Reports of Bitcoin's death have been greatly exaggerated

In case you hadn't heard...

There's always an attempt to pin a narrative on these moves - What caused this?!

This weekend has been no different...

🗣 RUMOUR MILL 🗣

• The U.S treasury will be charging financial institutions with money-laundering...

'sources'

Or this one?

• Maybe it was Turkey & India banning cryptocurrencies?

• The Bitcoin hash rate dropping due to blackouts in Xinjiang?

• Or maybe 'everyone' was MAX. leveraged long just as liquidity dried up...?

It shouldn't be a surprise, but people seem to have really short memories!

Bitcoin is a volatile asset & the Bloomberg headline tells us all we need to know

PLUNGE in February... Hits RECORD HIGH... PLUNGES 15% on a weekend in April...

Bitcoin just being Bitcoin...

Volatility + leverage = nearly $10B Rekt 👇

 For me, the most likely driver of this was leverage + lower liquidity...

Everything can have an influence, but price cascades such as these are usually triggered by excessive order flow in one direction: excess leverage longs = lots of large sell stops & liquidations as the market falls...

I mean, do the other narratives even make sense?

Are people really trading size in Bitcoin whilst completely oblivious to potential attempts at 'regulation'?

The Russia story doesn't pass the test either - the U.S. treasury has apparently identifed 28 Russia-linked digital currency addresses which have received $2.5 million in Bitcoin since 2013...

Seriously... so f**ing what?

People have made more than that just by HODLing since 2013!

And wouldn't Russia just use some different addresses?

If anything, the idea that the U.S will continue weaponising access to their financial system for foreign policy goals should be bullish crypto!

Summing up...

Sticking to the subject of leveraged longs: Margin debt is up 71.6% since March 2020 according to Hedgopia 👇

And the guys at Spot Gamma note the potential for another gamma squeeze (only this time it would be put-driven... 📉)  

Full details here 👇

NOT CALLING A TOP: I'm not stupid enough to call the top in an uber-bullish bull market at All-Time-Highs™...

I'm just building a broader picture of what's going on...

The S&P has clearly changed since Covid (thanks Captain Obvious):

Gone are the days of casually bumping along the 200DMA with low volatility, adding a handful of points every week...

Nope, this is a brand new BTFD market... 🚀

Although...

7 weeks ago, the market took off from the lows ~3720, and we've added 456 points since...

The past four weeks have all closed just a smidge off the highs...

And that 4k area hasn't been re-tested either...  

Maybe it will just keep rising for a while longer, but I can't shake the feeling that there's just more leverage being added... and the short put trade could be something to monitor: more fuel for the fire...

Then all we need is the spark...

• Geopolitics - U.S. - China/Russia tensions?

• Fed taper jitters/economic data too good?

To my eye, the market seems complacently long right now and a correction into 4k would be no surprise...

Perhaps a little lower? If the leveraged trade is as large as it seems, the down move could come at quite a pace and may overshoot...

Also, if prime brokers are increasing margin requirements since Archegos, wouldn't those margin calls/forced liquidations come earlier/sooner as the market drops?

I would still rather buy the dip than try and short the top...

But it will be VERY interesting to see if this Bitcoin move spills over into the wider markets - keep an eye on the commodity currencies (AUD, NZD, CAD) on the open, especially AUDJPY.

Brent Donnelly at HSBC ran a study on the Bitcoin/AY correlation recently, here's the short version 👇

Could the Bitcoin crash now be a signal to sell AUDJPY?

David hopes so, he's already short!

One more thing...

EURUSD and the mysterious Panda barrier: Have China cornered the market?

This one is purely based on trader talk...

On Friday (16th) I heard this

DNT = (Double No Touch): an exotic type of option which gives the holder a specified payout if the underlying asset price remains within a specified range until expiration - In this case that range is 1.17-1.20...

Another source said:

Exotic option plays like these are not designed to be transparent, so there's no way of verifying who placed the bet, nor when it expires...

Soooo... Why are you telling me this?

EURUSD looks absolutely primed for a breakout to the upside...

If there is a whale sat there defending that barrier, it would likely reinforce the belief and send price lower instead... if you can't beat 'em, join 'em, right?

Interesting timing that this has leaked now as we approach 1.20

Apparently China don't usually execute this for less than two or three month expiries...

Price broke below 1.20 on the 4th of March: if this is genuine we could be rangebound for a while longer yet...  

If it does break above 1.20, many are calling for another leg lower for USD, with Goldmans calling for 1.25 for EURUSD within 3 months 🔮...

Don't forget the S&P 500 earnings bonanza: 83 companies report this week including Netflix & Intel...

Make sure you tune into the TMI webcast in association with Equos!