Below is a chart and brief excerpt from today's Early Look written by Hedgeye CEO Keith McCullough.
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As opposed to Episodic-and-non-TRENDING moves in my Vol of Vol Signals (my cats will have to get quite “creative” to copy how I define and write about those) like we’ve recently seen in #RussVol (Russell 2000 Volatility)… This recent Vol Spike in Bitcoin stuck. For those of you who haven’t used the outputs of my 3-factor model (PRICE/VOLUME/VOLATILITY) before: A) 30-day Realized Volatility for Bitcoin is currently trading at 102… Can you imagine the VIX was at 102 this morning? Would you be buying AMC or stah-ks!? Uh, maybe. And if you did as realized volatility went from VIX 16 to 30, you’d lose lots of money. Then from 30-100, you’d lose all your money. That’s what the guys like The Maestro (Mike Saylor) didn’t get about the math and my models. When you “invite” all of the “billionaires” and/or Institutional money to the #Bitcoin game, you invite their risk management rules. Most hedge funds have liquidity and leverage rules that are married to drawdown rules, don’t forget. That simply means that since the mid-May Vol Spike in Bitcoin stuck, the tapping of the shoulders (i.e. “take down your leverage to these bloody Bitcoin trades”) happened … and less volume bought the bounce to lower-highs. This morning is a textbook breakdown in Bitcoin to lower-lows within a Bearish @Hedgeye TREND with volatility that may or may not go away. I’ll let the math in my models and process let me know when/if that happens. |
