BTC

ETH

S&P Futures 500

$26,119.00

$1,681.25

$4,387.25

(-2.34%)

 (-0.85%)

(+0.05%)

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

GM Treehouser 🌳

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July 2023 Market Recap

Our Daily View

What We Are Covering Today

  • China advocates BRICS expansion; PBOC addresses local government debt amidst economic concerns. (more in Macro & TradFi)
  • SEC likely to approve multiple Ether futures ETFs, also seeks permission to appeal XRP case ruling. (more in DeFi & CeFi)
  • Vote of confidence in $APE as Machi Big Brother accumulates $3M worth in August. (more in On-Chain)
  • Term structures return back to Contango with C-P skews continuing to decline despite a quiet weekend with largely sideways movements. (more in Crypto Derivatives)
  • BTC tests $26.1K support; ETH mirrors price descent, hovers around $1.6K support. (more in Crypto Technical Analysis)

Macro & TradFi

China is advocating for the expansion of the BRICS alliance to challenge the G7's dominance in global geopolitics, prompting a debate during the upcoming Johannesburg summit, attended by numerous global leaders. However, internal tensions have surfaced, particularly between India and China, on whether BRICS should remain an economic consortium for developing nations or evolve into a political entity countering Western influence. While South Africa's stance opposes viewing this potential enlargement as anti-Western, the probable inclusion of nations like Iran, Belarus, and Venezuela could be perceived as strengthening ties with Russia and China's allies. Meanwhile, Brazil suggests setting clear membership criteria, with some officials hinting at prioritizing trade settlements in local currencies over the U.S. dollar.

In other news, China's central bank, the People's Bank of China (PBOC), plans to coordinate financial support to address rising local government debt concerns amidst signs of a weakening economic recovery and potential spillovers from the ongoing property crisis. Despite recent interest rate cuts and anticipated adjustments to prime loan rates, analysts argue more decisive actions are essential. The backdrop includes local governments grappling with inflated debt after years of excessive infrastructure spending, dwindling land sale returns, and escalating COVID-19 related costs. Notably, Fitch Ratings believes Beijing may resist direct bailouts to maintain its stance on debt reduction. The gravity of the situation underscores the critical need for effective interventions to stabilize economic sentiment and bolster investor confidence.

Last Friday, US equities extended their losses for a third session as investors evaluated earnings and economic data amid rising interest rates. DJIA rose by 0.07%, posting its worst week since March. The S&P 500 fell 0.01%, and the Nasdaq Composite dropped 0.20%. Applied Materials surged by 2.41% following an optimistic Q4 profit forecast, driven by increasing chip demand and significant government subsidies. Meanwhile, Ross Stores experienced a 5.01% jump after the discount retailer not only surpassed estimates but also elevated its annual sales and profit projections.

DeFi & CeFi

  • SEC likely to approve multiple ETH futures ETFs
  • SEC seeks permission to appeal XRP ruling
  • DeFi protocols Exactly and Harbor hacked in separate attacks
  • Ethereum launched Devnet 8
  • Checkout.com ends Binance partnership

Reports suggest that the US Securities and Exchange Commission (SEC) is contemplating the simultaneous approval of several applications for ETH futures ETFs, indicating a potential shift in their approach. Unlike the scenario in 2021, the SEC has not requested firms to withdraw their applications this time around, which signals a more favorable disposition. Presently, approximately 16 applications for ETFs involving ETH or BTC-ETH futures are in the queue for approval. Amid this, asset management company Valkyrie has recently submitted an application for an Ether futures ETF which is eyeing for an early October debut. The SEC's decision-making process also holds sway over the potential green light for a spot Bitcoin ETF in the United States, with industry giants such as Fidelity and BlackRock eagerly awaiting developments.

Shifting our focus, the SEC is actively seeking authorization to challenge the judge's ruling that absolves the sales of XRP tokens from violating regulations. This endeavor takes the form of an interlocutory appeal, following the judge's approval of the SEC's argumentative presentation. The appeal revolves around the question of whether Ripple's XRP sales run afoul of securities laws, given the varying perspectives held by investors. This issue requires an interpretation of the rules governing investment contracts and the potential profitability stemming from trading XRP on cryptocurrency platforms. The outcome of this appeal could potentially have ripple effects across other SEC cases, including those involving Coinbase and Dragonchain, as well as the broader legal matters faced by Ripple. Ripple has until September 1, 2023, to provide its response. If the appeal is granted, the SEC will need to seek consideration from higher courts.

