(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
'The other side' most likely. RRP more likely to be falling $17.5b per week based on Andy Constans maths, therefore depletion in Q324. Equally BTFP is most likely to be replaced by yet another 4 letter acronym program, higher odds of that happening in the election year. I would give March wobble -50% at 5%; -30% at 20%; -20% at. 35% and -10% at remaining odds.
“2024 is an election year, and the plebes of Pax Americana are sick and tired of bankster bailouts. Therefore, I believe Yellen, to project an air of confidence in the strength of the American banking system, will not renew the BTFP.”
I’m pretty well-off and barely anyone I know is even aware of the BTFP. The psy-op there was a good one. SVB is a distant memory.
Arthur, can we get an update on this going into the weekend? I've already secured a few puts spread across strikes and expirations, but it feels at the moment like the ETF inflows will overwhelm macro factors. RRP balance at 450, is this low enough?
450 is way higher than Arthur predicted. BTFP has a year term - and as far as I know, it nor anything similar has been reinstated. Thus, over the next month the first banks who had to make use of BTFP will have to repay the loans. There was a large spike I believe 2nd half march 2023 of BTFP usage. That is prob when bank problems are most likely to arise. Would love to hear Arthur’s take on the reality of March 2024 though, as it is a combo of situations he predicted. With significant rrp reserves, bank problems arising due to BTFP I can see as being a positive for bitcoins price… because they spell the ostensible creation or extension of BTFP or a similar program (re: money printing), and they further sow distrust in banks
Serious question - in the terms and conditions of the BTFP the definition for Program Duration says "Advances can be requested under the Program until at least March 11,2024. And the "Advance Term" says "Advances will be made available [...] for a term of up to one year".
So, even if the program is not extended in March 2024, banks could request advances and post all their collateral below (which trades below face value) just on 11 March and "postpone" the problem or at least conserve a significant amount of liquidity for another year.
So the effect you are describing could be postponed, or not? Or do you expect markets to be forward looking, i.e. already responding to the fact that this facility hasn't been extended, even though the liquidity might only leave 1yr later?
I was wondering the same. $80B of the $145B was borrowed in the initial weeks of the program, so at least that would be due with no change.
I’m also wondering why there has been a sharp increase in program borrowing since the last week of November. What additional risks lie below the surface that banks are preparing for. Nobody is talking about the BTFP, glad I finally found this post.
A 30% drawdown from a new ATH is still higher than where we’re at now. My takeaway is to keep stacking sats and use a March drawdown if it comes as another buying opportunity.
Where did you learn this type of analysis? I’ve been educating myself about markets for many years, but learning about macro market cause and effect structures like this have alluded me. Any resources would be appreciated. Thanks for the article.
Ser do you perhaps have PTSD from a little something that happened in March 4 years ago?
Good read, RRP balance is definitely something to bookmark and keep an eye on, plebs: https://fred.stlouisfed.org/series/RRPONTSYD/
TLDR - Beware the Ides of March.
Pepe Caesar meme forthcoming...
Thanks for the article.
'The other side' most likely. RRP more likely to be falling $17.5b per week based on Andy Constans maths, therefore depletion in Q324. Equally BTFP is most likely to be replaced by yet another 4 letter acronym program, higher odds of that happening in the election year. I would give March wobble -50% at 5%; -30% at 20%; -20% at. 35% and -10% at remaining odds.
“2024 is an election year, and the plebes of Pax Americana are sick and tired of bankster bailouts. Therefore, I believe Yellen, to project an air of confidence in the strength of the American banking system, will not renew the BTFP.”
I’m pretty well-off and barely anyone I know is even aware of the BTFP. The psy-op there was a good one. SVB is a distant memory.
Arthur, can we get an update on this going into the weekend? I've already secured a few puts spread across strikes and expirations, but it feels at the moment like the ETF inflows will overwhelm macro factors. RRP balance at 450, is this low enough?
450 is way higher than Arthur predicted. BTFP has a year term - and as far as I know, it nor anything similar has been reinstated. Thus, over the next month the first banks who had to make use of BTFP will have to repay the loans. There was a large spike I believe 2nd half march 2023 of BTFP usage. That is prob when bank problems are most likely to arise. Would love to hear Arthur’s take on the reality of March 2024 though, as it is a combo of situations he predicted. With significant rrp reserves, bank problems arising due to BTFP I can see as being a positive for bitcoins price… because they spell the ostensible creation or extension of BTFP or a similar program (re: money printing), and they further sow distrust in banks
Wicked report. Great thought process.
Great perspectives and analysis. Very well thought out....
Thank you
Serious question - in the terms and conditions of the BTFP the definition for Program Duration says "Advances can be requested under the Program until at least March 11,2024. And the "Advance Term" says "Advances will be made available [...] for a term of up to one year".
So, even if the program is not extended in March 2024, banks could request advances and post all their collateral below (which trades below face value) just on 11 March and "postpone" the problem or at least conserve a significant amount of liquidity for another year.
So the effect you are describing could be postponed, or not? Or do you expect markets to be forward looking, i.e. already responding to the fact that this facility hasn't been extended, even though the liquidity might only leave 1yr later?
I was wondering the same. $80B of the $145B was borrowed in the initial weeks of the program, so at least that would be due with no change.
I’m also wondering why there has been a sharp increase in program borrowing since the last week of November. What additional risks lie below the surface that banks are preparing for. Nobody is talking about the BTFP, glad I finally found this post.
What's your preferred way to short BTC?
Love your work. Are there any other crypto traders/analysts out there that you respect who are publishing similar content?
Thanks for the incredible essay! 🙏
A 30% drawdown from a new ATH is still higher than where we’re at now. My takeaway is to keep stacking sats and use a March drawdown if it comes as another buying opportunity.
Where did you learn this type of analysis? I’ve been educating myself about markets for many years, but learning about macro market cause and effect structures like this have alluded me. Any resources would be appreciated. Thanks for the article.
You write great! I love reading your thoughtful and insightful posts!
RRP, non-TBTF... Yep. :) But thank you so much for the inside information!!!