Form 144 HERSHEY CO For: 2 April

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Analysis

Regulatory and data-integrity friction in crypto markets shifts economic surplus away from low-margin retail venues toward regulated, vertically integrated infrastructure (clearing, custody, certified market data). Over 6-18 months that favors operators able to offer exchange-traded derivatives and regulated custody — they capture ancillary revenue (clearing fees, custody AUM fees) even if spot trading volumes fall 20-40%. Expect market-makers to demand wider spreads for non-certified feeds, creating persistent microstructure inefficiencies (basis between spot and listed futures widens by 50-200bps at times of stress).

The most dangerous short-term tail is an operational/data outage or a major enforcement action creating a liquidity vacuum: within 24-72 hours funding rates can spike, forced deleveragings cascade, and implied vol can double. Over 3-12 months, clearer regulatory outcomes (settlements or rulemaking) can either compress or amplify that volatility; a protracted legal settlement cycle keeps realized vol elevated and institutional flows muted. Reversal catalysts would be definitive rulebooks or federal-level custody/insurance backstops which would re-price risk premia lower by 30-60% over 6-12 months.

Actionable implications: buy optionality on volatility around near-term legal/regulatory milestones while positioning structurally for winners in regulated infra (listed derivatives and custody) and against thin-margin retail exchanges. Size trades to survive 2x realized vol moves and prefer convex instruments (options, spreads) over linear exposure. Maintain a 10-25% hedge in cash/futures to manage liquidation risk should a sudden data failure or enforcement action trigger a 30-50% intra-week move in major tokens.

Key Decisions for Investors

• Buy convex BTC volatility: purchase 3-month straddles on BTC options (via Deribit/CME) sized 1.5% NAV. Entry when 30d IV < realized 30d vol + 5ppt; target >2x premium breakeven on a 40-80% spot move within 3 months. Cut half if IV compresses 40% from entry.
• Relative-value infra trade (6-12 months): pair long CME Group (CME) 1.0% NAV vs short Coinbase (COIN) 1.0% NAV (dollar-neutral). Rationale: capture fee/clearing/custody re-rating vs retail-exchange legal/regulatory risk; target 30-50% relative outperformance, stop the pair if adverse move reaches 15%.
• Regulatory event hedge (days–weeks): buy BTC spot (or ETF like BITO) protective put (30% OTM, 1-month) sized to cap downside on existing crypto exposures. Cost = insurance premium; objective to limit tail loss to <20% of crypto book if a major enforcement ruling lands.
• Microstructure arbitrage (3–6 months): long custody/custodian proxies (select names with explicit institutional custody offerings) vs short high-retail-volume venues — allocate 0.5–1% NAV each leg. Expect capture of 200–500bps annualized spread from custody AUM fees and compressed retail volumes; re-evaluate at 6 months or after major regulatory clarifications.