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Earlier in the month, FT columnist Robert Armstrong coined what had been a little-known term called ‘TACO’, which stands for ‘Trump Always Chickens Out’, a rather cheeky dig at the President’s seeming propensity to back out of tough trade negotiations after an aggressive opening salvo. Effectively, Mr. Armstong suggested that it was in the counterparty’s interest to ‘wait out’ the President’s threats as he would eventually stand down.
The TACO acronym took on mainstream relevance when the President was asked about this term specifically during a WH press meeting, and it was naturally not well received by the leadership.
Perhaps in response to the insolence, the administration turned noticeably more hawkish towards the end of the week, headlined by a slew of negative US-China escalation headlines:
Trump accused China of “total violating” their Geneva trade agreementSecretary Bessent accuses China that it is holding back products that are essential to the US industrial supply chain (rare earths)Trade Representative Greer accused China of ‘slow-rolling’ rare earth export approvalsBeijing has countered by accusing the US of ‘absuing’ export controls in semiconductorsThe Administration broadened restrictions on licensing agreements on China’s tech sectorThe Commerce Department restricted the sale of chip design software and some jet engine parts to ChinaSecretary of State Marco Rubio announced that the US would start revoking Chinese student visas, on top of the earlier ban on Harvard’s foreign students
Overall, the market went into a more decidedly risk-off time late in the week, with equities struggling to make new highs despite equities and fixed income volatility receding back to cycle lows.

Earlier concerns over runaway bond yields have also calmed, with 30yr JGBs moving lower in lock-step with US treasuries, making it difficult to say which market is leading who. This actually suggests that the overall rise in yields is from general fixed income de-risking and overall macro concerns, rather than valid and idiosyncratic issues, adding comfort to our view that yields should be steadily grinding lower into the summer months.

Outside of the daily trade-related headlines, which the market has started to normalize to, markets are feeling tired with convictions low across the board, with focus likely to be towards the end of the week to see whether the NFP can continue to buck the trend against softening survey data and lower growth expectations. Given the persistent softening in job surveys and jobless claims, the risk is probably skewed to the downside, in particular given where overall equity levels are. Famous last words!

Over in crypto, while recent headlines have been positive, the price action has struggled as both BTC and MSTR have failed to break decisively to the upside, with major tokens falling around 5–10% on a weekly basis.

On the positive side, Blackrock’s IBIT ETF saw the largest monthly inflow on record at over $6bln, while ETH futures open-interest has been moving higher with the Q1 rally, suggesting that new longs are being added.

On the news side, Stripe is reported to be in ‘serious discussions’ with TradFi banks on adopting and using stablecoins for transactions, while Trump Media has raised a total of ~$2.3B in equity and convertibles to fund more BTC treasury purposes. Lastly, the SEC has dropped their outstanding lawsuit against Binance, with prejudice (ie. cannot reopen the case again), marking the end of the previous crypto era as well as the beginning of a brave new world, albeit with significant TradFi and political influence.
Unfortunately, despite the positive backdrop, BTC failed to hold its ground last week and prices have broken down from its upward channel, and it’s always an internal flag for us when markets can’t rally on positive news. Furthermore, the recent strength in BTC has not been matched by similar gains in crypto proxies such as MSTR, where we actually saw outflows from the leveraged MSTR ETFs, marking a negative divergence vs what we are seeing with BTC and ETH.

On a YTD basis, BTC remains a strong outformer on a macro basis and vs equity, though there are short-term signs that we might be up for more challenging times ahead, with OGs and natives continuing to be better sellers and profit takers against mainstream buying.
Will we see a catch down in performance, should macro risks take a new leg down into the summer? Our bias is that markets will be quiet and not too exciting after a volatile 1H.
Good luck & good trading friends — and try to refrain from running 40x levered position in on-chain BTC if one can help it!

Key metrics: (19May 4pm HK -> 26May 4pm HK):
BTC/USD +6.8% ($103,200-> $110,200) , ETH/USD +7.3% ($2,405 -> $2,580)

A new all-time high for BTC! After taking out the prior highs we traded up to $111.9k before an eventual reversal as Trump tariff headlines + heavy supply/offers pushed us briefly back below the support/resistance pivot $108.25-109.75k, but we have been sitting in a tight range since then. From here we continue to lean towards the notion that the market will likely continue to grind higher in a contained (if locally choppy) manner, and this could take us to our terminal target of $125k fairly soon. The good two-way spot action here could keep us sideways for a few sessions, especially if the market is not given any lead from the Bitcoin conference in the coming days, but we think that another test of the highs is likely coming soon. If we do see a trend reversal, then a break below $100-101k key support could lead to a move down to $93-94k
Market Themes
Risk on sentiment generally continued in markets, though momentum began to fizzle out, with a downturn in US equities as US treasury yields pushed higher and Trump also threatened 50% tariffs on EU starting from early June, though he quickly reversed the threat for now, with a 9July deadline to make progress on a deal. Uncertainty over US policy continues to weigh on the USD in particular, with Gold climbing back to near $3400 while G10 currencies continued to gain ground against the USDBitcoin benefited from the extended pressure on the USD this week, despite the weakness in US equities, pushing to an ATH of $112k before finding some resistance. The brief risk-off turn on Trump’s initial 50% EU tariff headline saw a capitulation of short-term longs, driving spot back to $107k, though the dip was ultimately well supported and we find ourselves back at $109k ahead of the Bitcoin conference this week. ETH found relative stability in the $2,400-2,700 range, with positioning clearly a lot lighter/cleaner there now. Positive developments continue in the stablecoin space, and ETF inflows remain robust, though a further extension higher in prices from here will likely require a fresh catalyst
BTC$ ATM implied vols

Realised volatility picked up last week from a very low base, as highly leveraged short-term positions began building up as spot gained momentum higher, before being flushed out on Trump’s EU tariff headline on Friday. Despite the local high frequency realised picking up to high 40s/low 50s, ultimately we remained very well contained within the broader $105-112k range, and actually fix-to-fix realised numbers were significantly lower, suggesting that the market remains in mean-reversion state with long gamma causing short-term fluctuations to normalise quickly. As such, there has been a lack of directional interest in this environment and this has kept implied vol levels muted despite the pick-up in local realisedThe term structure continues to remain steep as the market looks to fund its long vol positions in Jun-Sep expiries with shorter dates. The exception comes in the intraweek where the market is pricing in some additional variance for the upcoming Bitcoin conference in Vegas, with the 28May expiry covering the first day of speakers and pricing in a spot gap of around 2%, which is on the lower-end of recent ‘events’ for Bitcoin though the significance is admittedly less clear for this particular event
BTC$ Skew/Convexity

After fairly static prices last week, skew attempted to move higher on the break of ATH, but with the spot price action quickly reversing the move in skew was unable to sustain. Shorter dated skew then tried to move aggressively lower on the Trump EU Tariff headline on Friday, with a pick-up in realised (and implied) volatility on lower spot admittedly justifying the move. However with spot quickly retracing after Trump’s U-turn, and with focus on potential positives from the upcoming Vegas conference, skews in the front-ends have moved quickly back for calls once moreConvexity traded very heavy in the past week as overlay selling both sides of spot continued in earnest, with the market struggling to fund its position of long vol and long wings and therefore willing to sell wings down to low levels to mitigate decay. Given the contained price action locally in spot and the potential for a sharp pick up in realised (and implied vol) and also skew on a range break (e.g. Friday’s flush lower as a good example), we think convexity offers very good value in this environment
Good luck for the week ahead!

That was quick.
Shortly after capitulating on the China tariff pause, President Trump made an abrupt post on his social media that EU trade discussions "are going nowhere" and he is thus "recommending a straight 50% Tariff on the European Union, starting on June 1, 2025". Citing EU's "powerful trade barriers, VAT taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against Americans Companies", Trump blames these actions to have created an "unacceptable" US trade deficit of >$250B a year. 
Just as markets were preparing for EU retaliation, the President quickly reversed course and agreed to extend the tariff deadline to July 9th after a phone call with the EU Commission President. So now we are back to square one versus where we were, except with the USD even under even more pressure to start the week.
At the risk of oversimplying things, if the US objective was to eliminate its trade deficit with trade partners, they are effectively asking the EU to make a 'payment' of ~$200B to gain access to the US market. That's obviously a price too steep to pay for most.
In fact, based on the work done by Citi, they actually see the 'Nash Equilibrium' outcome to be a 50% reciprocal tariff being levied between the US and EU, based on game theory outcomes.
In the case of Japan, the same analysis would suggest that Japan would be better off dragging out the 'No Deal' stance from their end, given the minimal net dollar impact on their exports. Ironically, a 'Full Deal' with the US based on the current terms might be the worst case outcome for them, so we shouldn't be surprised at a continued impasse in the foreseeable future.
Obviously, there are additional moving pieces to this that markets and economists are not aware of (eg. Rare earth dependencies etc), such as in the case with China, where the US appears to have fully capitulated and settled for the least-optimal outcome. Similar to Japan, economists estimate upside for China to come to a full trade agreement, with the optimal case to drag things out and hoping for more US concessions, which are happening. This is also the 'optimal' outcome for global macro. as the US retreats from forcing the global economy into a synchronized slowdown, with the USD taking the brunt of the hit and offset by gains in overseas equities.
Back on markets, outside of the dollar, the big loser was (global) fixed income, with the recent ratings downgrade, a disappointing budget outcome, and a series of weak treasury bond auctions have taken yields back to the highs of the recent range.
The double-whammy of higher bond yields and budget concerns caused the SPX to underperform its global peers and other macro asset classes, suffering its worst week since the beginning of April (-1.6%) with broad selling across every industry sector.
The recent US equity swoon is happening at a time where equity sentiment has rebounded to a frothy level, in particularly across the US, China, and European markets.
While growth stocks and real estate have the worst sensitivities to yields, gold prices have also suffered as higher term premium have dragged spot prices lower with geopolitical and recession tail risks having receded over the past month.
In the near term, we think the US budget and spending concerns are overblown, just like the recession slowdown risks before them, and the administration's enacted tariffs will soon bring significant revenues to government coffers, which should offset some of the near-term deficit concerns.
In contrast, crypto has been a real stalwart over the past 2 weeks, with Bitcoin prices outperforming US equities and bonds by ~15% over the past 3 weeks. 
ETF inflows saw a net weekly gain of $2.75bln, the 3rd highest weekly draw in history, with Ethereum even seeing net gains to the tune of $248M on the week. 

The passage of the GENIUS stablecoin bill was widely hailed as a key milestone in crypto development, albeit coming at the cost of increased institutional control and regulatory overnight, while moving further and further away from the OG decentralisation spirit. 
BTC & ETH vol skews have returned to more normal levels with a bias returning to the upside, while implied vol has also perked up as investors appear to no longer be fading rallies and are bracing for a more sustained break to the upside.

In the meantime, (Micro)Strategy has announced their latest $2.1BLN at-the-market equity program (perpetual preferreds) to purchase additional BTC. With the macro environment continuing to be a tailwind, momentum appears to be on crypto side, and we believe that the recent price action has been structurally healthier with less momentum chasing. We see these confluence of factors to be more conducive to a sustained break to the upside and new ATHs to be reached in the weeks ahead.
Good luck & good trading.

