🌳 Le Pen's Far-Right Party Leads French Elections; SEC Sues Consensys Over Alleged Securities Violations.

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Le Pen's party leads in France; slowing inflation boosts case for Fed rate cuts (More in Macro & TradFi)
• SEC files lawsuit against Consensys; S-1 forms returned to the ETF applicants with light comments (More in DeFi & CeFi)
• Bitcoin miner capitulation suggests a potential bottom; top-heavy signal indicates the risk of a downtrend (More in On-Chain)
• 7-day and 30-day 25-delta skews exhibit convergence; short-term BTC ATM IVs increase sharply (More in Crypto Derivatives)
• BTC and ETH see significant surges over the weekend with their respective RSIs entering the overbought territory (More in Crypto Technical Analysis)

Macro & TradFi

Marine Le Pen's far-right party has surpassed President Emmanuel Macron's centrist alliance in the first round of France's snap parliamentary elections, signaling a potential shift towards a nationalist government that could disrupt the European project. The Rassemblement National (RN) party secured 33.2% of the vote, followed by the leftwing Nouveau Front Populaire (NFP) with 28.1%, while Macron's Ensemble alliance garnered 21%, according to Ipsos projections. The RN is poised to win the most seats and possibly an outright majority in the National Assembly, leading to a potential cohabitation government. This scenario has prompted intense negotiations among leftwing and centrist parties to block the RN in the final round of voting on July 7. However, the Euro rose on concerns that Marine Le Pen's far-right party would be unable to win an absolute majority. Le Pen’s National Rally won the first round of the French elections with a smaller-than-anticipated margin. 

Elsewhere, the core personal consumption expenditures (PCE) price index decelerated in May, reinforcing the argument for potential interest rate cuts later this year. The core PCE price index, which excludes volatile food and energy prices, rose by only 0.08%, the smallest increase since late 2020. Meanwhile, consumer spending rebounded by 0.3% in May, driven by strong income growth. This combination of slowing inflation and robust spending suggests that the Fed might achieve its goal of reducing inflation without significantly harming consumer demand. Treasury yields declined, and stocks rose in response to the data, reflecting increased market expectations for rate cuts. This report provides optimism for the Fed, but officials will seek additional consistent data before making definitive policy changes.

Last Friday, US stocks experienced slight declines as traders processed new economic data indicating slowing inflation. Despite hitting record highs in early trading, the Nasdaq Composite ended down 0.54%, the Dow Jones Industrial Average slipped 0.12%, and the S&P 500 fell 0.4%. Markets reacted to former President Trump's perceived victory in the first presidential debate of the 2024 elections, where he reiterated his pledge to impose a 10% tariff on all imports if elected, potentially increasing inflationary pressures. Investors are now closely watching US jobs data, with the JOLTs Job Openings report due on Tuesday, 22:00 SGT. 

DeFi & CeFi

• SEC files lawsuit against Consensys for its Swaps and Staking product
• SEC returns S-1 forms to ETH ETF applicants with comments
• Vitalik Buterin condemns US approach to utility tokens
• Kraken Co-Founder Jesse Donates $1M of ETH to Trump
• Sony acquires Amber Japan to enter into the crypto field

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, targeting its MetaMask service for allegedly acting as an unregistered securities broker and violating federal securities laws with its Swaps and Staking products. The SEC's enforcement action also encompassed Ethereum staking services provided by Lido and Rocket Pool, specifically referencing their liquid staking tokens as unregistered securities. Consensys, led by Ethereum co-founder Joe Lubin, has previously contested the SEC's regulatory stance through legal action and maintains that the SEC's pursuit represents regulatory overreach aimed at redefining established legal standards in the crypto space.

Meanwhile, the U.S. Securities and Exchange Commission (SEC) has returned S-1 forms to prospective Ethereum ETF issuers after providing light comments, indicating that the issuers need to address these issues and refile by July 8. This step marks another round in the process before the ETFs can become effective and start trading. Despite earlier expectations of a potential July 4 launch, uncertainties remain regarding the final timeline for approval. SEC Chair Gary Gensler previously suggested approvals could happen "sometime over the course of this summer," underscoring ongoing regulatory scrutiny and procedural steps involved in bringing Ethereum ETFs to market.

On-Chain

In an analysis by CryptoQuant, Bitcoin miner capitulation has reached levels comparable to December 2022, with a 7.6% drawdown. December 2022 marked the cycle bottom following the FTX collapse. This current capitulation could indicate that Bitcoin is at a “bottom,” as many miners have reduced their outputs. The lower hash rate may encourage other prospecting miners to increase their mining activities, potentially gaining higher rewards due to decreased competition.

