EnD3m

Lucky

[Brett Harrison @BrettHarrison]

A Guide to the US Financialization of Compute

We frequently receive questions about compute trading from neoclouds, GPU-as-a-service providers, data center operators, training and inference companies, energy companies, HFTs, brokerages, investment banks, FCMs, CTAs, RIAs, ETF issuers, VCs, and others. Here's a current summary of the market structure and participants:

Three main participants in the US compute derivatives universe:

1. CFTC-regulated derivatives exchanges (DCMs)

Definition
• Exchanges where CFTC-regulated futures, options on futures, and swaps can be legally traded in the US.
• Designs, certifies, and lists derivatives contracts. Engages with third-party index providers for cash-settled derivatives’ underlying settlement prices.
• Facilitates capital formation and investment in new US commodity, currency, and energy products.
• Responsible for market monitoring, position limits, circuit breakers, recordkeeping, and protection against market manipulation.

Participants
• American Innovation Exchange: Architect acquired a DCM this year to launch the first AI-industry-dedicated futures exchange in the US. Going live soon with listed compute futures and options, with index data from Compute Desk.
• CME: the largest US futures exchange by volume, concentrated in stock indexes, rates, and agriculture. In an exclusive agreement with data provider Silicon Data to list compute futures later this year.
• ICE Futures US: the second-largest US futures exchange (run by NYSE's parent), concentrated in energy/power and soft agricultural derivatives. ICE announced intent to list compute futures in an exclusive agreement with data provider Ornn.

(pending regulatory review)

Role in compute futures/options
• Create derivatives contracts that allow commercial compute consumers, compute producers, financial firms, and individuals to hedge and speculate on the price of compute for different GPU types.
• Build a broad liquidity profile to create price discovery across the futures expiry curve.
• Facilitate sufficient liquidity and volume for the creation and redemption of compute ETFs, currently registered by six ETF issuers.

2. Compute index providers

Definition
Independent third parties that combine rental price offers and private transactions into single values representing the cost of compute per accelerator.

Participants
• Compute Desk, Silicon Data, Ornn, SemiAnalysis.
• Free aggregators (not formal index calculators): United Compute, AI Multiple, GPU Lease Index, CloudePrice_net, Thunder Compute.

Role in compute futures/options
• Standardize pricing data across the range of GPU manufacturers, SKUs, configurations, and geographies to build a useful index for hedging by commercial consumers and producers of compute.
• Build non-manipulable, IOSCO-compliant benchmarks for use in CFTC-regulated cash-settled futures contracts on DCMs.

3. Spot/forward compute capacity platforms

Definition
• Marketplaces that match customers seeking short- and long-term capacity with the neoclouds and GPU-as-a-service providers that make delivery.

Participants
• Nvidia DGX Cloud Lepton, Compute Desk, Compute Exchange, Vast_ai, Andromeda, VoltagePark, HydraHost, RunPod, Ornn, SF Compute, Shadeform, Spheron, Hyperbolic, SaladCloud, Prime Intellect, Clore_ai, Cudo Compute, Akash Network, Digital Ocean, Aethir.

Role in compute futures/options
• Collect and normalize raw GPU pricing data for index providers.
• Aggregate fragmented physical supply/demand and establish compute grades as precursor to development of physically-settled exchange-traded futures.
• Create transparency in a market where suppliers may prefer opaque pricing power.
————————————————————
Architect’s thesis is that compute will mature as a US exchange-traded asset class very quickly. We're excited to compete with incumbent exchanges, support index providers, provide ETF liquidity, and partner with capacity platforms to augment our cash-settled futures markets with physical delivery capabilities.

[Avi @AviFelman]

I am spending a lot of time on BioTech these days, more convinced than ever we are looking at a new bubble forming.

It's a bit difficult for your average person right now to navigate.

This entire industry will explode... so it's worth diving into.

[Capital Flows @Globalflows]

The recordings of all livestreams we’ve done this week are linked in this article

Kevin Warsh, Yen, compute, and Capital flows

Next week we are just going to get more dialed

@jaymesrosenthal 🤝

[Capital Flows @Globalflows]

I’m long a lot of $ORCL calls

The Trump tweets will come and catalyze the fundamental value that Ellison has been building.

What do you think happens when Trump runs the Intel playbook on Oracle ?

Everyone will be afraid of not being long the stock

I’ve laid the entire thesis out multiple times in reports on the website. I’ll cover it more today in the livestream. Links below

[Jaymes R. @jaymesrosenthal]

This strategy would be doing just fine right now...

