SignalPlus

Key metrics: (16Jun 4pm HK -> 23Jun 4pm HK)
BTC/USD -4.7% ($107,000 -> $102,000) , ETH/USD -11.5% ($2,630-> $2,320)

After testing and rejecting the pivotal support at $99–101k once again over the weekend, it seems we could have a springboard set-up for a re-test of the highs once more, similar to the price action from a couple of weeks ago. On a technical basis it seems that the end of wave 4 is hopefully in sight, though there are clearly decent stacked offers ahead of the prior highs and as a result the market will need some decent momentum to really punch through to fresh highsShould the market accomplish that, we would expect a fairly swift move up to our eventual target of $125k, which we think will mark a secular high for this cycle (with some potential for an overshoot to $130k)
Market Themes
Eventful week driven by geopolitical developments as Israel launched an attack on Iran’s nuclear facilities, drawing retaliation from Iran and eventually targeted involvement from the US after some back-and-forth from Trump. For the most part, the reaction in markets was fairly muted (‘another war’…), with Oil the obvious exception spiking higher over the course of the week, especially with threats from Iran to close the Strait of Hormuz. Tensions reached a peak over the weekend after the US involvement, though within 24hours this resulted in a telegraphed response from Iran and a temporary ceasefire brokered by the US, leaving a minimal net impact on the week on markets (and NASDAQ closing at an ATH eventually!)Crypto markets were exposed by virtue of being open and tradable over the weekend’s developments, with Bitcoin eventually dropping below the psychological $100k level to test a low of $98k on Sunday night, before swiftly regaining ground and eventually closing above $105k by Monday night as news of the ceasefire hit. Given most of the move was during the weekend (not during the IBIT/ETF trading hours), it seems core long positions remained broadly unscathed and the nature of the shallow dip and the swift recovery will give comfort to bulls. ETH also held above the psychological $2k level, dipping briefly to $2.1k before quick rallying back to the recent equilibrium zone of $2.4k
BTC$ ATM implied vols

Realised volatility picked up last week over the course of the geopolitical developments, with high frequency realised clocking up to around 43–44 vols by the end of Monday’s NY session. Despite this, spot remained broadly contained in the $108–100k range with a fleeting dip below $100k, and as such demand for optionality was limited outside of a few tactical hedges over the weekend. The market is not attributing any premium to a potential regime shift in volatility any-time soon, with longer dated volatility levels continuing to drift lower as the market anticipates a quiet and range-bound summerThe term structure continues to flatten out as the market loses patience on longer dated vol length, given the lack of demand and the existing inventory from overlay selling. Moreover, funding the book with gamma expiries has proved a losing trade also given the high realised last week over the headlines, while the reaction in longer dated vols was also muted. With the roll down on longer-dated vols much less punitive now, and with absolute implieds approaching levels that realised performance has consistently outperformed on a 3 month to 12 month look-back, it is fair to say we are approaching levels that locally look oversold (we do not discount the possibility of a quiet few weeks ahead into summer, though again this is well within the market’s pricing at these levels)
BTC$ Skew/Convexity

Skew prices moved broadly sideways last week, with a brief move lower in gamma tenors as we plunged below $100k but this quickly reversed as the market reclaimed $100k and there was a lack of demand for an extension of a move lower below $100k. Skew in vega tenors starting to normalise back towards par/calls over, as the market continues to look for the next break/regime shift to be on fresh highs in spotConvexity traded broadly sideways and then eventually lower last week, as the market continues to receive wing supply from overlay sellers both sides of spot, and looks to fund their vol longs more efficiently. However, given the propensity for a realised vol regime shift and high vol-of-vol on a range-break, we think flies continue to remain a buy on dips in this environment (especially as local realised volatility generally continues to underperform)
Good luck for the week ahead!

