BTC

ETH

S&P Futures 500

$61,338.10

$3,448.08

$5,077.25

(+7.48%)

 (+5.89%)

(-0.19%)

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

GM Treehouser 🌳

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January 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Fed officials prioritize data for rate cuts; CSRC curbs risky trading strategies (More in Macro & TradFi)
  • CBN scrutinizes Binance for fund flows; Coinbase users hit by zero balance bug (More in DeFi & CeFi)
  • BTC on-chain transaction volume over $35B; $PEPE whale withdraws large amounts of $SHIB (More in On-Chain)
  • Over $400M of shorts liquidated; Short-term IVs for BTC and ETH increases (More in Crypto Derivatives)
  • BTC breaks multiple resistance zones and experiences a fake-out peaking at $64K (More in Crypto Technical Analysis)

Macro & TradFi

Federal Reserve officials, including New York Fed President John Williams, Boston Fed President Susan Collins, and Atlanta Fed President Raphael Bostic, emphasized that future interest-rate cuts will be guided by economic data rather than a predetermined schedule. This approach marks a departure from previous cycles of rate reductions, reflecting a more dynamic response to evolving economic conditions. Officials highlighted the necessity of data dependence, particularly in light of recent unexpected inflation figures and the robustness of the economy, shown by sustained consumer spending and low unemployment rates. Despite anticipation of gradual rate cuts later this year, the Fed's strategy underscores a cautious and flexible approach, aimed at achieving stable prices and maximum employment while navigating potential economic uncertainties. This strategy signifies the Fed's commitment to tailoring monetary policy to real-time economic indicators, ensuring a calibrated response to inflationary pressures and economic health.

In other news, The China Securities Regulatory Commission (CSRC) is implementing measures to mitigate the impact of a quantitative trading strategy, Direct Market Access (DMA), which has been linked to recent disturbances in China's stock market. Regulators are directing quantitative funds to stop accepting new inflows and to gradually drop their existing DMA products, which often involve swap contracts and high leverage, to avoid abrupt market sell-offs. This action addresses the strategy's role in intensifying a stock market downturn earlier in the year. Although the CSRC has not mandated funds to reduce positions in existing products, the guidance has raised concerns about potential further declines in the market. The crackdown reflects China's broader effort to reduce market leverage and stabilize market operations by curbing speculative trading practices that have contributed to market volatility.

Wall Street experienced a slight downturn on Wednesday, with key indexes such as the S&P 500, Dow Jones Industrial Average, and Nasdaq falling by 0.17%, 0.06%, and 0.55%, respectively, as investors anticipated inflation data that could shape the Federal Reserve's next policy moves. In contrast, Beyond Meat's shares surged over 30% following the announcement of cost reductions and changes to its product lineup aimed at enhancing financial outcomes. Meanwhile, Asian markets opened mostly lower on Tuesday, coming off record highs from the previous week. Market participants closely monitor upcoming economic data, which could provide clearer insights into potential central bank rate cuts. The focus remains on the forthcoming PCE data release today at 21:30 SGT, which investors highly anticipate for its implications on future monetary policy decisions.

CeFi & DeFi

  • Nigerian central bank head criticizes Binance, execs reportedly arrested
  • Coinbase users report zero balance as Bitcoin spikes to $64K
  • Risk Manager quits Aave and moves to rival lending protocol Morpho
  • Bitcoin miner Marathon plans 'Anduro,' a Multi-Chain Layer-2
  • Gemini to return at least $1.1B to Earn customers in settlement with NYDFS

The Central Bank of Nigeria (CBN) has escalated its scrutiny of Binance, expressing concerns over "suspicious flows'' of funds through the cryptocurrency exchange in 2023. CBN Governor Olayemi Cardoso highlighted the movement of $26 billion through Binance Nigeria from unidentified sources, prompting a collaborative investigation by various government agencies, including the Economic and Financial Crimes Commission (EFCC), the police, and the National Security Adviser (NSA). The situation intensified with the detention of two Binance executives and the seizure of their passports in Abuja, amid allegations of the crypto exchange's role in destabilizing the Nigerian naira. In response to these developments, internet access to Binance and other crypto exchanges was blocked in Nigeria, coinciding with the naira's depreciation to a record low against the U.S. dollar. This regulatory action comes despite the CBN's recent move to lift a ban on bank crypto transactions and the introduction of guidelines for virtual asset service providers, as well as Nigeria's pioneering efforts in launching a central bank digital currency and a naira-pegged stablecoin in a regulatory sandbox.

