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      Euro - everybody long?

      The euro is putting in a massive shooting star candle today. We touched the huge negative trend line and are now back below the 200 day. Everybody has been busy loading up on euros and puking the dollar. Looks like we could see some serious short term pain here. Second chart shows how momentum chasers have been busy loading up on euro longs...

      Euro - everybody long?
      Source: Refinitiv
      Euro - everybody long?
      Source: MS
      SPX - levels to watch here

      The short term 3950-4050 range stays intact for now, but this bull is losing steam. A close below the 3950 support and we risk breaking out of a rising wedge. Not overly pretty.

      SPX - levels to watch here
      Source: Refinitiv
      That China re-opening...

      1. “Now, reality kicks in and investors will have to re-adjust their overly optimistic view on reopening,” said Lu Ting, chief China economist at Nomura Holdings Inc. “Related markets might be tumultuous this week. Reopening will be slow, painful and bumpy.”

      2. Goldman sees 30% probability of reopening before Q2 next year

      That China re-opening...
      Source: Goldman
      Chasers have been busy

      The huge US equity net short is gone, but we are far from a meaningful net long. Noteworthy is the fact skew has caught some bids lately as people have closed out shorts. The increase in skew suggests people are switching into hedging the downside via puts, instead of running those delta 1 shorts.

      Chasers have been busy
      Source: GS
      Chasers have been busy
      Source: Refinitiv
      Wait - VVIX not puking

      VVIX is down over past sessions, but is not much below late October levels. Back then the VIX was at 26 ish. We are not saying VIX must trade at 26, especially not given the most recent implosion in realized volatilities, but you should watch the VVIX closely here.

      Wait - VVIX not puking
      Source: Refinitiv
      FTX – Unravelling the web of borrowing 

      We are learning more about the balance sheet, creditors and users of FTX through documents published in relation to the bankruptcy and hearings. The largest proportion of customers were registered in the Cayman (22%) and Virgin Islands (11%); we note that the locations likely host a large number of hedge funds from around the world. 8% of users were in China, despite historical limitations on trading crypto in that country. Great Britain (8%) and Singapore (6%) had the next largest proportion of users. Only 2% of FTX users were from the US, which may seem low but aligns with the assumption that US funds may have registered elsewhere and FTX.US was only 5% of revenue in 2021. There are more than 1 million creditors, with the 50 largest unsecured creditors owed $3.1bn, each owed from $21mn to $226mn, with 10 owed at least $100mn. We compiled a list of companies that have declared exposures to FTX here. Information relating to the case will be revealed and analysed by the markets in coming weeks and months.

      FTX – Unravelling the web of borrowing 
      Source: Morgan Stanley
      Bitcoin's leader

      Time to adjust the bids to even lower levels?

      Bitcoin's leader
      Source: Refinitiv
      Crypto lending is dead. Long live Crypto lending!

      Sanford Bernstein has a decent write-up on crypto lending, basically concluding that it takes all the bad stuff from traditional lending and then makes it slightly worse.....Bernstein: "The big crypto leverage blowout happened because of off-chain lending. Off-chain lending is somewhat like pawn broking. You go to a physical pawn broker, offer gold as collateral. The lender evaluates the gold for its authenticity & value, offers you a loan amount at a certain loan-tovalue (LTV). In crypto, you offer your Bitcoin to a Crypto prime broker, who offers you a loan on certain LTV. Except, lender has to build in more cushion for Bitcoin's volatility and Bitcoin's authenticity is on the blockchain. However, there are a few things that can go wrong - 1. You can offer an aggressive LTV, not accounting for volatility. 2. You can build in some subjectivity, and say this borrower has a great balance sheet, and they have 1M followers on Twitter, so I might allow them to borrow more than the collateral. Thus, off-chain crypto lending is not very different from traditional lending, the lender has credit criteria and they apply judgement. And the judgement can be wrong and the risk filters are not built for extraordinary circumstances, which happen all too often in crypto frontier tech. Thus, crypto takes all the bad stuff from traditional lending and then makes it slightly worse" (Sanford Bernstein)

        

      Remember elevated tech volatility?

      A month ago we suggested to look at elevated tech vols and use it for yield enhancement (here). We wrote: "For must be longs overwriting continues to look like an attractive "yield enhancing" strategy." Since then vols in stuff like Apple have reset big as the stock continues to do nothing...

