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Market Updates

No Rest for the Wicked – June 16th, 2022

By June 16, 2022June 30th, 2022No Comments

Since last update: BTC -29.5%, ETH -37.9%, large cap alts -26.8%, mid cap alts -24.5%, stocks -9.7%, bonds -2.8%, gold -0.8%

1) Our expectations for a rally in crypto before further downside were superseded by an upside surprise to inflation last Friday which sparked a historic tantrum in front end rates and by some measures the fastest selling of U.S. stocks by hedge funds since Lehman.

We view the largest marginal buyer of crypto as households who do not want to miss out on “the next big thing.” Once ubiquitous (VIX <20), risk-seeking investors now have their hands full with even a 60/40 portfolio and declines over the past months have reflected that.

2) Swirling rumors, and then facts, regarding Celsius and Three Arrows Capital liquidity issues turned the crypto selloff from one driven by macro risk to one driven by industry risk.Tether saw renewed redemptions, Coinbase layoff news hit, and the mood among many quickly became “so it really wasn’t different this time” / “it was all a ponzi scheme” / “99% of this won’t even survive.”

Our conservative expectations for risk asset returns through the rest of the year remain in place but we will note that funds blowing up is not something that happens far from market bottoms.

3) We were able to exit long positions around CME open on Sunday (BTC @ 27k) and remain net short until pre-FOMC before taking advantage of extreme June 16th+17th option prices to express a short vol and long delta view.

4) In light of the Luna disaster and now Celsius, we think most would agree regulatory risks for crypto have ballooned. Due to forced selling however and now a sharp short-covering rally, many altcoins are outperforming BTC and ETH over the past week…

This is a positioning-driven move that we don’t think reflects reality (particularly in DeFi coins) and we are happy to begin scaling into the opposite side.