BTC

ETH

S&P Futures 500

$69,676.44

$3,515.70

$5,307.75

(-1.30%)

 (-2.74%)

(+0.60%)

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 official warns about lowering interest rates; Japanese Yen hits 34-year low (More in Macro & TradFi)
  • Blackrock remains optimistic about ETH ETF despite its possible classification as a security; FET, AGIX, and OCEAN to be combined into a single ASI token with the new AI Alliance (More in DeFi & CeFi)
  • On-chain fraud uncovered in Munchables; Bitcoin holders realize profits as SOPR peaks (More in On-Chain)
  • BTC’s 25-Delta skews 7-day and 30-day maturities diverge further; BTC term structure maintains a pronounced contango shape (More in Crypto Derivatives)
  • BTC struggles at $72K resistance; ETH tests key $3.45K support level (More in Crypto Technical Analysis)

Macro & TradFi

Senior Federal Reserve official, Christopher Waller, expressed caution about lowering interest rates following disappointing inflation data. In a recent address, he emphasized the lack of urgency to cut the Federal Reserve’s target range, currently at a 23-year peak of 5.25% to 5.5%. Waller highlighted the considerable progress in curbing inflation over the last year but noted that the recent metrics suggest that this progress may be plateauing. He suggested that it would be prudent to decrease the number of anticipated rate cuts or delay them, in light of the most recent inflation figures showing a month-on-month rise. Waller's stance reflects a broader consensus within the Fed that any moves to cut rates should be delayed until there is consistent evidence pointing towards sustainable inflation at their 2% target. 

In other news, the Japanese yen descended to a 34-year low after briefly approaching the critical threshold of 152 per dollar, the yen saw a modest recovery following the government's warning yesterday. Nonetheless, it remains fragile, showing only a slight improvement from its lowest point. As of Thursday morning in Tokyo, the yen was trading around 151.35 per dollar, barely 0.4% stronger than the previous day’s low. The Bank of Japan’s negative interest rate policy, intended to combat deflation, is now facing the new challenge of preventing a falling yen from driving up inflation due to expensive imports. While the BOJ has tightened its policy for the first time in nearly two decades, its actions have not reassured the markets, especially compared to the Federal Reserve's significantly higher interest rates. Japan's finance officials are closely monitoring the situation, prepared to enact "bold measures" if the yen's slide turns excessive, which might include direct market intervention—a strategy they have previously employed in 2022.

The Dow Jones Industrial Average led the gains in U.S. stocks, surging by 1.22%, bolstered by Merck & Co's 4.96% climb after FDA approval for its new therapy. The S&P 500 followed suit, rising by 0.86% to a record finish of 5,248.49, while the Nasdaq Composite's advance was more moderate at 0.51%. Investors now turn to the upcoming PCE Price Index data, which could shape expectations for the Federal Reserve's rate path. The likelihood of a rate reduction in June stands at 70.4% according to the CME FedWatch Tool. Sector-wise, utilities saw a significant uptick, rising by 2.75%, with real estate not far behind at a 2.42% increase, both benefiting from a dip in bond yields. The quarter is shaping up positively, with all three indexes positioned for quarterly gains, and the S&P 500 potentially securing its most robust first-quarter percentage increase in three years.

CeFi & DeFi

  • Blackrock says an ETH ETF is possible even if ETH is a security
  • Ethena to airdrop its governance token ENA on April 2nd
  • FET, AGIX, and OCEAN to combine as ASI with the new AI Alliance
  • 'Hamas-Aligned' Gaza crypto addresses are sanctioned by U.S and  U.K.
  • A federal judge ruled that the SEC has a plausible case against Coinbase

BlackRock CEO Larry Fink expressed confidence that an Ether ETF could still be listed by the company, even if the U.S. Securities and Exchange Commission (SEC) classifies the token as a security. This statement comes amid reports that the SEC is considering classifying ether as a security, which has raised concerns about the feasibility of an ether ETF in the U.S. However, Fink's optimism suggests a potential path forward for such an ETF, despite regulatory scrutiny. Notably, BlackRock is among the issuers that have submitted filings for a spot Ether ETF, alongside seven others. 

Meanwhile, Fetch.ai, SingularityNET, and Ocean Protocol have agreed to merge their respective tokens and establish an alliance aimed at decentralized artificial intelligence. This collaboration seeks to offer an alternative to centralized AI projects controlled by major tech companies. Under the agreement, Fetch.ai's native token (FET) will be rebranded as ASI (artificial superintelligence), with a total supply of approximately 2.63 billion tokens and an initial price of $2.82. Additionally, SingularityNET's token (AGIX) and Ocean Protocol's token (OCEAN) will merge into ASI at conversion rates of around 0.433 to 1. As such, ASI is anticipated to have a fully diluted market capitalization of about $7.5 billion. The combined entity aims to establish an open decentralized AI infrastructure, contrasting with current systems that lack transparency regarding data usage.

