🌳 Sony Sees $10B Decline In Value With The Reduced PS5 Sales Forecast; JPM Raises Questions On Bitcoin ETFs’ Impacts On Coinbases’s Financials

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter, where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

Also, in case you have missed it, check out our latest research piece 👇

You can also access our research articles on the Bloomberg Terminal with the command “NH TRH < GO >"!

Our Daily View

What We Are Covering Today

• Sony's market value dips over PS5 forecast; Chinese markets upbeat post-holiday (More in Macro & TradFi)
• J.P. Morgan questions Coinbase's ETF impact; Ethena Labs raises $14M for USDe (More in DeFi & CeFi)
• Fixedfloat gets exploited for approximately $26M; wallets withdrew $216.4M worth of LINK from Binance exchange over the past 2 weeks (More in On-Chain)
• Both BTC and ETH experience an increase in IVs and C-P Skews, showing bullishness by traders (More in Crypto Derivatives)
• BTC consolidates with unclear direction; ETH shows bullish momentum, eyeing next resistance (More in Crypto Technical Analysis)

Macro & TradFi

Sony experienced a significant $10 billion decline in market value following a reduction in its PlayStation 5 sales forecast for the fiscal year, a move that startled investors and analysts alike. However, financial experts are more concerned with the declining operating margins within Sony's gaming division, a crucial segment of its portfolio. Despite the expectations for higher margins driven by digital sales and the PS Plus subscription service, the operating margin for the gaming business fell to just under 6% in the December quarter, a stark contrast to the more than 9% observed in the same quarter of the previous year and significantly lower than the 12% to 13% margins seen in the years prior. The situation shows deeper challenges within Sony's strategy and operations in its gaming division, pointing to inefficiencies that have yet to be addressed despite favorable market trends. The discrepancy between expected and actual performance metrics not only highlights issues in adapting to changing market dynamics but also raises questions about Sony's ability to leverage its digital and subscription-based services effectively.

In other news, Chinese markets are poised for a robust opening as onshore markets resume trading following the Lunar New Year holiday, buoyed by optimistic travel and tourism data. This positive shift is attributed to robust holiday spending and travel statistics, signaling a resurgence in consumer spending amidst ongoing economic challenges, including deflation and a property sector crisis. Analysts anticipate this upbeat sentiment to provide a temporary uplift to equities, supporting government efforts to bolster investor confidence. However, early signs of recovery in services-related sectors, coupled with state interventions and policy support, hint at a stronger opening for A-shares, reflecting optimism for short-term market performance while keeping an eye on long-term economic strategies.

Last Friday, major U.S. stock indices experienced declines, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite dropping by 0.48%, 0.37%, and 0.82%, respectively. These downturns reflect ongoing concerns about persistent inflationary pressures within the U.S. economy, exacerbated by a recent CPI report that surprised markets with higher-than-expected inflation rates. In a strategic move within this volatile market, Boston-based Arrowstreet Capital acquired nearly 4 million Nvidia shares in the fourth quarter, elevating its investment to $2.1 billion by year's end. This position is reported to have garnered at least a $1 billion profit for Arrowstreet Capital this year, assuming the stake was retained. Market participants are now keenly awaiting the release of the Federal Open Market Committee Minutes scheduled for Thursday, 03:00 SGT, for further insights into the central bank's monetary policy direction amidst these inflationary challenges.

