QCP Asia Colour – 2 December 24

BTC briefly touched 98k over the Thanksgiving weekend, driven by Saylor's BTC investment strategy presentation to Microsoft. Microsoft's shareholders are scheduled to vote on a proposal to add BTC to its balance sheet on December 10. Could this be the catalyst BTC needs to break 100k before year end?

Microsoft's top shareholders such as Vanguard, BlackRock and Fidelity already have exposure to crypto with investments in MSTR, Coinbase and other crypto firms. One could argue that they already possess sufficient exposure. On the other hand if the proposal passes, it would be bullish not only for BTC but also for their other investments.

As we await Microsoft's verdict next week, US employment and labor data will take center stage again this week. ISM manufacturing and PMI data are scheduled for release on Monday and Wednesday, respectively. This week's highlight, however, is NFP data on Friday. The market will be closely monitoring this week's reports to get a better sense of inflation, especially ahead of rate cut decisions on 17-18 December.

QCP Asia Colour - 3 December 2024

- BTC rose above 97k since our last commentary but has since retraced to hover above 95k. This pullback coincided with reports of the U.S. government moving 10k BTC (approximately $963 million at the time of transfer) linked to Silk Road. The front-end vol curve has shifted further toward puts over calls following the move.

- On the institutional demand side, optimism persists. Spot ETFs recorded another $350 million in inflows yesterday, while MARA Holdings has followed MicroStrategy's lead, acquiring $618 million worth of BTC over the past two months.

- Other crypto mining companies like Riot Platform are increasingly likely to halt BTC sales, with some considering expanding holdings. Coupled with news of Microsoft contemplating a BTC purchase, this underscores growing corporate interest in Bitcoin as a reserve asset.

- Meanwhile, equities continue to set new records, with the S&P 500 marking its 54th all-time high this year. Several Fed members have signaled an inclination to lower borrowing costs at the next meeting, albeit contingent on forthcoming economic data—an announcement likely to add volatility around the event window.

QCP Asia Colour - 4 December 2024

Reject modernity, embrace tradition. These 4 four words would have served you well in navigating (and profiting!) from crypto markets in the past week.

Seasoned coins that have been around since 2021 have staged a spectacular rally in the past two weeks. XRP broke the 2021 high of $2, staging a spectacular 400% move since November to top at $2.90. Other aged coins such as ADA, HBAR and XLM have also made moves of 300%, 800% and 600% respectively.

So why have these coins been pumping, and why is the altcoin market so juiced up?

Trump announced a proposal to eliminate capital gains taxes on cryptocurrencies issued by American companies in November. This spark ignited the mad frenzy in altcoin markets that has persisted till today. The anticipation of a crypto friendly cabinet has added more fuel to the fire.

We didn't start the fire. Trump did.

Gary Gensler who has been a thorn in the crypto communities' side is rumoured to be replaced by Paul Atkins to lead the SEC. Other candidates also look to be crypto friendly. Howard Lutnick, current CEO of Cantor Fitzgerald, is set to be Commerce Secetary. Cantor Fitzgerald is currently in talks with Tether, making Lutnick look like a crypto proponent.

The enactment of martial law in Korea did little to dampen animal spirits yesterday. BTC traded to a low of 93500 as news of martial law hit the tape and Korean traders pared exposure. The buyback following that in both Majors and Alts only goes to show how strongly bid the market it.

We do see some macro risk in the near term. Worries of inflation rearing its ugly head again have caused markets to pare back expectation of US rate cuts to just 3 in 2025. Geopolitical risk from Trump against China, Mexico, Canada and BRICS are also present.

Despite the risks, we think the crypto market is poised for higher. Trump's team will most possibly enact crypto friendly policies, drawing in more institutional interest. BTC above 100k is possible, and ETH above ATHs looks more a near reality than a dream. Respect the pump.

QCP Asia Colour - 5 December 2024

- The day is finally here! BTC crossed the long awaited 6-figure milestone earlier this morning, rallying to a high of 103,620. The rally above 100,000 triggered a short squeeze which led to the liquidation of US$90 million worth of BTC shorts over 2 hours.

