BTC

ETH

S&P Futures 500

$51,513.25

$2,938.42

$5,033.75

(-1.26%)

 (-2.11%)

(+0.99%)

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

GM Treehouser 🌳

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January 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Nvidia surpasses initial expectations; China Securities Regulatory Commission (CSRC) introduces new measures (More in Macro & TradFi)
  • Do Kwon to be extradited to the US; Circle halts USDC minting on Tron (More in DeFi & CeFi)
  • Onchain data shows decreasing number of wallets holding any amount of BTC; BTC’s UTXO sees increase post-ETF (More in On-Chain)
  • Both BTC and ETH continue to see declines in IV and C-P skews (More in Crypto Derivatives (More in Crypto Derivatives)
  • BTC consolidates near resistance; ETH pulls back after testing $3K level (More in Crypto Technical Analysis)

Macro & TradFi

Building on yesterday’s speculation of Nvidia’s earning reports, Nvidia has reported a staggering 265% increase in quarterly revenues, reaching $22.1 billion and surpassing Wall Street expectations, with the company attributing this surge to a global spending frenzy on artificial intelligence (AI). This performance positions Nvidia as a pivotal force in the S&P 500's recent rally and underscores the company's significant role in powering the generative AI revolution. Nvidia's forecast for $24 billion in revenues for the current quarter reflects the immense demand for accelerated computing and AI technologies. With a market valuation of approximately $1.7 trillion. Nvidia's data center division generated $18.4 billion in the fourth quarter alone. Despite facing challenges such as competition and regulatory constraints in China, Nvidia's unparalleled growth and the anticipation surrounding its future products, like the B100 chip, signal a continued trajectory of innovation and dominance in the AI space.

China has imposed a new regulation prohibiting major institutional investors from net selling shares at the opening and closing of the trading day, aiming to stabilize the $8.6 trillion stock market amid ongoing declines. This directive is part of a broader series of measures by the China Securities Regulatory Commission (CSRC) under Chairman Wu Qing, which seeks to curb bearish bets and include the creation of a task force to monitor and regulate short-selling activities. This restriction will affect major asset managers and brokerages disallowing these institutions from selling more shares than they buy during the market's first and last 30 minutes, a move that could significantly impact hedge funds and other institutional strategies. These measures are part of the Chinese government's heightened efforts to prevent further erosion of market confidence, which has seen the benchmark CSI 300 Index hit a five-year low earlier this month. In addition to trading restrictions, the CSRC is recalling stock loans for shorting and has halted certain leveraged market-neutral strategies. This regulatory tightening comes as China's stock market struggles with deflation and a property crisis, with authorities pledging to adopt more supportive measures for the market, including promoting dividend payouts and combating financial fraud.

Following Wednesday’s closing, the S&P 500 and Dow Jones increased by 0.13%, while the Nasdaq fell by 0.32%, as anticipation built around Nvidia's earnings report, which eventually saw its shares jump 6% after hours following a revenue forecast above expectations. Nvidia's pre-earnings drop of 2.85% contributed to the Nasdaq's third consecutive session decline. The Fed's latest minutes indicated a cautious stance on early rate cuts, affecting market sentiment. Sector-wise, technology shares dipped by 0.76%, whereas energy led the gains with a 1.86% increase. Amidst this, Palo Alto Networks plummeted by 28.44% after a disappointing billings forecast, influencing a broader downturn in cybersecurity stocks.

CeFi & DeFi

  • Do Kwon to be extradited to the US
  • Circle to halt support for USDC on Tron blockchain 
  • Fuel Labs evolves into 'Rollup OS,' with multiple native assets, combating state bloat
  • Stellar launches smart contracts platform
  • Wormhole collaborates with AMD to make hardware accelerators

Do Kwon, Terraform Labs co-founder, is set to be extradited to the United States from Montenegro after a court ruling, despite his legal team's efforts to redirect extradition to South Korea. Following his arrest in Montenegro in March 2023 for using falsified travel documents, Kwon faced legal battles regarding his extradition. The High Court of Podgorica's decision came after rejecting an appeal by Kwon's lawyers, who argued that the Justice Minister of Montenegro had the ultimate authority over the extradition process. This development is part of the ongoing legal saga stemming from the collapse of Terra in May 2022, with Kwon facing eight criminal charges in the U.S. shortly after his arrest. Additionally, the U.S. Securities and Exchange Commission has scheduled a trial against Kwon and Terra for March 25, related to allegations of a multi-billion dollar securities fraud involving TerraUSD (UST) and Terra LUNA.