CeFi & DeFi

• Ethena Labs secures $14M in funding for its synthetic stablecoin
• YouTuber KSI faces pump-and-dump allegations from ZachXBT and Coffeezilla
• Big banks are nudging the SEC for a slice of sweet Bitcoin ETF action
• Protocol Village: Wormhole Foundation Collaborates With Succinct on 'ZK Light Client'
• Revolut to Introduce Crypto Exchange Targeting 'Advanced Traders
• Bored Ape Yacht Club development team Yuga Labs has announced that it has acquired Moonbirds development team Proof

In a recent analysis, J.P. Morgan expressed skepticism regarding Coinbase's disclosure and the actual benefits of its involvement in the launch of ten spot Bitcoin ETFs, which have been credited for the exchange's strong fourth-quarter earnings. Despite Coinbase's claims of positive impacts from its ETF business, specifically in providing custodial services for eight of these funds, J.P. Morgan analyst Kenneth Worthington highlighted the company's failure to provide detailed insights into the economic implications of these arrangements. This lack of transparency raises doubts about the true financial impact of the ETFs on Coinbase's revenue, especially against potential losses in spot market volumes. The critique emerges amidst an overall positive market reaction to Coinbase's earnings report, with some analysts upgrading their outlook and price targets for the stock. However, concerns remain about the ETFs' low trading fees potentially diverting investors from traditional exchanges, despite Coinbase's assertion that the ETFs have not affected client behavior significantly.

Elsewhere, Ethena Labs has successfully raised $14 million to develop an Ethereum-based synthetic dollar, signaling a strategic move to innovate within the global market for financial instruments linked to the U.S. dollar. This funding round, led by Dragonfly and other notable investors, builds on a previous $6 million investment to enhance decentralized finance solutions. Ethena's initiative introduces the USDe, a synthetic dollar that leverages delta-hedging strategies with staked Ether as collateral, a novel approach different from traditional stablecoins. Since its launch, USDe has secured $200 million in total value, demonstrating significant market traction. This development highlights the evolving landscape of crypto financial instruments and underscores the potential for synthetic dollars to offer a more decentralized, efficient alternative to traditional stablecoins, addressing the critical needs for stability, censorship resistance, and capital efficiency in the digital economy.

On-Chain

According to Etherscan, a wallet address starting with 0x85c4 exploited the decentralized crypto exchange Fixedfloat for approximately $26M worth of Bitcoin and Ethereum. The exchange initially blamed "minor glitches” for a huge wave of money leaving the platform and shut down services for maintenance. But since February 17th, users have been reporting frozen transactions and missing funds on the platform's X page, raising concerns about something more serious. This highlights the susceptibility of exchanges to security breaches, requiring greater efforts to establish an industry-standard security protocol for crypto services to enhance investor and trader protection.

Lookonchain reported a significant activity by 83 fresh wallets, which may belong to the same institution, that withdrew a total of 11,097,687 LINK tokens worth $216.4M from Binance exchange over the past 2 weeks. The recent concentration of LINK withdrawals suggests potential institutional involvement, strategic positioning, or consolidation. The distribution of funds across numerous wallets points to sophisticated risk management strategies, underscoring the institution's cautious approach to safeguarding its investments. This activity not only reflects the growing institutional interest in cryptocurrencies but also underscores the importance of risk mitigation techniques in the digital asset space.

Crypto Derivatives

• Funding rates remain positive for both BTC and ETH.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH rose to 57.211% and 63.00%, respectively.
• The 30-day 25-delta skew (C-P) for BTC and ETH remains positive, with a slight increase of 5.06% and 6.33%, respectively.
• The futures market witnessed $380.89M worth of liquidations over the weekend, with longs representing 53.08%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Both BTC's 7-day and 30-day ATM IVs experienced an uptick over the weekend, approaching their respective 30-day highs. This indicates that traders anticipate heightened volatility shortly, possibly driven by recent price movements. The bullish C-P skews suggest that traders are likely directionally bullish for this period, expecting potential upward price movements.

The BTC Shadow Term Structure continues to exhibit a contango state, with minimal changes observed across all tenors, except for slight variations in the early-dated contracts.

The BTC 25-delta skew demonstrates an upward trend for both the 7-day and 30-day periods, suggesting that sentiment regarding near-term price action is becoming increasingly positive. The recent bullish surge in BTC's price is likely contributing to these fluctuations in skew, indicating a leaning towards bullishness in the short term.

