BTC

ETH

S&P Futures 500

$66,262.15

$3,327.11

$5,276.00

(+1.42%)

 (+1.63%)

(+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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March 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Jerome Powell reinforces Fed’s hesitancy to cut interest rates; Model shows that Trump’s tariff on China would significantly affect inflation (More in Macro & TradFi)
  • Lido stSOL users face funds lockup; Coinbase integrates Bitcoin Lightning with Lightspark (More in DeFi & CeFi)
  • BTC LTHs move from accumulation to distribution; Alternating inflows and outflows hint at shifting sentiments (More in On-Chain)
  • BTC's term structure shows contango; skew data reflects a balanced market outlook (More in Crypto Derivatives)
  • BTC and ETH experienced minimal fluctuations in the last 24 hours with the previous analysis holding true (More in Crypto Technical Analysis)

Macro & TradFi

Federal Reserve Chairman Jerome Powell, underscored the necessity for more substantial evidence of declining inflation before considering interest rate cuts. Emphasizing the recent stronger-than-expected inflation data, Powell conveyed that the Fed is not poised to ease its monetary policy hastily. He indicated that current economic indicators, including a robust job market and controlled inflation trends, provided the Fed latitude to scrutinize incoming data before altering its policy stance. This approach aligns with the central bank's decision during the March 20 FOMC meeting to maintain interest rates while awaiting greater confidence that inflation is moving consistently toward the 2 percent target. Powell also addressed the importance of the Fed's independence, especially in the context of the upcoming presidential election, assuring that the central bank's decisions are unbiased and purely economic. This statement reinforces the Fed's commitment to focusing on its core mandates of achieving maximum employment and price stability, without succumbing to external political pressures or expanding its role into areas beyond its established scope.

The tariff plan proposed by Donald Trump would result in higher inflation rates and potentially compel the Federal Reserve to increase interest rates. If enacted, Trump's campaign pledge to implement a 60% tariff on Chinese goods and a 10% tariff on imports from other countries would be projected to elevate consumer prices by 2.5% and lower the U.S. gross domestic product by 0.5% over two years. This protectionist approach could push the core personal consumption expenditures price index—a key inflation measure—up to 3.7% by the end of the following year, substantially surpassing the Fed's 2% inflation target. The impact of such tariff levels is uncertain due to the lack of recent precedents, but economic modeling suggests significant adverse effects on both growth and the cost of living.

The S&P 500 and Nasdaq managed to close slightly higher, with gains of 0.11% and 0.23%, respectively. This marginal rise came despite a cooling in the U.S. services sector, where the non-manufacturing PMI dropped to 51.4 in March, a decrease from February's 52.6. The Dow, on the other hand, experienced a modest decline of 0.11%. On the corporate front, notable moves included Ulta Beauty's stock plunging by 15.3% after issuing a subdued forecast. In comparison, Intel's shares fell by 8.2% due to the revelation of a $7B operating loss in its foundry business for 2023. The broader market saw 33 new 52-week highs against 5 new lows, with advancing issues outnumbering declining ones on the NYSE by a 1.66-to-1 ratio, a reflection of cautious optimism in the face of mixed economic cues. Investors will be looking out for the Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings data due tomorrow, at 20:30 SGT.

CeFi & DeFi

  • Faulty smart contract leaves $24M Lido staked SOL stuck
  • Coinbase embraces Bitcoin Lightning network
  • IoTeX secures $50M investment expanding dePIN narrative for next cycle
  • U.S. Government Moved 30,175 Bitcoins to Coinbase
  • Crypto phishing attacks reached “alarming levels"
  • Zuckerberg’s metaverse division has reportedly made a loss of $40B

Holders of Lido-staked Solana (stSOL) tokens are facing considerable anxiety as approximately $24M remains trapped due to a malfunctioning smart contract, five months after the closure of Lido's Solana staking program. The program initially offered a 5% yield on staked Solana. However, it was discontinued in October 2023 due to financial unviability and minimal fees. The end of a user-friendly interface in February left users with only the complex option of manually unstaking via Solana’s command-line interface, a process too intricate for many. The situation was further aggravated by users encountering errors that prevented unstaking, despite following available instructions. Although a product manager from P2P Validator, previously involved with Lido on Solana, reported a fix and an updated maintainer bot, the resolution involves significant technical complexity and coordination with the Lido DAO for smart contract alterations.

In other news, Coinbase partnered with Lightspark to integrate Bitcoin Lightning payments, aiming to reduce transaction fees by shifting activity from Bitcoin's base layer to its more efficient second layer. This collaboration, led by former PayPal president David Marcus, is poised to offer Coinbase's 108 million users access to faster and cheaper Bitcoin transactions. Lightspark's development focuses on simplifying Lightning nodes for transactions while introducing an AI-based engine to improve liquidity and routing. This move, anticipated by Coinbase's CEO Brian Armstrong, reflects an industry-wide effort to enhance Bitcoin's scalability and usability as a medium of exchange. 

