Alpha Report: A Clean Slate After the Reckoning, and Topping Signals for TradFi

October 13, 2025

For weeks, our models have been flagging quiet warning signals, indicating a fundamental shift was occurring beneath the market's surface - we warned about BTC may tag 103K (which it did) and excited ETH - pointing 3500 as a good re-entry.

Then came the catalyst: a classic "headline risk" event that lit the fuse on pressures that were already building. The result was an estimated $19.4 billion in liquidations—the violent flush we anticipated.

As we outlined in our report two weeks ago, a melt-up scenario for equities over a 3-6 week timeline was our base case. That scenario is in its "final innings". The recent fear-induced dip, while sharp, is likely to be met with a bounce.

We will use that expected strength to begin reducing our positions, preparing for the next phase. It is hard to predict the timing but we do see SPX touching 7000 as part of the topping process - catching the top perfectly would be hard.

The 3 Min Alpha Brief: The Architected Reality

• Our Updated Base Case: The Topping Process
  We are now officially in a market topping process. This is not a call for an immediate crash, but a recognition that the conditions for a significant regime change are aligning. Volatility will increase, and the market will become more sensitive to news. Our primary focus is now on capital preservation and positioning for the next leg of the cycle.
  
• US Equities: The Final Ascent?
  The melt-up continues, but we are in the final stages. We would not be surprised to see the S&P 500 touch 7,000 as part of this topping process. However, the risk/reward of chasing this move is becoming increasingly unfavorable. We are waiting for a weekly sell signal on SPX (SPXL) and TQQQ to begin establishing short positions.
  
• Crypto Majors ($BTC, $ETH): A Diverging Path
  The outlook for the crypto majors is diverging. We still see a high probability that ETH will attempt a new All-Time High around $6,000 this quarter or next (most likely this quarter). The recent wipeout has cleaned the slate, potentially paving the way for one final, powerful move. For BTC, however, we see little favorable risk/reward from here. It is late in its cycle, and the institutional flows that propelled it are showing signs of exhaustion.
  
• Altcoins: The Dream is Fading
  The probability of a broad, explosive altcoin season has been further downgraded. We now place it at a 30% chance. After the last wipeout, we do not see anything significant happening until ETH firmly establishes a new all-time high and we see clear evidence of capital rotating down the risk curve. For now, the dream of a 2025 alt season is on life support.

How We're Playing It: YTD & Strategic Stance

• YTD Performance Summary: Our portfolio performance remains robust at +86% year-to-date - despite the friday dip. Our systematic model, Duo Lens, absorbed the recent drawdown, a move well within normal historical expectations, giving back a portion of the melt-up gains while remaining positive on the year. We are 5.6% up in October.
• Strategic Stance: Our strategic priority is now capital preservation. While a potential final rally in $ETH requires tactical attention, we will use any resulting strength to reduce overall risk, not add to it. The superior risk/reward has shifted to defensive plays like long-term bonds ($TMF) and identifying high-conviction shorts in preparation for the next regime.