Q9 Markets: How High

Q9 Capital
7 min readOct 22, 2021


22nd October 2021

Q9 Capital: www.q9capital.com

  • BTC reaches all-time-high of $67k, dominance rises
  • ProShares BITO ETF launches on NYSE
  • JPM strategists believe demand is driven by inflation concerns

The crypto market cap roared past the $2.5tn mark and Bitcoin set a new all-time-high of $67k as the first BTC futures ETF was approved by the SEC and began trading on the NYSE. Ethereum also had a positive week, closing at just over $4k. October has been a fantastic week for crypto as markets have soared +50% in 20 days.

Market analysts are setting ambitious targets in the wake of Bitcoin’s rally to new record highs, with some eyeing a move to $100,000 before the end of the year. As BTC’s price increases vs everything else its dominance is creeping up and now sits at 45.9%. Bitcoins dominance fell dramatically during the Spring as the DeFi rally set in.

BTC Dominance, 1 Year

Source: TradingView

Ether took over from BTC later in the week, topping $4.3k at one point, the highest since May and close to an ATH of $4.4k. In many previous bull runs we’ve seen Bitcoin lead, followed by Ethereum and then everything else takes over. Many DeFi names are currently lagging in this current run. Will we see a fresh alt-coin rally in the coming weeks?

Bullishness is building in ETH’s derivatives market. The amount of money dedicated to ETH futures listed on the CME has risen past the $1 billion mark for the first time on record. The CME is considered synonymous with institutional activity.

The explosive debut of the ProShares ETF (BITO) saw more than $1.2bn of inflows into the product, the fastest any ETF has ever hit the $1bn mark, highlighting the extreme levels of pent up demand. The “Fear and Greed” Index is now at 82, the highest since March and may still climb higher.

Due to its popularity, BITO is already on track to breach a limit on the number of futures contracts it is permitted to hold by the CME. After two days trading BITO owns nearly 1,900 contracts for October, and CME rules cap the number of front-month contracts one entity can own to 2,000. This pressure might be somewhat alleviated by the launch of competing products. Funds from Valkyrie and VanEck are both due to begin trading in the next few days. VanEck’s Bitcoin futures ETF is set to go live next week on Oct 25th.

Grayscale is planning on filing an application to convert its flagship fund into a spot ETF early next week. If approved, Grayscale’s spot Bitcoin ETF would be backed by actual Bitcoin rather than derivatives that track the cryptocurrency’s price. The founder of Grayscale, Barry Silberts took to twitter “Friends don’t let friends buy and hold futures-based ETFs.”

Adjusted for Inflation

However, the JPMorgan strategists believe inflation concerns rather than exuberance about the first US Bitcoin futures ETF is driving the digital currency to record highs. “By itself, the launch of BITO is unlikely to trigger a new phase of significantly more fresh capital entering Bitcoin,” wrote strategists including Nikolaos Panigirtzoglou. “Instead, we believe the perception of Bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into Bitcoin funds since September.”

Growing concerns over inflation have renewed investors’ interests in assets that can act as a hedge. Gold has failed, in recent weeks, to respond to heightened concerns over rising cost pressures, and the shift away from gold ETFs into Bitcoin funds has gathered pace. “This flow shift remains intact supporting a bullish outlook for Bitcoin into year-end,” the strategists said.

Inflation expectations have now reached their highest levels in more than a decade. The breakeven rate for five-year Treasury inflation-protected securities surged Thursday to the highest since the maturity was reintroduced in 2004. The move was particularly striking as it coincided with the biggest-ever auction of the tenor. The $19 billion offering drew a record-low yield of minus 1.685%, below where it was trading before the auction, a sign that demand exceeded dealers’ expectations.

“There is an inclination now to look to Bitcoin as a portfolio diversifier, with inflation being one of the catalysts,” said Mohamed El-Erian, president of Queens’ College, Cambridge and chief economic adviser to Allianz. “Bitcoin has attracted money away from gold.”

Daily Cartoon by The New Yorker

How High Ser?

With main stream investment pipes like ETFs coming online at the same time that the inflation narrative receives another tailwind one has to ask “how high can this market go”. While such questions lack nuance we all want to know. Crypto is still small as an asset class, BTC is a fraction of Gold and who knows how big the top smart protocols can be when the distinction between crypto and mainstream tech eventually evaporates. It is perhaps more interesting to ask, how much higher we go in the short term given we are back at ATHs. Usually markets move more than we think they can (in both directions), and only history will tell if we are in for a euphoria phase in the short term. We’ve seen it before (see NASDAQ chart below). Keep your eye on ETH and alt protocols, if they take over from BTC than there is additional crypto flows behind the new mainstream BTC pipes.

NASDAQ, 5 Years

Source: NASDAQ

Miner Exodus

New data from Cambridge University shows the extent to which Bitcoin miners have migrated to the USA from China. From August 2020 to August 2021, the share of global Bitcoin mining in the United States grew from 4% to 35%, whilst the share of global Bitcoin mining in China evaporated from 67% to 0%. Not the numbers we hear anecdotally, where more mining remains in China and has yet to move. But directionally, this is right and more or less what we will see in the near future.

Bitcoin Mining Map

Source: Cambridge University

Evolution of Country Miner Share

Source: Cambridge University

In the News…

  • Fixed-income titan Pimco is starting to embrace cryptocurrencies, CIO says. Daniel Ivascyn stated some of Pimco’s hedge fund portfolios are already trading crypto-linked securities.
  • El Salvador is seeing an influx of dollars into BTC as Bitcoin prices rise. The Chivo wallet, the wallet of choice for the El Salvadorians, also saw a significantly higher usage rate than local bank accounts.
  • Walmart Inc. has started a pilot program in which shoppers can buy Bitcoin at Coinstar kiosks in some of its U.S. stores.
  • China’s state planning agency calls for public opinion on Bitcoin mining ban. The move could signal plans by Chinese authorities to amend its previous negative stance on Bitcoin and cryptocurrency mining activities.
  • Crypto exchange FTX raises $420 million from 69 investors, in meme funding round
  • Sotheby’s makes first crypto investment, backing NFT startup using Ethereum
  • Martha Stewart releases NFTs as more celebs tap into crypto craze. The 80-year-old lifestyle guru posted her collection of NFTs for sale on her digital store, called “FRESH Mint.”

Legacy Markets

Oil futures rose +0.9% and the SPX rallied 2.5% printing a new record high led by consumer and tech names. 10-year US treasury yields rose 15bps and the US dollar index dropped -0.3%. The Gold & Silver index rose +0.5%

Crypto Markets

  • BTC/USD rallied +8.5% printing a fresh ATH this week while ETH/USD rose +7.1%. The total market cap of crypto universe crossed 2.5tln mark and Bitcoin dominance rose above 46% at the end of this week
  • LTC/USD and LINK/USD rose +9.3% and +6.1% respectively. The majority of the DeFi names underperformed ETH and BTC
  • Annualised volatility rose to 79% for BTC while ETH saw a modest uptick in volatility


  • We saw profit taking on our client pad (7.1x sellers vs buyers) but on muted volumes
  • Net sellers in ETH and net buyers in BTC. Two-way flow on LINK
  • Mild buying activity in EOS and YFI

Q9 Capital: www.q9capital.com



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