🌳Powell Signals No Early Rate Cuts In His Speech; KyberSwap Utilizes Its Treasury To Compensate Victims For The Recent Exploit

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Our Daily View

What We Are Covering Today

• Jerome Powell signals no early rate hikes; China plans a regional approach to financial risk management (More in Macro & TradFi)
• KyberSwap plans to offer victims treasury grant after $49M exploit; Grayscale hires industry veteran from Invesco for Bitcoin ETF (More in DeFi & CeFi)
• Glassnode reveals ETH staking pool shifts; Santiment shows Chainlink's wallet accumulation (More in On-Chain)
• BTC's rise in IV driven by ETF optimism; Call-Put skew rise indicates bullish sentiment (More in Crypto Derivatives)
• Both BTC and ETH surpassed their respective key resistance zones, with no immediate resistance in sight for ETH (More in Crypto Technical Analysis)

Macro & TradFi

During the speech on Saturday, Federal Reserve Chair Jerome Powell signals no early rate cuts, emphasizing that the war over inflation has yet to be won. He stresses commitment to keeping policy restrictive, indicating a wait-and-see approach. Markets interpret his remarks as somewhat dovish, but Powell remains cautious, asserting a need for ongoing vigilance against inflation. He acknowledges the risks of over-tightening but emphasizes the uncertainty surrounding the economic outlook due to the lingering effects of the pandemic. Despite market expectations of rate cuts, Powell indicates a focus on data-dependent decision-making for future policy adjustments.

Elsewhere, China's National Financial Regulatory Administration emphasizes a tailored approach to managing financial risks, urging provinces to develop individual plans. This move follows recent commitments to establish mechanisms for resolving local debt issues. The regulator, led by Li Yunze, stresses the importance of avoiding a uniform strategy and calls for "one province, one policy" in risk management. With China grappling with economic challenges and a lingering property crisis, local and central authorities have provided support, but concerns persist about concentrated government debt at the local level. The agency aims to deepen efforts to rectify disruptive market behavior and pledges to investigate those causing significant risks. Plans for resolving disputes related to consumption and protecting consumer rights are also outlined.

On Friday, the US market witnessed a continued rally in both stocks and government bonds, with the DJIA up by 0.82%, achieving its lengthiest winning streak since 2021, rising for the fifth consecutive week. The S&P 500 gained 0.59%, reaching its highest closing level since March 2022. The 10-year Treasury note yield settled below 4.3%, contributing to the ongoing robust bond rally. In corporate news, Pfizer's shares declined following concerns about side effects from a weight-loss drug trial, while Ulta Beauty reported positive results, leading to a rise in its shares.

DeFi & CeFi

• KyberSwap plans to offer victims treasury grant after $49M exploit
• Grayscale hires industry veteran from Invesco for Bitcoin ETF
• Etherscan seeks $1M annual sponsorship to advance ENS features
• Coinbase has no plans to launch token
• Platypus Finance hackers cleared of criminal charges
• Arbitrum DAO grants $23M ‘backfund’ for projects that missed initial grant
• Velodrome, Aerodrome websites compromised for second time in days
• Starknet Foundation confirms airdrop plans
• KuCoin pledges $20K grant to TON Foundation for ecosystem development

KyberSwap has revealed plans to extend grants from its protocol treasury to aid victims affected by the recent exploit, aiming to provide financial relief. Details regarding the grants and their distribution are still being finalized, with KyberSwap expecting to provide more information within the next two weeks. The exploit, resulting from a vulnerability in the tick interval boundaries of concentrated liquidity pools, led to approximately $48.8M in losses. In a failed negotiation attempt offering a 10% white hat bounty to the hacker for returning the funds, the hacker rejected the offer and demanded complete control over the project. Additionally, KyberSwap managed to recover $4.7M from funds drained by third-party MEV bots during the hack.

In other news, Grayscale has appointed John Hoffman, former Head of Americas at Invesco, to lead its distribution and partnerships team. With more than 17 years of experience in ETFs, Hoffman's tenure at Invesco spanned various significant roles, including director of ETF institutional sales and capital markets. Grayscale expressed excitement about Hoffman joining as Managing Director and Head of Distribution and Strategic Partnerships, citing his extensive industry expertise as crucial, particularly amid their current phase. Grayscale is currently anticipating the SEC's decision in January on converting its GBTC Bitcoin trust into an ETF.

On-Chain

In an analysis by @Glassnode, there has been a significant shift in the dynamics of the ETH staking pool. Since the Shanghai upgrade, which enabled stake withdrawals, the daily average of exiting validators has risen from 309 to 1,018, corresponding with an uptick in digital asset market prices. This trend is impacting the “Total Effective Balance” of the staking pool, which reflects the amount of ETH actively involved in Proof-of-Stake Consensus. After a period of consistent growth, this balance is now showing a decline post-upgrade. The growth rate of this balance has more than halved since May, indicating a flattening trend. This may also be driven by the desire for greater liquidity as investors prefer to hold ETH directly, anticipating to swiftly take profit of emerging market upswings, over the less liquid staked ETH.

