BTC

ETH

S&P Futures 500

$60,354.32

$3,343.58

$5,516.25

(-4.15%)

 (-2.18%)

(-0.37%)

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

GM Treehouser 🌳


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May 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Yen continues to inch lower despite Japanese Vice Finance Minister’s warning of intervention; Oracle acknowledges the potential negative impact on the Tiktok ban (More in Macro & TradFi)
  • Mt. Gox users receive repayments in July; Riot Platforms reshapes Bitfarms' board (More in DeFi & CeFi)
  • Historical corrections shows correlation with Supply in Profit metrics (More in On-Chain)
  • Over $360M liquidated in 24 hours; Notable divergence in 7-day and 30-day 25-delta skews. (More in Crypto Derivatives)
  • BTC struggles to hold 60K support; ETH stabilizes at 3.3K amidst bearish momentum (More in Crypto Technical Analysis)

Macro & TradFi

Despite warnings from Japanese Vice Finance Minister Masato Kanda about potential intervention in currency markets to stabilize the yen, the currency remained under pressure, hovering near 160 per dollar and close to a 34-year low. The threat of intervention comes amid a wide yield gap between Japan and the US, making the yen vulnerable to further depreciation. Bank of America anticipates the yen weakening to 163 against the dollar by September, with 165 serving as a critical threshold that could prompt Japanese authorities to act. Recent interventions in April and May, costing ¥9.8 trillion, were aimed at halting yen depreciation, though subsequent gains have largely been erased. Speculation persists as to when the Bank of Japan might intervene again, particularly if the dollar-yen pair breaches key resistance levels.

In other news, Oracle acknowledged in its annual report that a potential U.S. ban on TikTok could negatively impact its business. The software company provides cloud infrastructure services to TikTok, which has a substantial user base of over 150 million in the US. Oracle expressed concern that losing TikTok as a client could lead to a decline in revenues and profits if it cannot redeploy its capacity elsewhere promptly. Oracle's involvement with TikTok dates back to 2020, when it became part of efforts by TikTok's parent company ByteDance to satisfy U.S. regulatory concerns about data security. Despite TikTok's initiatives to maintain its operations within the U.S., including the Oracle led Project Texas, the situation remains uncertain amid ongoing legal and regulatory challenges.

On Monday, U.S. stocks showed mixed results with the Dow Jones Industrial Average rising 0.7%, while the S&P 500 fell 0.3% and the Nasdaq Composite slid 1.1%. The day saw a continuation of last week's sell-off in AI and semiconductor stocks, notably impacting Nvidia, which had its second-worst day since 2022. The broader tech sector struggled, with companies like Salesforce and Amazon lagging due to ongoing concerns in the AI space. Energy stocks, however, saw gains with Chevron leading the Dow's performance. Treasury yields remained stable as investors awaited key economic data later in the week, which could influence Federal Reserve decisions on interest rates.

DeFi & CeFi

  • Mt. Gox trustee to start Bitcoin, Bitcoin Cash repayments in July
  • Riot seeks three Bitfarms board members, says it holds 14.9% stake
  • Bitcoin Lightning hacker Burak introduces new layer 2 ‘Brollups’
  • Mark Cuban sells Pudgy Penguin for $30,000 along with several other NFTs
  • RWA platform Swarm Markets to offer tokenized gold via NFTs as MiCA stablecoin rules begin

After a decade-long wait, users of the defunct Mt. Gox cryptocurrency exchange will finally receive repayments starting in July 2024. The Mt. Gox rehabilitation trustee announced plans to process repayments in BTC and BCH following the exchange and confirmation of required information with various cryptocurrency exchanges. This announcement follows a significant transfer of 141,686 BTC, valued at $9.62 billion, on May 28, signaling the first on-chain movement of funds in over five years. The trustee has urged patience, as the repayment process will be carried out sequentially through the exchanges involved. This marks a pivotal moment for approximately 127,000 creditors who have awaited restitution since the exchange's collapse in 2014 due to multiple security breaches, leading to the loss of 850,000 BTC.

Elsewhere, Riot Platforms, which owns a 14.9% stake in Canadian mining firm Bitfarms, announced its intention to replace three members of Bitfarms' board of directors, including the interim CEO. Riot aims to appoint independent members John Delaney, Amy Freedman, and Ralph Goehring. This move follows Bitfarms' adoption of a shareholder rights plan to prevent Riot from increasing its stake beyond 15%. Riot expressed frustration with the current board's refusal to engage in acquisition discussions and has withdrawn its previous proposal to buy all Bitfarms' shares at $2.30 each. Despite recent stock price volatility, Bitfarms' board remains committed to protecting shareholder interests and criticized Riot for undermining the process. With this restructuring, Riot is consolidating its position in the cryptocurrency mining sector.