Key metrics: (12May 4pm HK -> 19May 4pm HK):
BTC/USD -1.5% ($104,800-> $103,200) , ETH/USD -5.3% ($2,540 -> $2,405)

Having broken into the new higher spot range ($101–110k) the market has generally exhibited low volatility in both high-frequency and fix-to-fix as good two way spot price action has kept us well contained. In terms of the typcial consolidation cycle length, we note that most consolidations over the last 18 months tend to last between 14–20 days, and rarely extend much longer, which suggests to us that the market will likely see one side or the other getting exhausted in the next week or so. This means there’s a good chance that we either test the all-time highs once again or we correct into a longer consolidation closer to $90–95k.While our base case has been that we would see some retracement before this consolidation we have experienced, it is noteworthy how well supported spot has been and this lends credibility to the idea that the final large push to $125k could be well underway and that we could have a much faster move than initially expected. The jury is still out on this, but we think the market will be inclined to chase the move should we manage to clear $110k
Market Themes
Risk on sentiment in markets last week as US and China rolled back tariff rates to their starting point before the whole escalation (was it all a bad dream?), while US macro data was also risk-friendly with a slightly softer CPI print. US equities have now unwound the entire trade-war induced sell-off and also began to unwind some of the ‘US economic slowdown’ revaluations as well. Moody’s downgrade of US debt from AAA to AA1 was only a minor bump in the road as the knee-jerk sell-off in US equities was quickly faded, though the US dollar and long term US treasuries have repriced accordingly lower. Ultimately any further extension higher from here in US equities is a ‘pain trade’ with the market being forced to cover shorts/rebuild underweights in the past week at levels that most people remain cautious/bearish on from a ‘fundamental macro’ perspectiveCrypto remained fairly range-bound with Saylor continuing to accumulate every dip in BTC, purchasing another 7,390 coins last week at an average of around $103.5k. There still remains good offers up in the $105–107k region, with a brief test up there Monday morning quickly faded and driving prices back down to $102k, before eventually recovering back into the middle of the $101–107k range that has trapped us for the past couple of weeks. ETH also slowed down its ascent after a brief look at offers ahead of $3,000, topping out ~$2,800 before pulling back and stabilising around the $2,500 level
BTC$ ATM implied vols:

Another week of low realised volatility, clocking down to the low 30s before the quick round-trip on Monday morning. This weighed heavy on implied volatility levels throughout last week, while the Monday morning reflation was also quickly faded. Ultimately the market feels long vol from heavy overlay selling both sides of spot, and while we remain contained in the $101–107k range, end user demand for options will be mutedThe roll down on the term structure remains punitively steep, with June and July volatility levels rolling down 1–1.5vols/week on a static basis, meaning holding optionality in this environment even on a longer dated basis is very challenging (despite the low implied levels in absolute terms). It seems market makers are long in those buckets and struggling to fund their positions, which is why shorter-dated contracts remain heavily offered (to the point of screening almost cheap vs even the low realised base)
BTC$ Skew/Convexity:

After fairly static prices last week, skew attempted to move sharply for calls as we first broke through $106k on Monday morning, before the aggressive high-realised pullback to $102k drove skew prices back down. However with decent demand in spot ahead of $101–100k again, the market continues to be more concerned about a volatile move higher through ATH and skew prices have moved back further for calls againConvexity remained broadly sideways after bouncing off very low levels, with the overlay supply still providing some wings to the market, but the market is also very aware of the potential for a shift in the realised regime outside the $101–107k and is therefore less eager to sell options outside the range too cheaply
Good luck for the week ahead!

Source: IgniteRatings, X
Moody’s Ratings (Moody’s) has downgraded the Government of United States of America’s (US) long-term issuer and senior unsecured ratings to Aa1 from Aaa and changed the outlook to stable from negative.This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.— — Moody’s, May 16, 2025
Moody’s downgrade of the US long-term credit rating marks the last major credit agency hold-out to have removed US debt from a vaunted ‘AAA’ status. The announcement came hours after Friday’s market close, and might have played a hand in pushing the House Budget Committee to advance their “One, Big, Beautiful Bill” in unusual hours on Sunday night to minimize market fallout.
Ignoring all the political charade around spending measures, does a credit rating still matter? Readers might recall that the collapsed Silicon Valley Bank was given a solid ‘A’ rating into its final hours, and more seasoned readers might remember the comical ratings assigned to CDOs, CMOs, subprime mortgages, and China property bonds to draw their own conclusions.
But let’s cover some of the relevant points this week in a FAQ format.
When were there previous ratings downgrades?
S&P in Jul 2011, Fitch in August 2023.
Are there immediate, technical consequences?
For ‘ratings based’ holders who cannot hold non AAA debt
They’ll change the rules (as they have), given the scale and irreplaceability of US debt as an asset class.
Impact on centralized asset clearing
DTCC and CME treat treasury collateral using maturity and security based haircuts, with less dependency on ratings.
Impact on money market funds
Short-term maturity profiles dilute the impact of credit ratings; treasury bills demand has barely blinked despite the prior rating downgrades and even debt ceiling shenanigans.
Long-term treasury reserve status
Realistically, President Trump’s tariff policies and the global trade reset have had exponentially more impact on global treasury demand than any rating agencies could do.
What happened to markets previously?
2011 was a bit of more of a shock as it was the first downgrade and came in the first iterations of the debt ceiling ‘crisis’, which we have now normalized as political theatre.Equities fell ~20% in Jul-Aug and treasury yields… fell 120bp (prices went UP) after the downgrade, due to risk-off hedging and the ongoing QE at the time. So much for that.

In 2023, the downgrade happened in August after the debt ceiling crisis in the early summer, and at a time when the treasury was withdrawing liquidity though the TGA rebuild (reserves) along higher treasury issuance. SPX fell ~10% and treasury yields went up about 50bp as a continued YTD trend move at the time. The downgrade might have accelerated their relative moves but didn’t appear to have been a game changer in and of itself.

Will the downgrade impact fiscal decision making?
The House Committee did advance their budget in an usual Sunday night vote, so there’s some effort made to mitigate the market fall out.In terms of cutting USD spending and reigning in deficits? It might give more voice to the fiscal hawks but unlikely to change the longer-term trajectory of out-of-control spending and the ongoing concern on unsustainable treasury supply.It will add to uncertainty over the timing / delay in the final passage of the bill, and dampening potential positive impacts of tax cuts given their negative budget impacts.
Market reaction this time around?
Equity reaction is likely negative as a knee-jerk, in light of the prior experience as well as the rapid run-up in prices over the past few weeks on very limited leadership (growth stocks, Mag-7 etc).Less certain on bonds, depends on the extent of the equity risk-off, the subsequent political action from budget hawks vs Trump’s deal making, the ability to pass the Senate bill before debt ceiling deadline, and any contagion impact it might have on Trump’s 90-day tariff truce.Net net, probably a risk negative on the whole on US equities, USTs, as well as the dollar.

How are markets positioned in macro?
Macro managers, systematic funds, and quant funds have all covered their shorts / underweight or have gone long.

Last week saw a mini ‘melt-up’ in buying activity as traders scrambled to cover shorts with NYSE stocks making a recent new highs in their Advance-Decline Line.

How was last week’s data?
Pretty bad for bonds.Michigan sentiment showed a massive drop in outlook despite the recent tariff trade relief.Headline was the lowest level since Jun 2022, and closest to the lowest levels since the 1980s.Long-term inflation expectations came in at the highest levels since 1991 (4.6%).One-year inflation reading came in at an astonishingly high reading of 7.3%, the highest since 1981.

Should markets worry about foreign selling?
Let’s take a look at what happened over the past few months.In equities, non-US investors have already stopped buying US equity funds and have been net sellers of bond funds since March. This trend is likely to continue for the near future.

However, in terms of impact, bank data suggests that foreign investors hold a total of ~$57 trillion of USD assets in 2024, vs $2.2 trillion in 1990. ~$17 trillion of which are in equities, and $15 trillion in bonds.Said in another way, foreigners hold ~20% of total US equity supply and 30% of US bond supply.These are not small notionals that can be sold and de-risked in meaningful amounts without impacting the total capital markets structure.Plus, ownership is scattered across various foreign holders, so any rash decisions from one will have complex game-theory implications on other holders.For equities, key will remain earnings performance, which have been positive so far. JPM data suggests that SPX Q1 earnings have surprised by ~8% to the upside, with 70% of companies having reported, and 54% of companies beating revenues and 70% beating earnings estimates. Mag-7 earnings were also well ahead of the index at a blistering +28% EPS growth.

In terms of ownership, ignoring ambiguities out of ‘Carribean’ (ie. Cayman) entities for now, UK, Canada, and Japan are the top-3 holders of US assets globally, all of which should be expected to be close US allies. Chinese holdings is at a mere distant 4th at 4% vs ~8–9% for the upper group.

And judging from the past month, Japanese investors have been selling USTs but against big inflows into equities, mitigating fears of any significant ‘de-dollarisation’, and turned out to be more of an asset allocation move.So in short, probably shouldn’t expect any huge de-coupling flows in the meantime… For now!

How about Crypto?
Interestingly, crypto prices have hung in throughout this move despite an ~7% sell off in gold prices from the peak.Unlike in previous months where both BTC and gold went up in unison, Bitcoin has been rising against a drop in spot gold which is also reflected in ETF flows.Gold ETFs saw a notable drop in flows against a small rise in BTC ETFs, with a similar pattern in gold vs BTC futures on CME.

In short, with macro markets stabilizing and the USD-debasement trade reflected across most asset classes, we should assume more of these micro-correlation breaks and relative value opportunities to take hold while we await the next major geo-political developments to materialize.
Good luck & good trading!

Key metrics: (21Apr 4pm HK -> 28Apr 4pm HK)
BTC/USD +8.2% ($87,500-> $94,700) , ETH/USD +13.2% ($1,590 -> $1,800)

Last week we saw a fairly clean and quick move through key resistance at $89–91k (coinciding with the 100d MA), faster that we initially expected (and the market seemingly). For now we expect the market to take a breather in the comfortable trading range of $92–99k, where we anticipate range-bound price action, especially with the European May Day holiday coming up and local holidays in the Asia regionAt some point in the coming weeks, we do expect the market will want to test key resistance at $100k above here, but we’d expect reasonable offers stacked ahead of that. A break below $89k could see us retreat into the $82–89k range for a little while, though we expects dips to the now support zone of $91–89k to be bought. We remain structurally bullish over the medium term and think that the next few quarters will see a move to new highs, targeting $115–125k, with the path now looking a little clearer having taken out some key resistance levels cleanly
Market Themes
Positive week for risk assets as Trump/Bessent began back-pedalling on the China tariff situation, suggesting they acknowledge that they have overplayed their hand (China refused to be bullied into a ‘bad deal’), and Trump also denied reports of plans to imminently remove Powell from his position as Fed chair. While the catalyst for this shift of tone is hard to pinpoint, it seems no coincidence that it came after Trump’s approval ratings fell to their lowest yet in his term, which lends further credibility to the argument that Trump remains beholden to his voter base and ultimately doesn’t want to drive the US economy into a recession, particularly ahead of mid-terms next year. Longer-dated treasury yields retraced quickly from the highs while equities re-gained footing with SPX back to 5,500 — for context only 10% off the ATH despite all the fanfare. VIX also retraced back sub 25 after holding surprisingly long above the 30 levelAs for crypto, BTC continued to show some de-correlation from SPX price action, though was ultimately buoyed by the tailwind for risk assets, briefly testing through $95k at the end of last week. Altcoins finally joined the rally, exhibiting a stronger correlation to risk assets, with ETH briefly testing up to $1,800, though still lacking some real momentum higher. Overall it feels we have reached a zone ahead of $100k where there is plentiful supply of BTC ahead, from those who missed selling last time round and also those who re-initiated longs between $75–82k, and as such without a fresh catalyst we can expect some consolidation in this range
BTC$ ATM implied vols

Implied vols trended lower last week despite the break higher in spot above $90k, as overlay selling of both calls and puts accelerated, with the downside seemingly established now, especially with risk assets recovering and BTC beginning to break its correlation from SPX. On the other hand the market seems to be expecting a wall of offers in cash ahead of $100k and therefore is willing to enter short calls against core cash longs at these elevated prices in spot. The other factor is that realised volatility has remained pretty subdued despite the magnitude of the move in range terms on the week — spot up almost 9% but in a very orderly fashion, with 1w realised clocking in the mid-high 30s on a high frequency basisThe term structure remains very steep with the market still reluctant to price in a more medium term reversion to a lower vol regime. If the ‘digital gold’ thesis does play out for BTC and its correlation does break with SPX, then this should actually be pretty bearish for volatility with lower realised vol on pullbacks encouraging more inflows on dips. With some expiries like June offering static roll-down of 3–4 vols in a month’s time, we continue to think longer dated vols should remain under pressure in the absence of any changes to the current environment
BTC$ Skew/Convexity

Skew prices in shorter-dated expiries moved for calls on each break higher in spot, but ultimately these skew moves were short-lived given realised volatility remained subdued on the moves higher in spot and this put pressure on implied vol levels even at higher spot prices. Further out the curves skew prices continued to normalise to levels more consistent with the past 12 months, as the market becomes more confident that BTC will not exhibit the same volatile down-moves as we saw in Q1 even if we see local down-turns in SPX/global equity pricesConvexity broadly moved sideways over the course of the week, though at this vicinity of spot ($92–99k), local strikes are likely to struggle to perform given muted realised volatility locally, but strikes outside the $88k/$102k might exhibit a sharp pick-up in realised volatility given the technical/psychological levels involved
Good luck for the week ahead!

