QCP Asia/London Colour – 22 May 24

- ETH 24-May contracts at 105 vols signal anticipation for a big move by the application deadline.
- ETH Perp funding went from 50% to flat in 12 hours, with Jun forwards still yielding 15%, possibly reflecting diminished short-term speculation but sustained medium-term bullishness.
- ETH 24 and 31 May risk reversals at -7 suggest lingering market fear of short-term downside volatility, potentially prompting tactical hedging of long ETH positions.
- Spot BTC ETF sees a 7-day inflow streak totalling nearly 1.5bn.
- Growing narrative around crypto in US elections gains traction, especially following SEC's recent shift in their stance.

Trade Idea
If you missed your chance to buy ETH below 3,000, fret not!
Our accumulator product enables you to buy ETH at 2900 😏

ETH Accumulator (32 weeks, 27-Dec 24)
Buy ETH at 22% discount (2,900) every Friday if spot is below 4,300

QCP Asia Colour – 23 May 24

•⁠ All eyes are on the ⁠ETH ETF deadline later today
•⁠ ⁠With Friday implied volatility above 100%, the market is expecting fireworks
•⁠ ⁠BlackRock and five other issuers have amended their ETF filings with the SEC and ⁠VanEck’s ETF has been listed by the DTCC. We think an approval is now highly likely with trading expected as early as next week

Trade Idea:
ETH ETF a done deal? If the BTC ETF approval was any indication, we could see a similar 60% rally from here.

ETH Enhanced Sharkfin (Principal Protected)
Spot Ref: 3740 ETHUSD

Maturity: 27SEP24
Base Coupon: 3% p.a.
Strike: 4500
Knockout: 6000
Max Payout: 98% p.a.

Get paid up to 98% p.a. if ETH expires just below 6000 on expiry. Even if ETH dips below 4500, you still get paid a 3% p.a. coupon.

QCP US Colour - 24 May 24

What has happened with the ETH spot ETF?
- Yesterday, the SEC approved Form 19b-4 for eight spot ETH ETF issuers including Blackrock and Fidelity but trading cannot begin until S-1 forms are approved.
- The market was expecting a big bang this week, with options trading up to 185 vols!
- However, price action has been truly disappointing and has caused front-end vols to collapse below 60.

What now?
- While the trading of the ETH spot ETFs is now a matter of time, it could take awhile.
- ⁠The desk has been seeing consistent demand for long dated ETH calls as investors take the opportunity to build more ETH longs.

The Trade:
Use this window to accumulate ETH spot before the ETFs go live. Elevated backend make Accumulators an optimal strategy.
(Spot ref 3735 ETHUSD)

ETH Accumulator (20 weeks, 11Oct24)
Buy ETH spot at 15% discount (3200) every week as long as spot price is under 4500.

QCP Asia Colour – 27 May 24

- ETH rallied from 3810 to 3940 during Asia open, likely from Trump's pro-crypto comments over the weekend.
- From today's price action, it seems that market participants are expressing their bullishness in ETH rather than BTC, especially with the potential institutional demand once the ETH spot ETF starts trading.
- While we are structurally positive ETH, we don't see a major breakout until we have more clarity on the S-1 approvals and get some inflow data, which should only be a matter of time.
- Until then, ETH frontend vols could remain 15-20 vols above BTC and ETH skew is likely to remain in favour of Calls.

Trade Idea:
With crypto becoming a trump card for the upcoming US elections and with potential institutional interest once the spot ETF debuts, 3k remains as strong support for ETH. Earn 37% p.a. weekly as long as ETH fixes above 3k with the CFCC (Conditional Fixed Coupon Convertibles)
(spot ref: 3900)

ETH CFCC (23-AUG 12 weeks. USD deployment)
Cost: ZERO
Payout: 37% pa every Friday as long as spot price is above 3k (threshold level)
At expiry, only if spot price is below 2900 protection level, USD will be converted to ETH at 3400 strike.
As long as spot price is above 2900 at expiry, 100% of the USD principal is returned.

QCP London / New York Colour – 28 May 24

- Movement of BTC from a Mt. Gox cold wallet this morning triggered a sell off below 68k.
- However, these bouts of supply anxiety are likely to be blips in a broader trend higher into the end of the year.
- 3 bullish reasons:
a. Stronger equity markets led by counters like Nvidia should pull crypto prices higher as well
b. Crypto is seeing unprecedented political support in the US (Bill passed to create regulatory clarity for digital currencies, positive turn by the SEC on the ETH spot ETF, Trump's overt support with Biden likely to follow suit)
c. We expect strong demand for the ETH spot ETF once it begins trading, brining in a fresh capital into crypto

Trade Ideas:

1. BTC Spot-Forward Basis remains elevated despite the selloff today. Lock in 11-12% pa with zero downside held to end-Dec.