Geopolitical tensions escalated over the weekend, as US bombers made a surprisingly quick and precise attack on 3 Iranian nuclear installations situated well underground. Damages to the sites were stated to be severe according to US reports, though there has yet to be official confirmations on whether the nuclear material had been destroyed or evacuated away earlier.
The knee-jerk reaction was to sell risk assets over the week, with crypto taking the brunt of the damage by virtue of being the only asset class open as BTC fell ~4% from >102k to ~99k as the attacks were first launched. Don’t forget that crypto will continue to be treated as a frontier/risky asset class by TradFi investors until further notice.
Participants were originally worried about a tough Monday open given the kinetic escalation, though those concerns appear to be dissipated quickly in the early Asian hours. Instead of worrying about the onset of a larger global conflict, a nascent view is emerging that this might have been a successful “escalate to de-escalate”, where the US’s critical show of force becomes a powerful motivator for negotiating parties. Practical difficulties with blocking the Strait of Hormuz (vast majority of Iran oil/LNG exports are to China) have also eased concerns on a runaway oil spike.
The early morning price action would seem to agree with this view, with US equity futures having rebounded back nearly to the Friday levels, oil prices steady at ~$75/barrel, spot gold giving up all its early gains, and USD-Shekel having recovered back to pre-conflict lows.

In general, geopolitical stress tends to be short-lived with only temporary effects on equity prices. A recent study from Citi shows that the SPX tends to react negatively heading into geopolitical event risk, but tends to fare just fine once it takes place. This makes logical sense if we continue to believe that equity markets are generally efficient and forward looking at pricing-in all available known and known-unknown risks. Absent an unfathomable WMD strike or a truly outlier development, we would also expect risk markets to normalize themselves to this latest conflict and to refocus back on the ongoing tariffs negotiations and economic developments.

In rates markets, despite all the noise surrounding outsized US interest payments, possible runaway inflation, implied rates volatility have cratered back to interim lows, with the markets not expecting DM central banks to be ‘in-play’, as the forward rate trajectory remains highly stable with bond traders back in cruise-control mode.

At the same time, market liquidity (aka financial conditions) remain ample by most Wall Street mentions, which has allowed risk assets (eg. equity) to continue scaling the proverbial wall of worry, with the SPX recovering smartly despite Liberation Day and ongoing Russia-Ukraine and Israel-Iran complications.

While macro observers might remain (permanently) bearish, investors are voting with their wallets and risk-sentiment remains comfortably risk-on underneath all the premonitions, as the overall economy continues to putter on with rising corporate earnings.

Unfortunately, the same cannot be said in crypto. BTC fell -4% to touch ~$98.9k, while ETH dropped ~10% to $2150, hitting the lowest intraday levels since early May. Well over $1bln in futures were liquidated over the weekend over the Iran strikes, as traders naturally sold the only market that was open.

While equities, oil, and gold prices have reversed their weekend moves early on, crypto is struggling to do the same, as participants are still caught long in the interim with a lot of PNL noise over the past month, as prices have struggled to make any headway since Q1 with BTC still struggling to break the February highs.

Glassnode performed an excellent analysis last week, which suggested that on-chain BTC activity has also slowed materially despite all the excitement from the TradFi community. Effectively, off-chain ‘OTC’ has been active as mainstream investors are trying to acquire BTC exposures via traditional instruments (eg. ETFs, futures), while on-chain activity has not recovered since FTX, as evident through the soft DeFi/Altcoin landscape, and slowdown in new narratives (outside of stables/RWA).

Similarly, ‘power rule’ outcomes are becoming more prevalent in crypto, with BTC continuing to gain market cap dominance on one-hand, but even its own transfer volumes are being increasingly dominated by larger wallets. Glassnode reports transactions >$100k have risen in dominance from 66% in 2022 to 89% today, reinforcing the view that ‘whales’ are becoming increasingly dominant in the space, and the market being ever less driven (or even exciting) for smaller accounts.
Unfortunately, this trend is likely to continue as the crypto industry matures, and maybe an unavoidable outcome of its increasing institutionalisation.

Moreover, off-chain volume remains large vs on-chain activity as BTC becomes a mainstream asset class, and will have to ‘play by the rules’ of how macro assets are expected to behave as determined by the largest capital holders. Long-term crypto observers have noted how this cycle has been ‘unprecedented’ given the lack of altcoin catch-up or rise in new narratives, but this is something that we have long feared as TradFi players are only interested in speculating via their tried and true instruments (off-chain). Self-custody and on-chain narratives offer little to this crowd, but their much larger wallet size will mean that price action will be increasingly driven by their mindshare.

This macro-correlation can be visualized through the rising open-interest changes in BTC futures, where the much higher and sharper change since 24Q4 has why we are seeing more frequent liquidation gaps, such as over this weekend. Off-chain activity and futures driven moves equal higher macro correlation and less crypto-native drivers for where prices are going.

