BTC

ETH

S&P Futures 500

$67,193.47

$3,913.12

$5,223.50

(+1.43%)

 (+1.95%)

(+2.38%)

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

GM Treehouser 🌳

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February 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Federal Reserve Chair Jerome Powell suggests that the central bank is getting close to adjusting interest rates; Chinese regulators are inspecting regional banks' bond investments (More in Macro & TradFi)
  • Hong Kong announces CBDC project; Kamino airdrop to launch in April (More in DeFi & CeFi)
  • Whales hold Bitcoin firmly; memecoin investments by 0x373 show significant unrealized gains (More in On-Chain)
  • BTC shows minimal changes in IVs and C-P skews while its terms structure mostly back to a contango state (More in Crypto Derivatives)
  • BTC consolidating in the $65.5K to $68K range; ETH approaches the key psychological level of $4K (More in Crypto Technical Analysis)

Macro & TradFi

Federal Reserve Chair Jerome Powell suggests that the central bank is getting close to adjusting interest rates. Inflation data recently has indicated the pace of price increases is continuing to slow down and on the right path towards moving sustainably at 2% but more confidence is required. The current outlook will see the first rate cut arrive in June, with four reductions totaling a full percentage point by the end of 2024. This emphasis on careful analysis and data before making policy changes shows the Fed’s strict stance on fighting inflation, even though the market is expecting interest rate cuts later this year.

Chinese regulators are inspecting regional banks' bond investments amid concerns that the banks are speculating on these securities instead of using their money to provide loans and stimulate the economy. This crackdown arrived after a surge pushed longer-term sovereign yields near all-time lows earlier this week. While these lower yields save the government money on borrowing, officials might be concerned that the buying frenzy could make lenders less likely to invest in loans that are essential for economic growth. Additionally, a sudden shift in the market could cause banks to lose significant amounts of capital. Credit expansion has been weak despite efforts by authorities to boost liquidity through reserve requirement ratio cuts for banks and cash injections via other tools

The S&P 500 increased by 1.03%, the Dow Jones Industrial Average by 0.34% and the Nasdaq by 1.51% due to speculation of a potential interest rate cut this year. The retail industry displayed a strong performance, with Kroger co closing at $55.48, a 9.88% gain, after beating expectations and recording positive earnings. ON Semiconductor Corp closed with an upside of 6.88% at $82.96 and Microchip Technology at $93.34, increasing 6.3%. This indicates that the semiconductor industry is gaining momentum from the AI trend and is not showing signs of slowing down.

CeFi & DeFi

  • Hong Kong announces new CBDC project
  • Kamino announces airdrop scheduled for April
  • Do Kwon to be extradited after 23 March
  • Blockfi settles with FTX, Alameda for over $800M
  • Cosmos platform Cosmology raises $5M

The Hong Kong Monetary Authority (HKMA) has initiated Project Ensemble, a new venture into wholesale Central Bank Digital Currency (wCBDC) aimed at enhancing the tokenization market. This project is set to explore and implement innovative financial market infrastructure to enable smooth interbank transactions using tokenized money, with a primary focus on tokenized deposits. Hong Kong's journey with wholesale CBDCs began in 2017, extending into retail CBDC research by 2021, although decisions regarding the launch of a digital Hong Kong dollar (e-HKD) remain pending. Project Ensemble introduces a wCBDC Sandbox, expected to launch within the year, to delve deeper into the tokenization of real-world assets, such as green bonds and carbon credits. This initiative aims to establish a collaborative community involving both public and private sectors to align with industry standards, potentially leading to the development of new infrastructure facilitating transactions between tokenized assets and money. Depending on industry interest, this could eventually lead to an official issuance of wCBDC. Eddie Yue, HKMA's Chief Executive, believes that Project Ensemble will invigorate Hong Kong's financial sector and solidify its status at the forefront of tokenized money and assets.

