QCP London & New York Colour - 30 Apr 24

- The Hong Kong BTC and ETH spot ETFs kicked off today with terribly disappointing volumes. BTC saw $8.5m and ETH saw $2.5m in volume.
- This might be an indication that institutional crypto interest is concentrated in the US while Asian interest is more private wealth focused and natively dominated.
- The market is trading heavy on the back of this with BTC touching 61k and ETH close to 3k.
- With Amazon earnings and CZ's sentencing coming out this evening we might be looking at a volatile session into New York hours.

Trade Ideas:
Short term downside hedges that are relatively low-cost
(spot ref: BTC 61.2k. ETH 3010)

BTC 31-May (58k Put / KO 50k)
Max payout: 8.25x
Cost per BTC: $850

ETH 31-May (2700 Put / KO 2200)
Max payout: 10.63x
Cost per ETH: $47

QCP London & New York Colour - 29 Apr 24

- We saw large and aggressive BTC call buying in the London session (about 500x JUN 65k C) but vols continued drifting lower in spite of the significant option buying.
- Although short-term realised volatility is indeed depressed given the tight spot range, the market is possibly overly complacent given prevailing macro developments (Middle East conflict, potential US stagflation, Yen weakness, US fiscal injection, etc).
- Perp funding is largely flat with many Altcoins showing negative funding which opens up a path for speculators to build leveraged long positions.

Trade Ideas (BTC spot ref: 62k)

1. Low-risk yield generating strategy
   BTC ZCC (27-DEC)
   Upfront payout: 20%pa
   Strike: 45k
   Protection Level: 40k

2. Zero-downside moonshot strategy
   BTC Enhanced Sharkfin (27-DEC)
   Max Payout: 69% pa
   Guaranteed Coupon: 3% pa
   Call Strike: 80k
   Knockout: 115k

QCP Weekend Macro - 28 Apr

Data Prints, Inflation and Monetary Policy
US GDP in 1Q24 grew 1.6% q/q v 2.5% exp.
Core PCE YoY was 2.8% v 2.6% exp.
* PCE YoY was 2.7% v 2.6%

- Some worrying data out of the US this week. The weaker than expected GDP print points to a more sluggish economy while the higher Core PCE warns of an inflation problem that continues to be a thorn in the Fed's side.
- If GDP were to continue weakening and inflation remains sticky, the US might go into a stagflation scenario (negative GDP growth & high inflation) , but that is not our base case yet.
- On the back of this data, markets are now pricing in 1 cut in 2024. This is a stark difference to 7 priced at the start of the year, and 3 in March.

Yellen, the TGA, RRP and Fiscal Policy
- However, at this point monetary policy might matter much less than fiscal policy which will be the main driver of liquidity and asset performance.
- The US Treasury General Account (TGA), has close to USD 1 trillion in assets, after large US treasury issuances this year and strong tax receipts.
- The US Govt can choose to spend the money in the TGA, potentially injecting 1 trillion in liquidity into the financial system. We feel this is likely, given how close we are to US elections.
- The upcoming Quarterly Refunding Announcement (QRA) on 1st May could also see higher issuances in short term US bills. This will drain the RRP, which currently has USD 400 billion and also increase liquidity.
- Yellen had previously used the QRA to influence short term interest rates in Oct 2023. We saw 2Y yields peak at 5.2%, equities bottomed and started the race to new highs after Oct 2023. It is very possible that she will repeat this action to some degree.
- Between the TGA and RRP, there is a potential $1.4 trillion of liquidity, ready for injection. This could be the main driver for bullishness into the end of the year.

Trade Ideas
In spite of major macro movements and conflict headlines in the last few weeks, vols and funding have been crushed. The best strategy might be to put on some cheap topside structures, sit back and watch everything play out. We recommend a few below:
(BTC spot ref: 64k)

1. BTC Call ERKO (90/150k 27-DEC)
   Max payout: $60,000 per BTC (16.4x)
   Cost: $3,650 per BTC

2. BTC Call DIGI (120k 27-DEC)
   Payout: 7.15x

Please check in your trading chat for more details

QCP Asia & London Colour - 19 Apr 24

- BTC broke below 60k again in Asia morning following headlines about an Israeli attack on Iran. (BTC low of 59.5k and ETH low of 2865)
- However, once again, BTC bounced hard off this level and is trading back above 64k (ETH well above 3k).
- Today is the eve of the BTC halving and the market appears to have formed a clearly defined baseline support level around the recent lows.
- As a result, we have seen a flurry of options activity around the year-end expiry as investors begin to position for a post-halving resumption of the uptrend and a breakout from this two month long consolidation.
- What level will BTC settle on at the end of a watershed year?

