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18th October 2021 > > Exchange traded funds (ETFs).

tl;dr

A futures ETF is not the same as a physical ETF.


Market Snap







Market Wrap

Big move in the perpetual futures funding rates. Some of the leveraged children are getting a little over-excited.


$60k seems to be holding well for now, but one might want to exercise a little caution here (see commentary below).


Occasional Series – the CCC is back

For anyone who missed the Sancho Panza boat party, rest assured that Bill Brewster (who has been playing records since vinyl was invented) was in cracking form. I loved his set.


And for those who made the afters just such a lovely time, hats off to you.


Occasional Series – Technical analysis (TA)

Long term subscribers are intimate with the CCC’s scepticism of TA.


Our brains have an innate desire to spot patterns in price movements. A whole cult of belief has built up around this natural phenomenon that these patterns can give an insight into the future.


A few days ago, Larry – a surprisingly committed adherent to this fallacy despite being one of the smartest cookies on the planet – was kind enough to give his analysis of recent price action, and a firm prediction of what this analysis meant for the price of BTC going forward.


I quote:


“QED for Technical Analysis. Mark, even you must surely be a believer now.


NEW ATH WITHIN 48hours GUARANTEED!!!”


More than 48 hours later, the ATH (all-time high) of just shy of $65k has not come under any real pressure.


QED for Technical Analysis, Larry, even you must now surely know it is just snake-oil.


The CCC is an all-inclusive and open forum.


Within the bounds of reasonable human behaviour no-one has the right to enforce their own values and beliefs system on those with a different outlook on life. You certainly cannot be cancelled by the CCC for holding an alternative point of view.


Reasoned and constructive debate – largely missing from discussions about such topics as the culture wars, trans rights, and Brexit to name just three flash points – will always lead to a greater understanding of a perfectly valid alternative point of view. This can only be a good thing.


Larry – I hope we see more input from you going forward about the insights and benefits that you believe accrue from the use of TA.


Normal day rates apply.


Curious Cryptos’ Commentary - the US BTC exchange traded fund (ETF)

The crypto press is full of claims that the ProShares application for a futures-based ETF is set to launch today or tomorrow following SEC approval which has not yet been made public.


There is little doubt that this speculation has been a key factor in the recent ramp-up in the price of BTC.


I am going to say this just one more time – a futures-based ETF is an entirely different beast from a physical ETF based on the spot price of BTC.


A futures-based ETF has far less attraction to the institutional and retail investor base than a physical ETF.


The obvious – and admittedly most natural – assumption is that this ETF will increase demand for BTC and hence increase the price.


That may well turn out to be true.


But a key tenet of a successful trading philosophy (as opposed to an investment philosophy) is that markets will always cause the maximum amount of pain to the greatest number of players possible.


At the moment, perpetual futures funding rates indicate that there are over-leveraged longs out there. If the ETF launch becomes a buy the rumour, sell the fact situation, there could be a very short but very nasty correction to the downside.

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