Market Update: 2 Dec 2021
Hello from Miami! Point-form summary this week with some insights from our meeting with Paul Tudor Jones.
- Our short vol view on BTC and ETH from last week has worked very well. Both BTC and ETH vols have dropped around 5–10% (week-on-week BTC price remains at 56,000 level).
- We turned long a massive amount of gamma from the month-end expiry on Friday. Gamma realised very well because of the knee jerk reaction to the Omicron headlines as well as Powell’s recognition of high inflation and indication of an accelerated taper. The market bounced back quickly on reports of Omicron symptoms being mild (BTC tested 53,320 and ETH tested 3,950 before rallying higher).
- ETH has outperformed BTC this week possibly on headlines of a possible ETH ETF which we expected to happen at some point. Kelly Strategic Management filed for approval this week.
- Options market is heavily discounting calls with risk reversals still skewed to puts in spite of the spot bounce. Could be a decent opportunity to buy some calls if you have a long view into 2022. We’ve now flipped to a topside skew for both BTC and ETH.
- Position-wise we continue to be heavily short vols in BTC and ETH against long vols in the Alts. We will be turning long gamma again post-expiry. We have a bullish bias on ETH spot with a long gamma position on the topside vs short gamma on the downside.
- LUNA broke out strong this week making a new all-time high of $60. The 7.2 million LUNA burned this week was likely to be a catalyst for the move. Our LUNA option book has been growing well with almost 2 million notional through defi option vaults.
- QRDO has been another strong performer making a 170% move from $4.7 to $7.5 in November. QRDO is a layer 2 protocol focused on cross-chain interoperability and security of digital assets. They recently announced a partnership with Metamask and have plans to integrate Layer 1s such as ALGO, SOL, BSC, DOT, ADA and LUNA. This could potentially serve as a catalyst for further upside for QRDO.
- NEAR is a project we’ve been focusing on. The protocol’s blockchain reached a total of 50 million transactions yesterday. Earlier this month, NEAR launched their Nightshade sharding as solution to increase scalability and network performance. Tied together with the staggering 800 million funding initiative that was announced back in October. We can expect significant growth for NEAR’s ecosystem in the future.
- ALGO’s much anticipated conference happened this week with significant announcements of new ecosystem funds being set up (Hivemind and Borderless). We saw a rally from $1.5860 to $2.0470 before coming back to $1.80 levels. The volatility has been great for our significant ALGO vol positions from the launch of the ALGO defi vaults last week. (https://algorand.foundation/news/algo-option-vaults-on-thetanuts)
- We caught up with trading legend Paul Tudor Jones this week. He shared his deep concern about overstretched markets as we cross into 2022. Incredible valuations in both traditional and crypto markets coupled with inflation levels that haven’t been seen in decades could be setting macro markets up for a significant correction. Taking profits on deep in-the-money positions is a logical step to take. With that said, he expects crypto to outperform if the global economy faces persistent inflation.