Trade Ideas:
The following are some potential strategies catered for a defined year-end view on BTC. (spot ref: 64,500)

1. ERKO (100/200k)
   Max payout: 20.4X
   Price: 4900 USD per BTC
   Strike: 100k
   KO: 200k
   Expiry: 27-Dec 2024
   This strategy will earn a return if BTC spot expires above 100k level at year end.
   At expiry, if BTC spot trades right below the 200k level, it will earn $100k per BTC notional or 20.4X of the premium paid.
   Anything in between 100k and 200k is a pro-rated return.
   If BTC spot expires at-or-above 200k, the payout is zero.

2. DIGI (200k)
   Payout: 20X
   Strike: 200k
   Expiry: 27-Dec 2024
   At expiry, if BTC spot trades at-or-above 200k, the payout is 20X of the premiums paid.
   If BTC spot expires below 200k, the payout is zero.

*These strategies can be structured as zero-downside notes on a USD deployment as well for a more conservative strategy.
Clients may check on your trade chat directly for details.

QCP New York Colour - 18 Apr 24

- BTC broke below 60k overnight and ETH traded to 2915 lows on the back of weakness in US equities mainly.
- BTC has since bounced back to 64k and ETH close to 3100.
- Vols and funding/forwards have been largely unchanged.
- The most surprising thing about the markets in the last 24 hours is probably how uninteresting it has been.
- The BTC halving will occur this Saturday in Asia morning and the way the market is reacting, it seems to have been almost forgotten.
Trade Ideas:
BTC halving moonshot?

BTC 26-Apr 70k Call Digi
Payout: 5x
If BTC expires at-or-above 70k on 26 April, you will receive 5 times whatever premium was paid.

BTC 26-Apr 75k Call Digi
Payout: 10x
If BTC expires at-or-above 75k on 26 April, you will receive 10 times whatever premium was paid.

QCP Asia & Europe Colour - 17 Apr 24
- Some calm is slowly returning to the market with BTC and ETH stabilising around 63k and 3050 levels respectively.
- The options desk saw mostly sellers of front-end vols pushing vols down to 70% from highs of over 100%!
- Funding has also normalised with perp rates flattish and the forward curve settling around 10%.
- We were surprised by how calm the markets were given Powell’s hawkish comments which caused the market to price out more Fed cuts this year.
- Perhaps we’ll see some consolidation from an exhausted market in the short-term.

Trade Idea:
If you are upset about missing the Spot-Forward Basis trade for 20-30% yield, you can still get similar yields from UFCCs (Unconditional Fixed Coupon Convertible). indicative example below:

BTC UFCC (USD deployment)
(spot ref: 63,000)
Earn a weekly coupon of 26%pa.
At expiry, as long as BTC spot is above 45k, 100% of the principal is returned.
If BTC spot is below 45k at expiry, you will buy BTC at 55k level.

Expiry: 12JUL24 (12 weeks)
Strike: 55,000
Protection Level: 45,000
Coupon Rate: 26% p.a.

QCP Extraordinary Market Update - 14 Apr 24

- The Iranian attack on Israel has caused panic in the market. BTC traded to lows of 60.8k, ETH to 2850 and Alts were down another 20-30% on average.
- It is likely that BTC was used as a weekend proxy macro hedge and therefore bore the full brunt of the immediate risk-off reaction.
- BTC has since traded back above 64k and ETH above 3000.
- ETH risk reversals dropped all the way down to -18% but is now back up to slightly positive in the front-end! (Chart below)
- This has been our best leading indicator for the downside moves. Will it also be an accurate signal for bullish recovery? If so, there could be opportunities to buy the dip.
- It is worth noting that historically, buying the dip on the outbreak of major geopolitical conflicts has been a profitable trade.

Trade Ideas:

If you would like to buy the dip defensively with some safety buffers, the following are two possible strategies.
Indicative (spot ref: 64,500)

1. BTC Accumulator
   Every Friday, buy BTC at 54k level as long as BTC spot remains under 77,400 at the time of observation.

Maturity: 23AUG24 (20 weeks)
Strike: 54,180 (-16%)
Upper Barrier: 77,400 (+20%)

1. BTC Bullish CFCC
   Every Friday, you will get a yield of 92.5%pa as long as spot price is above 64.5k.
   At expiry, if spot price is below 55k, USD will be converted to BTC at 60k strike.
   If spot price is above 55k at expiry, 100% of the USD principal is returned.

Coupon Rate: 92.5% p.a.
Maturity: 27SEP24 (23 weeks)
Coupon Trigger: 64,500
Strike: 60,000
Protection Level: 55,000

QCP Weekend Brief - 13 Apr 24

- The downside skew in the ETH risk reversal that we highlighted on Friday has proven to be an accurate early downside indicator.
- Likely because of its sensitivity to crypto market anxiety as speculators who are long Alts tend to hedge using ETH puts.
- Overnight, the macro trigger was the threat of Iranian retaliation to Israel which caused a sell-off across all risk assets.
- BTC traded to 65.1k lows, ETH to 3100 and Alts sold off around 20-30%.
- The market was caught off guard by this move with perp funding driven to negative to (over -40%), the deepest it's been this year.
- The negative perp funding has also crushed the forward curve with the front-end now below 10%.
- With this move, BTC is right back in the middle of a tightening range between 64k and 73k.