- Aggressive topside buying by short sellers cemented BTC’s current price as it stabilised below the 103,000 figure. This is reinforced by market makers hedging their short delta exposure as well.

- BTC vols spiked up across all tenors during the rally, with front-end vols rising 10pts and back-end vols jumping 5pts. Vols continue to be elevated even as it has fallen through the day.

- The desk observed two very distinct reactions to this morning’s price action:

a) For the front-end traders, they were frantically covering their short positions as the continued rally squeezed into their shorts

b) Mid-tenor traders were relatively muted as many were positioned for this move up

- With market in an unchartered territory, we are now in a new price discovery zone. We have returned to a binary scenario, where the spot price could either be driven higher, or selling pressure could push it back below $100k.

QCP Asia Colour - 9 December 2024

- The 4k and 100k levels are lines in the sand for ETH and BTC. The majors breached these key levels last week before trading lower for most of today.

- Looking at the tenor with the highest OI, 27DEC24, those levels coincide with the strikes with the highest OI: ETH-27DEC24-4k (90k contracts) and BTC-27DEC24-100k (16k contracts). So, will there be a squeeze higher if spot trades higher as dealers look to cover?

- We’re less inclined to think so. Just today, we saw takers taking profit on their long BTC-27DEC24-100k-C positions and possibly rolling them out to March (130k–150k). This indicates there should be ample supply of topside gamma. Furthermore, perp funding is flattish on Deribit and slightly higher than usual on major exchanges, making a flush to the topside less likely.

- Although we’re still structurally bullish, spot is likely to range here for the remainder of the holiday season. Historically, ETH does not usually put in a new all-time high until January of the post-halving year. This sentiment is also reflected in the options market, where ETH risk reversals are skewed toward calls only from January onwards.

QCP Asia Colour – 10 December 24

Bitcoin was rocked by $1.5 billion in long liquidations, plunging 3,000 points before rebounding off the critical 95k support. It now consolidates around 97-98k, leaving altcoins in its wake.

Yet, BTC and ETH spot ETFs are on an impressive streak, posting 8 and 11 consecutive days of net inflows, respectively. Riot Platforms is emulating MicroStrategy's playbook by issuing $500 million in convertible notes to buy Bitcoin. With a 0% coupon and strong demand, can anyone afford to stay on the sidelines?

Microsoft shareholders vote today on adding BTC to the balance sheet—a potential surprise to the topside if approved, despite the board's recommendation against it. Adding to the intrigue, Amazon shareholders reportedly push for Bitcoin adoption as a reserve asset.

With inflation data due, macro volatility has eased slightly amid political stability in France and Korea, while Asia rallies on China’s stimulus promises. BTC and ETH front-end vols remain elevated, skewed toward puts. A pivotal catalyst is needed to reignite momentum toward the 100k level.

QCP Asia Colour – 11 December 24

Bitcoin remained resilient at $97.5K, recovering from a modest 3% dip to $94.5K lows. The sell-off occurred shortly after Microsoft shareholders decisively rejected a BTC treasury proposal to allocate 1% of total assets into BTC as an inflation hedge.

Despite MicroStrategy Chairman Michael Saylor’s efforts to sway opinions, Microsoft maintained its stance, citing concerns over BTC's volatility.

MSTR, on the other hand, doubled down with another $2.1 billion BTC purchase last week—its fifth consecutive week of accumulation. This move signals strong support for downside movements and reinforces their $42 billion strategy, suggesting more acquisitions are on the horizon.

The crypto lobby has intensified its efforts against SEC Commissioner Caroline Crenshaw ahead of the Senate committee vote due to her alleged anti-crypto stance. The timing of Crenshaw’s vote is labelled by the Republicans as a last-minute effort to counter Trump’s agenda of reshaping the SEC into a pro-innovation, pro-business advocate for digital assets.

With the stage set for a high-stakes battle, the future of digital assets is at a crossroads.

QCP Asia Colour – 16 December 24

Yet another milestone: BTC surged past 106,500 during early Asian hours. Short liquidations totaling approximately USD151 mm over the past 12 hours fueled the rally, as an illiquid and complacent weekend (Deribit funding briefly turned negative) market squeezed shorts on the topside.