From the LIVESTREAM yesterday w/ @Globalflows

We will be live again today at 11:30 MST/PST to discuss the upcoming FED meeting tomorrow.

[Capital Flows @Globalflows]

Gm Hyperliquid enjoyers and $PURR holders

Everything for the gamma squeeze has been laid out

I make zero apologies for my conviction.

YOU GET PAID TO HOLD RISK

[Atlas @crptAtlas]

They call him the Einstein of Wall Street

For 2 years he dressed up every morning, took the train to Wall Street, and had no money

Survived all 5 global market crashes. Traded $1 billion a day for 40 years

Never bought a single stock in his life. Made everything on commissions

Said by a man who never owned a share

Watch 35 mins

Then read the article

[The Rollup @therollupco]

🚨LIVE From The Tower: PURR Huge Numbers?! SPCX IPO Coming. Market Holding On By A Thread. Keone & David Schamis Join Today https://t.co/vXqt35GVlV

[Capital Flows @Globalflows]

NOTHING HAS CHANGED

IM HOLDING MY $PURR LONG

YOU GET PAID TO HOLD RISK

[Capital Flows @Globalflows]

UPDATE ON $PURR

Open interest on calls continues to rise as implied volatility is elevated

I continue to hold my position and make ZERO apologies for sharing my view and conviction

YOU GET PAID TO HOLD RISK

[Atlas @crptAtlas]

Paul Tudor Jones made $100M in a single day

Stan Druckenmiller made one trade that broke the Bank of England

Both of them ended up on the same RobinHood stage for 30 minutes to gave the most honest trading masterclass

Better than anything sold by people who've never actually run money

Watch it first

Then read the article on how top quant funds run the same decision logic

[Hyperliquid News @HyperliquidNews]

HIP-3 open interest has surpassed $3B for the first time ever.

[Jaymes R. @jaymesrosenthal]

If you guys follow @Globalflows and have learned/benefited over the last year…

Repost this and comment so we can get more eyeballs on his work. Absolute chad who I’ll be supporting as long as I’m in the space.

He’s been Jon Snow’n against so many doomers the past 6 months and it’s proving that there’s more depth to this game of global capital than we all could possibly understand.

There’s levels to this ish

[Capital Flows @Globalflows]

Gamma squeeze in $PURR will pull in EVERYONE

I don’t make the rules

[Capital Flows @Globalflows]

Hyperliquid Strategies ($PURR ) will have a gamma squeeze in the next 60 trading days (similar to GameStop)🧵👇

$PURR just had its largest day of trading volume, indicating how aggressively investors are establishing positions into the regulatory change for Hyperliquid

On top of this, call open interest for $PURR is surging, as traders buy the OTM tails. Watch very closely because once more OTM calls get listed, it will almost certainly cause a gamma squeeze. Right now, $PURR is the only liquid location to buy OTM calls on Hyperliquid, squeezing into the regulatory acceptance.

There is a massive problem with the calls right now, though. The strikes aren't listed very high. I'll explain this in the next tweet below for you.

[Capital Flows @Globalflows]

I want to explain the most misunderstood factor for Hyperliquid. If what I lay out is going to happen, the price will easily go to $350 this year. 🧵

Right now, everyone is overly fixated on the launch of the ETFs. The Hyperliquid ETFs are a drop in the bucket for the wall of capital that is going to hit the market

This is very straightforward if you understand global interest rates, fx, and the supply of money in the system. Most people have ZERO clue about how these markets function because they have never traded G7 rates. People think they understand liquidity because they traded Bitcoin during a dollar devaluation narrative but when asked about the most important input into macro liquidity, interest rates, they have no clue.

It is IMPOSSIBLE to have a view on macro liquidity and money in the system without understanding interest rates. These are two sides to the same coin.

Let me lay out this thesis very simply: 👇

Interest rates are all about the price you pay for money in the system. FX markets are the flip side of the coin, which is denominated the actual currency you are borrowing relative to other currencies and their respective interest rates.

Why does this matter for Hyperliquid? Because the largest markets in the world are all about interest rates and FX. Bitcoin and crypto are a drop in the bucket for large players who are managing massive balance sheets. If Hyperliquid can provide enough value via liquidity and low-cost leverage, then the largest players in the world will start moving more capital onto the platform to transact in the most important markets, interest rates, and FX.

Simply put, if you have enough liquidity on your platform, the price you pay for leverage can be LOWER than what you might pay somewhere else. Simple example: If you need a mortgage for your house, you are going to try to get the best rate possible. This is you trying to find the "cheapest leverage" possible in the system. If someone offers you a lower interest rate, with no trade offs, people will take it. Many brokerage accounts compete with each other on the margin rates you have to pay in order to use the firms margin.

