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Market Updates

Post-merge – September 20th, 2022

By September 20, 2022October 18th, 2022No Comments

Since last update: BTC -4.4%, ETH -14.0%, stocks -2.0%

1) Post-merge has so far been as textbook ‘sell the news’ as it gets… Largest 1 day decline for the ETHBTC cross since May 2021 and now negative/flat on 1 month/1 year lookback.

In the hours before the merge, we were happy to lift ETH futures trading between $15 and $30 below index price and sell higher shortly after.

The ETH long term trend against an equal-weight index is clear and some may say now even conservative due to ‘structural’ circumstances, i.e. we would rather buy ETH vs. market than sell it here, but have no plans to do either.

2) With actual crypto use floundering (last time 1 month median gwei was here = May 2020!), the easiest fallback is to an SOV narrative where we think BTC still wins.

But take with a grain of salt any charts shared of ‘BTC.D’ which of course declines over time as new coins, illiquid coins, and stables weigh against it. The performance of BTC vs. the same index from above (equal weight top 10 coins, monthly recomposition) is less exciting. Clearly, pitching BTC as relative value is not so straightforward, but it remains our preferred long:

3) In broader markets, poor September seasonality has so far played out as expected. Equities last week posted their worst day since June 2020, helped by STIRs per usual.

We have maintained low expectations for equities (which are correlated with our business – crypto volume) since Q1. We are a quant fund not a macro fund, but if equity returns are at all cyclical (and history suggests they are), it doesn’t make sense to be relying on tailwinds.

4) Wintermute’s loss of $160mn to a hack today is big news and an unfortunate reminder of the ever-present security risk in crypto, even for the most professional entities. We hope all funds can be recovered in the end.