High Conviction Bets #6

ETF! ETF! ETF!

GM! Welcome to the first High Conviction Bet of 2024. I hope you guys have had a wonderful new year, and without further ado, let’s get straight into it.

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Market Read 📊

Before we start, I’m plugging my Christmas Special newsletter for those who haven’t read it. I’ve gotten a really positive reception about it, so I just figured I’d put it here in case you haven’t taken a look at it.

0xKyle's Christmas Special: 50 Lessons I Learnt This Year

Now moving on to the good part.

ETF. The ETF approval is expected to come somewhere next week, between the 11th and 15th of January. Unfortunately, I myself am not immune to the flip-flopping bias we’ve seen and I’ve had to constantly re-evaluate where exactly I stand on this trade.

Previously, I thought it’d be buy the news. But after seeing the current market state, I firmly believe it’s sell the news. This is why:

Many people are paying >50% APR to long alts, with most alts around 80 - 100% APR.

CME OI levels are equivalent to what we saw at 69k last bull run. The literal pico top of 2021.

This is how the Gold ETF played out.

Basically my thoughts

As Husslin has very nicely drawn for us - this is basically how I expect the Bitcoin ETF to play out. TLDR: Sell the news. So, where am I wrong on this position? I can think of a couple reasons that will make me flip bias -

1. The launch of the ETF is startlingly close to the ETF approval date

I think that this majorly impacts the trade because the fundamental idea is that funds will start selling post-approval pre-launch, due to the time discrepancy of the catalyst. Flows would take a while to come in, so real buying pressure wouldn’t hit just yet. In the meantime, funds are up bigly on their trade - as such, many of them would start taking profit. However, if the ETF launches say - the day after the approval, this would drastically change the time horizon of the trade - leading me to buy back in.

2. ETF launches, everything pumps and sustains it for a couple of days

This is the scenario that I believe will happen if it doesn’t sell-the-news. I’m ok with this - it would mean that I lose out on a couple of pumps before I can enter with conviction. I do believe that if the ETF ends up being bullish, there is virtually nothing stopping us from going upOnly until Rate Cuts.

ETF is the “overhang” event that has got people on the edge of their seats. A bullish ETF approval would quite literally send the market. Note that I’m also already allocated spot-long, so when I say I’m ok with losing out on a couple of pumps, I’m talking more on the trading side than the spot allocation side.

3. Nuke Pre-ETF

I’m not sure what would cause this, but I guess if we see a giga nuke to 30k+ on BTC pre ETF, that would be the “sell the pre-news” and you can enjoy buying the dip.

Now that we have the market read out of the way, let’s move on to portfolio allocation:

UPDATE:

This was in the drafts since yesterday, and then the flush just happened. Funding just got reset, so I think we have space to go uponly for a bit (bought the blood). But still nuke after approval is a very likely scenario, imo.