The BTC/Gold ratio reached an all-time high during the move, amplifying Bitcoin’s status as “digital gold” and cementing its position as an increasingly favored store of value over traditional gold.

MicroStrategy’s inclusion in the Nasdaq 100 added further momentum to market sentiment, with Michael Saylor hinting at additional BTC purchases, even with spot prices above 100k. This inclusion could trigger passive fund inflows into MicroStrategy shares, indirectly enabling the company to raise funds more easily for acquiring Bitcoin.

This week’s central bank meetings seem to be mere background noise for crypto, with BTC remaining firmly sentiment-driven. While highly unlikely, an extremely dovish Fed and Powell could still provide the push Bitcoin needs to climb even higher.

QCP Asia Colour – 17 December 24

It's becoming increasingly difficult to find reasons to be bearish on Bitcoin's spot price. However, the options market offers a note of caution, with a continued skew toward puts over calls even as spot continue to make new highs—perhaps signaling a preference for hedging rather than aggressively chasing the rally.

VanEck projects a "medium-term" peak for the crypto market in Q1 2025, placing Bitcoin's target at $180k, buoyed by sustained bullish sentiment.

Adding to this optimism, the Financial Accounting Standards Board (FASB) has adopted fair value accounting for Bitcoin and other digital assets, allowing companies to reflect fair value gains directly in their net income—a game-changer for corporate treasuries holding BTC.

With a supportive regulatory environment driving the rally, this could spark a cross-asset feedback loop, where firms holding BTC in their treasuries find it easier to raise funds—potentially fueling institutional demand for BTC in a non-linear fashion.

QCP Asia Colour – 18 December 24

The last Fed meeting of 2024 happens tonight and despite the festive Christmas season, we see little cause for celebration. The Fed is expected to cut rates by 25bps at this meeting and release the final dot plot of the year.

We anticipate tonight's statement and dot plot to carry a slightly hawkish tone, reflecting US inflation stabilizing above the Fed's 2% target and a robust labor market. Expect the statement to remain non-committal for the path of rate cuts in 2025, emphasizing the difficulties of accelerating rate reductions. Meanwhile, the dot plot is expected to telegraph 3 cuts for 2025.

While we don't foresee the Fed meeting carrying much weight, liquidity across all markets have slowly decreased. This could result in gappy moves, potentially leading to large liquidations.

The technical outlook for BTC also appears cautious, with BTC printing an evening star on the daily timeframe and exhibiting bearish divergences.

Don't get shaken out of your positions if a drop occurs. With 2025 poised to be a potentially bullish year for crypto, particularly with Trump in office, staying the course may prove beneficial.

QCP Asia Colour – 19 December 24

The hawkish FOMC triggered a sharp selloff across all risk assets. Nasdaq plummeted 3.56%, S&P 500 dropped 2.95% and BTC declined 6.13%.

While the Fed's 25bps cut was expected, the source of panic can be attributed to the dot plot which was revised lower. Due to persistent inflation, the Fed now projects 2 rate cuts for 2025 compared to the market’s consensus of 3 rate cuts.

BTC fell to a day low of 98,800 during the Asia session with multiple altcoins suffering losses of at least 10% as the market saw US$258.6 million worth of longs being liquidated.

While it it easy to blame the selloff on the Fed’s hawkish cut, we believe the root cause of the morning’s crash to be market’s overly bullish positioning. Since the election, risk assets have enjoyed an impressive one-sided run, leaving the market extremely vulnerable to any shocks.

QCP Asia Colour – 23 December 24

After last week's washout, spot continues to chop sideways as approach the festive holidays. While this may seem like a quiet week for markets, all eyes are on the massive expiry this Friday, where almost $20B notional across BTC and ETH options will expire. This represents almost half the total OI on Deribit.

Will we see the typical quarter-end vol selloff post expiry? We believe it's quite possible especially if spot continues to range here and as option sellers continue to roll their shorts out. Unlike most option sellers who have to wait for collateral to be released post-expiry, Call buyers would have likely already rolled most of their positions. However, if BTC manages to break 100k, vols are likely to hold firm.