Trade Idea:
Even though we are about a week out from BTC halving, BTC might struggle to break out of this defined range in the short-term. We recommend the CFCC (Conditional Fixed Coupon Convertible).
Indicative pricing below (spot ref: 68k):

1. If you are long BTC, do a call-side CFCC

Coupon Rate: 60% p.a.
Maturity: 31MAY24
Coupon Level: 64,000
Strike: 73,000
Protection Level: 80,000

How does it work?
Every Friday, as long as spot price is above 64k. you will get a yield of 60%pa. At expiry, only if spot price is above 80k, BTC will be converted to USD at 73k strike. If spot price is below 80k, 100% of the BTC principal is returned.

1. If you are deploying USD, do a put-side CFCC

Coupon Rate: 66% p.a.
Maturity: 31MAY24
Coupon Level: 73,000
Strike: 64,000
Protection Level: 60,000

How does it work?
Every Friday, as long as spot price is below 73k. you will get a yield of 66%pa. At expiry, only if spot price is below 60k, USD will be converted to BTC at 64k strike. If spot price is above 60k, 100% of the USD principal is returned.

QCP New York Colour - 11 & 12 Apr 24

- We had the smallest GBTC outflow to date yesterday at just -$17.5m and a decent total BTC spot ETF inflow of +$123.7m.
- The market took this positively, taking BTC up to 71.3k in Asia time.
- However, there has been no follow through and BTC spot price remains stuck around the 70k level.
- In the absence of bullish momentum, the desk is starting to see some profit-taking on long BTC call positions and a shift towards delta-neutral deployments like selling the Spot-Forward Basis (which has pushed the forward curve lower again).
- ETH risk reversals are once again skewed to the downside at -5% in the front-end.
- This has been an early signal for the previous few price dips. Will it prove to be an accurate leading indicator again?

Trade Ideas:
While we remain structurally bullish, deleveraging dips can go very deep especially given the extent of the bull run this year. So if you are looking to hedge short-term downside the following are indicative examples of two possible strategies:
(spot ref: 70.2k)

1. Downside Sharkfin

Deployed with USD and with zero downside, Maximum profit of +80% p.a. if BTC price is just above 58k at 31-May expiry. If BTC price is below 58k or above 65k, 100% of the principal amount is returned. (Pro-rated return in between)

2. Decumulator

Sell BTC at 76k (+8.3% premium to spot price) weekly as long as BTC spot is above 66k.

Please approach the desk directly for details. Strategies available for both BTC and ETH.

QCP Weekend Brief - 6 Apr 24

- We saw unusually large selling of Perp-June Basis over the last two days for both BTC and ETH.
- This has compressed the front-end and flattened the whole forward curve to 15-17% across the board.
- We suspect the flow could be Ethena related but it could also simply be large players squeezing yield out of elevated forwards as leveraged longs decrease.

- In spite of the tight range in the past week, we are picking up on more BTC bullishness (especially in comparison to ETH) for the following reasons:

1. Increasing BTC spot ETF inflows in the last few days (up to +$232m on Thu)
2. Positive headlines about key traditional finance players like Citadel, Goldman, UBS and Citi joining as Authorised Participants for Blackrock's ETF.
3. Consistently large buying of BTC calls (vs large selling of ETH calls)
4. Reduced leverage in BTC with perp funding flat and the rest of the forward curve lower as well
5. Upcoming BTC halving narrative
   - Are these 5 factors enough to take BTC another leg higher?

Bullish BTC Trade Idea: The BTC Moonshot

Deployment in USD. Profit if BTC moons. Buy if BTC dips, and get your principal back if it trades sideways.

Live examples (spot ref 68k):

26-APR expiry
- 350% p.a. profit if BTC is above 90k at expiry
- If BTC is below 50k at expiry, USD is used to buy BTC at 60k
- If BTC is in between 50k and 90k at expiry, 100% of the principal is returned

28-JUN expiry
- 340% p.a. profit if BTC is above 110k at expiry
- If BTC is below 50k at expiry, USD is used to buy BTC at 60k
- If BTC is in between 50k and 110k at expiry, 100% of the principal is returned

27-DEC expiry
- 275% p.a. profit if BTC is above 150k at expiry
- If BTC is below 50k at expiry, USD is used to buy BTC at 60k
- If BTC is in between 50k and 150k at expiry, 100% of the principal is returned