On-Chain

According to analysis from @lookonchain, Machi Big Brother continues to make strategic moves amidst prevailing market turbulence. After the market downturn late last week, Machi Big Brother acquired an additional 67,028 $APE tokens, equivalent to $583K, from Binance. This isn't a solitary transaction; throughout August, they have systematically increased their position, accumulating 1.88M $APE valued at approximately $3M. Such accumulation underscores positive sentiment towards the token, and strong confidence for future products in the Yuga Labs pipeline.

Crypto Derivatives

  • BTC and ETH funding rates remain negative over the weekend.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped slightly after the sell-off, currently at 42.84% and 38.93%, respectively.
  • 30-day 25-delta skew (C-P) for BTC decreased further to -2.19% while that of ETH dipped to -5.39%.
  • The futures market witnessed $166.56M worth of liquidations since Friday with shorts representing 51.07% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

13.04%

LTC

Binance

dYdX

12.40%

BNB

OKX

Binance

11.43%

ETH

OKX

dYdX

Source: @CexyArbBot Telegram Bot

Notes:

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

2) CEXs observed include Binance, Bybit, OKX & dYdX.

3) Lookback period is 24 hours.

Following a substantial sell-off last Thursday, Bitcoin's ATM IV experienced a modest decline over the weekend, as the market returned to a more stable state following heightened volatility. At present, the 7-day and 30-day ATM IVs stand at 39.7% and 38.6% respectively. Although these figures have receded, they remain above the highest points observed within the last 30 days prior to the sell-off.

Over the weekend, the term structures for both BTC and ETH shifted back into contango, reflecting the market's return to normalcy. Minimal changes were observed in IVs across the curve within the past 24 hours, mirroring the prevailing quietness in the market. A comparison between the term structures of BTC and ETH reveals a continued disparity, with BTC's IV notably surpassing that of ETH. This accentuates the market's heightened responsiveness to macroeconomic factors and suggests that traders are discerning differences in risk between these two major cryptocurrencies, particularly in light of recent developments.

Meanwhile, the (C-P) skews for both BTC and ETH, spanning 7-day and 30-day periods, have consistently held negative values, indicating traders' inclination towards hedging against downside risks. Notably, BTC's 7-day and 30-day skew both decreased despite relatively sideways market movements over the weekend, settling at -4.62 and -2.10 respectively. This marks the highest put premium for the 30-day skewness throughout the month. Conversely, ETH's skew has remained relatively stable in the negative zone, hovering around -5.03 for the 7-day skew.

As reported by @Paradigm, some of the notable trading structures after the volatilities last week include the purchase of 7250x Oct-23 2200 ETH Call (45v), 6600x Oct-23 2100 ETH Call (42.5v), and 5250x 21Aug23 1600/1450 ETH Put Spread. These actions indicate traders positioning themselves with low-delta options to navigate the current market conditions.

Crypto Technical Analysis

Moving on to technical analysis, BTC has seen a largely sideways movement during the weekend. Notably, the Heikin-Ashi candles (candlestick chart calculated using averages of prior candles, offering a smoothed trend representation) for BTC showcase smaller candles, suggesting a deceleration of the selloff. BTC is currently positioned near the $26.1K support—a confluence of a recent local trough and a crucial psychological support. If BTC recovers, it faces the $28.3K area, which played critical roles in April and May and now serves as the potential resistance, underscored by the bull market support band's shift to resistance. With an RSI of 15.9, BTC is in an oversold domain.

ETH has similarly breached its bull market support band and deviated from a symmetrical triangle pattern. The Heikin-Ashi candles also suggest a potential slowdown in its recent bearish momentum, hinting at a consolidation or possible trend reversal in the near term. With the RSI plunging to 19.44, indicating a deep oversold territory, ETH has found potential support at $1.6K—a level reminiscent of lows from April and a resistance barrier between January to March. Should this support falter, ETH could further retreat to the $1.5K threshold, suggesting an additional 10% downside risk. However, any upward recovery might be challenged by a resistance near $1.74K.

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