Meanwhile as BTC continues to struggle below 100k, we could also see alts start to play catch up again. A similar trend was observed a month ago where BTC was trading around these levels and ETHBTC bounced off 0.032 support. With BTC dominance still at 58%, we are closely watching for a significant drop below this level to confirm a rotation into alts.

QCP Asia Colour – 24 December 24

What Santa Rally? The anticipated rally failed to materialize as Mt. Gox moved $49.3 million in BTC, triggering a selloff to 92.5k—a 14% drop from last week’s all-time high—before a rebound to reclaim 95k. Sentiment appears to be softening, with liquidity drying up toward year-end and spot ETFs seeing their third consecutive day of outflows yesterday.

MicroStrategy announced another BTC purchase of $561 million at an average price of 106,662, marking its seventh consecutive week of buying. However, this represents its smallest purchase in recent weeks, prompting questions about its appetite at these levels.

Interestingly, despite the slide, there was no notable rush to cover gamma, with front-end vols staying subdued. Ahead of Friday's Mega Expiry, the market appears primed for volatility, with vol flies elevated at +2.0—indicating it has yet to find its footing.

With traditional markets winding down with shortened hours or closures, Bitcoin’s 24/7 nature could serve as a key outlet for views on extraordinary events. For instance, BTC/KRW recently reflected market responses to President Yoon's martial law declaration. Hence, we remain cautious of potential gap moves.

QCP Asia Colour – 30 December 24

As expected, we saw the typical quarter-end post-expiry vol selloff as vols are 2-3 vols lower since Friday's record-breaking expiry.

Although BTC is consolidating near the bottom of the 1-mth range and is flattish returns on the month, both BTC and ETH performed decently in Q4: BTC is up 48% while ETH is up 30%. However it may be a little premature to sum up the quarter for now. Just yesterday, Saylor posted his BTC purchase tracker again which could signal another round of imminent purchases, supporting prices further.

Despite the possibility of another round of purchases, we are skeptical of any New Year fireworks especially with funding healthy. January's average returns (+3.3%) are relatively similar to December's (+4.8%), and we could expect spot to remain in this range in the near-term before things start to pick from Feb onwards.

Options flows are also reflecting similar sentiments with frontend vols drifting lower and risk-reversals most bid for Calls in March, partly due to significant March (120k-130k) Calls bought last Friday.

QCP Asia Colour – 31 December 24

BTC spot has been notably gappy due to thinner liquidity. Any upside recovery over the past couple of days has been capped by persistent selling pressure.

Momentum in BTC has clearly fizzled as the year ends, with $1.8 billion of net outflows from spot ETFs since Dec 19 and a noticeable slowdown in MicroStrategy’s BTC purchases.

The weak price action in crypto mirrors broader market sentiment, with the S&P 500 and NASDAQ logging their third >1% drop in eight sessions as markets price in heightened uncertainty around global trade heading into 2025.

Q1 2025 Outlook

Despite a lackluster finish, BTC will close the year up 120%, outperforming globally stocks and gold. For 2025, while optimism surrounds crypto-friendly regulations post-Trump inauguration, we think the key catalyst may come in January as institutions readjust asset allocations.

With BTC now broadly adopted by a broad spectrum of institutions—adding university endowment funds to the list this year—allocations are likely to increase, strengthening Bitcoin dominance, stabilizing spot movements, and shifting volatility dynamics closer to equities. Expect stronger demand for downside puts for hedging and more covered call selling on the topside.

QCP Asia Colour – 6 January 25

A positive start to the week as BTC managed to inch closer towards the 100k mark, staring down the hefty sell wall yet again. This is the level which saw increased selling pressure in December.

So will BTC break 100k again? The first time this key level was broken, on 5-Dec, funding skyrocketed above 60%. However funding levels remain healthy this time round and we do not anticipate a squeeze higher in the near-term. Unlike previously, it's also quite unlikely we get any Trump-related catalysts till after his 20-Jan inauguration. Frontend vols have also remained soft with a relatively neutral skew which indicate a similar sentiment.

With no crypto-specific catalysts on the horizon, focus will be on the first US jobs report of the year this Friday (10-Jan). However expectations for Fridays NFP will be firmed up through the week with the release of JOLTS job opening numbers and ADP on 7-Jan and 8-Jan respectively.