US continued their tariff brinkmanship with the world, with Trump most recently declaring that ‘over 200’ trade talks were taking place and that he’s spoken on the phone with President Xi most recently. However, that statement was quickly refuted by the Chinese Embassy in Washington, who officially declared that “China and the U.S. are NOT having any consultation or negotiation on #tariffs”, and that “The U.S. should stop creating confusion”.
Political analysts believe that low-level talks are probably on-going and taking place, but it’s doubtful that any serious deals are being made, with the effective trade embargo dragging economic growth lower in first half. We don’t expect to see a clean resolution of any China-US trade talks in the foreseeable future.

The news (or lack of bad news) was good enough for equity markets to stabilize, which saw US stocks post their 2nd biggest weekly gains YTD, and for most non-USD macro assets to recover much of their drawdowns since liberation day.

Volatility and credit spreads have made a similar recovery, with expensive tail hedges rolling off and the worst scenarios have not (yet) been realized. We expect that risk markets could continue to squeeze higher a bit more to ‘illogical’ levels before we resume on a more pronounced bear market later on in the 2H of the year.
The breaks in trade relationships and growth damage are very real, with the respective countries cutting off their supply chain dependency on one another. Global portfolios will be reconsidering their USD dependency as well if the current account-funded deficit begins to reverse in the years ahead.

Interestingly, the recovery in credit spreads is now pricing just ~20% chance of a US recession, based on historical modelling. On the other hand, the poor performance of small caps is suggesting ~70% of an imminent slowdown, with treasuries and SPX looking at basically a coin-flip. Different strokes for different folks.

For now, normalcy is returning as even US treasuries saw its biggest 4-week in nearly 2 years, with investors purchasing bonds en masse ahead of an imminent economic slowdown and continued softening in spot inflation.
As our long-term readers are aware, expectations of any near-term demise of treasury bonds are always greatly exaggerated, with private holdings of treasuries increasing in 2024 to make up for any drop in official (central bank sales), and non-US holdings still at elevated levels.

The most recently available data on weekly official activity suggests that there hasn’t been any significant selling of treasuries, with cumulative Japanese purchases also looking stable despite concerns otherwise.

On the other hand, the recovery in risk appetite sparked the largest daily gold outflow in over 14 years, with dealers reporting over $1.3B of net selling last Tuesday.

Similarly, the USD index is off to the worst start during the first 100 days of a US presidency, with the dollar falling over 10% vs majors, performing worse than the end of the Bretton Woods era in 1973.

To add insult to injury, Saudi Arabia’s fiscal situation is looking to turn from lender to borrower even with oil price at $80, removing one of the biggest excess capital sources in the world, and raising questions on how much the available pool of capital will be to fund the burgeoning US debt balance in the long-run.

Bitcoin has been a key benefactor of the USD swoon, with BTC outperforming both the Nasdaq and gold in April, enjoying one of the best weeks since Trump’s election victory.

The narrative of BTC as an alternative safe haven continues to grow, as seen from the steady rise in BTC dominance since 2023, indicative of a consistent sea-change in investment narrative, rather than FOMO driven behaviour.

ETF inflows have recovered along with the improvement in risk appetite, seeing 6 consecutive days of inflows to recover from the Q1 swoon, with prices breaking out decisively against the downward trendline at around $88k.

One of the recent and prevailing narratives suggest that BTC is about to break higher as a delayed reaction to the increase in M2 money supply. While we are not a strict subscriber to this view as there are lot more nuances behind the data, we are bullish on BTC in the medium term due to expectations of monetary and fiscal eases across in response to tariff-driven slowdowns.

In the meantime, we expect to also see some return of FOMO behaviour, though not necessarily in DeFi-native land, as TradFi investors have started to pile into the latest Bitcoin SPAC announced between Cantor, SoftBank, and Tether.
Keep an eye out in this space for FOMO behaviour to flow back into crypto from TradFi markets, rather than vice versa, as future mania will likely be driven by mainstream investor behaviour crypto-beta assets become more prevalent across traditional venues.

Looking ahead, GDP figures are due from the US and Europe, with additional inflation readings out of Europe and NFP jobs data out on Friday. The BoJ is expected to keep rates steady at 0.5% on Thursday with the Fed already in communication blackout ahead of the May 7th decision.
Over in equities, over half of the Mag-7 members (Microsoft, Meta, Amazon, Apple) will report this week against drastically lower EPS revisions.
As such, we expect markets to shift their focus to economic releases and earnings reports, and tune out some the cacophony of trade-related noises for this week. Good luck and good trading ahead!

Key metrics: (14Apr 4pm HK -> 21Apr 4pm HK):
BTC/USD +3.6% ($84,450-> $87,500) , ETH/USD -1.9% ($1,620-> $1,590)
Another week on from the test below $75k (which was the post-election pivot level) and we have received further confirmation that the double-bottom has marked a strong support/base, with price action this week holding cleanly above the $80–81.5k resistance/support level. Our base case is that the market will hold within this higher $82–90k range for the next few sessions, if not weeks. A break above $91–92k and the market will be looking to test $100k, and potentially then onto the highs again. If instead we get a move below $73–74k then we could see spot breaking down more structurally to $60–65kWe remain structurally bullish over the medium term and think that the next few quarters will see a move to new highs, targeting $115–125k technically, but the path/timing continues to remains difficult to pinpoint
Market Themes
Much calmer week overall across markets as a huge amount of position rebalancing/de-grossing in equities/treasuries/FX/crypto has been done by this point, while most of the ‘bad news’ related to tariffs is now out there (including freshly announced export restrictions on chips to China). Powell spoke and struck a more cautious tone on rate cuts, noting the risks of higher inflation, which was not particularly well received by the market or Trump. Reports then came out over the weekend that Trump is ‘looking at ways to remove Powell’, which sparked a fresh wave of USD selling and weakness in US assets on the Monday open after Easter weekend, with the credibility of US assets continuing to be undermined by Trump’s actions. VIX continues to remain sticky above the 30 level despite lower realised volatility, as the market remains very nervous of further unexpected headlines from Trump and his administrationAs for crypto, BTC is for the first time since late February attempting to break its correlation to SPX/equity beta, and reacting more to the USD weakness side of the story, rallying against the USD on Monday in line with Gold and G10 FX, despite weaker equities/higher VIX. Altcoins meanwhile struggle to rally in this environment of weaker equities, so the BTC outperformance looks specific to the story of diversification away from USD holdings/assets, and if this continues to play out then BTC should have decent room to catch up to the large moves higher in the likes of Gold this year, and it has always been our view in this environment that the SPX-BTC correlation needs to breakdown in order for BTC to really take its next leg higher
BTC$ ATM implied vols

Implied vols trended aggressively lower last week after a sharp drop-off in realised volatility, clocking in the mid 30s last week with positioning a lot cleaner and spot finding equilibrium in a fairly tight $83–85k range for the majority of the week. The move lower was fairly weighted with front-end vols most significantly selling off ahead of the Easter holiday weekend, before reflating naturally once the weekend was over and with spot showing signs of life on the move higherWhile the cross-asset backdrop remains more volatile than previous environments, BTC in particularly is starting to de-correlate from other assets, notably SPX, and if this should continue then ultimately that could weigh further on implied volatility further out the curves, and begin the more structural repricing lower of BTC volatility that is essential for its continued adoption/capital allocation as a non-speculative store of value/USD diversification play
BTC$ Skew/Convexity

Skew prices in shorter-dated expiries moved from pricing deeply for puts over towards flat, in line with the spot move higher and pick-up in realised performance on higher spot on Monday. However ultimately it feels as though the market is a lot more ‘comfortable’ in this zone of spot, as implied volatility levels have not rolled up much despite the 5% rally in 24hours, suggesting that the market has some overhang of long volatility positions in this vicinity of spot, while we have seen some longer term players using the pop in spot to re-initiate covered callsConvexity broadly moved lower in-line with the reprice lower of base volatility and also with supply of wings from overlay sellers both sides of spot, given spot is consolidating in this well-established technical band of $82–90k. However should this range now break we would expect an acceleration of realised vol (and implied vol) either side of spot, therefore we continue to advocate owning wing strikes in this environment given the technical spot outlook, and given the higher realised vol-of-vol and the strong risk-reversal vs spot correlation that continues to be exhibited either side of spot
Good luck for the week ahead!

We are coming up in the first 100 days of Trump's 2nd presidency, but the geopolitical world already feels unrecognizable versus just a few months ago. It's no longer a question of whether the US will decouple with the world, but how, and the US's 'exhorbitant privilege' when it comes to the USD reserve status is legitimately being challenged.Correlations are breaking, capital flows are reversing, Bitcoin is (finally) starting to diverge from equities, the President threatening to treat the FOMC Chair like a participant at the 'Apprentice', and the elephant US endowments are dumping illiquid private equity during one of the toughest times in the industry. Have we truly arrived at an inflection point in financial history?
Dollar-Based Safe Haven
The top of mind questions on everyone's mind right now - have USD and US Treasuries lost their long-held position and safe-havens? And has Trump inflicted irrecoverable damage to the post-war global security and financial infrastructure?
Investors have been fleeing the USD for the EUR and JPY, and selling US equities in favour of Chinese stocks. Uncertainty over the end of US exceptionalism has led to the USD falling to a 3-year low, and last week's Michigan Sentiment index falling to a near record low against rising inflation concerns.

Foreign investors have also dramatically slowed their investing in US equities, with ETF flows dwindling to near zero over the past 3 months.

Macro correlations are also breaking with the JPY seeing a substantial rally (~140 on USDJPY), but against a rising Nikkei, as the Yen rally is now a function of the weakening USD, rather than a conventional carry-unwind.

The most important 'known unknown' question surrounds US treasuries, where 10y yields have risen against a backdrop of weaker USD, equities, and the underlying economy, making the bond move seem 'EM-like'. While we don't subscribe to that call, US financial conditions are tightening and bonds are not playing its role as a safe-haven hedge. We don't see a clean resolution to this until we see a more conclusive dialing down of Trump's precarious tit-for-tat tariff negotiations.

Foreign Investors Have Been Net Sellers of Treasuries Over the Past 6 Months, with Central Banks Likely Liquidating their USD Positions to Defend Their Own Currency Moves

Despite the sell-off, US equities still enjoy a substantial premium over EM and global competitors, with the latter treading water (in terms of valuation multiples) ever since the GFC. As the trade war is unlikely to benefit any nation as a net winner, we doubt that foreign multiples will close the gap against the US on their own. In that case, a US 'catch-down' is probably not a great development given the implied wealth destruction.
Markets need to be careful with what they wish for.

Deal or No Deal

The tariff drama continues with President Trump flip-flopping between overt intimidation vs proclamations of imminent 'deals' with former partners & allies. Risk assets initially rallied on Friday as Trump stated that he was "very confident on trade deal with EU... Will make good deal with China...Everybody's on my priority list.", but that saw very little follow-through as the 1st trade deal remains elusive.
We continue to believe that the headline tariffs will matter less than the 'floor rates' that will be assigned on the initial agreements, and the fact that the administration is still unable to articulate a deal with Japan remains concerning. Have the negotiators even defined the goal posts yet?