Furthermore, similar to what SignalPlus has seen through our franchise as well, crypto options activity has experienced a significant gain in interest through this cycle. Volumes have surged from ~1.5B / day in 2024 to a peak of $5B / day most recently, highlighting the growing use of options by increasingly sophisticated participants in managing their risk exposures. Please keep engaging with the SignalPlus team on how we can help you on this journey!

Back at the current junction, momentum demand on BTC looks lethargic with CryptoQuant reporting the worst demand momentum on their index record. Short-term holder supply (ie. New money) appears to be slowing as prices have failed to break out to new highs despite overwhelming positive policy narratives (Genius Act, BTC treasury, HK stablecoin policy etc). Watch this space.

In vol space, prices suggest traders were caught off guard by the move with IV spiking against what had been a one-way downward move in vol. Put skews were heavily bid, particularly in ETH, as traders sought protection to the downside with traders caught-long in delta, with more weakness possible in the short-term.

Looking forward, we think the market will soon normalize and move on from the latest geopolitical episode, and we might actually see a renewed interest in reaching some sort of peace deal for both the Russia and Iran situations, not to mention some breakthrough in the tariff negotiations. Markets should naturally rally on those developments, but at which point the focus should shift back to high equity valuations, where the SPX earnings growth is already pricing in +12% to $296 (20x forward PE), and the US economy appears to be slowing down for real (employment indices, CEO firing intentions).
As we have been consistent with this move, we wouldn’t fight the equity move up, but believe that we are closer to the end of the current rally than not, and would be focused on de-risking. On crypto, given the latest price action, we are more worried of a bigger shake-out to stop out the recently longs and weak-hands, and are worried about the negative FOMO signals from all the public companies looking to establish new BTC treasuries as their latest financial engineering gig.
Stay stay and keep your risks tight, and may cooler heads prevail over the current situation. Good luck.

Geopolitics stormed back to the forefront, with Israel’s attack on Iran’s facilities, and the latter’s subsequent response spiked oil prices and weakened risk sentiment on Friday. With markets rightly concerned about further escalation risks, Iran’s possible closure of the Hormuz canal, and as well as the US’s potential response to the conflict, would influence where oil prices go into the peak US driving months.

In the meantime, the price rally has stalled against the falling 2yr trend line, and more convincing break upwards will likely spell issues for risk sentiment in the near term. However, Street consensus suggests that energy disruptions should be limited, such as with rising production out of the Saudis, though the most sustainable forward would still have to be through diplomacy.

A more interesting take away is how the US$ and US Treasuries have failed to see any real ‘flight-to-quality’ bids throughout this move, indicating that the world remains more worried about US capital flow concerns than the situation in the Middle East. This is certainly not something that hasn’t gone unnoticed.

Rates volatility have also regressed back near to multi-year lows, suggesting that macro markets are eager to move on and focus back on tariffs and the economy.

In fact, the conflict has barely made a budge in the rate cutting odds for 2025, where markets are still only expecting just 2 rate cuts before year-end, despite the string of softer than expected inflation prints.

Before Friday’s moves, markets had enjoyed a string of lower inflation prints across developed markets (except Japan), with the US showing downsides misses in CPI, PPI, NY Fed inflation & U-Mich inflation expectations.

In fact, the recent drop in core CPI was one of the bigger downsides surprises in recent memories, helping to buoy risk sentiment and giving the Fed ample room to keep financial conditions easy.

Long/short equity hedge funds have re-added back to their equity longs, taking their net exposures back to some of the highest levels in a year, with the path of least resistance still upwards.

Crypto reaffirmed its status as a ‘risky’ asset class as token prices fell across the board on the week, with over $1.2bln in futures liquidated on Friday as prices retreated along with the equity swoon. Altcoins led the decline on Friday with BTC settling back into the 105k area helped by steady ETF inflows and public treasury vehicles.

BTC ETFs saw 1.4bln of net inflows, while ETH ETFs just broke a streak of 2+ weeks of consecutive net buying as TradFi participation remains healthy. We expect prices to continue to follow the equity sentiment into the summer, with a slow grind higher in prices.