QCP Asia Colour – 7 January 25

What's a QCP Tuesday Colour without mentioning MicroStrategy? The company has purchased another 1,070 BTC at an average price of ~$94k. This follows news that they are raising up to $2 billion through perpetual preferred stock.

Bitcoin is trading at a premium on Coinbase as spot pushes above $100k for the first time in two weeks. This coincides with spot ETFs returning to net inflows, as ETF issuers mostly trades and custody with Coinbase. This trend may suggest institutions are increasing their 2025 Bitcoin allocations, as mentioned in our commentary on 31st Dec.

Waves of favorable regulatory narratives continue to support the spot market. In Canada, pro-crypto politician Pierre Poilievre is now favored to replace Justin Trudeau as the next Prime Minister, according to Polymarket.

However, It won’t be smooth sailing into January, as structural risks loom. The U.S. Treasury debt ceiling reinstatement is projected to be reinstated mid-month, requiring the Treasury to adopt "extraordinary measures" to fund government expenditures. This could trigger market volatility as discussions around the issue intensify.

QCP Asia Colour – 8 January 25

Bitcoin has retraced to the $95K support level following hotter-than-expected US job data. JOLTS job openings surged to 8.1 million, surpassing the 7.74 million forecast. The unexpected strength in the labor market fueled risk-off sentiment, triggering a sell-off in risky assets as long-term bond yields spiked.

Bitcoin's sharp price drop resulted in approximately $206 million in liquidations within an hour. The risk-off ripple effects extended across other financial markets, particularly equities, with the Nasdaq and S&P 500 showing signs of weakness, hovering around 21.2K and 5.9K, respectively.

Bitcoin ETF inflows have plummeted by 94%, dropping to $52.9m from $987m. BlackRock's IBIT stood out as the sole BTC ETF to record a significant inflow of $596.11m, while ARK and 21Shares’ ARKB led outflows, with $212.55m exiting the fund.

All eyes are on this week's FOMC and NFP releases, which are expected to further influence Bitcoin's price trajectory. With market anticipation building, we believe Bitcoin's pullback is merely a pause, setting the stage for a bullish rally as Trump's inauguration fuels optimism.

QCP Asia Colour – 9 January 25

BTC rebounded last night to $95.2K after successfully retesting the $92.5K key support. However, the outlook for BTC remains bearish during early Asia session today after news of US government selling their stash of seized Silk Road BTC broke out.

Crypto prices continue to be weighed down by macro headwinds, as last night’s Fed Minutes revealed an increasingly hawkish stance. The Fed indicated that they will slow down the pace of rate cuts given that the risks of inflation have increased. Yesterday’s ADP employment survey also added to macro uncertainty, showing a slowdown in both private sector hiring and wage gains. This heavily contrasted with Tuesday’s JOLTS jobs openings which painted a stronger labour market.

On the options front, the curve has steepened across all tenors with Mar-Jun spread widening by 1.5 vols, and Jun-Dec spread rising above 1 vol. The desk continues to observe selling pressure on front-end vols with 17Jan ATM options priced 3 vols lower from last night.

With US markets closed today, we expect prices to remain weak as BTC consolidates between $92K and $95K. A break below $92K could bring the $90K figure into view.

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QCP Asia Colour – 13 January 25

Is inflation back? The US economy is certainly showing signs of overheating with Friday's scorching NFP print of 256k, obliterating the forecasted 164k. After last week's macro data, rumors of any imminent rate cuts have gone up in smoke as equities have tumbled lower. Potential Trump-era tariffs have also ignited more inflation fears.

Despite the macro headwinds and lingering Silkroad fud, crypto seems to have found some footing as $91k and $3100 supports still remain intact for now. Implied vols are also at relatively modest levels and drifting lower, with only a slight Put skew on the frontend persisting until after Trump's inauguration.

Although the vol market hasn't reacted much, crypto isn't out of the woods just yet. The macro storm cloud still looms with PPI (14 Jan), CPI (15 Jan) and Unemployment Claims (16 Jan) on the horizon, potentially adding fuel to the fire. As the US economy heats up, this week could be a real test for crypto to step up as an inflation hedge