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 ...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...