Lastly, @Paradigm highlighted bullish sentiments during the Asia/Europe Session Hours, with key BTC trades of 400x 29-Mar-24 65k/72k call spread bought and 250x 28-June-24 80k call bought. Noteworthy ETH strategies included 5500x 1-Mar-24 2800 put sold, a 4000x (Inverse) 29-Mar-24 3200 / 26-April-24 4000 call calendar bought, and multiple other put selling.

Crypto Technical Analysis

In the 4-hour chart for BTC, the price action indicates stagnation after an unsuccessful attempt to breach the resistance level. Currently, the market is consolidating, as evidenced by the price movements oscillating within a narrow range. This consolidation phase often precedes a potential directional movement, indicating that traders are collectively deciding on Bitcoin's next move. The resistance level to watch is at approximately $53K, which if surpassed could signal an uptrend continuation. Conversely, should the price decline, the next key support lies around $47K, a 9% drop from the current price levels. The Relative Strength Index (RSI) is positioned at 59.19, signaling a neutral momentum that aligns with the ongoing consolidation phase.

Moving on to ETH, the price has achieved a higher high following a retracement, indicating a continuation of the bullish momentum. This pattern of higher highs is a characteristic of an uptrend, suggesting that buyers are maintaining control of the market. Currently, ETH is priced at around $2.9K. If the bullish momentum persists, we could anticipate an attempt to test the next resistance level. The nearest resistance, according to the recent price action, is potentially at the $3K mark. A breakthrough above this level could lead to further gains, while any pullback might find support at the $2.7K level, which would represent approximately a 6.5% decline from the current price.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Yields, dollar rise after stronger-than-expected US PPI data

• China’s New Year Travel and Spending Top Pre-Covid Levels

• Former Thai Leader Thaksin Freed From Detention Under Parole

• Sony plunged $10 billion after its PS5 sales cut. But a bigger issue is its near decade low games margin.

• European leaders appeal for greater support for Ukraine as Russia makes major gain

• Trump will quit NATO, Hillary Clinton says, as anxiety mounts U.S. commitment

• Germany's defense minister says spending 2% on defense 'can only be the start'

• Navalny death is a pre-election gambit from Putin, anti-Kremlin activist Bill Browder says

• EU to hit Apple with first ever fine in €500mn music streaming penalty

• Biden pins blame for Russian battlefield victory on Congress inaction

• Israeli cabinet rejects international calls for Palestinian state

• FBI warns Chinese malware could threaten critical US infrastructure

• Global Factory Check-Up Is About to Reveal Extent of Nascent Recovery

• China Holds Key Rate Steady as Yuan Limits Room for PBOC Moves

• Cracks Start to Emerge in Global Central Bank Synchronicity

Crypto

• JPMorgan Analyst Criticizes Coinbase's Lack of Insights Into Its ETF Business

• Craig Wright Trial Includes Ninja Anecdote Cited as Proof He's Bitcoin Creator Satoshi

• Revolut to Introduce Crypto Exchange Targeting 'Advanced Traders'

• Protocol Village: Wormhole Foundation Collaborates With Succinct on 'ZK Light Client'

• Coinbase drops native Bitcoin payments from merchants’ platform

• FixedFloat confirms $26M exploit in Bitcoin, Ether

• VanEck admits ETF marketing violation, agrees to SEC fine

• Genesis GBTC sell-off will balance out in crypto market — Coinbase

• FTX creditors sue bankruptcy law firm S&C, alleging fraud involvement

• Celsius distributed $2 billion of crypto to creditors, court document shows

• Coinbase donates $3.6 million to support Bitcoin developer funding through Brink

Deal Flow

• Bored Apes' creator Yuga Labs acquires Proof, takes over Moonbirds NFT brand

• USDe developer Ethena raises new funding round at $300 million valuation

• DePHY Secures Seed Funding Round at $40 Million Valuation

Yours sincerely,
Treehouse Research 🌳