Highlights

  • None

Positions

  • 60% Cash, 40% Crypto
  • Allocating into a new narrative bet - we’ll create a write-up on the hypothesis soon

Topic 1: Cartel Manipulation

  • Tellor $TRB is the most recent example
  • Perp shorts begin to pile in due to lacking fundamentals, while “the cartel” coordinates to drive up spot prices (which in turn drive up perp prices as perps are pegged to spot and spot supply is limited)
  • “The cartel” opens a futures position and starts heavily bidding spot
  • Funding rates were highly negative due to the spot/perp difference, and “the cartel” continues buying up all spot to liquidate perp shorts while having a large perp long position
  • Mathematically, it’s more profitable for “the cartel” to increase spot by X% while having a long futures position and exiting it into liquidated shorts.
  • For perps, the price is driven up either by longs (naturally), or liquidated shorts (forcefully)
  • We believe this strategy is highly unethical and caused by declining opportunity for ethical revenue streams, although we speculate it will happen more frequently during the bear market, especially on alts that are listed on perps with spot having low liquidity
  • Example: if it costs someone $100k to pump spot by 200% and cause a short liquidation of >$200k on perps due to the open shorts being liquidated at the much higher price, it makes sense to accumulate spot and sell after the short liquidation into the pump
  • The actionable strategy is to monitor perps on the above-mentioned scam exchanges, and their open interest, funding rates, and open interest/mcap ratio
  • Speculations that DWF is behind these pumps & dumps
  • Our understanding of “the cartel” strategy: 1. pump a coin, 2. wait for shorts, 3. if there are enough shorts so that it’s profitable to buy up all spot and move price higher to liquidate shorts, do so, otherwise range sideways waiting for more shorts, or dump hard exiting longs if volume dies
  • The result is that pumps are diagonally upwards without pullbacks, trapping new shorts, while the dump is diagonally downwards without pullbacks, to exit the position into the buy volume (people thinking the dip has to stop and revert a bit)
  • We suspect this “playbook” will become very obvious soon and more efficient (with traders realizing what’s happening)

Topic 2: Bitcoin Alternatives

  • Treasuries at 5.5%
  • Gold (and other metals)
  • Bitcoin is now a big player, unlikely to grow much more than other risk assets (during bull times)
  • There are not many alternatives. The best bet is to wait out in cash until new opportunities arise or the macro environment changes (liquidity)

Topic 3: Prolonged Bear Market

  • Bitcoin bear market second leg might be starting
  • We haven’t seen capitulation yet, at least, it didn’t feel like it
  • We believe two more years of sideways/downwards action, potentially even seeing <10k
  • Tighter liquidity in all global markets

Outlook

  • SBF trial will be very interesting for the whole industry, especially if he decides to drag down everyone else (Binance, Tether)
  • Student loan repayments start October 1st again