BTC

ETH

S&P Futures 500

$26,390.00

$1,835.50

$4,275.00

(-2.99%)

 (-2.69%)

(-0.42%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

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May 2023 Market Recap

Our Daily View

What We Are Covering Today

  • Asian bonds nosedive as traders brace for an interest-rate roller coaster ride (more in Macro & TradFi)
  • Binance.US to remove select trading pairs and halting OTC trading; Circle Singapore obtains Major Payment Institution (MPI) license (more in DeFi & CeFi)
  • Exodus of assets from Binance remains pale in comparison to FTX; Gas fees and total gas paid craters as memecoin season fades (more in On-Chain)
  • Surging implied volatility, put-skew persistence, and options activities suggest a cautious market amid regulatory uncertainty (more in Crypto Derivatives)
  • BTC and ETH are consolidating within previous range; ETHBTC ratio retraces to trendline (more in Crypto Technical Analysis)

Macro & TradFi

Asian bonds are plunging this morning as traders react to early hawkish signals from recent central bank meetings. This has prompted market participants to anticipate a prolonged interest-rate hiking cycle. The benchmark 10-year yields jumped around 12 basis points in Australia and New Zealand during today’s Asia session, while their Japanese equivalents of the same maturity moved up slightly by two basis points. The yield on Australia's three-year bond also reached its highest point since 2012.

This surge follows the Bank of Canada's unexpected move to reinstate its rate-hiking campaign. A similar decision in Australia earlier this week caught traders off guard and triggered a reevaluation of bond market prices. The Canadian rate hike sent shockwaves through global markets, prompting traders to switch their stance from anticipating a rate cut to betting on tightening by the Federal Reserve. At one point, swaps were fully factoring in a quarter-point hike for the Federal Reserve's July meeting. However, the odds of such an increase in next week's decision remain below 40%. Investors will be watching next week's U.S. inflation data closely for further insights into the Fed's policy trajectory.

Meanwhile, the fallout from the recent debt-ceiling conflict has financial markets bracing for an influx of over $1 trillion in Treasury bills, a move that could introduce new market volatility. Fears are mounting that the size of this issuance could overwhelm buyers, unsettling markets and boosting short-term borrowing costs. Although most are not predicting significant turmoil, there are concerns about unforeseen issues within the complex financial transactions system that could lead to market-wide shocks. By the end of May, the Treasury Department had depleted its checking account to less than $50 billion and is now seeking to replenish it to $600 billion. This, coupled with regulators' push to increase banks' cash reserves and the Federal Reserve's balance sheet contraction, could further drain market liquidity.

U.S. stocks had a tough trading day, with the S&P 500 dipping 0.4% and the tech-heavy Nasdaq Composite down 1.3%. Conversely, the Dow Jones Industrial Average managed a slight gain of 0.3%. Additionally, the Russell 2000 advanced 1.8%, marking a positive continuation of its strong start to June, following a period of underperformance earlier in the year. Treasury yields rose, with the policy-sensitive two-year yield climbing to 4.56%, and the 10-year yield advancing to 3.782%, holding onto their gains into Asian trading.

DeFi & CeFi

  • Binance.US to remove select trading pairs and halts OTC trading
  • Circle clinches major payment institution (MPI) license in Singapore
  • Digital asset-denominated life insurance provider Meanwhile launches with $19M in successful funding from investors
  • Arbitrum initiates on-chain vote on 10 June for locking 700M $ARB in smart contract
  • Arbitrum stops processing transactions due to sequencer bug
  • BNB Bridge attacker's $250M $BNB Collateral liquidation level sits at $220
  • Web3 gaming studio Argus Labs completes $10M seed round led by Haun Ventures
  • BitDAO approves proposal to convert $BIT to $MNT at 1:1

Binance.US recently issued a statement announcing their decision to eliminate certain trading pairs, specifically those involving USDT, BTC, and BUSD for advanced trading. They have also temporarily suspended over-the-counter (OTC) trading. This change impacts a range of token trading pairs, including AAVE, APE, CRV, MANA, MKR, YFI, among others, which will be delisted. Additionally, Binance.US is planning to streamline its Buy, Sell & Convert services by reducing the number of supported Convert trading pairs to 226.

On Wednesday, Circle Singapore, a subsidiary of Circle, received a Major Payment Institution (MPI) license from the Monetary Authority of Singapore. This license authorizes Circle Singapore to provide digital payment token services, as well as cross-border and domestic money transfer services, through its range of products and offerings. A notable offering is the Circle Account, which provides institutional customers access to USDC.

Elsewhere, ‘Meanwhile’, the world's first fully digital, asset-denominated life insurance provider, has launched with $19M in funding. Prominent investors include OpenAI CEO Sam Altman and Google-backed Gradient Ventures. Licensed by the Bermuda Monetary Authority, Meanwhile offers Bitcoin-denominated life insurance products powered by AI. It aims to streamline the insurance process with AI-driven underwriting, claims handling, and operations. Meanwhile's target market is long-term BTC holders, and it plans to expand its offering to other BTC-denominated financial products.