This will be a week of Central Bank meetings (Fed, BOJ, BOE, Norges, SNB, though we don’t expect a lot of surprises for the market. The Fed will likely see some dovish risk on the margin, and the market will see whether the committee will use the recent string in downside inflation misses and weaker jobless claims to justify a more pronounced dovish pivot. We don’t expect a whole lot out of the meeting and the near-term focus will remain on the Iran-Israel situation, in particular to any kinetic escalation or dangerous political moves, with the US still bogged down in various tariff and budget negotiations. Good luck & good trading.

Key metrics: (2Jun 4pm HK -> 9Jun 4pm HK)
BTC/USD +0.2% ($105,400 -> $105,650) , ETH/USD -0.6% ($2,510 -> $2,495)

The market tested the support level $99–101k last week but bounced swiftly off this level, reverting back to $105–106k quickly. This strongly suggests a re-test of the resistance above and ultimately the highs is fairly imminent. If we fail here, it could mean the move is going to be more drawn out and that we could be reverting back to $90–95k first. Otherwise, we expect a break higher through this resistance to open us up for a move towards our target zone of ~$125k. We would expect a break above the ATHs to push up realised vol from these compressed levels
Market Themes
It’s the final month of a turbulent Q2 and we’ve started in much the same fashion that May finished, with a continued decline in cross-asset volatility and a grind higher in risk prices. SPX finally breached above the psychological resistance of $6k last Friday, fuelled by better than expected jobs data, after a brief wobble ahead of the level on Thursday night after Trump and Musk took their feud into the public domain. In the past 9 weeks, $VIX has declined from 45.3 to 16.8, a 63% decline marking the steepest 9week decline on record (even surpassing the 58% 9-week decline from 65.5 end March 2020 to 27.5 end May 2020 after the COVID shock!). Ultimately the macro/fundamentals remain conducive to a grind higher in risk assets for the near-term and the market is becoming more comfortable with the noise from Trump’s administration around trade tariffs, though from these now normalised low levels of volatility we could expect short-term wobbles as we approach the July 90-day deadlineBitcoin’s correction from ATH continued last week, with a brief test of the key $100–101k support zone (triggered by Trump-Elon headlines), which held very well and spot subsequently reclaimed $105k within 24 hours of the low print at $100.4k. Ultimately we find ourselves firmly back in the middle of this $100–110k ‘upper range’ of spot that we have traded in for quite some time since the US election last year
BTC$ ATM implied vols

Realised volatility broadly based last week, though ultimately failed to pick up significantly from the low-mid 30s despite a test of the support at $100k (and subsequent reversal), and with a fairly muted reaction on NFP also failing to catalyse realised. This continued to weigh heavy on implied volatility across the term structure as we consolidated back in the middle of the $100–110k trading range. Demand for optionality remains very muted heading into the summer months, and the market seemingly remains long volatility and funding books with shorter dated expiries, which are now approaching thin value from the short side with the upcoming events for the rest of the month.The term structure has begun to flatten out as the market loses patience on longer dated vol length, given the lack of demand and the existing inventory from overlay selling. Ultimately the roll down on the longer-dated vols is much less punitive now, and given the asymmetric nature at these levels — that is, any range-break or spike in realised could lead to a very swift repricing of implied vega levels — we think Vega tenors are approaching good value to accumulate
BTC$ Skew/Convexity

Skew prices moved broadly sideways last week, even despite the move lower in spot towards $100k. Ultimately it seems the market is uninterested in playing for a downside break in this environment, and as such demand for downside optionality remains limited. This is continuing to keep skew prices supported for calls across the term structureConvexity traded broadly sideways last week, though interestingly longer dated convexity picked up as ATM prices moved lower, with the market reluctant to price out too much variance in the tails yet given the historic high vol-of-vol nature of the asset, while local variance continues to price lower with the market comfortable in this $100–110k range of spot. We think this repricing ultimately makes sense and we continue to advocate owning flies in shorter expiries for more explosive repricing on a range-break
Good luck for the week ahead!

A grounded NFP report added 139k jobs in May and above Wall Street consensus of 126k, though job creation was heavily concentrated in leisure & hospitality and healthcare, with outright losses in government and manufacturing. Details of the report were slightly softer with the unemployment rate rising from 4.19% to 4.24%, and would have been higher to 4.6% if not for the drop in the labour force.

Equities prices rallied along with rising bond yields with NFP faring better than the higher frequency claims data, even as hard data is finally catching-down to the softening survey data that has been widely expected by Wall Street for a long time. Furthermore, with the softening geopolitical stance since Liberation Day, not to mention the local tensions within Trump’s internal sphere, markets are currently back in the bad news = good news regime, where markets are looking for every excuse to urge further Fed cuts.

