Market Insights
Article by Elisha
Monday’s Cointelegraph Spot ETF tweet hoax proves that there’s only one game in crypto right now – the BTC spot ETF.
The more than $2000 spike and reversal in BTC on the fake news showed the strong anticipation of the industry towards this event.
Unfortunately we do not expect the actual SEC approval for any application or conversion to take place this year, which means the larger BTC trend below 25k or beyond 32k is beholden to macro winds for the rest of Q4.
As yet, the jury is still out on whether we will have a Q4 macro risk-off.
However we believe risks are firmly tilted to the downside from here for equities and bonds, where a selloff on both will drive a major risk-parity catastrophe.
More pertinently, the jury is also out on whether BTC will rally on a “flight to quality” as Blackrock CEO Larry Fink expects, or sell-off as a high beta risk asset in such a risk off.
If BTC indeed proves a safe-haven in this sell-off, then we believe that will mark the start of a major multi-month BTC bull market to come.
For this week, we have US earnings starting in earnest today, and Powell speaking on Fri (00:00 SGT).
We are particularly interested in Tesla’s earnings after the bell today – whether they have dumped their remaining 25% BTC after revealing they had already sold 75% of their holdings (30,000 Bitcoin) in last quarter’s earnings call.
Our main reason for being bearish on equities is the extreme consensus view related to the Q4 seasonal rally.
However, breaking down the NASDAQ return into parallel years – we find that October is a key inflection point for markets, rather than always being the springboard for a rally.
As we approach the end of the global hiking cycle, you would have to believe we were in 2007 or 2017 (flat/positive Q4), rather than closer to 2008 or 2018 or even 2000 (negative Q4) (Chart 1).
Chart 1
We think the biggest trigger will be an exponential rise in US real rates from here, when consensus is again at an extreme expecting lower rates (Chart 2).
Chart 2
Biden and Yellen gave a major shot in the arm for bond vigilantes this week by openly declaring their “ability” to support both the Ukraine war and the Israel war, with Biden’s response in particular looking like it will age extremely poorly.
The hospital bombing in Gaza overnight represents a major escalation in the conflict on the eve of Biden’s arrival in Israel.
Being the 50th anniversary of the Yom Kippur war, both sides have a vested interest to not back down this time, a risk we believe markets are still underpricing.
Furthermore, with US citizens both killed and taken hostage by Hamas, the US would undoubtedly have to get involved this time.
With Biden setting a major precedent for a sitting US President to personally visit ground zero of a war zone on the eve of an actual war, this sends a strong message that this time is different.
An outright sell signal for equities would be Iran’s direct participation in the conflict, or worse, US boots on the ground.
NASDAQ is showing a bearish ending diagonal (Chart 3) and a sharp move down would no doubt drive BTC out of its 6 month range (Chart 4).
Chart 3
Chart 4
In light of this major catalyst, we have launched a new product to take advantage of the BTC opportunity here.
USDC Denominated Principal Protected Participation Structure (UPS) is an investment product which provides investors exposure to BTC (or ETH) within a fully principal protected structure.
Whether bullish or bearish, buyers of UPS will get exposure to upside or downside BTC (or ETH) moves, whilst ensuring that their principal is protected from the price of the underlying BTC and ETH and returned to them at the end of the tenor.
Get in touch with us to learn more: https://www.qcp.capital/#contact
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