Institutions are accelerating the reduction of positions in big technology stocks (TMT below)

The expectation that the spot BTC ETF will be approved coupled with the weakening US dollar and U.S. bond yields have allowed BTC to break through the $40,000 mark. The market is now very optimistic that the ETF can be approved in early January. However, we have analyzed before and do not believe that entry into the cryptocurrency market is currently strictly restricted, whether it is Coinbase or already listed crypto ETPs such as BITO and GBTC, or the Bitcoin and Ethereum futures markets.

According to a survey by Coinbase in February 2023, 20% of Americans own cryptocurrencies, compared to 21% of Americans who hold stocks directly, showing that the penetration rate of cryptocurrencies in the United States is already high (such as CB survey data not too outrageous), there is limited room for further expansion. So I tend to think that whether the Bitcoin ETF fails or succeeds again in January, it may mean the emergence of a short-term top.

Trend Fund CTAs’ current exposure to stocks, bonds, U.S. dollar, oil, gold and copper

The net long position in U.S. stocks in the futures market has risen for the third consecutive week, but the serious deviation from economic fundamentals is also the first time since the end of 19

While many believe that a Fed easing cycle will be the catalyst for the next wave of stock market gains, history shows that an environment in which a Fed easing cycle coincides with widening investment-grade credit spreads is the worst for stocks, known as a recessionary environment. Bulls should hope for an improving economy, leading to easier credit conditions, rather than easing led by a dovish Fed because of a weak economy.

In terms of BTC futures, asset management (blue) positions continue to hit record highs, retail investors (purple + red) have turned net short last week, market makers (gray) have net short positions hitting a new high since February this year, and leverage funds (green) have net short positions. The head count has decreased but remains at a high level. We have previously analyzed that most of the increase in asset management positions was contributed by BTC futures ETFs, so it can be seen that players in the futures market other than ETFs are not actively doing long BTC. Historically, the behavior pattern of leveraged funds operating against the trend is very obvious. They always reduce their positions when they rise and increase their positions when they fall. Since players outside of ETFs have obvious short positions, on the one hand you can understand that these people think the market may have peaked. But if their judgment is wrong, the motivation for subsequent short covering is bound to be stronger.

Before looking forward to the promotion of Bitcoin in Argentina, let’s review the results of the experiment in El Salvador, the first country to adopt cryptocurrency as legal tender. In fact, there is very little private use (according to data from the Central Bank of El Salvador, in the first six months of 2023, Only about 1% of remittances received are in Bitcoin; the transaction speed and cost of Bitcoin are not suitable for daily payments, but it has a huge cost advantage for cross-border remittances. The World Bank will calculate the average cost of cross-border remittances of US$2006 %), but it promoted the rebound of El Salvador’s national debt (0.26-0.8). The good performance of Bitcoin prices this year is an important reason behind it. It is somewhat similar to Microstrategy. In short, Bitcoin has not become a currency, but it has become a reserve that outperforms the US dollar. things.
The chart below shows the price performance of El Salvador’s 10-year government bonds:

[After the “final liquidation”, Binance’s share can only be higher, not lower]

By calculating the data of exchanges that have disclosed asset address certificates, excluding the impact of altcoins on the results, and only counting the three hardest currencies, namely BTC, ETH, and USDT, the total assets of mainstream exchanges are approximately US$70 billion.

It can be imagined that the entire crypto market, including spot and derivatives, has a core trading activity of US$150-200 billion per day, which is derived from the underlying assets of US$70 billion. Among them, Binance has the largest share of 49%, which has been stable at around 50% since the middle of last year. This ratio is close to/slightly higher than its share of the trading volume market.

We believe that after the large penalties from US regulations and the reorganization of Binance’s management, the exchange will only improve its credibility rather than decline. There may be some fund outflows in the short term, but this will not affect the general trend, as Mainstream exchanges that have cleared their main risks have no reason to compete, but other exchanges that have not yet cleared their risks and manage relatively black boxes.

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Today's surge in interest rates is caused by the epidemic, war, anti-globalization, fiscal excess and inflation. Don't expect it to return to its past overnight.

Historically, we believe that the allocation value of BTC as an alternative asset is largely supported by the shadow of inflation. The 5-year and 10-year breakeven rates commonly referenced in the secondary market are used as indicators of inflation expectations. BTC’s bull market and Bear markets always correspond to rising and falling inflation expectations.

If the Fed policy rate peaks, will it cause inflation expectations to also cool down (in the past two weeks, it has dropped by 20bp in 5yr and 10bp in 10yr). If Godiloc does not continue thereafter, then the demand for alternative allocations may also weaken.

Another good scenario is that the Fed policy interest rate has peaked, but the actual economic development continues to improve, leading to a sharp rise in inflation expectations. However, at least the current expectations for economic cooling in the fourth quarter and the first quarter of next year are still very strong (excluding the third quarter subsidy) Inventory and one-time consumption support). So it's somewhat contradictory to bet that falling interest rates coincide with rising alternative assets.

Red wine performs better than art

The Strongest Bubble in History #BTC

Via BoA: The price ratio of real assets (real estate, commodities, and collectibles) relative to financial assets (stocks and bonds) fell in 2020 to its lowest level in nearly a century. The investment background in recent years includes: bond and stock bear market, oil shock, food shock, monetary policy instability, loose fiscal discipline, industrial unrest, civil unrest, and war. It is very similar to the stagflation period in the 1970s, and the winning rate of being bullish on real assets is even higher. high.

Personally, I think cryptocurrencies should also be included here. Its attributes have many overlaps with alternative assets such as commodities and collectibles, such as limited supply, high volatility, hedging against inflation, etc.

Altcoin rose 6.2% last week, while BTC+ETH only rose 2.1%. The difference in single-week gains between the two hit the highest level in three months. Judging from the history since 2017, ALTCOIN has experienced significant beats in the early stages of the past three bull markets, such as August 2017, June 2020, and August 2021. The weekly change difference last week is only the 18th percentile of history, indicating that if this does become a generally rising crypto bull market, ALTCOIN's agitation is far from exaggerated.