On the other hand, according to @Santiment, Chainlink is gaining momentum relative to other altcoins, a trend that is partly attributed to significant accumulation by the largest LINK wallets. The top 200 LINK addresses have increased their holdings by approximately 3.9 million LINK over three days, with an aggregate addition of over $50 million worth of LINK in about five weeks. The market capitalization of Chainlink has seen a substantial increase of 143% overall in five months, with a 93% rise against Bitcoin. This analysis suggests a bullish sentiment among major LINK investors and a strong performance of Chainlink compared to other altcoins.

Crypto Derivatives

• Funding rates remained positive for BTC and ETH.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 54.49% and 55.56%, respectively.
• The 30-day 25-delta skew (C-P) for BTC and ETH rose to 5.09% and 3.84%, respectively.
• The futures market witnessed $137.13M liquidations, with shorts representing 69.47%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

After BTC’s rally in the spot market, BTC’s 30-day implied volatility (IV) has increased to 51.14%, signaling heightened market expectations for price fluctuations over the medium term. Similarly, the 7-day IV has increased to 50.25%, suggesting that option investors are bracing for potential short-term price movements or events that could have a pronounced impact on BTC's market price.

The term structure of BTC is maintaining a contango pattern. However, the near-dated options have seen an increase in IV, which can be possibly attributed to the positive sentiments given BTC’s performance in the last several days.

On the other hand, the 25-delta 30-day call-put skew has increased to 5.09%, and the 7-day skew has risen to 5.08%. This indicates a growing preference for calls over puts, suggesting a more bullish sentiment among short-term traders and investors. This shift reflects increased optimism in the market, potentially driven by positive sentiment for a BTC ETF approval.

Over last week, @Paradigm highlighted option flows emphasizing downside coverage with strategic put purchases and structured positions. Key BTC trades encompassed the procurement of 810x 1-Dec-23 40K/8-Dec-23 40K Call Calendars, and 450x 29-Dec-23 40K/23-Feb-24 58K Custom Structures. For ETH, substantial activity was seen with the purchase of 17,905x 26-Jan-24 2400/3000 Call Spreads, and 13,068x 26-Jan-24 2600/3200 Call Spreads.

Crypto Technical Analysis

Onto technical analysis, BTC's price continued its ascent over the weekend, breaking through the upper boundary of the previously identified rising channel on the 4-hour chart. Currently, the price has also briefly surpassed the formidable $40.0K psychological resistance level, marking the first time since May 2022. It is crucial for BTC to confirm its foothold above the $40.0K mark, with the immediate resistance lying between $41.0K and $42.5K if the bullish momentum persists. Following the price surge, the RSI has entered the overbought territory at 79.82, suggesting a potential short-term retracement. If such a trend materializes, BTC will likely approach $39.7K, situated at the upper boundary of the aforementioned rising channel.

Turning to ETH, a similar upward movement is evident with a weekend spike that broke through the previously identified resistance within the horizontal channel, reaching the highest price point for ETH since April. RSI is also on the verge of entering the overbought territory. Looking ahead, there is no clear resistance, which signals a highly bullish scenario from a technical perspective. However, a slight retracement is possible given the continuous pumps over the last few days, potentially towards $2.11K, representing the channel's upper boundary and the support formed by the previous high in April, or $2.0K, acting as a robust psychological support zone.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Fed Chair Powell calls talk of cutting rates ‘premature’ and says more hikes could happen

• Evergrande Faces Final Chance to Avoid Liquidation by HK Court

• Modi’s Party Wins Key State Polls, Boosting Bid for Third Term

• China Frames ‘One Province, One Policy’ Plan for Financial Risk

• Alaska Air to buy peer Hawaiian for $1.9 billion

• Al Gore slams COP28 climate summit host UAE, says its emissions soared

• Two ships hit by drone attacks in Red Sea

• Brookfield's $10.6 bln bid for Origin Energy expected to fail on Monday

• China has more space to cut reserve ratio instead of interest rates, says ex-official

• Islamic State claims responsibility for deadly Philippine bombing

Crypto

• KyberSwap plans to offer victims treasury grants after $48.8 million exploit

• Grayscale Setting Up for Bitcoin ETF Race by Hiring Industry Veteran from Invesco

• Etherscan Seeks $1M Annual Sponsorship to Advance ENS Features

• Coinbase Has No Plans to Launch Base Token: CEO Brian Armstrong

• Standard Chartered-Backed Zodia Custody Joins Ripple-Owned Metaco’s Global Crypto Storage Network

• Regulators have scared SoFi out of crypto: Bloomberg

• Platypus Finance hackers cleared of criminal charges: Le Monde

• Arbitrum DAO approves $23 million 'backfund' for projects that missed initial grant

• Velodrome, Aerodrome websites compromised for second time in days

• Starknet Foundation confirms screenshots showing draft airdrop plans, says snapshot already taken

• Soccer Star Cristiano Ronaldo Faces $1B Class Action Suit Over Binance Endorsement

• Cryptocurrency Worth $1.5M Seized From Former Ukrainian Head of State Communications

• North Korean Hackers Lazarus Group Stolen $3B in Cryptocurrency

Deal Flow

• KuCoin pledges $20K grant to TON Foundation for ecosystem development

Yours sincerely,
Treehouse Research 🌳