On-Chain

On-chain detective ZachXBT has identified that four developers, ostensibly hired by the Munchables team and associated with a recent exploit, appear to be aliases of a single individual due to their mutual recommendations for employment, consistent payments to identical exchange deposit addresses, and the inter-funding of their wallets. The revelation underscores a significant compromise within the Munchables project. Efforts are currently underway to monitor and halt the fraudulent transactions, with updates to be provided as more information becomes available. This situation highlights the critical importance of rigorous vetting and security measures in the decentralized finance ecosystem to mitigate risks of fraud and ensure the integrity of projects.

Elsewhere, Glassnode's analysis reveals that most of the 2.0 million BTC, now with a cost basis above $61.2K, have recently been transferred to potentially secure profits. The chart showcases various adaptations of the SOPR (Spent Output Profit Ratio) metric, illustrating this trend of realized profit-taking. SOPR assesses the average profit or loss ratio realized by a specific cohort, acting as a counterpart to the MVRV metric, which evaluates the average unrealized profit or loss. Notably, all SOPR variants have reached significant highs, with the Entity-Adjusted SOPR nearing peaks observed during the 2021 bull market's zenith. This pattern suggests an uptick in the frequency and scale of profit realization in the spot markets, indicating a strategic shift among investors towards capitalizing on recent gains.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC dropped to 75.75% while ETH increased to 79.11%.
  • The 30-day 25-delta skew (C-P) for BTC and ETH slipped to 0.88 and -5.68%, respectively.
  • The futures market witnessed $252.15M in liquidations, with longs representing 66.8%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

43.24%

BTC

OKX

dYdX

35.29%

BTC

Binance

dYdX

31.10%

DOGE

OKX

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.

Bitcoin (BTC) ATM Implied Volatility (IV) chart shows a continued divergence between the 7-day maturities at 65.76 and the 30-day maturities at 75.82, potentially due to the market being cautious over US Inflation Data being released on Friday. The 30-day IV is starting to stabilize as the market looks forward to BTC halving in April and continues to observe BTC at current support and resistance levels.

Bitcoin term structure continues to illustrate a pronounced contango shape. This market behavior likely reflects traders positioning themselves ahead of key economic data releases. The upcoming US GDP growth rate announcement, the core PCE index, and personal income data are set for release today and tomorrow.

Today’s BTC 25 Delta skew chart indicates a divergence between the 7-day and 30-day skews, signaling a difference in market sentiments. The near-term options exhibit increased skew, potentially as traders respond to BTC’s strong test of the 68K support and position for the possibility of further upside movements, especially with the critical forthcoming macroeconomic data releases. 

Lastly, during yesterday’s trading session, @Paradigm reported key BTC options flows including a 500x Put Spread for April 26, 2024, with strikes at $60K/$55K, and a 400x Call for May 31, 2024, at $85K, both sold. ETH activity features a 2254x Put for March 29, 2024, at $3.5K purchased, and a 2000x Put for April 5, 2024, at $3.2K bought.

Crypto Technical Analysis

On the 4-hour chart, Bitcoin (BTC) exhibits a retracement to the $69K zone following an unsuccessful endeavor to extend past the $72K barrier in last night's trading session. This pullback outlines a failure to maintain upward momentum beyond the $72K level, suggesting that this level is a significant point of resistance. Looking ahead, should the market see a further decline, the next substantial support is identifiable at the $64K region, representing a potential 7.2% descent from the current pricing. Conversely, resistance is currently established at $72K, and surpassing this could indicate a bullish shift.

On the other hand, ETH has retraced to its resistance-turned-support level at $3.45K, marking a key juncture on the price chart. The recent downturn suggests a pivotal test of this level; maintaining it could be crucial for short-term market sentiment. A break below this could potentially lead to a further slide toward the next notable support region, which market participants may anticipate at around the $3K price point, a decline of approximately 11.67%. Conversely, should a reversal occur and a bullish momentum resumes, the immediate resistance to watch would be at the $3.6K level. The RSI hovers just below the midpoint at 47.89, signaling a slight bearish momentum without veering into oversold territory. This implies there may be room for further movement on either side before extreme conditions are indicated.

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