Asia Colour

The rally in Chinese stocks fizzled following their week-long holiday as a government briefing failed to introduce new economic stimulus. The MSCI APAC equity index recorded its largest decline in a month.

US equities also declined overnight, driven by megacap tech stocks and rising geopolitical tensions, with the VIX rising to 22 points. Interestingly, crypto volatility remained stable, with front-end implied vols trading at 43%, a 3-vol discount to 7-day historical realized volatility.

Bloomberg previously reported that Chinese investors may have sold USDT to fund stock purchases since the end of September, while BTC stayed flat.

As the Chinese rally wanes, we anticipate capital reallocation back into crypto, reflecting the industry’s growing maturity as an alternative risk-on asset.

Trade Idea

We foresee near-term downside risk for equities due to upcoming earnings season and CPI release, which may challenge their lofty valuations. Geopolitical tensions further complicate the outlook.

However, we maintain a medium-term optimistic stance, expecting election headlines to continue driving crypto movement. This was evidenced by Elon Musk’s remark on Polymarket, where Trump was predicted to lead Harris with greater accuracy than traditional polls – an event that coincided with BTC’s upward movement during the US open last night.

Bearish ERKO Put (25-Oct)

• Strike: 60,000
• Knock-out: 55,000
• Cost: 1,090 USD per
• Max payout: 4.59x if fixes just above 55,000 at expiry

Bullish ERKO Call (29-Nov)

• Strike: 65,000
• Knock-out: 75,000
• Cost: 1,630 USD per
• Max payout: 6.13x if fixes just below 75,000 at expiry

Spot Ref: 62,260