Nevertheless, following President Xi's recent visa to SEA, the US meetings should pick up this week with Japan, South Korea, Thailand, and India confirmed to be holding sideline trade meetings during the IMF Spring meetings. The UK is also expected to reach a trade deal within 3 weeks based on local reports. Keep your eyes peeled for any positive trade progress over these next few weeks.

The Apprentice, Season 2

"Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete 'mess!' ... Powell’s termination cannot come fast enough!""The Fed really owes it to the American people to get interest rates down. That's the only thing he's good for... I am not happy with him. If I want him out of there he'll be out real fast believe me."  -- Trump via Truth Social, 17April2025
If we had a Fed chairman that understood what he was doing, interest rates would be coming down. He should bring them down."-- Trump at the Oval Office on 19April2025
"With these costs turning so nicely downward, just what i predicted they would do, there can be almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already "lowered" seven times. Powell has always been "To Late,", except when it came to the Election period when he lowered in order to help Sleepy JOe Biden, later Kamala, get elected."-- Trump via Truth Social, 21April2025
Contrary to earlier proclamations that the administration was ready to endure some economic pain in response to the tariff war, Trump has reverted to his old playbook of bashing the Fed for not lowering rates fast enough. While we appreciate the wisdom of jawboning down longer maturity rates as financial conditions ease, we fail to see the benefit of urging the Fed to cut against the backdrop of softer USD and import-led inflation.
The market would seem to agree, as the SPX traded down -2% on Monday with yields rising once again as participants didn't appreciate the latest threats.
On the other hand, Fed Chair Powell has been taking the situation in stride and has been professional in response, staying firm on the line of Fed independence.
Fed's independence is "very widely understood and supported in Washington and in Congress where it really matters.""People can say whatever they want. That's fine. That's not a problem, but we will do what we do strictly without consideration of political or any other extraneous factors"-- Powell at the Economic Club of Chicago, 17Apr2025
Nevertheless, the rates market pricing in substantially more rates before year end vs Fed projections (4 vs 2), due to concerns of an incoming recession. We don't think it's wise for the President to pressure the Fed anymore on this front, though crazier things have been said over the past 2 months.

Looming Slowdown

By certain measures, the current economic policy uncertainty is at the highest levels on record, surpassing even the initial covid period. This is filtering down into a substantial drop in the business outlook, flagged most recently by the Empire State Survey, which showed activity expectations falling to the lowest levels in over a decade.

The sub-indicators showed a similar picture, with forward looking shipments and capex indicators falling precipitously, while prices paid are trending noticeably higher. Similarly, corporate earnings revisions have been ratcheting down, casting a long shadow over equity markets as earnings growth compresses.

Poison Pill
Although markets have been conditioned to follow what officials say, the 'Trump 2.0 trades' have been a disaster as most of the administration's narratives have led to significant losses. A picture speaks a thousand words:

Once bitten, twice shy. It might take a bit of work for markets to take Trump's words at face value again in the near term.
Bravery or Fodder?
While hedge funds have been busy de-risking in 2025 after suffering significant losses, retail investors have been bravely bucking the trend with the levered Nasdaq ETF seeing record-breaking inflows over the past 2 weeks.
It's well documented that retail and passive money have been massively outperforming managed capital and professional fund managers over the past 5 years - will history repeat itself one more time, as doubtful as it might seem at the moment?

The Retail Buying is Happening at a Time When a Considerable % of Companies have Cut Earnings Guidance with SPX Market Depth (Liquidity) Near All Time Lows

All That's Glitter IS Gold
The yellow metal is making up a decade of underperformance in a hurry, with spot prices rallying by 150% since the start of 2024, and the recent momentum going vertical as investors scramble for capital safety in this upside-down world.
Ironically enough, President Trump tweeted an auspicious comment on "he who has the gold makes the rules", likely referring to his negotiation tactics, which further spiked spot prices to a new record high at above 3,400.

Furthermore, data shows that gold has been deriving most of its rally during the Asian hours, suggesting possible central bank and official flows getting out of USD into alternative safe havens. The USD decoupling does seem to be more pronounced than previous episodes...

BTC Narrative, Revisited. No Longer Just Nasdaq, but Not Quite Gold (Yet).
One of the possible ramifications of the US decoupling is a revisit to the long-term BTC bull case as a store of value. While we have also been critquing BTC as a levered Nasdaq proxy over the past year, it has finally started to show some signs of its own decoupling away from equity markets. Bitcoin is close to regaining the $90k area despite a poor week for US equities across the board.

Before we get too excited, BTC is still lagging spot gold quite substantially YTD, so the best we can say is it's turning into some hybrid of gold + levered Nasdaq at the moment, which is a substantial upgrade than being just a glorified TQQQ proxy.

JPM data shows a spike in gold futures positioning while BTC inflows have flatlined. Keep an eye out for any rebound to finally justify BTC's promise as a hedging alternative.

US Endowments Mini-Shock
Finally, outside of his international saber-rattling, the Trump administration has been wagering a domestic fight with its own US endowments, most notably with Harvard, which is having potentially negative spillovers into market liquidity.
Reports suggest that the Yale endowment will be selling ~US$6bln of its private equity portfolio into an extremely weak private market that is struggling with record low liquidity exits and poor returns.

Non-domestic observers might not be aware of the size and importance of the US endowment system, but they are collectively one of the most critical investors and 'permanent' holders across capital markets. Will a continued politicized battle lead to a slowdown in their reinvestments, or a change in capital mix?
Never a dull moment with this administration. The times they are a-changin' indeed...

Good luck and good trading this week friends!

Key metrics: (31Mar 4pm HK -> 14Apr 4pm HK)
BTC/USD +3.0% ($82,000-> $84,450) , ETH/USD -11.1% ($1,800-> $1,620)

Technical price action was quite constructive in the past 2-weeks amidst all the cross-market chaos, with BTCUSD seemingly putting in a double bottom last week right ahead of $74k, which was the initial resistance zone on 6Nov24 where spot stabilised after the Republican sweep. Subsequently we broke through some more medium-term downtrend from the end-Jan highsand now find ourselves wedged between strong support at $81.8–82.3k, while big resistance continues to come in between $88–90k.Overall the technicals are suggestive of sideways consolidation in this broader $82–88k range in the coming weeks, with positioning likely a lot cleaner as well. Should this double-bottom at $74k hold then that may indeed mark the end of the corrective wave from the post-election highs that we expected and set up for a final wave ascent to $115–120k in the coming months
Market Themes
Extreme volatility across markets in the past 2 weeks as Trump implemented reciprocal tariffs that exceeded even the most hawkish estimates, with China particularly feeling the pressure as a tit-for-tat escalation culminated in tariff rates >100% both sides, effectively rendering trade impossible between the nations. VIX spiked from 20 at the start of April to a high of almost 60 as the market struggled to stomach the implications, with almost a week of Trump failing to budge stance as he attempted to bring nations to the negotiating table. However, with the US bond market in a fragile state, announcement of a 90-day pause on tariffs for all nations ex-China brought some relief to the markets, with VIX eventually closing out last week back below 40The implications were not just confined to equities, with the market effectively rejecting US assets on the back of the announcement, with the DXY dropping just under 5% in April so far alone, while long-dated US Treasuries, once a safe-haven, also sold off, akin to an ‘emerging market crisis’. Ultimately there is (estimated) over $10trillion of unhedged USD asset holdings out there, so while the pace at which this adjustment to the USD will almost certainly slow, the trend looks very much set now as the market looks to reposition hedges in the Trump eraAs for crypto, the equity-beta dominated price action for the most part, with BTC$ probing range lows of $74–75k on a couple of occasions, while ETH$ also saw a significant liquidation to below $1,400 briefly. However as the equity outlook began to improve, following the 90-day pause and with VIX lower, BTC$ in particular began to regain ground, with the diversification away from USD/FIAT starting to kick in. Ultimately we will need some continued stability in the macro backdrop for any rally above $88/90k to sustain in BTC$, while on the downside we would need to see fresh lows in US equities/fresh highs in VIX to take out the range lows of $74k. Overall it looks like we are setting up for some sideways consolidation ahead of Easter
BTC$ ATM implied vols

Drastic vol-of vol over the past 2 weeks as the market took its cue from equity volatility markets over the Trump tariff saga. There did not seem to be a huge amount of demand for volatility on the downside moves, aside from some more tactical shorter dated put protection demand, and as such the vol term-structure inverted steeply as realised performance drove gamma contracts higher.With VIX settling towards the end of the week and US bonds also finding some equilibrium, the case for higher volatility in crypto in the coming 90 days (during the tariff pause window) seems quite weak, and as such we would expect to see some overlay selling both sides of the distribution as we settle back into the range. Should we see some further disorder in equity/rates markets then the risk of some CB intervention may rise (including potential quantitive easing); the fattening of such tails would push crypto vol higher.
BTC$ Skew/Convexity

Skew prices moved aggressively for puts on each spike in VIX/dip in US equities as the local BTC-SPX correlation remained high and the BTC spot-vol correlation performed accordingly with SPX. The skew move was less pronounced in Vega tenors for BTC with a lack of structural demand for downside hedges beyond the end-April expiries, although a few buyers of June 60–70k puts were seen in the marketConvexity broadly ended the period unchanged despite drastic performance of implied vol-of-vol and also spot vs risk-reversal correlation both sides of spot (skew strongly bid puts on lower spot then reversing a lot of the move on higher spot). Ultimately local realised performance was relatively high in this period and spot has consolidated in the middle of the broad $74–90k range, and therefore appetite to own wings in the current regime is low. Structurally we continue to believe these flies are priced too low based on the noted performance of vol-of-vol and spot vs risk-reversal dynamics
Good luck for the week ahead!

After a wild week of intense geopolitical aggression from the US vs the rest of the world, we ended the week on a strong note as President Trump appears to have made a significant concession with a stated exemption on smartphones, computers, and other electronic devices from reciprocal tariffs. Specifically, the US Customs and Border Patrol also said that the goods would be excluded from Trump’s 10% global tariff on most countries.
The Chinese government responded positively and stated the move as a ‘small step’ towards rectifying Washington’s ‘wrong doing’ and removing the rest of the levies.

Risk assets obviously welcomed the move, with Nasdaq gaining 1.5% and China equities rallying by over 3% in the early Asian session. Even some subsequent retractions from Lutnick and the Trump administration were not able to dull the risk-on sentiment, with participants cautiously hopeful that the worst rhetoric is behind us (for now).

Despite the impressive risk bounce, US assets have suffered notably throughout this tariff saga, with the USD losing 3% and 10yr yields rising by nearly 60bp over the past week on heavy trading volumes. Citi reports that there were ~13 other historical instances where the dollar fell over 2% and 10y yields rose by over 30bp, ranging from the late 70s stagflation crisis, early 80s Volcker shock, and the Eurzone crisis in early 2010s. Historically, the SPX had recovered with double digital gains across the majority of these instances, but are things different this time around? Only time will tell.

Net international official demand for US stocks cratered over the past month, as Central Banks divested out of their USD holdings as a tariff response; however, retail demand for US & China equities remained healthy as investors remained in buy-the-dip mode, offsetting much of the aggressive selling from HFs that pushed US equities into deep oversold territory.

Outside of tariffs, the most important question for equities is whether the US economy is heading into a recession. Prominent financial figures have started to warn that the US is heading into an imminent recession, with betting markets placing 40% to 60% odds of one happening in 2025. Is this just a Wall Street scare tactic to convince the President to dial down trade aggression, or a genuine concern over the economic outlook? Our view is that it probably doesn’t really matter, as sentiment often frames reality, not the other way around.

With US earnings season starting to kick into gear, valuation will be a focal point and any considerations of fair market value will depend on whether the economy falls into a recession. The current forward S&P 500 forward P/E ratio is at around 19, well within the historical range, and a further correction to the lower end range of ~15x would imply a further 25% to 30% downside from here.
However, if a recession were to happen and corporate earnings dropped by a further -15% to -20%, the valuation floor for the SPX could fall into the sub-4000 area for the SPX. EPS revisions have already started to come down ahead of the earnings season.

