Chart of the Week: Late to the Party…Again? 

• Investors are getting a short-Bitcoin fund in an ETF wrapper - but this comes after Bitcoin has already crashed ~70% from its peak in November 2021. ProShares, the largest provider of Bitcoin-linked ETFs in the U.S., launched its short-Bitcoin CME futures ETF last week on 21 June, under the ticker BITI. 

• Recall that ProShares also launched the first long-Bitcoin CME futures ETF (BITO) back in October 2021 - terrible timing, as Bitcoin peaked the next month, and BITO is down 68% since that debut. 

• The asset management industry launches financial products to capitalise on high demand for a particular investment strategy or asset class, which tends to occur at times of peak popularity - resulting in an interesting contrarian indicator. BITO, ProShares’ long-Bitcoin ETF, was launched when fear of missing out was at its peak. With negative news, developments, and mood dominating now, here comes BITI, ProShares’ short-Bitcoin ETF. Direxion, another major ETF provider, also looks to launch a short-Bitcoin ETC, according to an SEC filing.

• Adding to the current pile of negative sentiment indicators, our previous issue of Market Pulse noted how Google search interest for the term ‘Crypto’ is at a low, and that the Bitcoin price appears to closely track the search interest trend for that term. 

Fund Flow Tracker

• Aggregated exchange balances for BTC and ETH are trending in different directions recently. BTC’s has fallen to a yearly low, while ETH’s is increasing, potentially implying strengthening inclination to hold for BTC, but selling pressure for ETH. The past week saw net outflows of -40.8K for BTC and net inflows of +433.0K for ETH. BTC balance held on OTC desks rose during the last week.

Derivatives Pulse

• Options implied volatilities (vol) for BTC and ETH have come down sharply after parabolic spikes 2 weeks ago, although term-structure has inverted, reflecting heightened concerns with near-term risks. 1-week implied vol currently stands at 77.6% (vs. 96.3% a week ago) and 99.2% (vs. 125.3% a week ago) for BTC and ETH, respectively.

• The put-call ratio for BTC remains at elevated levels. ETH’s put-call ratio continues to fall, potentially implying hedges are being reduced - while this could be interpreted as a sign of positive sentiment, we suspect it may partly be due to investors exiting long-ETH positions, therefore reducing the need for exposure hedging.

• Buying protection is still expensive, as option skews remain elevated, although they have come down sharply compared to 2 weeks ago.

• Short-positioning tilt appears to be strengthening in BTC and ETH perpetual futures, as funding rates have printed mostly negative for the past 2 weeks.

• Asset managers’ net-long position in CME Bitcoin futures has been rising since the end of May 2022.

• Leveraged traders are typically hedge funds and various types of money managers, including commodity trading advisors and commodity pool operators. The traders may be engaged in managing and conducting proprietary futures trading, and trading on behalf of speculative clients.

• The asset manager category consists of institutional investors, including pension funds, endowments, insurance companies, mutual funds, and those portfolio/investment managers whose clients are predominantly institutional.

• The dealer category consists of participants typically described as the “sell-side” of the market. These include large banks and dealers in securities, swaps, and other derivatives. The other reportable category consists of traders mostly using markets to hedge business risk, and includes amongst others corporate treasuries. 

Technically Speaking

• The longer-term weekly Relative Strength Indicator is signalling extremely oversold levels for ETH.

Price Movements

As of 27  Jun 2022     Source: CoinGecko.com

Source: Crypto.com

News Highlights

• Amidst a slew of liquidation cascades in a turbulent market, publicly listed cryptocurrency platform Voyager provided a market update, which included its exposure to cash-strapped 3AC totalling 15,250 BTC and US$350M USDC. This led to a further decline in the company’s stock price. Separately, fellow publicly listed platform Coinbase saw its corporate debt downgraded by ratings agency Moody’s on profitability concerns.

• Solana lending platform Solend exposed to single party risk and saw its DAO participants exercising votes to reduce a risky exposure from a particular whale. The whale deposited roughly 5.7M SOL tokens using it as collateral for a loan with a liquidation price of US$22.3. 

Catalyst Calendar

* Consensus forecasts from CME FedWatch Tool; dates shown are for Hong Kong time zone (GMT+8)

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