Elsewhere, Circle has announced the immediate cessation of USDC minting on the Tron blockchain, underscoring its commitment to maintaining the trust, transparency, and security of the USD Coin (USDC). This decision is part of Circle's ongoing risk management strategy and enterprise-wide assessment involving compliance and various business functions. While the company will cease minting USDC on Tron, it plans to support the transition of Tron-based USDC to other blockchains until February 2025, advising retail users and non-Circle customers to move their USDC to supported networks. This decision follows recent controversies surrounding Tron and its founder, highlighting Circle's prioritization of compliance and reputational integrity in its operations.

On-Chain

According to an on-chain analysis done by Santiment, there has been a noticeable shift in BTC wallet activity. Following the SEC's approval of BTC ETFs, there has been a significant decrease in the number of wallets holding any amount of Bitcoin, suggesting that investors are opting for ETFs to gain BTC exposure rather than holding BTC directly. In contrast, ETH and Tether are experiencing record highs in their number of holders, illustrating an accumulation trend in wallets across the top 3 cryptocurrencies by market capitalization. The data implies that the adoption of ETFs could lead to reduced active participation on the native networks, as investors may prefer the convenience and accessibility of ETFs.

In an analysis on CryptoQuant, we observe an uptick in Bitcoin UTXOs ranging from 1,000 to 10,000 BTC, suggesting increased activity by whales or institutional investors. This surge aligns with the introduction of Bitcoin spot ETFs, hinting at growing institutional interest. Though current levels do not match the peak of the 2021 bull market, they indicate a notable market entry by these larger players. Historically, the bull market in 2021 saw a wave of institutional investment followed by retail investors, which preceded the cycle's peak.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped to 55.40% and 60.10%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH dropped to 1.28% and 1.67%, respectively.
  • The futures market witnessed $198.14M worth of liquidations, with longs representing 75.06%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

43.22%

SOL

Bybit

dYdX

42.48%

SOL

OKX

dYdX

32.46%

SOL

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.

The stability in BTC's ATM IVs on both the 7-day and 30-day timeframes amidst BTC's ongoing challenge of its $52K resistance zone indicates a consistent expectation of BTC's movements in the near term. This suggests that market participants perceive a lack of significant catalysts to propel BTC's price further upward in the immediate term, reflecting a sense of equilibrium in the market as traders await clearer signals or developments to drive decisive price action.

The Term Structure of BTC also maintains its contango state, with IVs across different tenors remaining largely stable. However, there was a minor drop observed for contracts expiring between 15-64 days, indicating an increasingly consistent expectation of price movements over time.

The BTC 25-delta skew has continued to decrease in both the 7-day and 30-day periods, reflecting ongoing challenges and sideways movement in BTC's price. This decline in skew indicates a shift in sentiment towards a more cautious outlook among traders, as they hedge against potential downside risks in the near term.

Lastly, during the Americas Trading Session, @Paradigm reported that the flows were concentrated on Friday expiries for BTC while those of ETH center around March. Some notable trades include just a 300x 23-Feb-24 50K BTC Put sold. 250x 23-Feb-24 50.5K BTC Put bought, 1,250x 1-Mar-24 2.8K/29-Mar-24 2.4K ETH Put Calendar sold, and 1,250x 29-Mar-24 3K Call bought.

Crypto Technical Analysis

On the 4-hour chart for BTC, the price action is consolidating, indicating the formation of a horizontal channel. Currently, BTC is trading near the middle of this channel. A decisive breakout above this channel could lead to a test of the next resistance level, which appears to be at approximately $57K, a potential increase of around 11.5% from the current levels. Should the price break below the lower boundary of the channel, there is a visible support level near $47K, suggesting a possible decline of about 7.49%. The Relative Strength Index (RSI) is hovering at 47.89, near the 50 mark, which reflects a neutral sentiment, and it’s showing a slight downtrend at this moment. This consolidation phase with a neutral RSI indicates indecision among traders, which warrants close monitoring for either a breakout or breakdown from the channel.

Moving to ETH, the price has experienced a pullback after encountering resistance at the $3K level. The retracement shows a clear rejection at a statistically significant round number, often acting as a stiff resistance point. At present, ETH's price is oscillating around $2.9K, and should there be a further decline, the next support is established near the $2.7K mark, indicating a potential downward adjustment of approximately 6.9% from current levels. On the contrary, if upward momentum resumes, the $3K threshold remains the immediate resistance to overcome. The RSI is currently positioned at 53.57, slightly above the midpoint, but reflecting a downturn in buying pressure as it moves away from overbought territory. This recent price action and the RSI's posture suggest a cooling-off period following the recent test of the $3K resistance.

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