On-Chain

According to an analysis by Glassnode, there has been a shift in the behavior of Bitcoin investors, particularly among Long-Term Holders (LTHs) and Short-Term Holders (STHs). There's been a noticeable transition from holding to distribution and profit-taking, especially at the break of all-time highs. This pattern is highlighted by the steep decline in the LTH/STH Supply Ratio, suggesting that as the market rallies, long-term investors are increasingly motivated to sell their holdings, confirming a phase shift from accumulation to distribution. A significant reduction of 900K BTC from LTH supply since December 2023 indicates this trend, with approximately 286K BTC attributed to Grayscale Bitcoin Trust (GBTC) outflows. In contrast, the STH supply has swollen by over 1.121M BTC, absorbing not only the coins distributed by LTHs but also an additional 121K BTC from exchange inflows.

In another analysis by checkonchain, a cooling trend in the Bitcoin exchange-traded funds (ETF) market can be observed. In the past two weeks, BTC ETFs experienced significant outflows, with a staggering $890M exiting two weeks ago, followed by a robust inflow of $845M last week, only to be succeeded by a minor outflow of $93M in the current week. This pattern suggests a fluctuating investor sentiment and possible profit-taking, particularly from the Grayscale Bitcoin Trust (GBTC), which remains a substantial source of outflows. Trade volumes within Bitcoin ETFs have also declined, aligning with the overall market's cool-off from the all-time high (ATH) trading peak of $73K. During the surge, daily trade volumes were reported between $7B and $9B, but recent weeks have seen a reduction, with volumes dropping to between $2.5B and $3.5B per day. This downward trend in trading activity could indicate a market consolidation phase following a period of high volatility and price appreciation.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped slightly, currently at 71.18% and 75.41% respectively.
  • The 30-day 25-delta skew (C-P) for BTC remained flat at 1.13% while ETH recovered to -1.96%.
  • The futures market witnessed $151.62M in liquidations, with longs representing 60.43%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

17.09%

DOGE

OKX

dYdX

16.41%

DOGE

Bybit

dYdX

16.00%

ETH

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.

Today's Bitcoin (BTC) implied volatility (IV) chart reveals a divergence between the 7-day and 30-day maturities, likely influenced by the upcoming Halving event scheduled in 17 days, positioned between the two expirations. This timing results in the 7-day IV failing to encapsulate the Halving event window, which could have impacted short-term volatility expectations.

The term structure for BTC remained relatively unchanged, exhibiting a contango-shaped short-term implied volatility (IV) followed by a gradual leveling off into longer-term maturities, which suggests that market participants anticipate higher volatility in the near term, which gradually stabilizes over time.

The BTC 25-Delta skew data indicates that the 7-day and 30-day skews have maintained a relatively stable position since yesterday, hovering around the 0 mark. This steadiness in BTC skew comes after being tested and subsequently falling below the $68K threshold. This observation suggests a balanced market outlook or a wait-and-see approach among traders toward further developments.

Lastly, @Paradigm’s highlighted option flows this week emphasized upside coverage with strategic call purchases and structured positions. Key BTC trades encompassed the procurement of 200x 31-May-24 75k Calls, and 200x 12-Apr-24 76k Calls, alongside the sale of a 100x 27-Sep-24 85k / 27-Dec-24 85k Call Calendar. In the ETH realm, a significant transaction involved the purchase of a custom structure with 1000x 19-Apr-24 2900/3350 Put Spread.

Crypto Technical Analysis

In technical analysis, BTC has remained largely flat in the last 24 hours, trading slightly below the support at the lower trendline. Consequently, all previous analyses remain valid, with $65K representing a robust psychological support zone. Should this level fail to hold, the next immediate support lies near the $61.5K level, indicating a potential downside of 6.1%. On the flip side, the previous support zone between $68.5K and $69K now acts as a resistance zone in case of a reversal. Additionally, the RSI has rebounded slightly with the sideway movements, resuming to neutral territory at 41.

TH has undergone similar price movements with minimal fluctuations in the last 24 hours. With a slight increase in the price of ETH, it now rests slightly above the previously identified support zone at the $3.3K level. However, a definitive confirmation has yet to materialize to test the validity of this support zone. Other analyses continue to hold, indicating that should this support falter, the next level of support remains at $3.1K, corresponding to the local low. Conversely, the previous upper boundary of the triangle now serves as the immediate resistance, offering a 4.5% upside potential if the bulls reclaim control of the market. The RSI briefly moved past the 30 mark, indicating that ETH may also be oversold, hence, a potential reversal could be imminent.

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