Away from equities, the biggest concern last week was actually over the dramatic sell-off in fixed income, calling into question whether Trump’s aggressive actions have damaged treasuries’ heralded status as a global safe haven. Treasury yields saw the largest weekly jump in over 20 years as concerns swelled over foreign central bank selling as a tariff response, with the supposedly Japan-led treasury selling from last Wed triggering Trump’s initial tariff compromise.

While there have been numerous suspicions and concerns about China aggressively selling USTs, we are skeptical of that view given that their holdings have already been dropping over the past decade, and that central banks actually own very little of the long-end (20–30yr bonds), which is where most of the recent damage was on.

Nevertheless, regardless of who did the initial selling (we suspect it’s Japanese life insurance companies and pensions), the divergence of USD and 10yr yields is concerning and flashes early warning signs. Capital account surpluses go hand-in-hand with current account deficits, so any normalization of the latter will mean less dollars being recycled into debt funding.

To add fuel to fire, a jump in UMich inflation expectations is making things tricky for the Fed and bond observers as consumers’ view of inflation is diverging with recent underlying data. Short-dated rate pricings have repriced higher (less cuts) in the past week as the market is questioning the Fed’s ability to stay dovish against inflationary headwinds from incoming tariffs. A rock and a hard place indeed.

Ironically, crypto has been a benefactor from the recent shake-out, as equities have been realizing higher volatility than Bitcoin through the risk-off move. A beggar-thy-neighbour policy with tariffs has pushed spot gold to ATHs, with BTC finally regaining some of its long-lost ‘store of value’ narrative.

Chart technicals look good with BTC breaking out from its YTD trendline and looking to reclaim the 90–95k area as its next target. Furthermore, for the first time in months, memecoins and alcoins appear to be catching a bid once again, with a number of native-favourite memecoins seeing 100%+ gains over the past week.

Finally, on a longer-term basis, structural fundamentals continue to argue for higher long-term prices, with WSJ reporting that Binance is seeking to make a deal with the US and Trump’s crypto company in exchange for looser government oversight. Meanwhile, Bloomberg reports rising expectations for perpetual futures to be offered on US exchanges in the coming quarters, putting them on par with existing offshore offerings, dramatically increasing the secondary liquidity and leverage available on regulated US venues as mainstream adoption continues.

Did someone say Liberation Day? Or was it Liquidation Day?
Macro assets crashed across the board with the Nasdaq retracing nearly 25% peak to trough, and markets showing ominous signs of a modern ‘Black Monday’ with US equities trading down -4% this morning, and China/HK stocks trading down -9% as of the time of writing. This most recent leg of the sell-off was driven by China’s retaliatory action on the US (eg. Rare earths) but without announcing a domestic stimulus to offset. China announced a 34% additional tariff on all US imports starting April 10, with 11 US companies added to the list of “unreliable entities” amongst other retaliatory measures.
Are things quickly turning into a ‘race to the bottom’ to see who can take the most pain without folding to the other side? Has everyone gone ‘too far in’ to be willing to step back?

US equities are on track for the largest $ loss in history, with over $5 Trillion wiped out over the past few days and over $10T since inauguration day. But there was really no place to hide USDCNH spiked as devaluation concerns rose, JGBs saw a record rally with a -20bp move lower in yields, treasuries are now pricing in 4.5 cuts from the Fed before the end of the year (despite a Powell push-back), and ECB being priced for back-to-back cuts.

Investors are reacting as one would expect — by dumping whatever long exposures they have. Wall Street reports that long/short funds and equity prime books are showing some of the most aggressive selling and de-risking in recorded history, while JPM reported that US retail sold well over $1.5bln of equity exposure on Friday. We might be about to transition from the denial and anger phase to acceptance in the interim.

Funding pressures are starting to spread as well, with Citi’s ‘Keyrate’ indicator threatening to break to pre-SVB highs, and credit spreads are starting to widen out with Japanese and European bank stocks trading down -10% on Friday.

So what to look for in this sell off? We can do an entirely separate opinion piece of what we think the playbook is, but our bias is that this is one of the most coordinated administrations in history, and they have been extremely explicit about resetting the globalisation landscape since the beginning. We think Wall Street has been in denial to appreciate Trump’s conviction, (similar to how they missed the magnitude of Fed hikes) and they are finally coming around to really accepting this new era of new bi-lateral relationships.
“My philosophy, Mr President, is that all foreigners are out to screw us and it’s our job to screw them first.”— Treasury Secretary John Connally to President Nixon, 1971. Credit for the quote to Yanis Varoufakis
For our younger crypto readers, many might think that this is the 1st time that the US administration has done something unreasonable in an attempt to re-jig the world order in their favour, but that is sadly not the case. History has shown that the US is willing to disrupt traditional allies to extend Americna dominance, or to accept short-term financial pain for long term economic power.
“A controlled disintegration in the world economy is a legitimate objective for the Eighties.”— Paul Volcker during the ‘Volcker Shock’ as the Fed hiked interest rates into a global recession in 1982. Credit for the quote to Yanis Varoufakis
Remember when the Fed hiked the world into a recession which led to the lost decades in Japan in the 90s? Or how long Trump has been unhappy with the decline of American manufacturing since is ‘Art of the Deal Book’ in the late 80s?
“We’re a debtor nation. Something is going to happen over the next number of years with this country because you can’t keep on losing $200 billion (deficit at the time).”— Donald Trump on The Oprah Winfrey Show, April 1988.
We have held a firm view that the Trump administration is extremely serious about this reset, with any semblance of ‘Trump puts’ being placed on treasury bonds, not equities. The first mission is to force long-dated yields to go lower to lessen the debt refinancing pain, through an economic slowdown and DOGE cuts. 10y yields have done the hard work as they have collapsed by over 80bp without the Fed committing to any dovish pivot. So far, so good.

With the US funding situation in control, the administration can now conduct more aggressive geopolitical policies to weaken the USD and to buy time and start a long journey to bring some US manufacturing back onshore.
We see the current phase of the plan is the ‘shock-and-awe’ phase, where it’s really not about the actual value of the trade deficit (ChatGPT caclulated or not, that’s not the point), but Trump is basically forcing everyone back on to the negotiation table on a bilateral basis. We are already seeing that happening with Vietnamese, Korean, and Japanese entities looking to make new bilateral arrangements with Trump, where he is confident in his own abilities to negotiate structurally advantageous deals on a one-on-one basis.
It was never about the trade deficit. Everyone knows that America cannot reshore tomorrow (or ever), but it has always been about renegotiating better deal terms in a new global order.

In the meantime, the economic impact on trade partners will force domestic central banks into their own FX devaluation or easing policies to support the economy, therefore lessening the inflation impact on US imports. In return for removing tariffs, we suppose that the US will likely ask for critical assets to be manufactured in America, for allies to purchase more munition exports, or to increase their core holdings in long-dated treasuries as a deal condition.
In the meantime, for unfriendly partners, the tariffs will bring some temporary revenue relief for the treasury as a form of tax income, giving the US some fiscal buffer to continue their aggressive negotiating positions.

Naturally, all of this doesn’t happen without risks. The administration is effectively betting that they will be able to devalue the USD against lower funding yields, balanced against a softening economy with a manageable level of stagflation without losing USD hegemony. The economic pain will be palpable, but waged against the bet that this brings structural benefits to the US in 18 to 24 months’ time. Furthermore, unforeseen and unexpected retaliatory actions from trade partners will present extra risks to this framework.
Markets are not going to like this uncertainty.
Given the balance of risks here, the Fed will not be able to cut rates aggressively or Ctrl-P a new round of QE unless it is acting in unison with more strategic moves and timing of the administration, and this policy interdependence is the unfortunate reality of the environment we are living in. As such, all the signs suggest that macro markets are now in ‘bear market’ mode, and rallies are to be sold, and investors will be forced to accept this new reality against the long-term wagers being made. This is not dissimilar to other nations who have advocated short-term perseverance in return for longer-term prosperity. Tougher times are probably ahead of us.
How about crypto? For a brief while, it would seem that BTC had decoupled from the global sell off as BTC held the 81k level on Friday while global equities cratered. Well, so much for that.

Crypto prices ‘caught down’ to the fall in equities as BTC gave up the $80k support, with Bitcoin falling about 9% week-on-week to $75k, and Ethereum collapsing by -18% over the same time. Liquidation picked up on Sunday with low liquidity, and any hopes of a BTC ‘store of narrative’ appears to be shelved for another day.

Over the longer-term, charts might argue that BTC has broken out against global equities and is over-due to catch-up with spot gold, but catalysts appear to be fleeting at this time and risk management (ie. Lower prices) will likely dominate until global stops melting down… Whenever that happens.
Global leaders have gone too far in their negotiating positions to have any realistic hope of any de-escalation in the meantime, so markets will be stuck to deal with all the surrounding uncertainties and market pain for now. The market will likely continue to frustrate and shake investor confidence for quite a while longer.

What if it all goes astray, with leaders continuing to escalate their trade tensions and asset prices becoming collateral damage? Is there anyone left with liquidity to bail things out in case things get much worse before they get better?
Funny you would ask that. The legend lives on…

It’s shaping up to be a very rough week ahead. Good luck to all our readers and stay solvent!

Key metrics: (24Mar 4pm HK -> 31Mar 4pm HK):
BTC/USD -1.8% ($83,500-> $82,000) , ETH/USD -5.3% ($1,900-> $1,800)

While we experienced some choppiness over the weekend, for the most part BTC has been fairly well contained in the broad $81–88k range, with realised vol declining to mid 30s for the last 7 days. ETF outflows appear to be stabilizing here, though we suspect we will see more outflows if we get back above $90k without sufficient upward momentum. Otherwise there appears to be continued concerns over the trade war between the US and their trading partners which has led to spot trading heavy again, testing support around $81–82k level, which appears to be fairly solid for nowIn some ways price action here feels a little similar to that Sept/Oct price action last year, where price rallies were consistently sold into. A clean break below $81k will get more volatile and likely culminate in a test of recent lows, although the $77k-73k support zone should be expected to hold at first attempt; a breach of this could really open up the downside however to $60–65k and would leave us scrapping our medium term views. To the top side offers will be strong around $88.5–91k but above that the market might look to retest the $r100k level. We remain medium term bullish and expect the next quarters will see the market begin an ascent to $115–125k, but for the next few weeks or month there could be continued sideways price action.
Market Themes
Cross-asset markets were fairly calm for the first half of the week, even despite the looming tariff deadline and some drip feed information about what to expect at Trump’s ‘liberation day’ on 2Apr. However negative sentiment accelerated into the weekend as the market showed no appetite to buy risk ahead of month/quarter-end and with such an important tariff deadline approaching. Ultimately it feels as though this is a function of the market being in a position of weakness after what has been a very challenging quarter for most, and it seems most would rather remained sidelined until we navigate this upcoming week. Throw in some disappointing US data with growth metrics worsening and inflation remaining sticky, and the market is likely to remain defensive in the near term. However ultimately it feels as though weak leverage has been cleaned out from the market and the market cannot sustainably trade back-and-forth headlines over tariffs, so the bar for a low vol relief grind higher in April for risk assets seems lowAs for crypto, after briefly popping its head above the $2k parapet, ETH finds itself back below $1,800 as the market sentiment remains poor. BTC fared better relatively, testing short-term resistance at $88.5k and triggering some stops, before retracing back to $82k. While Gold is up 18% YTD, BTC is down 13% with some arguing that the combo of easy monetary policy + risk off favours Gold, while easy monetary policy + risk on favours Bitcoin. Monetary policy is certainly moving further towards the easy stance so if we get a significant pivot from Fed and/or risk assets rally, we could expect that to be the next catalyst to drive BTC impulsively higher
BTC$ ATM implied vols

