Market Update: 10 Nov 2021. All-time highs all around this week… | by QCP Capital | Nov, 2021

All-time highs all around this week with BTC and ETH trading to 69,000 and 4,868 respectively, taking total crypto market capitalisation above $3 trillion.

The bullishness has not been exclusive to crypto with major equity indices also trading at record highs this week; S&P500 at 4701, Russell at 2442, NASDAQ at 16359.

There seems to be a melt-up across global markets with participants chasing topside on the back of positive earnings and in anticipation of global trade reopening. We expect this broad bullishness to perpetuate in the near-term.

BTC price has no doubt been supported by the upcoming Taproot upgrade (likely to be activated by the end of this week or early next week). This is the largest upgrade since SegWit in 2017 and will improve a whole string of key functions. We are keeping long BTC into this major event.

Even a surprisingly high US CPI number earlier today saw a bullish reaction from BTC! We could be entering a phase where BTC is caught in a positive feedback loop where both ‘risk-on’ and ‘risk-off’ headlines see significant price increases. Effectively, BTC is seen as both a macro risk asset and also an inflation hedge.

In ETH, the ‘Raoul effect’ perpetuates with large open interest in ETH calls (Chart 1) and elevated implied vol levels in the March tenor. This has resulted in a super steep ETH vol curve in the front end (Chart 2). We are buying back our short tenor ETH option shorts and rolling them towards Dec or longer to take advantage of the steepness in the curve.

Our ETH short gamma and vega position has a real winner with the front end vols collapsing and the whole ETH curve softer (Chart 3). We are holding on to our ETH short vega.

Realised volatility remains low across the board in spite of the new highs and we think implied vols will continue to soften under these conditions.

Our position is BTC neutral, ETH short vega against long vega in SOL, BCH, DOGE, ADA, LUNA, AAVE (new!), DOT (new!), TRX (new!) and overall short vega still. And also long spot across the board.

On a side note, we’ve been seeing a material increase in Defi options trading. This week alone we traded $250 million in notional. We think this is a core segment of Defi 2.0 and we’ll be publishing a deep-dive research piece on this in the coming weeks.

Some Altcoin highlights:

SOL made new highs of 260 on Saturday as we headed into the Breakpoint conference this week.

ALGO perhaps will have a similar pump as we head into the Decipher conference on 29 November.
(sidenote: Our CIO Darius will be in Miami and then New York for the week so feel free to DM if you’d like to catch up in person)

KDA has gone up more than 2x in the past week. We don’t see any particular catalyst for this other than a slew of social media hype.
[KDA is a hybrid private and public blockchain and the only proof-of-work blockchain that does not consume more energy as it scales]

BCH has crossed above the 700 pivot level and a further move higher could potentially form a golden cross on the charts (50DMA crossing above the 100DMA). (Chart 4)

LRC has gone up 600% in the past two weeks on the back of rumors that GameStop is building a NFT marketplace powered by Loopring technology.
[LRC is built on the ETH network, and touts itself as being open-sourced, allowing anyone to build non-custodial, order book-based exchanges.]