Market Insights
Article by infotech
A volatile Q1
The Bitcoin spot ETFs took the crypto world by storm in the first quarter of 2024. Beyond the powerful narrative of real institutional access and participation in physical Bitcoin, the actual demand that it generated was unprecedented.
A consistent $500m-$1b of Bitcoin buying a day in the spot ETFs was enough for the market to shed all the trauma of the last two years and go into a speculative frenzy. Bitcoin price has broken all-time highs and has taken every crypto asset and token along for the ride.
On this +88% move for the quarter (38,500 lows to 72,415 highs), the ability to consistently buy Bitcoin at a discount to the market provided significant alpha. The discount buffer provided by some of our accumulator strategies provided investors the confidence to chase and increase long positions in an exponentially rising market.
An important effect of the frenzied rush into Bitcoin is the tremendous elevation of the forward curve to levels not seen since the previous highs in 2021 – even then, it was not able to sustain at these levels for long. This is driven by the huge amount of leverage that speculators are taking on and the cost that they are paying to keep these leveraged long positions.
Thoughts on Q2
The exuberance we’ve seen in Q1 2024 will make the next quarter very tricky.
Most expect Bitcoin to continue breaking new highs especially after the Bitcoin halving in April. There is also tremendous excitement around the approval of an Ethereum spot ETF which would see the frenzy from Q1 all over again, but with double the fervour. Will Bitcoin break above $100k by June?
On the other hand, we have started to see signs of exhaustion with the Bitcoin spot ETFs posting net outflows. If these outflows continue in larger size, will it result in a reversal of the Q1 rally – which was arguably, on the back of spot ETF demand in the first place.
Binary outcomes make for a challenging trading environment. One approach would be a strategy that has zero downside but with potential high return convexity on either of the outcomes like our Enhanced Sharkfin. For those sitting on huge profits from long BTC, ETH or Altcoin positions, it might be prudent to consider hedging using solutions like our Tactical Hedging Facility.
If you are looking to begin a conversation on potential solutions, do get in touch with our trading or sales teams.
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