Quite drastic vol-of vol once again this week as implied levels headed towards local lows in the first half of last week, driven by low realised volatility as the market clearly had a pocket of long gamma for the quarter end expiry on 28Mar. Realised volatility clocked in the low-mid 30s for most of last week, before picking up into the weekend (though even then only to a mid-40 handle realised). The market clearly has been delivered short gamma from a combination of the long strikes rolling off on Friday and some outright downside buying which has become more gamma intensive given the spot move lower. What is also surprising is the the 25April expiry has also rallied almost 9 vols off the lows of last week, with the market clearly scrambling to cover the intraweek notional/gamma shorts. Ultimately the baseline realised regime remains in the 35–50 range and any spikes above this are likely to be short lived, as we saw in the first half of MarchThe implied volatility term structure flattened out significantly as a result of the front-end led moves, with a lot of supply hitting the market in June-Dec expiries last week. Moreover, structural Vega demand remains less prevalent in a market where spot is trending lower and that is also reducing the upward pressure on longer-dated expiries
BTC$ Skew/Convexity

Skew prices moved quite aggressively for downside towards the end of the week, after the relief rally to $88k showed no impulsive momentum higher and spot/vol prices accelerated lower on Friday. It has long been our view that in the absence of crypto specific catalysts, the skew particularly for shorter dated expiries in BTC should correlate to that of SPX (i.e. in favour of downside) given the strong local correlation/risky asset behaviour. While it is not surprising to see front-end downside better bid in light of this, we think locally the move is a bit extreme given the realised volatility has been fairly contained on this move lower, indicated some real depth of liquidity on the bid-side ahead of $81–80kConvexity broadly ended the week unchanged after again spiking for gamma contracts with the market looking to own low delta downside in the event of another round of liquidations should tradfi markets continue with their risk off tone. We still think given the high levels of vol-of-vol and risky vs spot correlation that flies are structurally underpriced
Good luck for the week/month/quarter ahead!

Risk assets endured a terrible end to a rough week with US equities trading down -2 to -3% on terrible breadth, CDS spreads hitting recent wides (+20bp on high yield), crypto prices breaking back to YTD lows (BTC <$82k), treasuries bull steepened, and spot gold hitting record highs as the primary risk-off hedge. Tech stocks were hammered (Mag-7 down -3.5% on Friday) while defensive names outperformed, as risk-takers took shelter ahead of Trump’s imminent ‘liberation day’ announcements this Wednesday.
On top of tariff concerns, US economic data disappointed across the board with sticky inflation prints against weak consumer confidence surveys.
Consumer spending slowed materially to start the year, rising just 0.1% MoM in real terms following a rough -0.6% drop in January. Services spending fell for the 1st time since 2021, while core PCE came on the high side at 0.37% MoM and 2.8% YoY, giving the Fed room very little room to maneuver. Final UMich long-term inflation median came in at the highest level in a decade (4.1%), with the 5yr expectation also rising from 3.3% to 3.7% at the latest print.

While economic hard data has held in for the most part, participants are rightfully worried about the weakening survey data spilling over into an activity slowdown. This is especially true at a time when Elon’s DOGE department is making such drastic cuts to government faculties, with a Washington Post article suggesting that the latest DOGE initiatives will be cutting up to 50% of federal agency employees based on an internal White House document.
Such a cut would basically offset much of the US job gains post covid, which was mostly government sector driven, and puts significant upside risks on the unemployment rate vs current sell-side estimates.

Federal officials are preparing for agencies to cut between 8 and 50 percent of their employees in the first phase of a Trump administration push to shrink the federal government, according to an internal White House document.Source: Washington Post

As if that wasn’t enough, the latest update to Atlanta Fed’s GDPNow suggested a negative growth in Q1 even after adjusting for the outsized gold import figures. The latest adjusted print showed 1Q25 GDP growth at -0.5% vs +0.2% previously, well below the 1.2% consensus GDP estimate from Wall Street, which stood as high as 2.2% a short while ago.

In terms of market response, treasury yields aggressively bull-steepened into the risk-off move, providing a bit of a PNL buffer for equities, as stock-bond correlation fell to the most negative levels in a year. A negative correlation at this time suggests that markets are genuinely worried about an economic slowdown that the Fed might not be able to buffer with rate cuts in time.

SPX broke down through a bearish flag pattern, and the Mag-7 threatened to make a bearish breakdown against the YTD lows. Technical indicators look ominous and the path of least resistance appears to be downwards from here.

Naturally, risk takers are reeling from the PNL damage and have been taking a highly defensive stance with low exposure this week. FX option demand suggests low activity and positioning ahead of April 2nd, while outright exposures on tariff-sensitive assets in Canada and Mexico remain muted.

Just as in months past, crypto’s close correlation with equities continued, with BTC trading down -6% on the week and ETH and SOL losing -13% and -10%, respectively, on a lack of new catalysts and inflows. ETF activity has been muted and more of a function of hedge fund basis-arb trades, rather than new directional flows.

From a positioning perspective, speculative positions on BTC futures (CME) are at some of the most negative (short) levels over the past few years, a rapid turn around in fortune from the widespread bullishness in January. Keep in mind that positioning data is merely a statement on the market condition, and not necessarily a signal to a tradeable setup. The catalysts for a sustained rally remain fleeting at the moment, though we would expect any bullish turn to be sharp given the extended short positioning at the moment.

In options space, put skews are trading extremely rich to calls across all maturity tenors, with the market hedging aggressively against the downside, particularly around the 80k area. Futures liquidation has picked up recently, though nothing like the pace earlier in the quarter, signaling the current low conviction in the space to close a challenging quarter.

Key metrics: (17Mar 4pm HK -> 24Mar 4pm HK)
BTC/USD +4.1% ($83,500-> $86,900) , ETH/USD +8.9% ($1,900-> $2,070)

Realised volatility in BTC has finally rolled over this last week, with the market trading between $81.5–87.5k for the week in a rather contained/orderly fashion. Today the market appears to be testing some downward-trend resistance from the end-February highs. A clearance through $87.5–88k would open us up to a re-test of resistance at $91k, above which a break would be confirmed at $93k; if this plays out it should lend momentum to a test of more critical resistance at $100kIf instead we reverse lower from here, the market will likely see significant support ahead of $80k and extending down to $77k, with dips being bought into. A break of key support at $73.5k would open us up to a more material correction down to $60–65k and render our current view obsolete, suggesting a much more complex and longer-term dynamic at play. We continue to be medium term bullish and expect a move through $115–125k over the coming months and/or quarters.
Market Themes
Significantly calmer week across markets as VIX finally retraced below the psychological 20 level, closing out the week at 19 (from as high as 29 just 2 weeks ago) after Powell walked back any hawkishness in Wednesday’s FOMC meeting and a US government shutdown was once again avoided. Risk assets got a further boost over the weekend with leaks over the 2April tariffs suggesting much more targeted measures, potentially reducing the scope for near-term escalation into a full-blown trade war. While Trump has been unpredictable to some degree over this topic, ultimately a lot of fear/bearishness around trade tariffs has been priced into risk assets at this juncture, therefore short-term there seems to be asymmetry in terms of the reaction function (i.e. good news may be taken more favourably than a continuation of bad news)As for crypto, the market once again had reason to build some excitement/anticipation on Friday ahead of an unplanned address from Trump at last week’s Digital Assets Summit in NYC, though ultimately this turned out to be a damp squib as it was a 5 minute pre-recorded video address. BTC spot briefly tested $87k before retracing down to $83k as risk assets threatened to turn lower into the weekend, before finding its way back to $87k in light of the more favourable tariff news. ETH also squeezed out short positioning, breaking through $2k initially on Thursday and showing signs of a more sustained bounce currently.
BTC$ ATM implied vols

Implied volatility levels headed lower of the course of this past week, as realised volatility capitulated with spot finding equilibrium in the $81.5k-87.5k range. High frequency realised dropped down to 40 on a 1w basis, even including FOMC and Trump’s address at DAS, which is approaching the low realised levels of February. Ultimately our long term view remains that BTC realised volatility should trend towards a 30–40 vol regime, though it remains a high vol-of-vol asset so the occasional spike to a 50–60 vol regime will be within the distributionThe implied volatility term structure steepened out as front-end contracts led the way lower, driving a weighted move of the whole curve with expiries out to September reaching local lows for the year. The market seems to be extracting premium associated with policy changes, with the narrative on that front stale and Trump showing no particular signs of sensitivity to BTC prices. Moreover, with BTC showing good signs of support ahead of $80k even during more shaky SPX performance last week, the market is also removing some equity-beta vol as the realised correlation wanes and VIX also finds itself back below 20From here we do expect realised volatility to remain fairly subdued as we consolidate/await fresh catalysts into month/quarter-end. The 4Apr expiry may continue to pick up some interest with the next round of Tariff announcements from Trump due on 2April, but once that has been navigated should the macro/risk backdrop continue to look benign as it currently does, we may see the market position for a low realised grind higher during April
BTC$ Skew/Convexity

Skew prices continued to recover over the course of the week in gamma expiries (from very stretched levels for downside), with little positioning left to be liquidated on pullbacks lower and BTC spot holding up fairly well even during pullbacks in SPX last week. Further out the curve, supply of downside vol resulted in a slight reprice higher of skew (for calls) in April-September expiriesConvexity broadly ended the week lower as implied volatility levels compressed and realised vol-of-vol also waned. The market also saw some 1x2 call-spread ratios from directional players, net supplying vol and convexity to the market, further putting pressure on wings. We expect that convexity levels will find a base here with any break of the $80–90k range likely to trigger a pick-up in realised volatilityGood luck for the week ahead!

“April 2nd is going to be liberation day for America. We’ve been ripped off by every country in the world, friend and foe,” — Trump said in the Oval Office Friday.
Markets settled down over the past week as risk assets steadied after a few weeks of extreme selling pressures, and the Trump administration behaving in a relatively muted manner as of late. However, in a prepared speech from the Oval Office on Friday, Trump stated that they are preparing a “Liberation Day” tariff announcement on April 2nd (next Wed), where the US will be unveiling their reciprocal tariffs as retribution for the trade actions taken by other countries & allies.
Expectations are for tariff announcements to be more focused and immediate in nature, and only countries where the US runs a trade surplus with and have no imposed tariffs on the US will be spared, according to a WH official. Furthermore, Trump officials appeared to have softened some of their narrative recently as they acknowledged that the list of target countries may not be universal, and that certain existing tariffs (eg. Steel) might not be cumulative. Naturally, the political focus this week will be on preliminary details on the ‘America First’ review ahead of the April release, along with US/Russia talk on Mondays and ongoing Turkey/Isareal developments.
“It’s 15% of the countries, but it’s a huge amount of our trading volume,” referring to it as the “dirty 15” and signaling they are the target. — Treasury Secretary Bessent via Bloomberg

Regardless of how trade negotiations turn out, the damage to market sentiment has been done as tariff mentions have dominated corporate earnings calls YTD. Trade sensitive sectors have fallen by ~15% since the January peaks, and long momentum factors have seen some of the sharpest unwinds in 40 years, erasing 2 years of gains in just 3 weeks.

In response, professional money managers have retreated from their US stock holdings at the fastest pace on record, with Europe, UK, and China being the main benefactors thanks to their renewed fiscal spending aspirations.

Similarly, on the positioning side, managers have crowded into ‘low vol’ positions at some of the fastest pace on record, with recent performance rising above 92% percentile range and funds have taken on max defensive positions.

One positive is that retail remains to be equity ‘hodlers’, and have in fact been adding on recent dips as call option volumes and margin account balances remain elevated. Retail accounts have done very well and often outperformed their professional peers in recent years. Will their hot streak continue?

Sentiment remains oversold and at extreme levels, setting things up for a risk squeeze as a contrarian move in the interim. Google searches for the word ‘recession’ is also near multi year highs (similar to Covid / GFC), providing further support for a relief rally higher in the near-term.

Most importantly, US ‘hard’ economic data remains robust and in contrast with the soft sentiment, suggesting an over-extrapolation of the current weakness versus underlying fundamentals. In recent years, macro observers have generally been more precarious in their assessments than the actual reality, and we are of the view that the underlying economy remains stronger than feared as well.