2. ETH Accumulator to increase ETH longs towards the S-1 approval.

Buy ETH spot at 12% discount (3400) every week as long as spot price is under 4900.

Maturity: 11OCT24 (20 weeks)
Strike: 3,400 (-12.4%)
Upper Barrier: 4,900 (+26.3%)
Observation Frequency: Weekly
(Spot Ref: 3,880 ETHUSD)

QCP Asia Colour - 29 May 24

- ⁠Markets are quiet with BTC having achieved equilibrium once more, trading in a 60-70k range while ETH awaits the next stage of spot ETF approval.
- ⁠The market brushed off (maybe too quickly) confirmation that the Mt.Gox wallet move was in preparation for distribution.
- ⁠⁠The only thing to upset this state of zen is the persistently high spot-forward basis and perp funding suggesting there is still strong positioning and hence possible risk to the downside.

Trade Ideas:
We continue to favour longer term ETH bullish trades as well as the zen maximising spot-forward basis.

1. ETH Dec ERKO Seagull
Buy 27DEC24 4,000 CALL with ERKO above 6,800
Sell 27DEC24 3,000 PUT
Cost: ZERO
Max payout: 2,799 USD per ETH if ETH spot expires just below 6,800.
Downside: At expiry, if spot is below 3,000 then put is exercised and you buy ETH at 3,000.

2.⁠ ⁠BTC Spot-Forward Basis remains elevated despite the selloff today. Lock in 12% pa with zero downside held to end-Dec.

For those holding onto BTC (or ETH) longs and are looking to generate a meaningful yield, the deck below contains some possible strategies:

https://docsend.com/view/dckhau98kegtwnf4

QCP Asia Colour - 30 May 24

- BTC defended the 67.1k level for the fourth time in 2 weeks, continuing its consolidation within the range.
- Uncertainty about potential Mt Gox BTC supply hitting the market by October could hinder BTC, potentially benefiting ETH upon the launch of the ETH spot ETF.
- The desk observes bullishness in ETH, with sizeable buyers of 4k/5k ETH call spreads for end-June 2024.
- Traders are shifting focus to higher beta meme tokens like Shiba Inu (SHIBA), Dogecoin (DOGE), and Pepe (PEPE), which have seen double-digit gains (10-20%) and are polling in the top 10 for Open Interest.
- BlackRock filed amended S-1 forms overnight, with other issuers likely to follow soon. Approval may come by early July.

Trade Ideas:
With the market consolidating in the range and eagerly awaiting the ETH Spot ETF launch, accumulators continue to be attractive allowing you to consistently accumulate ETH at a discount!

ETH Accumulator (Indicative)
Spot Ref: 3,700 ETHUSD

Maturity: 11OCT24 (20 weeks)
Strike: 3,200 (-13.5%)
Upper Barrier: 4,400 (+18.9%)
Observation Frequency: Weekly

Buy ETH spot at 13.5% discount (3200) every week as long as spot price is under 4400. Any collateral not used to accumulate ETH for that week will be returned.

For BTC and ETH holders, we have developed some thoughts around strategies for earning yield on your coin holdings. (See above)

QCP Weekend Note – 1 Jun 24

- Vols have been absolutely crushed after ETH spot ETF approval this week in spite of prevailing catalysts:
1. Bearish BTC - potential supply from Mt. Gox distribution (~$9.6b) and also from DMM hack (~$305m)
2. Bullish ETH - ETH spot ETFs could start trading earlier than expected in June with the SEC urging applicants to submit S-1 forms by 31 May
- A sleepy market may get caught offside and our bet is on the bullish side, particularly for ETH.

Trade Ideas:
ETH Sep KIKOs (Knock-In, Knock-Out)
Sell 3000 Put w 2500 Knock-in (protection)
Buy 4500 Call w 6200 Knock-out
Cost: ZERO
Max payout: 175% pa or $1,700 USD per ETH if spot expires just below 6200)
Downside: At expiry, if spot is below 2,500, you buy ETH at 3,000.
(Spot ref: 3780 )

QCP Asia and London Colour – 3 Jun 24

- The market remains stubbornly bullish in spite of negative headlines about Mt. Gox and the DMM hack last week, BTC rallied confidently above 69k today in Asia.
- Alts especially have benefited from bullish speculation, perhaps stoked by the surge in GameStop (GME) following the reappearance of Roaring Kitty revealing a massive $200m long position in GME. The GameStop memecoin rallied 300% on this!
- This bullishness is likely to continue as the market waits for the ETH spot ETF to usher in new demand. The options market certainly reflects this with ETH vols still trading 15% over BTC vols.
- Another reason for persistent bullishness is speculators increasing long positions in other crypto majors in anticipation of additional spot ETF approvals in the near future.

