Monday April 26 Japan cash open ¥800 support holds at the open for 8698 Monex, making it (for now) the low end of the range band, Monex longs jump in.
BTC spike TRAILS/FOLLWS Monex (& have a theory as to why below)
Market Open in Tokyo, Monex rallies +6.5% coming off ¥800 support. Unsurprisingly, BTC jumps in tandem at Japan cash equity open. 8698 Monex Grp is once again among the top 10 among all Japan single stocks by value traded (currently at #6 at time of writing), behind the likes of behemoths 9984 SoftBank, 7974 Nintendo, and exceeding 6758 Sony & 7203 Toyota Motor in ¥ amount turnover. Again, these are internationally known brands/companies & internationally owned stocks, each with market caps of $150bn - $250bn. Monex Group’s market cap is under $2.5bn, or 1/100th the size and wouldn’t even qualify as “mid cap“ (so yes, it’s a small cap). Thats a TON of shares as a % of of market cap moving intraday- though this time last week when Monex cratered at the open -11% following BTC’s Sunday plunge, was the most traded in ¥ value. Monex is also the 2nd highest traded in share volume suggesting heavy HFT activity, but HFT exists either way & impossible to calculate to what degree. ¥ turnover matters more.
My theory: Has 8698 Monex “become“ GBTC?
Obviously no, in a literal sense, GBTC still very much exists and is at least attempting to serve its purpose. But it is doing s horrendous job, and ceding BTC proxy share to Monex Group, which is still just an online retail securities and crypto brokerage, not even the largest among the majors. SBI Group, Rakuten Securities, GMO Financial & Matsui make up the other competitor online retail brokers which are publicly traded. However, they all serve as poor BTC / Japan retail trading proxies relative to Monex, as none are clean/pure plays.
SBI Group started off primarily as an online brokerage platform and is the largest of them all, but they’ve since branched out into dozens of subsidiaries in fintech, banking, even non financial AI & healthcare - they are of course crypto exposed & involved, but far and above just BTC trading. Rakuten Securities is part of Rakuten, also in various industries but bread and butter primarily ecomm (the thorn in Amazon Japan’s side that had initially lost but impressively held ecomm market share against Amason Japan), also in retail/consumer banking & credit, and currently breaking into the big leagues of telecom against SoftBank, NTT Docomo and KDDI (like if ebay, Pinterest, Square and Etrade merged, and then decided to take on Verizon, AT&T and TMobile at their own game).
Monex is an online brokerage platform with crypto trading capabilities, pure and simple. They were already big with Japan retail stock trading for years without BTC. As such, Monex has become a BTC proxy, and has even outperformed BTC YTD, and by a lot (Monex at peak in Feb was +200% on the year, double that of BTC’s peak). Why the massive outperformance?
I believe 8698 Monex Group has been playing the role of a better, more liquid, less restricted, and perceived more fairly valued a BTC mirroring instrument vs GBTC. See my chart below- where I simply overlaid GBTC/Monex ratio on top of the GBTC NAV premium / discount chart that famously broke negative in mid Feb. Why did that happen? Because some of the undue premium that GBTC enjoyed is leaving/left and found it’s way into Monex.
In fact, I believe 8698 Monex has been playing the temp filled role of every pending BTC ETF globally. This would explain the huge daily turnover value rivaling the largest and most heavily traded Japan stocks, vs it’s small cap status. The fact that it’s a small cap and priced at only ¥1000 ($10/share) keeps it far from cap weighted TOPIX index correlation, and price weighted NKY index correlation, thereby making it that much more of a “pure play.” So if you’re an institution, why not trade Monex shares while waiting for regulators to get their act together? Or even if you’re japan retail (which is massive btw, and has has far more in savings dry powder than any US gov stimulus checks, not to mention Japan’s own round of stimulus checks) - trading Monex means “not having to worry“ about overnight volatility, and is frankly much easier. Especially if you’re executing your buy order to go long 8698:JP Monex shares, and doing so on your Monex mobile trading app- the very act of your buying Monex on Monex is far more psychologically bullish than say buying COIN shares on Robinhood.
This Monex ← the world’s go to BTC proxy, over the past few weeks has seemingly even exceeded its “proxy” role, to the point where the tail wags the dog- BTC follows Monex. Sounds ridiculous I know. But for the moment, seems to be the case and isn’t actually that ridiculous. Monex is benefitting from a massive demand for something legal/listed and able to clear and allocate in legacy institutional fund structures & compliance with a BTC-like return profile, that isn’t some (actually ridiculous) monopoly illiquid lockup trust with NAV always way the hell off the mark, + or - . Or CME listed futures which have a 2BTC multiplier and an underlying that also multiplied by 6x in 6 months- find me any CME listed future that has behaved anywhere near that. Initial and maintenance margin just got 6x harder to trade- let alone roll. And COIN is probably / ironically the worst and least threatening proxy of them all. So its not Monex, it’s the complete lack of anything even close to a listed BTC proxy or derivative that serves its purpose- and as Monex becomes a better proxy, it becomes a self fulfilling better proxy. And if far more money is locked out of direct BTC trading than is in BTC trading, Monex serves as the BTC spot driver for the time being.
Whether or not you agree with the concept is irrelevant- just look at the price action and charts. It’s pretty evident.
Why this hasn’t been realized: because if it’s foreign institutional flows, they won’t make the assumption / admission that this obscure Japanese small cap with remarkably solid “tracking error” is somehow known and traded among their peers, each of them also thinking the same. They’re clever, they’re first, they’re alone. And they want to keep it that way- they don’t want to “Grayscale-ize” Monex with ridiculous ≠NAV, and so nobody talks about it. what they don’t seem to realize is that the very crowdedness of the trade is what makes it correlate and track tighter.
POTENTIAL MAJOR TEST of Monex influence:
Thurs April 29 - Wednesday May 5. Japan Golden Week holiday, the longest consecutive days off holiday of the year. Japan Exchange closed for trading- no equities, no futures, no JGBs (no difference for JGBs). But simply the absence of Monex trading wouldn’t really prove/disprove much.
However, a timely potential added catalyst..
Mon May 3: CME launched BTC MICRO FUTURES
⅒ the notional and tick size of current BTC futures (which currently are roughly a quarter million USD notional per contract). BTC micros are still going to be roughly $25k notional per contract vs the $10/share of Monex (if using today’s prices), but initial margin brought down to $1k-$2k (these are just generic off top of my head) makes CME BTC micros a potential contender to Monex, and definitely would be the next best thing in Monex’s Golden Week holiday absence.
I suppose the only/best way we would find out if I’m right about Monex having become the world’s BTC proxy (if not making BTC BTC’s proxy via Monex) would be if there were some massive record breaking immediate first day open interest and trading volume on BTC micros, which has 3 full days of trading before Japan reopens on Thursday. If volume and open interest explodes, and then when Monex comes back, there is a palpable lack of trading value, volume, and diminished intraday influence on spot BTC - it then might be safe to assume that indeed Monex was the hidden BTC play YTD.
LAST WEEK Summed Up: Monex lost -22%, BTC lost 23%
8698 Monex Group sitting right at key support- Japan retail ready to sell crypto / proxies.
...putting BTC at risk of mirroring Monex‘s key price levels. BTC & Monex (%) :
Why ¥800 is a major major level on Monex ↓
Just because $40k on BTCUSD was a major significant resistance to clear on the way up, doesn’t necessarily mean it’s of support on the way down.