QCP: AI Credit Risk Heats Up, Bitcoin May Face Range Breakthrough

On October 19, QCP released its latest market analysis, stating that Bitcoin fluctuated mainly between $80,000 and $83,000 last week, with strong support around $80,000. Meanwhile, tech stocks continued to be under pressure, and the five-year credit default swap (CDS) spread widened to over 1,100 basis points, highlighting market concerns about debt financing driving AI infrastructure development, which is putting pressure on semiconductor sector valuations.

On the macro front, U.S. CPI data exceeded expectations, pushing the two-year Treasury yield close to 4.9% and the ten-year yield above 5.3%. However, defensive buying pushed yields across all maturities back down. Despite strong PPI data released on Thursday, the selling pressure on U.S. Treasuries did not persist. Following the Federal Reserve Chair's speech on Friday, market expectations for an interest rate hike in October dropped to about 15%, down from less than 30% earlier in the week, and the decline in yield expectations provided some support for risk assets like Bitcoin.

In terms of market fund rotation, investors are shifting from the semiconductor sector to defensive sectors such as healthcare and banking. The UK FTSE index, which has a lower weight in tech stocks, has recently outperformed U.S. indices with a higher proportion of tech stocks. The rebound in long-term U.S. Treasury demand and Bitcoin's relative resilience may reflect a market reducing its concentrated exposure to AI themes, but there is currently no evidence confirming that institutional funds are directly flowing into the crypto market.

Regarding volatility, the implied volatility of Bitcoin across all maturities is below the average level of the corresponding distribution over the past year. Market makers' positive gamma positions may help keep prices within existing ranges, but as options expire and related positions gradually exit, this stabilizing effect may weaken, making Bitcoin more sensitive to new catalysts.

QCP pointed out that if U.S. stocks continue to deleverage, the pressure may transmit to the crypto market and threaten the $80,000 support level; conversely, if U.S. Treasuries continue to strengthen while real yields decline and the dollar weakens, it may provide support for risk assets. If Bitcoin continues to break through the $80,000 to $88,000 range, both spot prices and implied volatility may experience more severe repricing.

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