Trade Idea:
If you are moderately bullish (ie not looking to chase the market) and you are looking for rich yield, ZCCs generate a high upfront payment with some protection on the downside.

ETH ZCC (Zero Coupon Convertible)
Upfront payment: 26% pa ($251 per ETH)
Expiry: 27-Sep
At expiry, if spot is below 2,500, you buy ETH at 3,000.
(ETH spot ref: 3800)

QCP London and New York Colour – 4 Jun 24

- As BlackRock's BTC spot ETF becomes the fastest ETF ever to cross $20b in size, we are seeing more follow suit with Thailand's SEC approving the first BTC spot ETF and Australia's first BTC spot ETF starting to trade today.
- Unprecedented inflow access for traditional capital around the world will undoubtedly keep BTC price supported. BTC has touched 71k into the NY session.
- We expect a further boost to this bullish momentum with NFP this Friday. The markets are pricing in 0% chance for a rate cut in June and July, A weaker NFP number might change that. Could this be the catalyst to break all-time highs?

New Strategy Alert
We expect ETH to play catch up here especially with the ETH spot ETF about to go live. Snatch up some ETH at discount with the Early Delivery Accumulator.

Unlike the regular Accumulator, you buy coin at discount upfront (4 observations worth) instead of week by week, thereby reducing the chance of price rallying past the upper barrier.

ETH Early Delivery Accumulator
You buy 12.5% of your deployment upfront at 3380 (11.4 discount to spot!). From the 5th week onwards, you buy at 3380 every Friday as long as spot price is below 4400.
Expiry: 20-SEP (16 weeks)
Strike: 3,380 (-11.4%)
Early Delivery: First 4 weeks are settled immediately
Upper Barrier: 4,400 (+15.33%)
Observation Frequency: Weekly starting from 5-JUL
(ETH Spot Ref: 3,815 )
*please check with the desk for additional details

QCP Asia and London Colour – 6 Jun 24

- BTC ETFs saw yet another strong day with $488.1m in net inflows.
- The desk saw more call buying overnight, targeting Jul 100k strike.
- A lower than expected jobless claims report tonight and the CPI release next week might potentially be the trigger for a new all time high for BTC. There may also be added momentum to the rally as the market prices in rate cuts.
- Meanwhile ETH continues to lag as SEC Chairman Gary Gensler notes that the ETH ETF S-1 Approvals 'will take some time'.

Trade Idea:
With the S-1 approval delayed, we expect ETH to continue lagging in the short term but eventually outperform BTC once the ETF starts trading.

Accumulate ETH at discount immediately with our revised early accumulator to receive more ETH upfront now.

Early Delivery Accumulator 2.0 (ETH)
On a 500,000 USD Deployment, you will buy 35.7316 ETH at 3500 ETHUSD (9% discount). ETH is credited to your account immediately.

From the 5th week onwards, you will buy at 3500 every Friday as long as the spot price is below 4450.

Maturity: 20SEP24 (16 weeks)
Strike: 3,500 (-9.09%)
Upper Barrier: 4,450 (+15.58%)
Observation Frequency: Weekly starting from 5JUL24
(Spot Ref: 3,850 ETHUSD)

QCP Asia and London Colour – 7 Jun 24

- Front-end vols were pressed lower yesterday with BTC now well under 50% and ETH under 60%.
- We find this move lower in vols unusual ahead of an important NFP number. A miss here would likely see the market price in a higher probability of Fed rate cuts in June or July - a very bullish catalyst.
- Yesterday's rate cuts by Canada and ECB will also increase pressure on the Fed to cut rates.

Trade Idea:
With lower vols just ahead of a potential catalyst event, buying June Digital Calls could deliver outsize returns.

BTC 80k 28-Jun
5x payout if BTC spot price is above 80k at expiry.
(Spot ref: 71,000)

ETH 5k 28-Jun
10x payout if ETH spot price is above 5k at expiry
(Spot ref: 3,800)

QCP Weekend Colour - 8 Jun 24

- A doubly strange session overnight starting with:

1. Strong upside surprise on NFP (272k vs 182k), higher payrolls that came with higher unemployment (from 3.9% to 4.0%). It was confusing enough to trigger a risk-off ahead of US inflation numbers and FOMC next Wed.

