“Long Bitcoin” is once again the most crowded trade in the known universe according to BofAML’s latest global fund manager survey.
This is the second time Bitcoin has topped the list and marks a shift from the last two months when “long Nasdaq” took the top spot:
You’ll note “short vol.” continues to place near the top of the crowded trades list.
One thing you should keep in mind here is that this is really all one damn trade. Global QE and the durability of the policy “put” have led directly to bubbles in risk assets and the persistence of the low vol. regime. As explained in detail over at DealBreaker, that same central bank profligacy is fueling the cryptocurrency bubble by: i) giving the tinfoil hat, hyperinflationary crowd an excuse to persist in the fantasy that digital currencies are the answer to unbridled money printing by policymakers, and ii) forcing those whose trading revenues have dried up thanks to the absence of vol. to venture into the only place where volatility still exists (i.e. cryptocurrencies).
Here’s how former derivatives trader Kevin Muir put it last week:
Say what you want about the investing merits surrounding Bitcoin and all the other cryptocurrencies, but it’s safe to say that without the massive Central Bank science experiment of massive balance sheet expansion and negative rates, it would have been considerably more difficult for cryptocurrencies to reach this sort of popularity. Try blowing a cryptocurrency bubble with positive real rates. Tough. Try again with negative real rates throughout the world. Much easier.
So when you think about these crowded trades, just know that it’s really all one trade. It’s just a matter of where the manifestation of that trade is most egregious in any given month.
Stay tuned next month when we expect “Long Ethereum-pegged Ziddu Coins” will top BofAML’s list.