The same dynamic is true for Hyperliquid. If they can provide attractive margin rates (or what we can funding rates on Hyperliquid), then this is the real value proposition for Hyperliquid. While everyone is focused on ETF flows, you want to ask what are the drivers of value that would catalyze the flows of the largest players to begin using Hyperliquid every single day.

Clearly, the regulatory constraint is holding capital back like a dam holding back water that wants to pour into a new market. But the most important thing to understand is that if the funding rates for interest rates and FX are low enough on Hyperliquid, this begins to attract capital from the largest players in the world. This especially attracts capital from the entire Eurodollar market that is constantly trying to hedge the surplus of dollar liquidity that is in the system due to the dollars reserve currency status and the historic level of trade the US has conducted which has pushed an unprecedented level of dollars through the entire system.

This flow mechanism connected to the larger macro picture is WHY I am so bullish on Hyperliquid. Notice that functionally, no one else has talked about this. They think this is just the regular "crypto cycle" where you buy momentum and fade the price once everyone starts talking about it on the timeline.

The place we are at with Hyperliquid is actually taking advantage of the biggest blind spots for both people in crypto and people in traditional markets. Crypto people have been conditioned to just think in terms of pump and dumps instead of value creation and flow mechanics in the global interest rate complex. Traditional finance people have functionally dismissed crypto as something that is worthless because no one has really provided true value that has lasted.

This is why I wrote this article on the blindspot that existed earlier this year, before Hyperliquid made its massive YTD rally: https://t.co/7E8bMaWOP6

There is a reason that no one is talking about these mechanics. The crypto influencers or VC establishments won't talk about it because they didnt get to invest in Hyperliquid before it launched or get a crypto allocation to schill. On the flip side, the largest institutions won't talk about Hyperliquid because they dont want to draw attention to a market that they havent established a dominant positioning in yet.

"Do you mean to tell me you've finally established a position, so you can price mine?" - The Big Short

My job is a trader. I get paid to hold risk and I have established a position in $PURR which is the largest Hyperliquid treasury company and the only treasury company in the world with a positive P&L right now. It is up over 140% since I originally published the view (see my pinned tweet). But we have only just begun to price what is possible for Hyperliquid and what is possible for $PURR.

Once you realize that Hyperliquid sits in a massive gap in the tradfi and crypto space, then you will realize why $PURR sits as the bridge to BOTH of these.

I continue to hold my $PURR position and it is my strong conviction that Hyperliquid will have a significant rally beyond anyone's expectations and $PURR will be the direct beneficiary of this in addition to adding additional shareholder value on top of HYPE returns.

There are several things that you need to know in order to navigate these changes in Hyperliquid:
1) Understand that we are in a credit cycle melt up that in its very nature is currently sowing the seeds of its own demise. None of this will end well given the amount of liquidity that is in the system but first we are melting up MUCH MUCH HIGHER.
2) Hyperliquid underlying drivers in its value proposition that could catalyze capital aggressively moving onto the platform to access cheap leverage.
3) All of the signals for positioning in global risk assets, interest rates, Hyperliquid, and $PURR.

I will be providing an entire playbook for #1-3 in a livestream tomorrow at 8:30am MST. You will walk away with a playbook for the credit cycle, a model with the code included on mapping funding rates on Hyperliquid, and Tradingview models for monitoring the positioning signals. This will be 100% free for everyone who is a subscriber here. I will send out the links tonight and resend them tomorrow morning so no one misses it: https://t.co/rpJr1XL6FO

Below, I will link the most important tweets and videos I have done thus far that you should review before the livestream tomorrow

Welcome to global macro

HYPERLIQUID

[kuno @kunoo]

Think about it.

[Jaymes R. @jaymesrosenthal]

Do you NOT understand what people mean when they say POSITIONING or big words like MICROSTRUCTURE?

Take 2 Minutes and check out this deck that explains it all 🧵/

[Jaymes R. @jaymesrosenthal]

BULL Market or BEAR Market?

Wrong Question!

Take 3 minutes to read through this RORO Primer 🧵

[Capital Flows @Globalflows]

The Credit Cycle Melt UP and Coming Crash 🧵

We have seen one of the greatest melt ups in US history since the 2022 lows, as we begin entering unknown territory of the highest valuations in human history

The melt up isn't driven by europhoria or sentiment, it is driven by liquidity and credit that is directly linked to the AI retooling occurring in the financial market and underlying economy

This thread is meant to be a complete breakdown of HOW to think about what is happening, and WHEN risks begin to build that will cause the next bear market 🧵