On-Chain

Turning our attention to on-chain data, the quantities of BTC and ETH held on the Binance exchange have been declining since the announcement of the lawsuit on Monday. Notably, the ETH balance on Binance is nearing its lowest level for the year, a mark observed in March during the onset of the banking crisis. In contrast, the BTC balance had been rising since the start of the year but began to see outflows from Binance following the recent lawsuit. Despite this, the outflow of both BTC and ETH from Binance remains relatively minor compared to the significant outflow of tokens observed during the FTX saga.

Elsewhere, as the memecoin season loses steam and with Pepecoin plunging from its peak since being listed on Binance, a wave of lawsuits has instilled fear, uncertainty, and doubt among investors. Consequently, there has been a noticeable decrease in demand for transactions involving speculative assets. This trend is evident in the ETH network, where the 7-day moving average of total fees paid in ETH has recently dropped to a one-month low of 161.938 ETH. Moreover, the 7-day moving average of the median gas price has also descended to a one-month low of 30.723 GWEI. These metrics reflect a decline in transaction activity and indicate the prevailing sentiment toward speculative assets on the ETH blockchain.

Crypto Derivatives

  • BTC and ETH funding rates remain positive
  • 30-day BTC ATM IV for BTC and ETH increases to 43.60% and 39.53% respectively
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH declines slightly to 45.86% and 41.65% respectively
  • 30-day 25-delta skew for both BTC and ETH is on the put side

Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:

Net Annualized APR

Perp (USDT pair)

Long on

Short On

17.21

BNB

OKX

Binance

9.31%

XRP

OKX

ByBit

6.25%

LTC

OKX

ByBit

Source: @CexyArbBot Telegram

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, DOGE vs USDT perps 

2) CEX observed include Binance, Bybit, OKX & DYDX

@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo

In the futures market, liquidations totaled to $108.40 million, with long positions accounting for 81.1% ($87.86 million) of the total.

The cryptocurrency market is witnessing a noticeable surge in implied volatility (IV) across the term structure for both BTC and ETH. The term structures persist in showing steep backwardation at the front end for BTC, primarily driven by the mounting uncertainty around impending US regulations on market makers. This has resulted in a scenario where IV is now largely in sync with realized volatility (RV) today, contrasting with the previous trend where RV outpaced IV. With today's BTC Vega for the near-term expiry standing at 2.85 at the strike, and BTC's Vega for the same expiry skyrocketing to 6.23 at the strike, long options positions could see an increase in their value.

In terms of skew, both BTC and ETH options have maintained a put skew, with the spread between ETH and BTC narrowing over the past four days to 0.95. Currently, the 30-day 25-delta for BTC and ETH stands at -1.75% and -2.7%, respectively.

There is a significant concentration of volume on contracts expiring on June 30. Interestingly, the distribution between puts and calls for these contracts is asymmetrical. Specifically, the market has seen more activity on the put side, with a total of 2.37K contracts, compared to 2.15K call contracts. Noteworthy trading volumes from @tradeparadigm in BTC were driven by notable options transactions. These include the purchase of 400 contracts of the 30-Jun-23 27.5K Calls, the sale of 182 contracts of the 30-Jun-23 25K Puts, and the purchase of 175 contracts of the 9-Jun-23 28K Calls.

Significant BTC trading activities were noticed in a Bull Call Spread strategy involving 2101 contracts, a Long Straddle strategy with 1000 contracts, and a Bull Diagonal Spread (Calls) strategy with 575 contracts.

Lastly, the VIX decreased to 13.94.

Crypto Technical Analysis

Turning to technical analysis, BTC continues its consolidation with choppy price action, following a drop of more than 3% yesterday. As with yesterday, the immediate support level for BTC is at the $25.8K mark, while the nearest resistance is significantly further away at $27.4K. Currently, it appears that BTC will continue its sideways movement, given that the MACD is nearly flat and the RSI hovers close to the middle of the range at 50.

Compared to BTC, ETH saw a slightly smaller decrease yesterday of less than 3%, but it also continues to consolidate with the same range-bound price action. There appears to be minor support at the $1830 level (which previously acted as resistance in May and April) and at the $1795 level (which served as support during the same periods). Overhead levels such as the $1940 and the $2000 marks may act as resistance if prices rise to those levels. At this stage, it's difficult to predict the possible direction of ETH, as the MACD is flat and the RSI is near 50, similar to BTC.

After breaking out of the upper trendline yesterday, ETHBTC continues to trade near the 0.07 level. If ETH continues to outperform BTC at this juncture, ETHBTC may attempt to breach the overhead 0.07 level. Otherwise, ETHBTC might fall below the trendline once more. However, it seems more likely that ETHBTC will maintain the bullish momentum it gained in early May.

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