In other news, as Bitcoin approached closer to a new all-time high, Coinbase users encountered a bug that displayed their account balances as zero, causing concern and confusion. This issue coincided with Bitcoin's price surge to above $64,000 on February 28th. Coinbase acknowledged the problem, assuring users that their assets were secure and that the team was investigating the cause. Following the incident, Coinbase services began to stabilize, with users reporting the restoration of their expected account balances. Coinbase's response to the situation included updates via social media and an on-site banner informing users of the ongoing investigation, however specific details about the cause of the bug remain unclear.

On-Chain

The on-chain data for Bitcoin reveals an impressive volume of activity with $35.37 billion in transactions, 283,000 unique tokens circulating, and a significant number of large transactions (3,661) each exceeding $1 million in value. This robust activity aligns with Bitcoin's surge to a $64K high, marking a level of network engagement not seen since 2022. This data suggests the substantial involvement of major stakeholders in the market, indicating strong market confidence and a bullish sentiment among investors.

An analysis of $PEPE on-chain activity indicates a notable profit-taking event by a whale, who deposited a massive 1.97 trillion $PEPE to Binance, potentially selling for a 135% gain. This move aligns with $PEPE reaching all-time highs. This whale has also moved a substantial amount of $SHIB off Binance, possibly due to the whale rotating $PEPE to $SHIB, sparking speculation about potential bullish movement for $SHIB soon.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH increased significantly to 67.91 and 70.42
  • The 30-day 25-delta skew (C-P) for BTC and ETH increased to 4.34%  and 2.78%.
  • The futures market witnessed $750.71M liquidations, with shorts representing 54%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

45.55%

DOGE

Binance

dYdX

42.49%

DOGE

Bybit

dYdX

41.54%

DOGE

Binance

OKX

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.

Today’s BTC ATM Implied Volatility (IV) chart exhibits a pattern in the short-term maturities. The 7-day IV showcases a significant uptick to 74.37 right now, which correlates with the recent news of Bitcoin breaking the $63K mark. This sharp increase in the 7-day IV also indicates a strong market reaction to the price movement, with traders likely expecting increased short-term volatility due to the rapid price appreciation. This could be a reflection of traders rushing to hedge or capitalize on the immediate implications of Bitcoin’s surge, which may be attributed to a variety of factors including positive market sentiment, adoption news, or macroeconomic factors driving liquidity into Bitcoin. The longer-term maturities, while also showing an uptrend, do not exhibit as pronounced a spike as the 7-day maturity. This suggests that while there is a general expectation of increased volatility, the market views this as a more immediate effect rather than a long-term trend.

The graph shows a significant initial spike in the Mark IV, which rapidly declines and approaches the Shadow IV as time to maturity increases. This represents an extreme short-term volatility expectation in the market likely due to the recent surge in BTC’s price. The steep decline in Mark IV also indicates that market participants might be expecting a significant but very short-lived event or piece of news to impact Bitcoin's price volatility, possibly the Core PCE data released today.

BTC 25 Delta skews (C-P) is currently positive for both the 7-day and 30-day skews, both noticeably increasing due to the recent price movements of BTC. This indicates a prevailing bullish sentiment and that the market is pricing in potential heightened volatility.

Lastly, during the US Trading Session, @Paradigm highlighted option flows this week, emphasizing downside coverage with strategically put purchases and structured positions. Key BTC trades encompassed the procurement of 300x 29-Mar-24 58/50k Put Spread, and 362x 8-Mar-24 63/70k Inverse Call Calendar. On the ETH front, significant trades included 6902x 8-Mar-24 3450/3800 Inverse Call Calendar, and 4432x 31-May-24 3500/4000 Call Spread.

Crypto Technical Analysis

BTC experienced significant growth in value overnight, breaking through key psychological resistance zones at $59K and $60K. However, at the peak of the market, BTC reached a high of $64K before quickly dropping back down to the $61K level, confirming it to be a fake-out. The $64K level now serves as immediate resistance, representing the last horizontal resistance zone before the previous all-time high. Despite the bullish momentum, RSI remains in the highly overbought territory, which may suggest a heightened possibility of a retracement or consolidation in the near term if buyers begin to exhaust. It is crucial to monitor the RSI for signs of divergence that may precede a potential reversal. In such a scenario, BTC could find support around the $58K level before further bullish sentiment emerges.

ETH followed a similar trajectory, albeit with a lesser magnitude. After surging to a peak of $3.5K, ETH also retraced to the $3.3K level, confirming a break above the previously identified channel upper range and the $3.22K resistance zone. Looking ahead, the $3.5K level now serves as immediate resistance, last seen in April 2022. Conversely, if a retracement occurs, the previous resistance at $3.2K could act as immediate support, indicating a potential downside of approximately 3%. The 4-hour RSI is positioned at 76.88, which suggests strong buying pressure but also signals caution as it is now in the overbought territory, which could lead to a potential pullback if the momentum cannot be sustained. 

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