The Fed Rug-pulls Bears
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 market weakness as a buying opportunity. Following this shake-up, BTC, ETH, and SOL all demonstrated resilience, finding support at the previous week's low, and have since recovered essentially all losses incurred on Sunday.
Such liquidation cascades, though jarring, serve as a reminder of the inherent volatility in the crypto market. It's important to remember that achieving outsized returns typically involves navigating through acute periods of volatility.
Interestingly, this year has been somewhat atypical regarding price fluctuations, as evidenced by the occurrence of only seven daily drawdowns exceeding 5%.
If these trends persist until the end of December, this year will record the fewest instances of 5% drawdowns in Bitcoin's history, underscoring a period of relative stability for an otherwise volatile asset....Reports you haven't read
BREAKING AWAY While we maintain that macro conditions are still the most critical factor in assessing the medium/long-term trajectory of BTC prices, daily returns of the leading cryptoasset continue to exhibit a lack of defined correlation with any major macro asset. To us, the biggest reason for this sustained lack of correlation is the advent of the spot BTC ETF. A prime example of how ETFs are influencing BTC's performance...
WEATHERING THE STORM Heading into Q1, the key risks identified were: (1) A potential QRA supply shock, as long-term interest rates could surge due to a possible shift in bond issuance towards longer-duration securities, (2) the repricing of interest rate cuts, as the Federal Reserve downplayed expectations regarding the timing and frequency of such cuts, and (3) concerns regarding the dynamics between the expiration of the Reverse Repurchase Agreement (RRP)...
QRA IN LINE WITH MARKET EXPECTATIONS _THE RESULTS_ The Treasury’s quarterly refunding announcement (QRA) was the first of two major macro events to transpire on Wednesday. Leading up to this, on Monday, there was an indication that the net borrowing for the current quarter would be $760 billion, which is $55 billion lower than the initial $815 billion estimate, and the total funding needs for Q2 would be just over...
THE GBTC PROBLEM We have been watching spot BTC ETF flows closely since their launch two weeks ago, and while overall net flows remain decidedly positive, the market seems hung up on GBTC outflows. As a reminder, the outflows we care the most about are those from entities that are not rotating into other spot BTC ETFs. This is comprised of some speculative capital that played the run-up into ETF...
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