Asymmetries
DCG Update
Leverage Unwind Recap
Clearly, the most challenging part of analyzing cryptoassets this year has been the opaque parts – the lending, borrowing, trading, and siphoning of assets that have occurred off-chain.
This year, we have seen a deleveraging event throughout the global crypto market spurred on by the centralized elements of crypto. First, we saw the de-pegging of UST and the incineration of $50 billion in market value with the downfall of LUNA.
Sure, this was technically an on-chain failure, but a significant portion of the capital locked in the Anchor Protocol was from centralized yield providers, which took retail money and either directly or indirectly were harvesting yield from this Anchor application. Further, many funds that locked capital into Anchor were clearly leveraged on their LUNA/UST positions. This is the reason that we witnessed additional fallout from the unwind of 3AC shortly after the LUNA unwind.
Then, in what seemed to be the final shoe to fall, FTX was revealed to have been cosplaying as a solvent exchange and Alameda as an outperforming hedge fund, only to be found to have papered over similarly excessive losses seemingly incurred throughout the previous 12 months. Their downfall (which was, by the way, only discovered due ...Reports you may have missed
CORE STRATEGY: FOCUS ON MAJORS, KEEP HEAD ON SWIVEL UNTIL BONDS/DXY RELENT We think it's right to expect a bounce into year-end, potentially starting tomorrow if PCE data comes in soft. In our view, this cycle is far from over, but until bonds find a bottom and the USD tops, it’s likely best for the more tactical investor to stay nimble and prepared for opportunities upon confirmation of this trend...
CORE STRATEGY Our base case assumes that the macro environment will remain accommodative for crypto through year-end. However, in light of recent market action, we remain alert for signs of a local top (not a cycle top). That said, it is difficult to justify a risk-averse stance at this stage and think it is right to lean into this altcoin rally. Source: TradingView, Fundstrat Source: TradingView, Fundstrat STRONG DOLLAR +...
Today's employment numbers broadly met investor expectations, placating a nervous market. Risk assets rallied, aligning with our view that yesterday's de-risking would not persist through today. Yields continued their downward trajectory, and Fed funds futures also declined, reflecting the market's adherence to the Fed's dovish messaging. Yields Falling: Source: TradingView Fed Funds Futures Showing More Cuts: Source: TradingView Oil prices nearing YTD lows likely assisted in alleviating near-term concerns about...
INDICATIONS OF FROTH Given the violent nature of the past month’s rally, we have been vigilant for signs of a local top. It would be disingenuous to claim that some qualitative "top signals" are not flashing right now. XRP—which we noted as a possible election trade back in October—with only 1–2k daily active addresses (vs ETH's over 400k, source: Artemis), is ripping toward new highs while influencers take to TikTok...
