QCP Market Update - 21 Dec 23

The BTC Spot ETF launch is less than 3 weeks away. It could be announced at market close on 5 Jan or between 8-10 Jan in 2024.

The last sticking point of 'cash only' vs 'in-kind' has been addressed, as practically all the ETF providers have given up on finding a compromise and have acceded to the SEC's 'cash only' demand.

As we finally approach the launch, we need to point out that it is likely that the actual demand for the BTC Spot ETF at the start will fall short of market expectations. This sets up a classic 'sell the news' scenario in the 2nd week of Jan.

For this reason, we expect topside resistance for BTC in the 45-48.5k region and a possible retracement to 36k levels before the uptrend resumes.

We are confident that the trend higher will eventually continue (perhaps after a few weeks) as the market positions for a strong rally into the BTC halving.

If one is already long BTC, a tactical play here would be to sell some covered calls, taking advantage of the elevated forwards and vols, and perhaps also buy some out-of-the-money puts to trade the post-ETF dip.

ETH might also be an interesting laggard play here as the market's anticipation could quickly turn to the ETH spot ETF, potentially leading to some switching out of BTC to ETH. We're also leaning against very strong support in the ETHBTC cross at the 0.051 level.

We think that any ETH spot ETF is still many months away, but it won't stop the recently approved BTC spot ETF providers from immediately filing for an ETH spot ETF. This kind of headline excitement could create some speculative uplift for ETH price whether it is warranted or not.

Finally, this will be our last market update for the year. We wish everyone a Merry Christmas and enjoyable end to this memorable and eventful year.

In the first week of the new year, do look out for our year-end research piece "Just Crypto #7: Schrodinger's Coin"!