would likely involve criminal charges against Changpeng Zhao (CZ) and a fine against the exchange. From our September note: _Source: Fundstrat_ Today, these views were realized. CZ appeared in...

MARKET PRICES IN RATE CUTS The key macro event this week was the release of the October CPI data, which came in notably cooler than anticipated. The year-over-year CPI was slightly lower at 3.2%, just below the predicted 3.3%, while the month-over-month figure remained steady at 0.0%, in contrast to the expected 0.1%. This cooler inflation data spurred a surge in equity indices. It also bolstered investor confidence in the...

MARKET BREADTH EXPANDING The crypto market is exhibiting signs of increased breadth, particularly noticeable as altcoins, typically further out on the risk curve, begin to attract more interest. As illustrated in the data below, the total market cap for altcoins (including stablecoins) is advancing towards its previous year-to-date high. ETH has not yet seen a substantial rally, but it appears to have established a potential near-term bottom against BTC. This...

TREASURY REFUNDING AND ITS IMPACT ON ASSET PRICES The bond market has been experiencing notable volatility, predominantly due to a phenomenon known as a bear steepening. This situation arises when short-term interest rates remain stable, but long-term rates rise precipitously. We attribute this volatility largely to an increase in the supply of long-duration assets, propelled by a growing budget deficit and the expectation of ongoing Treasury issuances. While this bond...

INSTITUTIONAL CAPITAL BACK IN THE FOLD It took 10 months, but BTC finally made it to the lower bound of our forecasted range for the year ($35k - $44k). The past week has been remarkable for crypto markets, marked by a notable divergence from traditional financial markets. This breakaway may portend a shift in investor sentiment, potentially signaling increased confidence in digital assets as an independent asset class. In any...

THE BID WE’VE BEEN WAITING FOR Last week, we painted a picture of a market on the cusp of a potential rally. Our thesis hinged on a confluence of favorable factors: a local peak in rates, a possible global liquidity turnaround, and encouraging seasonality trends. However, the market remained largely inert, a phenomenon we attributed to the uncertainty surrounding the SEC's potential stance on Grayscale. The market had been in...