On-Chain

In an analysis by CryptoQuant, historical data reveals substantial corrections during bull markets, particularly in 2017 with corrections around -33.4%, -39.6%, and -40% as the Supply in Profit metric neared the 1,500 DMA. Similarly, a -31% correction occurred in 2021 just before reaching the market peak. More recently, a -23.4% correction in early May tested the +0.4 standard deviation (SD) line, followed by a -16% decline in the past two weeks. These movements suggest that although the market remains in a bull phase, it is approaching a critical point. Should the Supply in Profit drop below the +0.4 SD and move closer to the 1,500 DMA, it may indicate the start of a bear market.

The Bitcoin Supply in Profit & Loss chart reveals that 81.16% of Bitcoin's circulating supply is currently held in profit, while 18.84% is in loss. The current market dynamics show a typical retracement pattern, with expectations that if the Bitcoin price were to fall further, the percentage of supply in profit might decrease to the 70-76% range.

Derivatives

  • Funding rates remained positive for BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC rose to 50.37% while that of ETH fell slightly to 64.14%.
  • The 30-day 25-delta skew (C-P) for BTC remained at -0.22% while that of ETH increased to 5.66%.
  • The futures market witnessed $362.36M in liquidations on Monday, with longs representing 81.7%.

Net Annualized APR

Perp (USDT pair)

Long on

Short On

21.16%

BTC

Bybit

Binance

20.64%

BTC

Bybit

dYdX

17.58%

ETH

Bybit

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 BTC implied volatility (IV) chart for ATM maturities highlights a significant spike in the 7-day IV, suggesting a sharp increase in short-term volatility expectations. This spike contrasts with the relatively stable longer maturities, which have shown only slight increases. The sharp rise in the 7-day IV could indicate immediate market reactions to the Mt Gox repayment announcement, which would likely have an adverse effect on the markets.

Today's BTC Shadow Term Structure shows a notable rise in the term structure across all maturities, notably in the immediate term of two days, which may be due to speculators trying to capitalize on the heightened volatility in the market. Interestingly, activity in the July options market remains muted, suggesting the market is not anticipating volatility around the distribution itself. 

Today's BTC skew chart shows a noticeable divergence between the 7-day and 30-day skews. The 7-day skew has fluctuated sharply, indicating a bearish sentiment, likely due to recent news about the Mt. Gox repayment and significant liquidations affecting market sentiment. In contrast, the 30-day skew remains more subdued, hovering at -0.22%. This suggests that while traders are preparing for short-term disturbances, their medium-term outlook remains relatively unaffected by these developments. 

Lastly, @Paradigm option flows highlighted an intense trading day with buy-the-dip strategies dominating during the Americas hours and mixed moves in the EU and APAC sessions. Key BTC trades encompassed the procurement of 575x 28-Jun-24 61000 Puts and 550x 28-Jun-24 62000/64000 Call Spreads. Additionally, in the ETH market, notable trades included the purchase of 3000x 28-Jun-24 3500 Calls and the sale of 2625x 28-Jun-24 3400/3600 Strangles.

Crypto Technical Analysis

On the 4-hour chart, BTC tumbled down to 60K yesterday and briefly breached its support at this level. However, it has since managed to hold the line and currently hovers around 60.2K. The price action suggests a significant struggle to maintain this critical support level. Should this level be breached again, the next support is anticipated at 58K, a fall of approximately 3.8% from the current price levels. Conversely, resistance is situated around 66K. The RSI is currently at 25.95 and is on a downtrend, indicating potential continued bearish momentum unless a reversal is observed.

Similarly, ETH has experienced a sharp decline, dropping to 3.3K yesterday and briefly dipping below its support at this level before managing to hold the support at this level. The current price of 3.33K suggests a tentative stabilization, but the market remains precarious. Should the support at 3.3K fail to hold, the next support level is at 3.1K, representing a potential fall of around 7.1% from current levels. On the upside, resistance is identified at 3.7K. The RSI is at 35.94 and trending downward, indicating bearish sentiment with a likelihood of continued pressure unless a reversal is signaled.

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