While the passage of the ‘Big Beautiful Bill’ remains in jeopardy given the slim margin of error, market sentiment has recovered back to the highs with volatility indices and credit spreads falling back to all time lows. The collapse in VIX has been one of the fastest in history, even including the Covid period, with the main casualty being the USD post the liberation day flip-flop.

Speaking of the USD, we are entering into a new correlation regime where equity prices are now moving positively with the dollar, a rare occurrence and the first sustained break since covid. This reflects that US equity prices are now moving more as a function of international flows, rather than implied Fed rate moves, as markets focus on what President Trump’s flip-flop on policies will mean for US assets.

On the bond side, yields have generally moved in sync with the dollar move in non-crisis environments, but the relationship has broken since Liberation Day, where yields have moved higher against a weaker USD, historically a sign of lower forward Fed rates. The divergence will likely continue until we get further resolution on the spending package and the elusive trade deals that may or may not come from the Trump cabinet over the next couple of months.

Looking ahead, this week will be an important litmus test for risk as we see long-dated treasury auctions mid-week, coupled with renewed US-China trade talks following the recent re-escalation. Any progress in trade talks will revolve around breakthroughs on rare earth tensions, while treasuries will have to contend with the upcoming CPI release into the 10y and 30y coupon supply.
Markets are expecting around a 0.25% MoM increase in core CPI, with limited cost push effect from tariffs until later in the summer, and building a case for Fed cuts to resume in late Q3 / early Q4 of the year.

Over in crypto, last week was a choppy week without a lot to note in the blockchain native space, with all the action happening on the TradFi side with the Circle IPO and continued banking activities. ETF flows were mixed in BTC, but positive in ETH, where they saw consecutive 14 days of inflows totally over $800M, and ETH futures open interest rising to record highs on CME.

Circle’s IPO came as a roaring success, with the stock popping nearly 4x post-listing with a market cap of ~$32bln. Crypto banking activity has been busy with Robinhood closing its $200M acquisition of Bitstamp, and Gemini filing for an IPO on the back of the red-hot public market sentiment.

Interestingly, we don’t think this necessarily is a straight line bull case for the likes of BTC or ETH, as there are now more options for the average investor to be exposed to crypto, either through one of the ETFs, MSTR and all the Bitcoin treasury proxies, and now with incoming exchanges and regulated stable issuers.
The current cycle will only get more nuanced as crypto matures as a viable macro asset class. Good luck and good trading this week!

Key metrics: (26May 4pm HK -> 2Jun 4pm HK):
BTC/USD -4.4% ($110,200-> $105,400) , ETH/USD -2.7% ($2,580 -> $2,510)

While BTC spot did pull back from the highs in the past week, the price action was broadly corrective/sideways without compromising the general upward trend. We continue to think the market will be looking to re-test the topside in the coming weeks/months and that could open us up for a move to our terminal target of $125–130k. Exact timing is tricky of course and if the $99–101k support doesn’t hold, then this terminal completion/resolution of the upward price action could be pushed back to late summer. For now we think that dips ahead of that key support zone represent a good tactical level to add to longs or re-enter some otherwise unwound longs. Below $99k could see a move back to $93–94k. On the topside, initial resistance comes into play at $108–109k and then again at all time highs ahead of $112k
Market Themes
There was a brief pop in risk assets in the middle of last week, as the U.S. Court of International Trade ruled unanimously that the Trump administration’s use of the International Economic Emergency Powers Act (IEEPA) to institute sweeping tariffs is illegal. However, there was no follow-through higher in equities as ultimately the risk rally from the lows of early April is beginning to look exhausted, while we did see fresh lows in cross-asset volatility which is another sign of exhaustion/reduced positioning. Overall the market looks to be fairly sanguine about the near-term risks of anything ‘rocking the boat’ heading into summer, and the response function to negative headlines (such as Trump tweeting that China had violated their trade agreement on Friday) has been accordingly mutedBitcoin’s impressive rally finally ran out of steam last week, posting its first down week in the past 2 months (on a Friday NY closing basis), with May ending up a record monthly inflow for IBIT ETF — at over $6bln! The correction seems mostly technical with some short-term leveraged longs flushed out in the process, but overall the realised volatility has been muted and as long as this holds we should continue to see passive inflows on dips, particularly with the broad USD weakness that is pervading through markets due to US policy uncertainty
BTC$ ATM implied vols

