As BTC approaches the $100,000 mark, every macro observer seems to have become an expert on MSTR convertible bonds in the past week, and cryptocurrency has once again become the focal point of news, attracting mainstream attention to the greatest extent since the FTX incident.
As we have mentioned in the past, the 'easy phase' has ended. With delayed investors entering the market with significant leverage, future market volatility will significantly intensify.
Microstrategy successfully exercised its overallotment option of $400 million on its original $2.6 billion convertible bond (0% coupon, 55% premium), raising the final scale to $3 billion. According to Cointelegraph reports, Allianz Insurance is one of the main participants in this transaction, and this batch of convertible bonds maturing in 2029 closed at over $104 on the first trading day.
The irony of Wall Street's involvement is evident. For years, they have criticized cryptocurrencies for being high-risk and lacking fundamental value, yet these banks are now scrambling to dominate this deal. In fact, when BTC was between $6,000 and $60,000, these banks claimed BTC had no value, and now these underwriters imply that it is 'quite reasonable' for investors to pay a 55% premium on a price of $95k through an indirect stock instrument to buy BTC. We won't delve into how MSTR has become a convex financing tool for TradFi investors, but we must acknowledge that these mainstream 'gatekeepers' (including regulators) are bringing mainstream investors into this market through this incredible structure. However, it all seems reasonable and legitimate since it's done through 'regulated securities,' which is a typical traditional finance tactic, isn't it?
Mainstream institutions naturally would not miss such an opportunity and quickly launched leveraged ETFs for Microstrategy (MSTX, MSTU), providing retail investors with more 'suboptimal' ways to leverage trade BTC spot. According to Bloomberg reports, the demand for these leveraged ETFs has put pressure on the main brokers responsible for securities lending, with related asset management scales surging to nearly $5 billion in the past week.
(Friendly reminder: Do not purchase leveraged ETFs except for short-term trading, as leveraged ETFs are mathematically designed to gradually lose value over time. Please Google their daily return calculation method for more details.)
Main brokers - units within banks that work with clients on securities lending and other businesses - have reached their cap on the swap exposure they are willing to provide for the T-Rex 2X Long MSTR Daily Target ETF (code MSTU), a fund established about a month ago. According to certain indicators, this fund was the most volatile ETF ever launched on Wall Street.
Mainstream enthusiasm has further fueled the recent market bubble, as prominent TV commentators suddenly changed their stance to support cryptocurrencies, leading to a significant increase in leverage at current market levels and causing actual volatility to soar. Reports indicate that due to the price's failure to break through again, nearly $500 billion in long positions were liquidated within the past few days, possibly the largest wave of liquidations in history.
As we have always reminded, the cryptocurrency market will be very volatile in the short term. BTC technical indicators show severe overbought conditions, and the public is experiencing FOMO towards this asset class. If the BTC price can successfully break through the psychological barrier of $100,000, there may be an opportunity for the price to further rise to the $120,000 to $130,000 range. However, we are not optimistic about the outlook for a stable price increase, as the overall asset market is in an overbought state. Selling put options as an income or target buy strategy may still be attractive in the short term (DYOR: not investment advice).
Speaking of options, following the launch of the IBIT ETF options by Nasdaq, CBOE will introduce the industry's first cash-settled options. We still expect the options market to become a significant growth catalyst for the industry after 2025, and SignalPlus will provide comprehensive support for your options journey!
Lutnick (Trump's new Secretary of Commerce) and his company Cantor's recent initiatives in the cryptocurrency space should have a positive impact on the long-term structural development of the ecosystem. According to recently disclosed information, the company is not only the custodian of Tether but also invested $600 million to acquire a 5% stake in Tether (valued at $12 billion). The company will also launch (off-chain) Bitcoin financing services, providing clients with fiat loans collateralized by BTC, further strengthening Bitcoin's role as a balance sheet asset in the mainstream ecosystem.
Returning to TradFi, last Wednesday Nvidia's earnings report exceeded expectations, and the high-income consumer index hit a new high, reflecting the strong spending power of the American (high-income) demographic, with the stock market rebounding strongly from earlier pullbacks. The economic surprise index rose to robust first-quarter levels, while inflation data has not yet broken upward, allowing for the possibility of Federal Reserve rate cuts to remain (December probability = 56%), and the soft landing scenario remains solid. Additionally, Bank of America reported that over $448 billion has flowed into the U.S. stock market this year, breaking the record set in 2021 and reaching unprecedented levels.
The U.S. market will welcome the Thanksgiving holiday on Thursday, and trading activity this week may be very light. Hopefully, this will give us time to catch our breath as we welcome the arrival of the last month of the year.
You can use the SignalPlus trading indicator feature at t.signalplus.com for more real-time crypto information. If you want to receive our updates instantly, feel free to follow our Twitter account @SignalPlusCN, or join our WeChat group (add assistant WeChat: SignalPlus123), Telegram group, and Discord community to interact and communicate with more friends.
SignalPlus Official Website: https://www.signalplus.com
