BTC

ETH

S&P Futures 500

$27,372.25

$1,822.25

$4,168.00

(+1.07%)

 (-0.14%)

(+0.94%)

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

GM Treehouser 🌳

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April 2023 Market Recap

Our Daily View

What We Are Covering Today

  • McCarthy criticizes Biden for his travel to Japan prior to finalizing the details on the debt ceiling negotiation (more in Macro & TradFi)
  • Tether and Circle redefine their investment strategies amid market volatility while Ripple expands through a strategic acquisition (more in DeFi & CeFi)
  • Long-term holders and whales cashing out of Bitcoin; Dogecoin daily transaction volume hits all-time high with introduction of DRC-20 (more in On-Chain)
  • Optimism in ETH; strong trading volume in Jun 2023 call options points to upward price sentiment (more in Crypto Derivatives)
  • BTC and ETH break below key support level but quickly rebounded and found acceptance above it, continuing their range-bound movement (more in Crypto Technical Analysis)

Macro & TradFi

As President Joe Biden departed for Hiroshima to attend the G7 summit, he expressed confidence that negotiators would reach an agreement to avoid a default. Biden and congressional leaders agreed to hold new staff-level talks in hopes of achieving a bipartisan deal. McCarthy remained hopeful for a deal but criticized Biden's travel during such critical times. The negotiations involve obstacles such as spending cuts and work requirements on federal aid. Biden stated that he authorized a small group with the authority to finalize the matters in the agreement but does not anticipate the deal to be completed before his return from Japan. Meanwhile, the Treasury Department warned once again of a potential breach of the debt ceiling by 1 Jun 23, which could have severe economic consequences.

Elsewhere, India is introducing a $2.1 billion financial incentive plan to attract laptop, tablet, and hardware manufacturers to the country as a way to diversify supply chains away from China. Prime Minister Narendra Modi aims to position India as a global manufacturing hub following the success of Apple's local assembly operations. The plan offers cashback incentives and financial benefits for local sourcing of components. Companies like Apple, Dell, HP, and Asustek could benefit from the new measures. Chinese manufacturers may face challenges in receiving incentives due to strained relations with India.

Lastly, major US equity indices rose during Wednesday's trading session in anticipation of a breakthrough in debt ceiling negotiations. The S&P 500, DJIA, and NASDAQ saw increases of 1.18%, 1.23%, and 1.27% respectively. Despite the positive market sentiments, several large corporations presented concerning news during their earnings calls. For example, while experiencing the fastest revenue growth in over a year, Tencent's earnings missed estimates. On the other hand, while Costco reported better-than-expected revenue and profit, its shares dropped by 4% in after-hours trading when the market learned about the 23% drop in orders hidden deep within the conference document's remarks.

DeFi & CeFi

  • Tether says it will buy Bitcoin for stablecoin reserves
  • Ripple acquires crypto custody firm Metaco in $250M deal
  • Circle moves $8.7B to repo agreements to protect against a potential US Debt Default
  • Lightning Labs teases new L2 protocol for Bitcoin-based assets
  • The SEC has implied that Grayscale should pull its application for a Filecoin Trust
  • Ripple XRP rises 7% after judge denies SEC’s motion to seal Hinman documents

Stablecoin issuer Tether has announced a new investment strategy, revealing its intention to use a portion of its profits to purchase Bitcoin. This strategic shift aims to strengthen and diversify Tether's stablecoin reserves while taking advantage of Bitcoin's potential for appreciation. By aligning itself with transformative technology, Tether aims to solidify its position in the digital asset market. The company disclosed that it plans to allocate around 15% of its realized profits from investments in Bitcoin, excluding any unrealized price appreciation of its reserve assets. The acquired Bitcoin will be added to Tether's reserve surplus, and the company intends to independently manage the custody of the Bitcoin stash.

Another major stablecoin issuer, Circle, has undertaken a strategic rebalancing of its reserves. The Circle Reserve Fund, managed by investment giant BlackRock, has allocated  $8.7 billion to overnight repurchase (repo) agreements. These tri-party repo agreements involve major banking institutions like BNP Paribas, Goldman Sachs, Barclays, and the Royal Bank of Canada. In these agreements, borrowers sell securities (such as U.S. Treasury bills) for cash and agree to repurchase the collateral the next day at a slightly higher price. This approach provides higher liquidity and safety in uncertain times, particularly considering the potential risk of a U.S. government debt default that could impact the value and stability of longer-term U.S. Treasury bills. By involving reputable banking institutions, Circle ensures the credibility and security of these transactions.

In other news, Ripple announced that it has acquired Metaco, a Swiss-based crypto custody firm, for a significant $250 million. Ripple's strategic acquisition is expected to enhance its enterprise offerings by expanding its digital asset custody, issuance, and settlement services. This acquisition comes at a time when the crypto custody market is projected to experience substantial growth. Ripple predicts that the market will reach a staggering $10T by 2030, driven by increasing demand for enterprise-grade digital asset infrastructure.

