Leading crypto hedge fund manager expects bitcoin to tumble once SEC gives green light to bitcoin-backed ETF – here’s why


Hello, welcome to an update on the most important crypto movements and news and what’s happening in the near term in digital assets. I’m Frances Yue, Crypto Journalist at MarketWatch, and over the next three weeks, October 10-24, we’ll be releasing Need to Know Crypto Edition as a prelude to a new weekly crypto newsletter ‘Distributed Ledger’, starting in November.

Click this link to subscribe to Distributed Ledger, but in the meantime: enjoy Need to Know Crypto Edition.

Another thing, MarketWatch and Barron’s are bringing together the most influential figures in crypto to help identify the opportunities and risks ahead in digital assets on October 27 and November 3. Register now !

Crypto at a glance

Bitcoin BTCUSD,
+ 2.46%
saw a significant increase this week, up 12.7% from last week on Friday, according to FactSet data. On Wednesday, the cryptocurrency posted a seven-day gain of 33.5%, its best seven-day performance since February of this year, according to our research team at Dow Jones Market Data.

Ethereum ETHUSD,
+ 0.69%
Also registered a weekly gain of 9.7% on Friday, while the DOGEUSD dogecoin,
increased 13% on the week.

Encryption metrics
The biggest winners Price % return over 7 days

0.00002697 $



$ 2.35


Infinite Axis

$ 135.21



$ 0.227



$ 66.3


Source: CoinMarketCap.com to October 8
The biggest declines Price % return over 7 days

0.0002233 $


Huobi Token

$ 7.8



$ 62.58



$ 0.04746



$ 21.53


Source: CoinMarketCap.com to October 8
A bitcoin-futures rebound?

The fourth quarter has historically been good for bitcoin. In the fourth quarter of 2020, bitcoin rose about 170%, from around $ 10,780 to $ 28,980, according to data from CoinDesk.

As October entered this year, bitcoin also got off to a good start, with the cryptocurrency surpassing $ 55,000 on Wednesday, the first time since May.

Traders and analysts attributed the recovery in part to institutional entries, as established players expect the SEC to approve the first Bitcoin futures exchange-traded funds in the coming weeks.

SEC Chairman Gary Gensler recently reiterated his support for a bitcoin-backed futures ETF, which would invest in bitcoin-based futures contracts instead of the crypto itself. The SEC has yet to approve an ETF backed by bitcoin or bitcoin derivatives.

Bitcoin futures contracts at CME Group CME,
were trading at a premium of up to 17% over the spot price on Wednesday, the highest since April, when bitcoin hit an all-time high, according to data analysis tool Skew. The metric generally reflects institutional flows, as the CME is the preferred avenue for institutions’ exposure to bitcoin.

“The unusually high premium indicates an overwhelming amount of outright buying,” crypto trading firm QCP Capital wrote on Telegram on Thursday.

The liquidation of leveraged short positions has also fueled the recent rally in bitcoin prices, analysts said. Leverage short positions occur when traders bet that the price of an asset will fall using borrowed funds.

“The short squeeze setup was initiated this week as bears shorted $ 50,000 resistance,” NYDIG, a bitcoin-focused financial services firm, wrote in a report on Wednesday.

Already seen in the fourth quarter of 2020?

Some analysts expect the rise to be sustained. Anto Paroian, COO of crypto hedge fund ARK36, said this week’s uptrend is different from a month ago when bitcoin broke above $ 50,000. “There was not enough strength in the markets to support a new rally,” Paroian told MarketWatch via email.

“Now, after consolidating in the $ 40,000 range for a long time, Bitcoin looks much better prepared for another big upward move,” Paroian wrote. “If this happens, Bitcoin will likely continue to test its ATH (all-time high) and there is a high probability that it will break it.”

However, some remain cautious that the crypto market could see another similar decline in the fourth quarter of 2020.

Dan Morehead, CEO of asset manager Pantera Capital, warned that the “buy the rumor, sell the news” model could apply if the SEC approves a bitcoin-backed futures ETF.

“Can anyone call back [me] the day before the official launch of the Bitcoin ETF? I might want to take some chips off the table, ”Morehead wrote in a report.

About a year before bitcoin futures contracts listed on the CME in December 2017, bitcoin rose 2,440%. The cryptocurrency rose 822% in the 12 months leading up to the Coinbase COIN crypto exchange,
direct listing of on the Nasdaq. However, the market retreated after the two events, Morehead noted in the report.

Meanwhile, as the crypto market becomes larger and more institutional, price swings are expected to moderate, Morehead speculates.

Brief crypto

Bloomberg Businessweek this week published a cover story on the mystery surrounding the $ 69 billion in assets of Tether, the world’s largest stablecoin issuer. With exponential growth in recent years, Tether has received increasing attention from regulators and some investors. Its USDT stablecoin is pegged 1: 1 to the US dollar.

Tether invested some of its reserves in Chinese commercial paper, and that was before the recent woes of Chinese real estate developer Evergrande, according to Bloomberg, citing a document detailing Tether’s reserves.

A representative for Tether did not respond to whether Tether held Chinese commercial paper, but wrote via email that the USDT is still backed by reserves, including cash, cash equivalents, other short-term deposits and commercial paper.

Bloomberg also reported that Tether made billions of dollars in cryptocurrency-backed loans, including one to crypto lending platform Celsius Network Ltd.

The Tether representative wrote to MarketWatch that “we have a small group of selected clients who borrow USDT in exchange for collateral. These loans are secured by a guarantee held by Tether for more than 100% of the loan proceeds and earn monthly interest to Tether. “

A pouf for Bankman-Fried?

Sam Bankman-Fried, founder and CEO of the FTX crypto exchange, is the richest person under the age of 30 in the world, according to Forbes. Thanks to the crypto boom, Bankman-Fried is now worth $ 22.5 billion, up from $ 8.7 billion in April.

The 29-year-old self-made billionaire is known to sleep in bean bags at the office most nights. “One advantage of ottomans is that if I sleep at the office, my mind stays in work mode and I don’t have to charge everything the next day,” Bankman-Fried said. wrote on Twitter.

It seems the habit has also been adopted by Ryan Salame, who has been appointed CEO of FTX’s newly launched subsidiary, FTX Digital Markets in the Bahamas. FTX has also moved its headquarters from Hong Kong to the Bahamas, where the regulatory environment is more favorable for crypto.

Parts quotations

Dawn Fitzpatrick, CEO and CIO of Soros Fund Management, said the family office founded by billionaire investor George Soros owns bitcoins.

“We own a few coins, but not a lot,” Fitzpatrick said in an interview at a Bloomberg event on Oct. 5. “And the coins themselves are less interesting than the use cases of DeFi (decentralized finance) and things like that.”

“I’m not sure bitcoin is considered just a hedge against inflation,” Fitzpatrick said. “I think he crossed the chasm to generalize.”

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