What a week! It’s definitely been a “wave” of action in crypto over the past 7 days.

Are you prepared for what’s next? 👀 

This Week’s Juice 🧃

• 🚨 Volatility Index spiked 150%+ on Monday (highest since COVID)

• 🟢 Japan Emergency BoJ Meeting decided against further rate hikes

• 🔥 Over 75% of carry-trade unwinded preventing further panic

• 🏦 US Treasury introduces Liquidity Buybacks of $50B

Getting up to speed! ⭐

“Black Monday” 2024 - Volatility Index makes COVID-19 highs overnight

Monday was one of the toughest days we’ve had in a long time.

Not just seen in the crypto markets — but a ripple throughout both US and Global Markets. And we’ve made it though — hopefully in one piece! 😄

This was certainly a black swan event, almost impossible to predict. A humble reminder of why developing a robust portfolio and implementing hedging strategies is so critical to long-term growth. Time for the personal hedge fund. 😉 🔥 

We can see the impact of Monday using the VIX (Volatility Index) which tracks the S&P500. Often called the “fear index”, we can get insights into the amount of panic in the market. 💠 

The VIX increased over 150% on Monday, reaching a high of 65 — not seen since the COVID-19 panic, or the 2008 crash! 👀 

Since then, we’ve retraced to ~21, which shows the majority of the panic has eased. Next, we’ll mention a few of the reasons why this was short-term.

US Treasury Introduces Liquidity Buybacks

The US Treasury has planned a buyback program which started on 7 August to inject funds into the bond market to support liquidity. This is in order to boost the economy and support the Japan Liquidity “rug pull” 🤣

• Total Buyback: ~$50B 🔥 🚀 

• August: $8.5B

• September: $31.5B

• October $10B

While there was no emergency Fed meeting this week. The panic has eased and it could be argued that an emergency rate cut may narrow the interest rate gap for the Japan Carry Trade even further.

No Further Rate Hikes — Japan Emergency BoJ Meeting

Japan had its worst market crash since 1987 on Monday, too. They called an emergency meeting and decided to maintain current interest rate levels. 🚀 

This is great news and alleviates further panic towards the carry trade, however, the strategy is based on a complex system which is not only impacted by interest rates. Perhaps the unwinding may have occurred even if we hadn’t had a Japanese rate hike last week! 👀 

Ethereum Spot ETF Update 🔹 

• Average Daily Traded Volume decreased to ~$350M (~30% relative underperformance of BTC Spot ETF)

• Daily Net Flows have started turning positive as ETHE outflows stop, however still underperform the BTC Spot ETF flows

• All expected, as BTC Dominance continues to increase — we will see further underperformance of the ETH Spot ETF until this turns around.

• The real test for demand for the ETF is when BTC Dominance decreases further. 👀 

Risks of restaking/stable depegs 👀 

It’s important to consider the potential risks of using restaking tokens or stablecoins.

Jump Crypto’s recent sell-off resulted in over $400M in wstETH being pulled out and over $277M in ETH being transferred to exchanges — this raises some eyebrows as to whether a black swan event could cause these restaking tokens to depeg!

While stETH has a market cap of over $11B, a continuous amount of selling pressure or withdrawal of staked ETH may result in a collapse of the peg to ETH — similar to the Luna UST collapse.

Note: Lido’s stETH is backed by staked ETH on their platform.

This is a hypothetical event, however, this has happened many times for stablecoins in the past.

May we remind you about UST’s collapse in a more visual manner. When we all thought Terra Luna would change the world, this happened:

And this could happen again — for any synthetic asset, restaking token or stablecoin!

In fact — USDT may be at risk of a depeg in the future. Why?

Because they have never had a formal audit declaring their reserves; we could make an entire lecture about this, but here’s an interesting video you can watch from Coffeezilla. Even though 3 years old, not much has changed!

We want to encourage a robust portfolio allocation — so here’s our key tips against this:

• Diversify your stablecoin usage in crypto — and understand the risks behind each one. (e.g: Ethena’s stablecoin is dependent on positive funding rates for ETH)

• Diversify your restaking token / synthetic asset allocation.

• Key point: Don’t be dependent on any one company to determine your synthetic assets.

Market Analysis ✨

We’ve had a huge bounce to the upside from the lows on Monday. Our trade ideas from Monday have been doing extremely well — let’s investigate what’s to come!

Our proprietary TAGO Ratio is signalling a reversal in selling pressure, which may mean a bullish next couple of weeks to look forward to!

BTC Analysis

Looking at the upside 📈 🚀 

• Yesterday we had a series of MASSIVE delta surges which leads us to suspect Saylor’s $2B clip of BTC Liquidity has come into play! (🙏 please saylor don’t tweet anything)

• We’re extremely bullish about what’s to come in the next few weeks.

• Liquidations @ ~67k and @ ~70.5k 🧲 

• Current High (key macro resistance) @ 62.5k remains 🧱 

• Potential SFP short trade at 62.5k if we lack delta/demand as we retest this level (potentially during this weekend)

• Key Resistance Levels: 64.6k, 67k, 68.3k, 69.7k 🚀 

• We will be looking at taking profit at these key resistance levels (IF WE HAVE A REACTION)

Looking at the downside 📉 👀 

• Value Area High @ 57.7k

• Local Point of Control (POC) @ 56.8k

• If we fail to hold these two, we will look at further drops to 53k and potentially closing any long positions

• If this happens, we will look for long trades @ 49k lows and 44k, 41.6k.

• Weekly VWAP possible weekend retracement @ 55600 (long opportunity)

Trade Idea - Take Profit

• We have taken partial profit on long positions @ 62.5k as part of our CME Gap retracement — and high confluence as this area marks key resistance.

Ethereum Analysis

• BTC Dominance remains high — we expect continued repressed price action for ETH and alts. However, ETH could experience a “slingshot” moment at some point, so we think you shouldn’t ignore any opportunities!

• However, if BTC drops to make lower lows, ETH will certainly underperform and fall much lower, so ensure any leveraged positions have strict stop losses.

• Key Levels to the Upside: 2730, 2850, 3012, 3318, 3535

• Key Levels to the Downside: 2540, 2460, 2250, 2218, 1994

• Weekly VWAP possible weekend retracement @ 2425 (long opportunity)

Altcoin Market Analysis

• We’ve stressed against going fully risk-on in altcoins for the past few weeks. However, we’re excited to share with you that altcoins may start to outperform BTC in the next few weeks. (We hope!)

• TOTAL3/BTCUSD correlation has been fairly positive during the weekend crash, not making new lows; as might be expected. 🔥 

• Altcoins are on massive discount, we hope you have managed to take some blue-chip buying opportunities in preparation for the next few months of price action!

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