      Remember elevated tech volatility?
      Source: Refinitiv
      Wait - VVIX not puking

      VVIX is down over past sessions, but is not much below late October levels. Back then the VIX was at 26 ish. We are not saying VIX must trade at 26, especially not given the most recent implosion in realized volatilities, but you should watch the VVIX closely here.

      Wait - VVIX not puking
      Source: Refinitiv
      > 50% of Bitcoin addresses are now in loss

      Previous bear markets ended with the majority of addresses being out of the money, on-chain data shows. Just over 51%, or 24.6 million addresses of the total 47.9 million, are below purchase price on their investments, according to data provided by blockchain analytics firm IntoTheBlock. About 45% are in the money, which means they are boasting unrealized gains, while the rest are roughly at break-even. The percentage of out-of-the-money addresses stood at 55% in January 2019. Bitcoin bottomed near $3,200 around the same time and began a bull run three months later. The percentage of addresses out of the money rose to 62% during the depths of the 2015 bear market. (Coindesk)

      Grayscale

      Grayscale refuses to share proof of reserves due to 'security concerns' as shares of $10.5bn Bitcoin fund trade at a 45% discount to Bitcoin. GBTC’s share price has plunged 77% in 2022.

      Grayscale
      Source: Bloomberg
      COIN

      Coinbase shares hit an all-time low, now down 90% from ATH.

      COIN
      Source: Bloomberg
      Tech vs tech

      It wasn't long ago crypto was considered the new hot tech. We all know what happened since then. Technology changes, but not the psychology of the masses. BTC vs FDN (internet) short term as well as the longer term charts. Will FDN and other ex hot stuff follow cryptos?

      Tech vs tech
      Source: Refinitiv
      Tech vs tech
      Source: Refinitiv
      Cryptos underlying delta remains poor

      Money matters for crypto...

      Cryptos underlying delta remains poor
      Source: Refinitiv
      What if BTC isn't a "local" issue

      Gaps between the SPX and BTC have had a tendency to "come in" over the past years. Will the horrible crypto mood spread beyond cryptos? SPX vs BTC log chart.

      What if BTC isn't a "local" issue
      Source: Refinitiv
      Bitcoin - slightly more downside, and then...

      ...the depressing hung over phase for a few months, or are we already there? That is how it should play out if we are to follow the 2017/18 wash out phase according to MS.

      Bitcoin - slightly more downside, and then...
      Source: MS
      Fed BS and BTC

      Nothing new really, but waiting to make a killing in BTC these days is naive. It was a big Fed BS trade...

      Fed BS and BTC
      Source: Refinitiv
      The bitcoin positioning crash

      Not overly surprising, but note we are printing the lowest levels since the chart started...

      The bitcoin positioning crash
      Source: JPM
      FTX suckers

      Exposure to FTX in a pic.

      FTX suckers
      Source: JPM
      Still wondering what happened to cryptos?

      It is all about the money...and the big delta.

      Still wondering what happened to cryptos?
      Source: Refinitiv
      Very late to the crypto party

      Most retail investors downloaded crypto trading apps when Bitcoin was worth more than $20,000. Assuming these investors purchased Bitcoin on the same day as the download, this suggests most of them may be in the red.

      Very late to the crypto party
      Source: BIS / EV
      Storing value in November

      The physical stuff just sits there...

      Storing value in November
      Source: Refinitiv
      Bitcoin- time for the classical hammer candle?

      Bitcoin has so far put in a big hammer candle. Let's see how this develops, but a hammer could be the short term reversal signal that leads to BTC bouncing further.

      Bitcoin- time for the classical hammer candle?
      Source: Refinitiv
      From 3tn to 0.8tn

      And it's gone...

      From 3tn to 0.8tn
      Source: MS
      Gravity

      What goes up, must come down. Crypto is no different...

      Gravity
      Source: BofA
      Bitcoin volatility - up up and away

      Welcome to total volatility panic. Hard to say much about this panic, but remember a 1% move in the underlying corresponds to 16% implied volatility. Just choose your scenario...Chart showing 1 week and 1 month implieds.

      Bitcoin volatility - up up and away
      Source: Amberdata
      Storing value over past days

      The real vs the digital stuff...

      Storing value over past days
      Source: Refinitiv
      Watching cryptos closely..

      ...irrespective if you trade it or not. NASDAQ vs BTC short term gap getting very wide.

      Watching cryptos closely..
      Source: Refinitiv