Realised volatility continued to trend lower last week, after a brief blip higher in the prior week due to the range-break/ATH and subsequent quick reversal on Trump’s EU tariff headlines. We are now clocking closer to mid-30s on a high frequency basis, even though the range of the spot move last week was relatively large. With spot pulling back to the $103–106 zone that contained us for a couple of weeks before, participation is likely to remain muted barring any unexpected catalysts, and this could cause a continued compression of realised volatility. Ultimately this lack of realised vol is putting pressure on implied volatility levels and overlay selling of options both sides of spot to monetise the range-bound environment has continued, resulting in a market that trades very long gammaThe term structure continues to remain steep as the market looks to fund its long vol positions in end-Jun-Sep expiries with shorter dates. With the Vegas Bitcoin conference failing to deliver any fireworks, and realised remaining muted, front-end contracts have turned heavy once more meaning the market is struggling to fund the higher vol base further out the curve with these expiries, and this has amounted to more pressure on Jun-July expiries in particular
BTC$ Skew/Convexity

Skew prices turned more for downside (BTC puts) over the course of last week, in line with the turn in short-term momentum of spot. The lack of interest for fresh calls even as we broke new ATH, and continued overlay selling of calls on pops in spot as a method of reducing delta, have both left the market unwilling to hold upside calls at a significant premium. Meanwhile, the market remains cognisant of the potential for slippery price action to the downside should the $99–101k support zone fail to hold, or if there is any turn in broad risk sentimentConvexity traded broadly sideways with a slightly offered tone in past week, as overlay selling continued either side of spot, and 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, we think convexity offers good value in this environment
Good luck for the week ahead!

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: (5May 4pm HK -> 12May 4pm HK):
BTC/USD +10.7% ($94,700-> $104,800) , ETH/USD +39.2% ($1,825 -> $2,540)

The market decided to test the $99–100k resistance level with intent and they successfully cleared it, taking us up into the higher trading range channel of $101–110k with surprisingly little standing in the way. Overall the absolute move on the week was reasonably impressive in terms of range (+10.7%), but the realised volatility remained in the lower end of the distribution with very orderly price action on move higher, due to decent spot selling from profit takers and long gamma related hedgingThe move off the $74–75k lows has been impressive — rallying 40% in less than a month — and has solidified our view that we have moved into the final progression that completes the move that began in September last year. From here we expect some consolidation between $106–92k over the coming few weeks, with a small risk of further testing an extension of the local highs. We continue to be structurally bullish BTC and are targeting $115–125k over the coming months/quarter(s), which we think will represent the secular high for the time being. From a technical standpoint, given this initial move has proved more extended than expected, there is a chance that the highs come in closer to $130–135k now
Market Themes
Fairly quiet week once again cross markets as the market looked past comments from the Fed about ‘not rushing to cut’, with 2–3 cuts still being priced in for the next year. The dominant narrative continues to be the unwind of Trump’s trade war, particularly with regards to China, with a rollback of the tariff rate (reduction of 115%) announced Monday to conclude of a week of progressive talks. Meanwhile other trade deals are in the pipeline, with the US-UK announcing one end of last week. The market has now fully unwound the equity sell-off on the back of tariff fears, and has actually unwound some of the more ‘justified’ repricing lower on the basis of the US economic slowdown, with SPX back to almost flat on the year already.As for crypto, the bullish equity sentiment and the clean break above $100k for BTC was enough to catalyse the Altcoin market back to life, with Ethereum in particular showing true Altcoin characteristics as it exploded almost 40% higher on the week, clearly liquidating a lot of structural shorts along the way. ETF inflows in ETH remained subdued but healthy in BTC, so while there will be a lot of ‘FOMO’ around this altcoin rally, ultimately the big-picture narrative of BTC dominance hasn’t changed materially, and this feels more of a short-term position cleanup
BTC$ ATM implied vols

