QCP Capital Easter Weekend Note – 29 Mar 24

– The positive spot ETF reaction function is back with BTC rallying more than a thousand dollars yesterday in Asia on the back of a $243.5m inflow.
– We should see positive numbers again in the next hour from the US session overnight. Do we break the all-time highs this long weekend?

– For Q2, there are sufficient catalysts to form a very bullish view:
1. continued BTC spot ETF demand (and shrinking supply as GBTC runs out)
2. BTC halving
3. London Stock Exchange ETNs
4. Potential ETH spot ETF approval

– At the same time, the price rally as been exponential in Q1 and there are signs of exhaustion:
a. ETH risk reversals are skewed to the downside at -8% indicating some fear
b. funding and forwards remain very elevated which means that speculators are still paying high prices to keep their leveraged longs
– While we remain bullish, we are cautious about leverage and we are also prepared to scoop some value on big dips.

Trade Ideas for a binary market:

i. Degen strategy
BTC end-Apr 90k Digi pays a nice 6.25X return if BTC expires above 90k (zero return if it’s under)

ii. Safe strategy with hints of Degen
BTC end-Jun 80k HYPP is a zero-downside strategy that pays 58%pa weekly coupon as long as BTC is above 80k level. Full principal is returned at expiry. This strategy takes advantage of the high yield from the Spot-Forward Basis to make a high-convexity bet.