2. Followed by a Roaring Kitty live stream which had almost a million viewers, during which GME stock price crashed. It was probably not a coincidence that Alts and Memecoins started collapsing as well with over $40 billion wiped in market cap.

- Our desk saw bullish flows on this dip, both sellers of aggressive puts and buyers of call spreads especially in BTC.

- BTC and ETH have since bounced off the lows of 68.3k and 3575.

- We agree that this is a good opportunity to buy the dip as the markets will increasingly price in at least one Fed rate cut from here. It will be difficult for the US to ignore as the rest of the world continues to cut rates.

Trade Idea:
Maximum upside at zero cost with ERKO Seagulls.

BTC 27-Dec ERKO Seagull
Buy 75k call with 125k knock-out
Sell 60k put
Cost: ZERO
Max payout: 150.5% pa or $50k per BTC if spot price is just below 125k level at expiry.
(Spot ref: 69,200)

QCP Asia and London Colour – 10 Jun 24

- Over the weekend, Trump continued to use crypto to gather more liberal support. At the SF tech fundraiser, he pitched himself as a ‘crypto president’ in front of Coinbase and Gemini executives and others.
- Despite all the chatter, spot continues to chop in a tight range following Friday's post-NFP dip. Could this be the calm before the storm?
- As we anticipate what the Fed has to say in this week's FOMC meeting, the desk saw more near-dated bullish flows this session, with Call skew increasing over Puts.

Trade Idea:
Capitalise on this dip and cheap vols. Get some topside exposure while staying protected on the downside.

BTC 26JUL24 KIKOs (Knock-In, Knock-Out)
Sell 63k Put (Knock-in: 58k)
Buy 70k Call (Knock-out: 80k)
Cost: ZERO
Max payout: 126% pa or $10,000 USD per BTC if spot expires just below 80k
Downside: At expiry, if spot is below 58k, you buy BTC at 63k.
(Spot ref: 69,400)

QCP London and New York Colour – 11 Jun 24

- Crypto markets have come under some pressure for the following reasons:

1. NFP numbers caught the market by surprise. US Treasury yields are at recent highs as Jul and Sep cuts are being priced out.

2. Macron called for a snap election in France. EURUSD sold off on heightened geopolitical risk in the EU. This has contributed to Dollar strength and a general risk-off sentiment.

3. Markets are risk-off mode ahead of CPI and FOMC tomorrow. This month's FOMC will also release the Dot Plot, which informs the market how many cuts the Fed anticipates for the rest of 2024.

4. 64m outflow from BTC ETFs yesterday, possibly due to traders derisking ahead of the tomorrow's events.

Despite short term headwinds, we think this might be a good opportunity to accumulate coin. Bullish events on the horizon such as the eventual ETH spot ETF going live along with Biden and Trump in a verbal armsrace to win the crypto vote.

Trade Idea:
BTC Accumulator
Buy BTC spot at 13% discount (58k) every week as long as spot is under 74k

Maturity: 25OCT24 (20 weeks)
Strike: 58k (-13.11%)
Upper Barrier: 74k (+10.86%)
Observation Frequency: Weekly
(Spot Ref: 66750)

QCP Asia and London – 12 Jun

- Both BTC and ETH spot prices still range bound as traders await the release of CPI data and FOMC meeting tonight.
- We are heading with into tonight's events with optimism due to:

1. BTC futures swap points bounced off the lows of 10% and rallied yesterday, as traders taking profit on their basis trade by closing up their short futures positions. With any catalyst, we could easily see yield pushed higher to levels above 15%.

2. We saw aggressive buying of 13-Jun calls today, coupled with a substantial increase in funding rate, indicating the market is positioning for an upside surprise.

- With the equity market registering their record highs for a second consecutive closing, we believe an inline CPI print and neutral FOMC outcome could propel the crypto market to retest its highs once more.

Trade Idea:
In this structurally bullish environment, ERKOs present an attractive risk-to-reward ratio with minimal cash outlay and no downside. We are poised for a breakout pending a catalyst, potentially emerging tonight post FOMC.

BTC 28-Jun Call ERKO
Strike: 68k
Knockout: 75k
Max Payout: 5.6x (if BTC spot price is just below 75k at expiry)
Cost: $1,250 per BTC
(Spot Ref: 67,800)

QCP London and New York Colour – 13 Jun 24

- Last night's CPI numbers ignited a breakout in risk assets. US equities hit new all-time highs, while BTC surged to 70k before settling back to 67.3k this morning.
- Market is pricing 2 rate cuts in 2024. Interest-rate futures now indicate a 56% chance of a rate cut in September, with the second cut to happen in December.