Implied vols struggled to rally last week despite spot breaking cleanly through $100k and testing up to a high of just shy of $106k. Ultimately realised volatility remained extremely subdued, with 1w high frequency realised clocking in around 37 last week despite the large range move. Appetite for optionality from market participants remained minimal, with tactical call-spread buyers the only real source of buying seen. Meanwhile overlay selling both sides of spot continued to pick up as the market took advantage of the higher spot level to reduce delta via covered calls, while some participants also sold puts on the trend move higher to collect yieldFrom here, barring a big range-break or a catalyst, we could expect consolidation in spot and further pressure on implied volatility, with the market seemingly fairly long vol already from overlay supply. The roll down on the term structure is punitively steep, with June and July volatility levels rolling down 1–1.5vols/week on a static basis, meaning holding optionality in this environment even on a longer dated basis is very challenging (despite the low implied levels in absolute terms)
BTC$ Skew/Convexity

Skew prices attempted to move for sharply calls as we first broke through $100k, with the market worried about an explosive move through the key resistance level of $99–100k. However, with plenty of supply in spot and perps from profit taking and overlay gamma, the move was very orderly and this encouraged more overlay call selling, putting further pressure on call skew. Eventually as spot began to reverse course lower these skew prices ended up flat/lower on the weekConvexity remained broadly offered as overlay supply of options either side of spot continued, while any directional bets were put on through call-spreads, net supplying more fly to the market. With this $94–106k seemingly a fairly low realised vol zone for spot (back in February and also past 2 weeks), we think that strikes outside the range will be worth owning once more, while local strikes can continue to underperform should be see further consolidation in price, therefore from a pure relative value perspective we think these convexity levels are too low
Good luck for the week ahead!

Risk assets have recovered sharply to levels that are now challenging even the most ardent bears on whether this is still a dead cat bounce or the beginning of a new bull market. While we think labels are often unhelpful and misleading, the pain trade remains for higher prices and that remains the path of least resistance in the near term.
Beginning with macro, we are certainly nearing the latter half of the drama with trade deals starting to be signed with US trading partners. The inaugural deal goes to the UK, where the big win was a cut of all US steel import tariffs from 25% down to 0%, along with smaller wins with a reduction in auto tariffs to 10% and a new $10bln Boeing procurement deal. Interestingly, the minimum 10% reciprocal tariff rate remains, though that is less of an issue here with the UK being a net trade importer.
More importantly, the much anticipated trade talks with China appear to be bearing fruit, with positive rhetoric coming out of the weekend meeting with Vice Premier Lifeng stating that trade discussions were ‘constructive’, and Treasury Secretary Bessen affirming ‘substantial progress’ being made by both sides. Markets are rallying strongly in the early Asian hours (HSI +2%) on the back of the thawing trade tensions. Expectations are running high for more trade details to arrive in the US hours later today.

Interestingly, shipping volumes from the China to US had already started to recover since Early May — were exporters ‘front-running’ any deal expectations or did people find a way to pass on the tariffs downstream?
Judging from the resilience in China’s recent export figures, it is probably fair to say that the US will not able to cut its import dependences in the near-term, and any direct cuts in US-China trade will likely be made up by a re-routing of goods to SEA as a ‘tri-party’ solution.

In any case, even before the weekend events, risk assets had already rallied aggressively with the equity VIX sounding the ‘all-clear’ by falling back to below pre-Liberation day levels, and the SPX recovering effectively most of its April losses.

From a YTD basis, the partial recovery makes sense with markets having effectively moved on from Trump’s tariff-charade, but remains cognizant of the worsening US economic outlook. Any progress to recovering against previous highs will be dependent on the economic path from here.
Who says markets aren’t efficient after all?

While it’s fair to say that tariff optimism is overpriced for now, it is difficult to fight the tape with US earnings growth still holding in, as well as US companies engaging in stock buybacks at the highest pace ever. Annual US stock buybacks are expected to surpass $1T for the first time in history this year.

From a positioning perspective, foreign capital has started to return to US markets, along with quantitative funds that have been quick to reverse their Feb-Mar selling into equity longs in April.

With retail investors remaining as bullish as ever, equity put-call ratios have also fallen to the lowest level in years, leaving only the traditional macro hedge funds being under-invested outliers as they are still recovering the tough PNL drawdown in Q1. We believe that the pain trade remains to be higher prices until more macro bears throw in the towel.

Speaking of squeezes, Ethereum witnessed the largest weekly squeeze since 2021 as the beleaguered token jumped ~40% on the week, far outpacing BTC at +10% WoW as Bitcoin quietly crawls quietly back to ATHs.