Solana's DeFi protocol Kamino has announced an airdrop of its KMNO token scheduled for April, following a March 31 snapshot to determine eligible users. The airdrop aims to allocate tokens based on users' accumulated points, with 7% of KMNO's total supply dedicated to this initial distribution. Kamino, known for its borrowing, lending, and yield-earning services within the Solana ecosystem, introduced a points program last year to incentivize user engagement and prepare for this event, drawing inspiration from similar strategies by Jito and Jupiter. From its launch, KMNO will function as a governance token, granting holders the power to shape the protocol's future direction, including incentive schemes, revenue allocation, and operational decisions. The token's debut will see 10% of its total supply, set at 10 billion tokens, becoming available for circulation. Kamino has also hinted at future airdrops, with "Season 2" starting in April, promising to reward loyalty and sustained interaction with its offerings.

On-Chain

According to Santiment, despite the significant volatility following Bitcoin's all-time high, data indicates that large-scale investors, notably sharks and whales, remain steadfast in their Bitcoin holdings. Concurrently, there's a noticeable decrease in the number of non-zero Bitcoin wallets, predominantly attributed to the exits of smaller traders from the market. This trend suggests a bullish outlook for Bitcoin, as the steadfastness of major investors amidst declining participation from smaller ones could signal a strong underlying confidence in the cryptocurrency's value and stability.

In other news, OnChainDataNerd reports that from November 2023 to January 2024, the whale identified by the address 0x373 exchanged $4.96 million for 3.969 trillion PEPE tokens, without having sold any to date. As of now, this particular investor's unrealized profit stands at approximately $21.54 million. This behavior from the whale wallet holder implies a continued bullish stance on memecoins, indicating confidence in their future value despite their inherent volatility and speculative nature.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH declined to 69.41% and 74.67%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH stayed relatively flat at 5.46% and 4.77%, respectively.
  • The futures market witnessed $212.98M in liquidations, with shorts representing 52.22%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

57.07%

AVAX

OKX

dYdX

50.08%

SOL

OKX

dYdX

50.01%

AVAX

Binance

dYdX

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.

BTC ATM Implied Volatility (IV) has experienced a minor decrease as the cryptocurrency major remains in a sideways movement, lacking significant catalysts to propel its price decisively in either direction. Currently, the 30-day IV rests at 67.01%, with the 7-day IV slightly higher at 66.73%.

BTC's term structure has predominantly reverted to a contango state, except for 1-day expiry contracts, which displayed higher IVs compared to longer-tenured ones. Moreover, the overall curve has shifted downwards across all tenors, indicating a stabilization in IVs and aligning with the narrative of a lack of significant catalysts driving market movements.

The BTC 25 Delta skews (C-P) have remained largely unchanged, indicating stability in investor sentiments for the near future. Conversely, ETH has exhibited a slightly decreasing trend, possibly influenced by positive price movements in recent days while BTC has remained relatively flat. Traders may anticipate a potential pullback as the price corrects itself in response to these dynamics.

Lastly, during the Asia/EU Trading Session, @Paradigm reported that option flows are getting increasingly focused on the medium to long-term plays. Some notable trades included the sale of 525x 28-Jun-24 $75K BTC Call, the purchase of a 19,750x 26-Apr-24 $3.6K/$4.6K ETH Call Spread, and 3,000x 26-Apr-24 $4.2K/$6K ETH Call Spread.

Crypto Technical Analysis

Onto technical analysis, BTC is currently consolidating within the $65.5K to $68K range on the 4-hour chart, with its current trading price near $67K following a minor decline in the previous session. The immediate support level is observed around $65.5K, with a potential further support level at $59K if this level is breached. Conversely, the key resistance level remains BTC's all-time high at $69K. The current RSI sits at approximately 56.47, indicating a neutral market sentiment in recent days. Traders interpret this neutrality as a potential for volatility in either bullish or bearish scenarios. Therefore, BTC's price action in the coming days will be crucial, potentially setting the tone for market momentum.

ETH continues to exhibit bullish momentum on the 4-hour chart, currently trading at $3.9K. The key psychological resistance for traders is positioned at the $4K level, representing a 2.1% increase from the current price. In the event of profit-taking from recent price gains, ETH may find support around $3.3K. The RSI for ETH has slightly rebounded from its neutral position of 60, currently sitting at 64 and nearing the overbought level. This indicates that the market should anticipate potential price volatility in both bullish and bearish scenarios.

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