BTC is trading just below its all-time highs, spurred by the first day of $1b inflow into the ETF on Tuesday. Two numbers stand out there: an $850m inflow into IBIT, which was the largest single-fund inflow yet, and only $80m outflow on GBTC, compared to an average of $350m per day during the previous week and a half. A combination of the largest fund picking up while, at the same time, the GBTC outflow has slowed down, is likely why BTC has pushed to its highs.
Interestingly enough, BTC isn’t even the main story this week. There are two other stories which, on most trading desks, are getting more attention.
Alts have been ‘going’ this week. Unlike the memecoin rally of last week, we’ve seen fairly enormous rallies in some of the largest market-cap coins. Each of the following rallies are driven by idiosyncratic headlines; the market doesn’t always care about idiosyncratic headlines, but right now it clearly does, which generally makes for a very healthy trading environment.
- TON is up 60% in the past week, as the founder of Telegram is considering an IPO. The native wallet in Telegram is a potential game-changer for both crypto payments and social, and it’s still very early in the project’s lifecycle (most users we speak to don’t even realize they have wallet access). Despite the large market cap, this still seems to be a very lightly-owned token.
- AVAX is up 30% as they announced that MapleStory would come to an Avalanche subnet. (If you are an old like me, you have no idea what MapleStory is, but it was produced by the top gaming company in Korea). Avalanche has quietly been building a strong niche in the gaming sector, and it has also made traction in DeFi, institutional finance, and even the memecoin space (ask your Cumberland RM for analysis of Avalanche memecoin landscape!) Going back to the beginning of September, it’s up 500%, only trailing SOL and NEAR in the L1 sector.
- NEAR is up 40% on the week, riding the AI narrative ahead of the Nvidia conference next week, where Ilia will speak alongside his co-authors of the influential “Attention is All You Need” paper (seriously: go read it.) NEAR has somewhat quietly been a star performer over the past few months, up 570% since the start of Sep, and it’s been a part of multiple sub-narratives in crypto.
The wild thing about these rallies: all three of these coins are in the top 20 cryptocurrencies. These aren’t deep alts or memecoins, but projects with substantial circulating market cap.
The other narrative (and frankly, this one is more concerning) is the amount of leverage in the space right now. Funding rates have been high, and yesterday we witnessed 40% yield for USDC on Aave. Even now, USDT yields above 20% on the platform. There are a few drivers for this:
- When the fear/greed index gets high, so do funding rates. We’re seeing this now, and it’s definitely a cause for concern.
- Miners typically sell less BTC ahead of halvings, but they still have dollar costs, so they will typically use BTC as collateral to borrow USD.
- As a result of the high perp funding rate, Ethena yields are extremely high, over 60%, plus whatever the points end up being worth. We’re seeing that yield get leveraged through platforms like Morpho.
All of this suggests there will be a significant pullback at some point, but… “Trading is Hard”. Predicting when the pullback will come is excessively difficult with the backdrop of record ETF inflows and the fact that retail enthusiasm has only shown the first signs of life.
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