Naturally, markets are looking to fabricate reasons to justify the rally. Whether it be the upcoming Pectra upgrade or something else, we subscribe to the view that this was a classic market short-squeeze against an exceptionally one-sided market, with Coinglass reporting over $1B in shorts liquidation in the latter half of last week, by far the largest wipe-out in recent record.

We didn’t see any follow through in ETH ETF buying, suggesting to us that this remains a native short-squeeze event rather than any detectable change in longer-term narrative.

In vol space, implied volatility spiked up following the gap move up in spot, but the vol smile remains negatively skewed in Ethereum vs a positive bias in BTC. In other words, we are not really seeing any new levered longs being placed on ETH despite the move, so we are pretty much in no-man’s land right now as to where prices will go from here.

Net net, assuming no drastic U-turn in the equity market, we would expect prices to grind up slowly with BTC likely to struggle against interim resistance at $105K, with Ethereum benefitting from the overall rise in the crypto complex. In terms of the safe haven argument, we think that the ‘anti-dollar’ ledge is more structural this time around and investors will be looking to invest into EM, precious metals, and crypto as a portfolio allocation decision away from the USD, and dips will be seen as a buying opportunity from here given overriding geopolitics.
Be patient and don’t fight the tape! Good luck and good trading this week.

The SPX ended last week with its first nine-day winning streak in over 20 years, closing at the highest price since late price and clawing back all of its losses since the ‘Liberation Day’ crash, as the administration dialed back some of the rhetoric on its most hawkish trade policies.

Both China and US continue to make baby steps towards reinitiating trade talks to thaw relationships, with both sides recently shaking up their trade ministers and negotiating staff, and China asserting that the “US has recently sent messages to China through relevant parties, hoping to start talks with China,” and that “China is currently evaluating this possibility”.
A recent Bloomberg survey suggests that participants now expect the Trump administration to be ‘market sensitive’ afterall, despite earlier attemps to shift the blame as “Biden’s economy”, and that we’ve reached the pain threshold for Trump to dial down his tariff threats.

Outside of trade positivity, a surprisingly resilient NFP report on Friday propelled the risk-on move higher, capping off a week of robust data that suggests the US econ remains in good shape despite the negative sentiment. April added 177k in new jobs with the unemployment rate steady at 4.2%, negating any concerns of an imminent recession, though the ‘true’ impact of tariff decisions might not be felt until the May-June figures.

Furthermore, the equity recovery now suggests that the market is pricing in just ~8% of a recession, based on the average drawdown from previous slowdowns, significantly lower than economist estimates or what is implied through fixed income markets.

In fixed income, yields have retraced back to their February levels in a curve flattening move, as markets are back to price just ~30% chance of a June cut and ~3 moves by year-end.

On the other hand, the recent drop in actual inflation data and positive assurances from foreign CBs on maintaining their treasury holdings have returned a sense of normalcy back to US bond markets.

Crypto prices were flattish over the uneventful week, though BTC did manage to reclaim the 96k level at one point before seeing short-term profit taking pressures. Vol smiles are as flat as they have been in recent memory (no conviction on either side), while realized volatility has receded to the lowest levels YTD.
Without an unforeseen spike to macro assets either way, we expect crypto prices to stay muted in the foreseeable future, with a small bias to the upside over the medium term.

ETF inflows have been small but consistently positive over the past 2 weeks, with cumulative inflows almost surpassing the record highs seen earlier in Q1.

Looking ahead, the ‘easy’ part of the bounce has been realized with SPX closing the post Liberation Day gap, and prices moving well back into a heavy technical resistance zone. ‘Bear market’ bounces, should this be one, are historically the most volatile and irrational to observers, but the speed of this rebound has also triggered some positive divergences which could pull prices back to January highs.

We don’t expect the FOMC this week to be a market moving event, and have no strong conviction at this point and think it’s coin flip on where prices go. Ultimately, it’ll depend on earnings growth, which will be a further function of the economic realities and post-tariff aftermath.
So far, so good. Q1 earnings growth is now expected at nearly 13% yoy, almost double the pace that was expected entering the earnings season, and marketing the 2nd straight quarter of double digit gains.

Gun to our head, we think pain trade remains higher prices as most observers are still largely stuck on “what’s done cannot be undone” with regards to tariffs. Dead cat bounces in bear market rallies are not to be trifled with!

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.