On-Chain

Examining on-chain data from CryptoQuant, it appears that the recent price correction in Bitcoin earlier this month could be attributed to regular market participants and long-term holders cashing out during periods of high-profit ratios. The Spent Output Profit Ratio, which indicates the profit or loss of BTC being moved on-chain, hovered near 1 (the break-even point) but briefly crossed 1.072 on 7 May 23. This suggests that regular market participants realized an average profit of over 7% at that time. On the same day, there was a surge in the Exchange Whale Ratio, which compares the value of the top 10 exchange inflows of BTC to the value of all exchange inflows of BTC. The proportion of whales depositing Bitcoin on exchanges reached a peak of around 82%, indicating that further selling could be associated with the subsequent downturn observed over the following week.

Credit: BitInfoCharts

Meanwhile, the introduction of the DRC-20 token standard on 9 May 23 led to a significant increase in network activity for Dogecoin. Prior to the introduction of this token standard, the average transaction volume remained around 20,000 daily transactions. However, the number of transactions surged to over 600K last Saturday and exceeded 1M yesterday, marking a new all-time high. This surpassed the daily transaction volume of Bitcoin and Litecoin. Critics have pointed out the challenges faced by everyday users, such as high fees and network congestion resulting from the token deployment. Nevertheless, these token standards present a value proposition for Dogecoin by enabling developers to issue tokens that collect network fees in DOGE.

Crypto Derivatives

  • BTC and ETH funding remained at a slight positive.
  • 30-day ATM IV falls slightly to 45.82% and 44.96% for BTC and ETH respectively.
  • 30-day 25-delta skew for BTC is neutral at -0.01%, while ETH remains negatively skewed at -1.90%.

Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:

Net Annualized APR

Perp (USDT pair)

Long on

Short On

18.25%

LTC

OKX

DYDX

16.16%

SOL

OKX

DYDX

8.67%

BNB

OKX

BYBIT

Source: @CexyArbBot Telegram

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, DOGE vs USDT perps 

2) CEX observed include Binance, Bybit, OKX & DYDX

@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo

The futures market saw $47.65M in liquidation over the 24 hours with 61% coming from longs at $29.04M.

The term structure for options remains in contango as IV has remained relatively stable in recent days without any significant catalyst to push it higher. This stability in IV is consistent with the overall optimistic macro sentiments regarding the debt ceiling and positive stock market performance. Realized volatility (RV) for both BTC and ETH has followed suit and decreased, falling below the implied volatility at the at-the-money (ATM) level. However, despite the decrease in realized volatility, the rising volatility risk premium (VRP) suggests an increasing demand for options to hedge against potential downside risks or provide protection.

The 25-delta skew (C-P) has shifted from negative to neutral this week, indicating a change in market sentiment and expectations. The skew for BTC and ETH options with a 7-day maturity remained neutral, suggesting that market participants do not have a strong directional bias for the next week.

The top traded strategy for BTC in the last 24 hours is the put calendar, which involves buying and selling put options with the same strike price but different expiration dates. Traders may be using put calendars as a volatility play to take advantage of lower premiums and an anticipated increase in volatility in the near future due to the decrease in IV. Based on options activity, the market sentiment for BTC appears to be neutral, suggesting that market participants do not have a strong directional bias for the upcoming week.

On the other hand, significant trading volume has been observed for ETH call options with a 30 Jun 23 expiration, mainly focusing on the $2K and $2.2K OTM strike prices. This suggests bullish sentiment and positioning for upward price movements in ETH over the next month.

Lastly, VIX fell 6.23% to 16.87.

Crypto Technical Analysis

Moving on to technical analysis, BTC experienced multiple instances of falling below the $27K level yesterday. However, it managed to regain stability above this level during today's Asian session. Analyzing the 4-hourly chart, Stochastic RSI reached its lowest level and exhibited a crossover, suggesting a potential upward reversal in the price action. In a similar vein, for any significant push higher, BTC would need to find a break above and gain acceptance above the ascending trendline.

Meanwhile, ETH is showing greater signs of strength in comparison to BTC. ETH has held well above the $1.8K level, even after being tested multiple times. Observing the 4-hourly chart, a well-established descending trendline can be seen. ETH has the potential to make further gains and move towards this trendline, and a successful break above it would signify additional upward momentum.

Based on the ETH/BTC pair, it is evident that ETH has been exhibiting superior performance since the beginning of May. An area of interest for a potential breakout in the ETHBTC pair is around 0.06789. If ETH manages to establish acceptance above this level, it would signify a continuation of strength and thus result in a potential bull rally.

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