In an analysis by Checkmatey, a 'top-heavy' signal has been identified, indicating a heightened risk of transitioning into a longer-term downtrend. This signal emerges when a substantial number of traders purchase assets at peak market prices. According to Checkmatey's analysis, the unrealized losses of short-term holders serve as a key indicator of this trend, especially when these losses intersect with current prices. Recently, there has been a notable increase in this metric, suggesting a potential shift. It is crucial to monitor this upward trend closely, as further increases could confirm the risk of a sustained downtrend.

Derivatives

• Funding rates remained positive for BTC and ETH.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 45.29% and 58.60% respectively.
• The 30-day 25-delta skew (C-P) for BTC increased to 0.02 while that of ETH decreased to 4.38.
• The futures market witnessed $265.7M in liquidations, with longs representing 62.58%.

The 7-day ATM IV for BTC rose sharply to 40.74%, being close to the 30-day level of 43.47%. This suggests short to mid-term volatility expectations have increased, possibly due to the U.S. SEC filing a lawsuit against Consensys, which drew the implication that other staking tokens such as stETH and rETH are also possibly unregistered securities.

BTC Shadow Term Structure maintained its contango structure, with increased volatility in short-term tenors of up to 2 days.  Long-term market expectations are closely aligned in tenors longer than 90 days, with minimal variances from yesterday’s IV.

BTC's 25-delta skews display a trend of potential convergence between the short-term and longer-term skews, with the 7-day skew at -0.25 and 30-day skew at 0.02. This convergence trend suggests that short-term maturities are still bearish but converging towards a bullish outlook with mid-term maturities remaining positive.

Lastly, @Paradigm’s option flows highlighted notable BTC trades that included the sale of 2 custom Call Calendars, with the first involving 262 contracts with July 24, 2024, strikes at $70K and August 30, 2024, strikes at $76K; the second involving 250 contracts with July 26, 2024, strikes at $74K and August 30, 2024, strikes at $85K. For ETH, significant trades were executed with the purchase of 2500 July 26, 2024, $3.7K Calls, 1846 July 5, 2024, $3.9K Calls, and 1250 July 5, 2024, $3450 Calls.

Crypto Technical Analysis

Moving on to technical analysis, BTC has experienced a strong bullish reversal over the weekend. The price bounced off the $61K level and broke above the descending trendlines formed by the local lower highs. If the bullish momentum continues, the next strong resistance lies near the $67K level, representing a 5% potential upside. However, the RSI has entered the overbought territory, currently at 70.85, indicating the potential for a short-term correction to the downside. If such a trend materializes, $61K will continue to serve as the immediate support, representing a 4% potential downside.

ETH followed a similar price trajectory, surging significantly alongside BTC. As a result, ETH currently hovers slightly above the $3.5K resistance without a definitive breakout. If this level is surpassed, the next resistance may lie between $3.66K and $3.71K. However, if the price is rejected at this level, ETH will likely move back to the $3.3K range, aligning with the previous support zone. The RSI on this timeframe is also approaching the overbought range, currently hovering at 68, which aligns with the view that there might be a pullback.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Far-right wins first round of France’s snap election, survey shows

• Fed’s Favored Inflation Gauge Slows, Supporting Case for Cut

• Asia markets mixed as China manufacturing contracts again, Japan business confidence at 2-year high.

• U.S. plans to seek guilty plea from Boeing over fatal 737 Max crashes.

• Gen Z's shopping habits are heavily driven by TikTok and influencers, KPMG says

• Democrats defend Biden's debate flop as voter support flinches

• Fathom, the company behind classic films at your local theater makes major gains

• Failure to meet surging energy demand jeopardizes economic growth, energy execs warn

• Boeing agrees to buy Spirit AeroSystems in $4.7bn deal

• Democrats line up to defend Biden as poll shows rising unease over fitness

• BlackRock agrees to buy UK data group Preqin for £2.55bn

• Central banks should set a ‘high bar’ for interest rate cuts, BIS warns

Crypto

• SEC Sues Consensys Over MetaMask Staking, Broker Allegations

• Vitalik Buterin says crypto regulations have created ‘anarcho-tyranny’

• SEC returns S-1 forms to Ethereum ETF issuers, with at least one more round to go: Source

• Kraken Co-Founder Jesse Powell Donates $1M, Mostly Ether, to Donald Trump

• South Korea’s 2nd largest chipmaker to invest $75B in AI through 2028

• AI needs a killer app to prove it’s not a bubble — Goldman Sachs, MIT

• Nigeria urged to adopt crypto regulations inspired by Europe

• Floki Inu warns of fake tokens on Solana and Base blockchains

• Number of crypto ATMs installed nears its all-time record

• Runes TXs on Bitcoin tank over 88% in June

• Meta’s prototype ‘full holographic’ glasses could be a game changer for Web3

Deal Flow

• Pudgy Penguins parent firm Igloo Inc acquires Frame

• Sony Group acquires Amber Japan, officially steps into crypto exchange arena

Yours sincerely,
Treehouse Research 🌳