Crypto markets had a similar quiet week, with prices largely rangebound and rebounding off recent lows as a mirror move of the equity action. A recent BoA survey on the most crowded trades saw a similar dip in crypto longs, following the recent capital exodus out of US equities. ETF inflows have been positive over the past 6 consecutive sessions, albeit in very muted volumes.

Technically speaking, prices remain on a negative downward trend but are stabilizing around key support levels, with ETH settling at the highs of the 2022 range, and the next big support level at around the 1500 area.

As a side observation from an otherwise slow week, Bloomberg data-mined an interesting pattern between DOGE and the BTC/Gold ratio, drawing an uncanny similarity over the past 2 years. While, we are not attributing any trading significance or intellectual explanations, we’ll leave it to our readers to draw any interesting inclusion, if any, from the industry’s most famous memecoin.

Finally, despite the recent pullback, we still see the year as a breakout year for the digital assets industry overall, with easy regulatory scrutiny, legislative optimism, and continued mainstream adoption. None of this is more prevalent with the recently announced M&A deals from a couple of US crypto giants, namely with Kraken acquiring NinjaTrader for $1.5bln to break into the TradFi futures space, and Coinbase being in acquisition talks with Deribit, crypto’s dominant option exchange.
We are confident that we are arriving at the inflection point of this growth journey, with crypto becoming a major asset class for mainstream investors. The development of crypto options trading, industry clearing, new stablecoin rails, and interest rate curves should proliferate in the foreseeable future, backed by a new wave of institutional players and expertise that should elevate the industry to new heights. LFG!

Key metrics: (10Mar 4pm HK -> 17Mar 4pm HK):
BTC/USD +1.5% ($82,300-> $83,500) , ETH/USD -8.2% ($2,070-> $1,900)

BTCUSD spot remained heavy over the last week but we have finally begun to see normalisation lower in realised volatility as we settle into the $80-85k range. It’s worth noting we made a fresh local low last leek which leaves us waiting and watching the price action for the next few days to obtain clues as to direction of the next major move in spot. Given the extended period of higher volatility we have just been through, we think we could be in for a few sessions of continued consolidation and expect support at $78-80k and resistance initially at $85-86k and above at $89.5-92k to guide the price action for the next week or soA break below $73k could see a more dramatic return to higher volatility, whereas a break above $92k would see us retesting more meaningful long-term resistance at $98-100k. We remain medium term bullish on BTC but will be looking for more confirmation to the end of this corrective period before engaging
Market Themes
Another volatile week across markets as SPX made fresh cycle lows amidst continued rebalancing and degrossing from equity long-short funds, with rumours of multi-sigma drawdowns reported. On the narrative front, nothing fresh really catalysed this, with the market becoming increasingly desensitised to the back-and-forth on tariffs; it was ultimately an overdue correction and de-leveraging in a market that has been very comfortably grinding along for years now. It feels that structurally volatility is creeping back into this cycle, with VIX unlikely to sustain as in the low-teens in the coming months, though of course we will have periods of calm and consolidation along the wayAs for crypto, the market continued to clean out residual positioning with more than a few looks below $80k in BTC last week, while ETH finally cracked below the key $2,000 support and hasn’t been able to reclaim upward momentum since. Intra-week Bitcoin spot traded with a high local index to SPX/QQQ Indices, remaining heavy in NY sessions as the rebalancing went through before finding some footing in Asia. However with positioning now clearly a lot cleaner across the board we would not expect such a high local correlation to continue, and we would need a material move lower in SPX to plunge through fresh lows in BTC
BTC$ ATM implied vols:

Implied volatility levels finished the week fairly lower than Monday’s levels after a brief spike on Monday night as equity vol rallied with SPX turning lower in the NY session. Realised volatility declined over the course of the week in Bitcoin with 1w realised retracing below 50 and into the low-mid 40s for the first time in weeks. The move lower was most pronounced in gamma expiries while further out the curves vols drifted lower with supply of June topside noted as medium term players unwound structural topside playsFrom here we expect realised volatility to remain fairly subdued as we consolidate/await fresh catalysts. The 4Apr expiry is beginning to pick up some interest with the next round of Tariff announcements from Trump due on 2April, with equity index and FX vol curves pricing a decent premium for this event

Skew prices gradually recovered over the course of the week in gamma expiries (from very stretched levels for downside), as liquidations to the downside clearly happened on Sunday/Monday last week, leaving little positioning left to be triggered on pullbacks in spot. Skew prices further out curves remained fairly static as structurally the market remains uninterested in downside playsConvexity broadly ended the week unchanged despite high vol-of-vol as implied levels retraced aggressively from the highs over the course of the week. While we structurally think convexity remains a good own, smile decay for shorter dated expiries can be punitive in locally range-bound markets and therefore we would look to accumulate convexity further out the curves for a change in narrative driving a breach of the $70-105k broad range we have been in since the election
Good luck for the week ahead!

Last week was another rollercoaster ride in asset markets, though the market saw a decent bounce on Thu/Fri after registering extreme oversold readings on various technicals (CBOE put-call ratios spiked to the highest levels since last summer). Limited tariff and geopolitical news (for now), an averted US government shut-down, and extreme over-old readings on US equities provided the stage for a 2%+ bounce on Friday, albeit on low volumes.
According to Bloomberg, it took only 16 days for SPX to fall >10% from its recent peak, citing the proliferation of automated trading systems and strict risk-management limits. Market corrections have been increasingly fast and sudden as technology advances, with the last 3 recent major sell-offs (Vol-crash 2018, Covid 2020, and Tariff 2025) registered as some of the sharpest retracements on record.
On the contrary, recoveries have generally taken longer as modern money managers are extremely risk-constrained. The 2018 sell-off took just under 2 weeks for the SPX to correct 10%, while needing nearly 4.5 months to recover those losses to break-even. Bloomberg cites that over the past 24 instances where stocks have sold off more than 10%, the average recovery time has been ~8 months, reflecting the idiom that markets tend to 'take the stairs up, but the elevator down' on price movements.
Furthermore, according to JPM, the last 12 US recessions saw US equities correct by ~30% on a peak-to-trough basis, versus 9.5% for the SPX at the current time. A simple extrapolation would suggest that equity markets are not pricing in ~33% chance of a recession, with commodities & treasuries suggesting close to a 50% chance, while credit coming in on the other end at just 10%.
While asset classes are still trying to find their footing, Wall Street economists have pre-empted the moves with GS as the first major investment bank to slash US GDP forecasts for 2025. GDP forecast was drastically cut to 1.7% from 2.4%, "the reason for the downgrade is that our trade policy assumptions have become considerably more adverse" as tariff impacts grow. Similarly, JPM raised recession risk to 40%, and cited risks to the US's 'exorbitant privilege' of finding its rising deficit profile against low funding rates, high capital flows and attractive dollar-based assets.
In addition, with the Democrats pretty much folding against Trump in the govt shutdown talks, that has fully opened the way for DOGE to continue with its aggressive cost-cutting crusade until at least September.
So has retail been astute enough to front-run this growth slowdown? The signs don't appear to support that thus far. Inflows into US equity ETFs have been positive almost every single day since the February peak, while outstanding holdings in growth ETFs (such as Nvidia) have rebounded back near historical highs.

Meanwhile, long-future positions have corrected from their peaks, but remain highly elevated versus recent history. Similarly, short interest on the SPX and Nasdaq remain non-existent at near historical lows with equity bears still largely extinct.As such, the current belief is that the current sell-off is entirely driven by the massive 'multi-strat' hedge fund strategies that have dominated the macro space. WSJ reports that the largest of the 'smart money' funds (Millenium, Point 72, Citadel, etc) have seen multi-sigma drawdowns and stop-losses in their February and March performances, an extremely rare mis-hap across their long trading histories.
The chaos continued Tuesday. As stocks tumbled in the morning, Goldman Sachs sent a note to clients saying stock-picking hedge funds had just endured their worst 14-day period since May 2022.Millennium sank 1.3% in February and was down about 1.4% through the first six days of March. Two trading teams at the firm focused on index rebalancing lost about $900 million this year. -- WSJ
This view is supported by monthly provisional hedge fund data (source: JPM), showing a big drop in equity exposures across equity-quant hedge funds. Popular long-short pairs across growth & momentum trades have been crushed, with the HF 'VIP basket' underperforming the SPX by ~10% over the past month alone.
Unfortunately, the market pain is seen not just in public markets, but also across investment banking with M&A activities reportedly coming in at the worst pace in over 20 years on tariff uncertainties.
M&A activity in the U.S. during the first two months of this year was the slowest in more than two decades, with only 1,172 deals worth $226.8 billion through Friday, according to data compiled by Dealogic. That was down by about a third from the same time last year by both volume and size and the slowest open by volume since 2003. -- Reuters
On the flip-side, outside of gold, (short dated) fixed income has been the other major beneficiary of the growth scare, with futures pricing in >2 cuts before year-end once again, and overnight rates to be as low as ~3.5% by the end of next year.
Undoubtedly, the continued withdrawal of excess liquidity from global 'QT', and a persistent short-base in US Treasuries (concerns over rising deficit etc) have certainly aided in the current bond rally.
Finally, equity valuations outside of the major large caps are actually relatively contained vs historical averages, and economic hard data is likely to outperform the rapid deterioration in soft data, so market consensus is that this remains a 'buy the dip' market while we work through the tariff volatility.
In crypto, sentiment remains muted with BTC hovering around the low $80k area post the strategic reserve disappointment, while altcoins fared better with a jump in Solana, Chainlink, and XRP (~10% higher WoW) following the Friday rebound in risk sentiment.
BTC ETFs saw record outflows last week and traders have already been hedging via downside puts as we appear to enter a range bound market in the near-term.
As sentiment takes a hit, publicly listed bitcoin miners have turned towards debt for their capex funding needs following a record year of equity fund raising from MSTR. As long as funding venues remain open, miners should be able to sustain operations without significant BTC divestitures to keep selling pressures in-check, though it would be important to keep an eye on this area as we head further into the year. MSTR's NAV premium has steadied around 1.8x, while their weighted-average BTC cost basis is at ~$67k, so still around 15-20% of buffer from current spot levels.
At the risk of sounding like a broken record, crypto's achilles heel remains with Ethereum, which fell another 5% week-on-week and has underperformed BTC by a whopping ~10% over that timeframe. The BTC/ETH ratio is now trading at 0.023, a level not seen since 2021, when BTC spot was trading at just around $35K.
A lethal combination of general apathy, PNL stop-losses, a lack of new narrative and unresolved value distribution with L2s continue to plague the #2 token. According to CoinGecko, the total market cap of stablecoins has now surpassed that of Ethereum's ($236B vs $226B), and ditto for the total value of all ERC20 tokens combined ($255B). In fact, this is the first time in history that ETH has started the first 3 months of the new year in the red as prices have fallen by nearly 48% YTD, with less than 50% of active wallet addresses in profit as the PNL damage is widespread.
Unfortunately, it will be difficult to expect prices to see a rapid turnaround with the kind of structural damage we are seeing in the ETH ecosystem, and it seems likely to expect any major strategic pivot from the Ethereum Foundation in the foreseeable future.
As they say, 'the beatings will continue until morale improves' - keep your bullets dry friends!