Our view:

- The Fed's dot plot remains ambiguous, making it challenging to predict whether officials prefer one or two rate cuts this year. However, we anticipate a rate cut in September, with the Fed likely adopting a wait-and-see approach for subsequent meetings in November and December.
- We maintain a structurally bullish outlook for the remainder of the year, driven by the anticipated ETH ETF S-1 approval and potential rate cuts in September and at the year end.

Trade Ideas:

- Given the current steepness of the vol curve, we like building a coin position using a longer-tenor accumulator, capitalizing on the higher vols further out.

ETH Early Delivery Accumulator

Buy ETH at 3100 (11.4% discount to spot) IMMEDIATELY for 25% of the total deployment.
From the 9th week onwards, buy at 3100 every Friday as long as the spot price remains below 4750.

Expiry: 17JAN25
Strike: 3,100 (-11.4%)
Barrier: 4,750 (+35.7%)
Early Delivery: First 8 weeks are settled immediately
Observation Frequency: Weekly starting from 9-AUG
(ETH Spot Ref: 3,500)

QCP Asia Colour - 14 Jun 24

- BTC is struggling to recover post-FOMC despite the strong momentum in equities.
- Why the divergence? We think this is because BTC miners are undergoing the post-halving capitulation, directly capping the price.
- Flowbank, one of the banks that Binance has a triparty agreement with, is also currently facing bankruptcy proceedings.

What's next?
- We are in for a quiet summer, with a lower vol environment and no catalyst to drive the market either way.
- We think there will be no immediate fireworks for ETH, with Gensler expecting the spot ETH ETF approval to happen late summer.

Trade Idea:
This is the ideal time to put on trades for accumulation ahead of the long quiet summer, particularly for ETH. Currently ETH vols are trading at a 10 vol premium to BTC, and we expect the spread to narrow with ETH overwriters returning as we wait in anticipation of an S-1 Form approval late summer.

Spot Ref: 3500

ETH Accumulator

Buy ETH spot at 14.29% discount (3000) every week as long as spot is under 4070

Maturity: 1NOV24 (20 Weeks)
Strike: 3000 (-14.29%)
Upper Barrier: 4070 (+16.29%)
Observation Frequency: Weekly

QCP London and New York Colour - 18 Jun 24
- BTC continues to sell off post-FOMC and tested 65k today.
- While BTC seems to have sneezed, alts seemed to have caught a cold as they dropped 20-30% over the weekend.
- We attribute this weakness in majors to a lack of news flow. Boring markets usually shake out weak hands, and nobody likes to pay 11% ann. to hold a long position in perps.

What do we do in boring markets?
- Ranging markets are difficult to trade, but why not earn yield while waiting for this range to resolve itself?

Trade Idea:
- With BTC at 65k and in the middle of the 60k - 72k range, its the best time to put on range accruals. Rather than getting chopped up within this range, earn yield instead!

Principal Protected Range Accrual (USD Principal)
Receive weekly 30% p.a. coupon if BTC is trading between 60k and 71k during observation

Maturity: 13-Sep (12 weeks)
Coupon Frequency: Weekly from 28JUN24
Coupon Rate: 30% p.a. in USD if BTC/USD fixes at-or-within Coupon Range, 0% pa otherwise
Coupon Range: 62,000 to 69,000

QCP London and US Colour - 19 Jun 24

- ETH spot prices sharply rebounded from a morning low of 3,400, with implied volatility notably rising to 65% in the front end.
- This strong bullish sentiment is supported by two developments:

1. The SEC is closing its investigation into Ethereum 2.0, ruling out any charges alleging that sales of ETH are securities transactions
2. Prospective issuers of Ethereum ETFs are reportedly responding to SEC comments and aim to hand them back this week

- The options market has also reflected this optimism, with the desk observing heavy buying activity of top-side calls across various tenors
- Despite uncertainty around the reception of the ETH ETF, capturing 10-20% of Bitcoin ETF flows could propel ETH above 4,000, nearing its peak of 4,800.

Trade Idea
Given the market's reactivity to the ETH ETF progress, digital options are appealing as a potential breakout strategy to capture profits on a move higher in ETH.

ETH 26-Jul 4,500 Digital
6.3x Payout if ETH spot price is above 4.5k at expiry

ETH 30-Aug 5,000 Digital
6.7x Payout if ETH spot price is above 5k at expiry

(Spot ref: 3,550)