Key metrics: (3Mar 4pm HK -> 10Mar 4pm HK):
BTC/USD -10.7% ($92,200-> $82,300) , ETH/USD -14.8% ($2,430-> $2,070)

Continued high volatility as the market reacted to a series of headlines and events involving Crypto last week, but we ultimately failed to gain a footing in spot and we remain caught in the broad range, with support down from $79–73k and resistance above from $89–93kWe had been hoping that last week’s test of the lows and quick reversal would have marked an end to this corrective period but sadly it feels that we will be left wanting. Resistance levels above the initial offers include $95–96k and then again $100–102k and finally back at $110k. Below here a break below $73k could see us retracing to $65–67.5k and could render this more general upward extension more complex than currently viewed. Our medium term bullish view remains intact, but the time-line for this continues to feel as though it’ll be longer than shorter in the absence of a strong catalyst higher
Market Themes
Another volatile week across markets as VIX rallied from 20 to 26 amidst implementation of tariffs reigniting fears of global trade war, while European and German defence spending sparked a rout in Bunds that spilled over to a sell-off in JGBs, Gilts and even US treasuries, putting further pressure on the overall risk complex. Ultimately it does seem that Trump’s administration is keen to bring down long term rates/re-financing costs and ease financial conditions, though the path to get there may involve a further sell-off and rotation away from US risk assets; NFP showed some signs of weakness under the hood that can be expected to continue especially in light of DOGE’s crackdown.As for crypto, the bounce on Trump’s tweet was short-lived as pressure on US equities drove a full-scale reversal from the $95k high we saw a week ago back down to test the lows of $81–82k. The market found support down there as US equities initially climbed off the lows and the market help optimism for positive crypto announcements at Friday’s crypto summit. On Thursday night Trump signed an executive order to capitalise the SBR with previously held BTC, which was a mild disappointment given no fresh buying announced, but ultimately still a step in the right direction for BTC at least (no mention of alts). Ultimately nothing further was announced at the summit and despite briefly testing the $90–91k resistance range after risk sentiment recovered on Friday, we found ourselves probing the lows again with an illiquid Sunday night sell-off to $80k in BTC and $2k ETH/$125 SOL
BTC$ ATM implied vols:

Implied volatility levels finished the week broadly unchanged after some severe volatility intraweek — implied levels all squeezed up ahead of the crypto summit with the overnight gap at one point being priced at over 5%. High realised volatility intraweek also supported vols into the event. However after the event ultimately brought nothing new and spot remained within a tight range, vols then oversold with the 14mar expiry briefly trading down to 47, before sharply rallying after Sunday night’s selloffRealised volatility continues to remain in the upper 50-low 60 range which is elevated vs the recent regime as the spot market attempts to find an equilibrium in this new range. While we can expect a bit of local volatility to continue in the coming sessions, we would anticipate that positioning is a lot cleaner at this juncture, and that realised vols will ultimately normalise back to the mid-40 regime of recent times after this week
BTC$ Skew/Convexity:

Skew prices retained premium for puts in gamma expiries as spot reversed aggressively lower from the squeeze higher and downside moves continue to remain more volatile than upside (barring the initial weekend squeeze on the Trump tweet). Further out the curve, skew flips for favouring calls from April/May onwards, with the market reluctant to play for structural downside in BTCConvexity broadly ended the week unchanged despite high vol-of-vol and strong performance of risk-reversal vs spot dynamics. However with spot remaining locally volatile in the range and participants looking for directional expressions via call-spreads and put-spreads, we can see why the weight of smile decay can be punitive and as such could see fly prices remaining relatively heavy in the short term, though we would advocate owning dips in flies
Good luck for the week ahead!

FAFO -- GeopoliticsFor those of you not familiar with the lexicon, 'FAFO' is an endearing acronym for ‘F— around and find out,’ and is probably the most apt description we have of the current global landscape.
With President Trump off to a volatile start in his 2nd term, perhaps even beyond what his most fervent supporters might have expected, US asset markets have been riled as sentiment has been sourced on his extreme tariff and military negotiations with USA's former and current allies, while Wall Street is starting to come to terms that an intended economic slowdown might be on the horizon as they attempt to re-private major parts of the US economy. This was something we had covered at length in last week's letter.
A quick look at some of the media headlines of the past week points to continued chaos on the back of the President's geopolitical moves:
Trump Pares Back Canada, Mexico Tariffs in Latest Whipsaw on Trade -- WSJTrump’s On-Again, Off-Again Tariff Strategy Sows Confusion -- BloombergChina Sets Retaliatory Tariffs on Canada Rapeseed Oil, Pork -- BloombergFed’s Powell Says Still No Need to Hurry to Consider Rate Moves -- Bloomberg
While markets are apt at looking past bad news, they are terrible at dealing with uncertainty, with Wall Street staring to call 'mercy' against the President's precarious narratives thus far.

FAFO -- Equity Markets
Since the YTD high in mid-Feb, the MSCI World index has fallen by 4.6% with the SPX being down more than 6%, and is currently flirting with the 200D moving average that it has held since late 2023. The tech-heavy Nasdaq dropped nearly 10%, Nvidia is off by ~20%, while emerging market stocks have outperformed US equities by the largest delta over the past decade. Is this the end of US market exceptionalism?

We already covered the oft-misunderstood 'Trump-put' in length last week, and this point was reiterated recently with Trump claiming that he's not even 'looking at the market' and blaming the recent sell-off on jealous 'globalists'.
“I think it’s globalists that see how rich our country’s going to be, and they don’t like it,” he said in a press conference in the Oval Office.“Nothing to do with the market. I’m not even looking at the market, President Trump stated. -- CNBC
In response, US investors sharply unwound their crowded momentum trades, leading to an unprecedented pace of factor collapse on widespread liquidation and deleveraging of systematic strategies. Stock return dispersion has also jumped to the highest levels since Covid, and cross-asset portfolios saw the largest losses since 2023 on weakening growth, tariff overhang, and a game-changing pivot in European fiscal policies.

FAFO -- US Economy
Aside from just capital markets, the market now also realizes that the Trump administration is also experimenting with some highly unorthodox changes to the economy, with the cumulative impacts of higher tariffs, stricter immigration and DOGE spending cuts overwhelming positives from tax cuts and corporate deregulation. With growth estimates being ratcheted down, the consensus is now calling for more back-loading growth policies post the 2026 mid-term elections, and to brace for more pain in the meantime while the aggressive policies work their way through the system.

The slowing trajectory has manifested through recent data, with Friday's NFP details showing tangible weakness under the headlines. A large spike in 'underemployment' to 5 year highs has added fuel to recession fears and drove yields lower as rate cuts were pushed forward into early summer.

Although Powell tried to strike a confident note during his speech at the Chicago Monetary Forum on Friday:
*POWELL: FED DOESN’T NEED TO HURRY, CAN WAIT FOR GREATER CLARITY*POWELL: US ECONOMY IS STILL IN GOOD PLACE DESPITE UNCERTAINTY*POWELL: TARIFFS DRIVING NEAR-TERM INFLATION EXPECTATIONS HIGHER-- Bloomberg
Treasury Bessent went the other way and claimed that while the economy they have inherited has started to "roll [over] a bit", he cautioned that “there’s going to be a natural adjustment as we move away from public spending to private spending". As if the warning was not stark enough, he further added that:
“The market and the economy have just become hooked, and we’ve become addicted to this government spending,” Bessent said. “There’s going to be a detox period.” -- CNBC
More explicitly, on the topic of the "Trump put", he flatly stated:
“There’s no put,” he said. “The Trump call on the upside is, if we have good policies, then the markets will go up.”“It’s a much-needed course adjustment,” Bessent said of Trump’s economic policies. “We’ll see whether there’s pain,” he added. “I’m confident if we have the right policies, it’ll be a very smooth transition.” -- CNBC
Basically, the administration claim they are adjusting-out of Democrat-run economy, and people should expect some pain as they FAFO on how far they can push the re-privatization agenda. Strap in.

FAFO -- European ReArm
One of the major fallouts with Trump's pivot on the Russia-Ukraine conflict is with how Europe is approaching the topic of defense and fiscal spending in light of the US military pull-out. European & German bunds suffered their worst yield sell off since the start of the Euro, with bund yields rising by a 30bp on a single day to shatter previous records, as investors were spooked by the ReArm Europe initiative and fiscal spending packages.

Specifically, the EU announced their "ReArm Europe" plan, which will earmark €800bn over the next few years for European defense, with 650bln of that funded at the individual country level. Following the announcement, Germany further announced a massive u-turn for for the country’s fiscal policy to include a €500bn Special fund for infrastructure spending over the next decade, and an exemption granted to defense spending to go above the 1% of GDP limit and other initiatives to raise their own debt ceiling in the coming years.
Without wading into the dangerous discussions of a re-militarized Germany in continental Europe (not going there), that's a lot of bunds to issue as far as the eye can see. Yikes.

FAFO -- Crypto Strategic Reserves
Crypto assets had a volatile week that ended mostly in disappointment, as the shock 'announcements' of including SOL/XRP/ADA in the 'purported' digital reserve and the high profile crypto summit did not lead to any factual buying plans.
In short, the 'Strategic Bitcoin Reserve' will simply be taking the seized BTC assets and accounting for that as a reserve, instead of outright selling them back in the market. In the similar vein that 'gaining weight slower' is considered as 'losing weight' as a typical new resolution, this is most certainly not the bullish development that crypto natives were hoping for.
"A 'Strategic Bitcoin Reserve' will be capitalized with bitcoin owned by the federal government that was seized as part of criminal or civil asset forfeiture proceedings" -- David Sachs via X
The administration tried to throw the market a bone by keeping the executive open to possibly buying bitcoin (and other tokens) in the future, but the damage was already done as the legislative hurdles to establishing any marginal crypto buying was indeed too complex for the administration to tackle at this time.
The U.S. commerce and treasury secretaries "are authorized to develop budget-neutral strategies for acquiring additional bitcoin, provided that those strategies impose no incremental costs on American taxpayers," - White House

IN ADDITION, the Executive Order establishes a U.S. Digital Asset Stockpile, consisting of digital assets other than bitcoin forfeited in criminal or civil proceedings.The government will not acquire additional assets for the Stockpile beyond those obtained through forfeiture proceedings.The purpose of the Stockpile is responsible stewardship of the government’s digital assets under the Treasury Department. -- David Sacks via X

Token prices fell 10-20% on the week, after a series of mishaps with the initial reserve 'basket selection' and the subsequent non-action taking the wind out of the sails across the ecosystem. Price action has turned technically very negative and the high realized volatility has worsened the BTC risk-adjusted profile, with few (if any) immediate positive analysts on the horizon.

In the meantime, we expect to see continued weakness (or unwinds) in BTC ETF flows as retail de-lever their positions given the cross-macro liquidation across risky assets.

With 'mission accomplished' from the political purview of strategic reserves, the administration is now pivoting their attention to re-establish the digital USD and institutional dominance via the upcoming stablecoin policies. So much for getting away from the US-fiat hegemony...
“I also want to express my strong support for the efforts of lawmakers in Congress as they work on bills to provide regulatory certainty for dollar-backed stablecoins and the digital assets market,” Trump said during a gathering of crypto executives at the White House. “They’re working very hard on that.”
“We are going to keep the US the dominant reserve currency in the world, and we will use stablecoins to do that,” Besset said.-- CNBC

FAFO -- Government Shutdown?
So, what to look forward to from here? Can we get a break with all the FAFOs?
Risk assets should be due for a tradeable bounce with the equity Fear & Greed index trading close to 'extreme' lows, and most US indices showing tactical over-shold conditions as well.

Furthermore, some aspiring minds have mapped the launch of GPT against the start of the Netscape internet browser, given how the former has been credited as seismic moment to introduce AI or LLM to the masses.
We do not have strong feelings about this comparison, but it makes for interesting data-mining nonetheless.

Furthermore, US financial conditions remain very easy given the fall in treasury yields, which would have normally been positive for crypto / gold / risk assets if markets weren't fretting about a serious and incoming economic slowdown.

So, is it safe to buy the dip now? Will the Trump administration take a break from all the wild proclamations?
Sorry to say friends, but the US congress is scheduled to hit their debt ceiling shenanigans this week, with additional stakes on the line given the volatile behaviour of the White House. Will they actually force the govt into a temporary shutdown as both sides overplay their bluffs at the negotiation table? Will it be one of those on-and-off moves similar to what we saw with the US-Canada/Mexico tariff developments?
Logic says yes, and it might be time to dip one's feet back into the risky waters... But who knows? That would be the ultimate FAFO indeed.
Good luck with trading this week friends!