Houthi attacks Middle East tension; KyberSwap slashes staff

BTC	ETH	S&P Futures 500
$42,356.75	$2,227.25	$4,824.75
(-2.51%)	(-1.82%)	(+0.35%)
Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

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November 2023 Market Recap

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Our Daily View

What We Are Covering Today

Tensions in the Middle East escalates as recent events widen conflicts; BYD forecasted to overtake Tesla in the EV sector in the following quarter (More in Macro & TradFi)
Key executives quit Greyscale’s board of directors; KyberSwap reduces its workforce by 50% (More in DeFi & CeFi)
Whales influence STORJ market; Bitcoin fees surge, signaling network growth and congestion (More in On-Chain)
BTC, ETH IVs suggest ETF anticipation; term structure signals event-driven volatility focus (More in Crypto Derivatives)
Both BTC and ETH experienced further declines with ETH breaking its support from the lower trendline (More in Crypto Technical Analysis)

Macro & TradFi

The situation in the Middle East is escalating as recent events indicate a potential widening of conflicts. The US launched strikes on installations in Iraq linked to Kataib Hezbollah, a group backed by Iran, following an attack that injured US personnel. In the Red Sea, Houthi militants, also supported by Iran, attacked shipping, leading to a US response to shoot down drones and missiles by the Houthis. Tensions are further fueled by Iran's denial of involvement in attacks on commercial ships and its vow of retaliation for an Israeli airstrike in Syria. The Biden administration faces challenges in balancing support for Israel against pressure to ease operations in Gaza. Israel perceives the conflict as a multi-front war, with concerns about Hezbollah in Lebanon and other regional groups. The complex dynamics make predicting specific incidents difficult, raising the potential for a broader escalation.

Meanwhile, China's BYD is on track to surpass Tesla as the global leader in fully electric vehicle (EV) sales, marking a symbolic shift in the EV market and highlighting China's rising influence in the automotive industry. BYD's success is attributed to its early preparation for rapid innovation and lower-cost EV models, which has positioned it to outpace Tesla. Despite its global lead in EVs, BYD faces challenges in replicating its success abroad, especially with potential tariffs on Chinese car imports and the escalating trade tensions between the US and China. BYD's billionaire founder, Wang Chuanfu, has played a crucial role in the company's growth, emphasizing innovation and competitive pricing. As the global automotive landscape evolves, BYD's ability to maintain its lead will depend on continuous innovation and adaptation to changing market dynamics.

Yesterday, the S&P 500 climbed 0.35%, inching closer to record levels. The Nasdaq Composite also advanced 0.54%, reaching an all-time high, while the Dow Jones Industrial Average gained about 0.43%. Despite the weaker trading volume, Tuesday's positive market moves are seen as a continuation of recent trends with both the S&P 500 and Nasdaq Composite notching an eight-week winning streak. In other news, Intel jumped 5.2% after receiving a $3.2 billion grant for a $25 billion plant, while Manchester United added 3.4% following a deal with British billionaire Jim Ratcliffe to buy a quarter of the soccer club.

DeFi & CeFi

Two key executives resigned from Greyscale’s board of directors
KyberSwap lays off 50% of its workforce following the exploit in November
BTC’s share of trading volume slides as altcoin surges
Reports emerge suggesting Mt. Gox creditors are receiving repayments
Sleepless AI receives investment from Foresight Ventures

Grayscale Investments, the firm behind the Grayscale Bitcoin Trust, has witnessed significant board changes with the resignations of key executives. Barry Silbert, founder and CEO of Digital Currency Group (DCG), the parent company of Grayscale, and DCG President Mark Murphy are stepping down from Grayscale's board of directors, effective January 1, 2024. The new board members are Mark Shifke, Matthew Kummell, and Edward McGee. Grayscale, a major player in the crypto investment space, has been actively seeking approval for its spot Bitcoin ETF from the SEC. Some speculate that these resignations may be linked to the potential approval of Grayscale's Bitcoin ETF, with online commenters expressing anticipation for the ETF's green light by the SEC. The new chairman, Mark Shifke, brings extensive financial expertise, having served as CFO of DCG and held key positions at companies like JPMorgan Chase and Goldman Sachs.

In other news, DeFi protocol KyberSwap has announced a 50% reduction in its workforce following a $48.8 million exploit in November. Kyber Network's CEO, Victor Tran, expressed regret over the decision and emphasized that it was a heart-wrenching move. The company will establish a "voluntary database" to assist departing employees in finding new opportunities in the Web3 space. In an effort to control capital expenditure, Kyber Network has temporarily halted its liquidity protocol initiatives and KyberAI project. However, core business operations, including KyberSwap’s Aggregator and Limit Order functions, remain intact. The company plans to launch its Zap API soon. Kyber Network is also working to reimburse customers impacted by the November exploit which is set to begin on February 1, 2024, with impacted users required to register between January 11 and January 23, 2024. The company estimates a reference value of nearly $49 million for impacted users but notes that they will receive 60% of this value.

On-Chain

According to @Spotonchain, three cryptocurrency whales, likely a single entity, transferred a substantial 30.78 million STORJ tokens, valued at $25.3 million and representing 7.24% of its total supply, to Binance within the last 17 hours. Initially, these whales acquired 10 million STORJ tokens at an average price of $0.44, totaling $4.44 million, during September and October. However, they expanded their holdings by purchasing an additional 20.8 million STORJ at $1.04 each during the price surge on December 17, ultimately incurring a loss of $745,000, or 2.86%.

Elsewhere, a recent CryptoQuant analysis depicts a stark increase in transaction fees collected by BTC miners, surging to a record $23.7 million. This peak contributes significantly to the total mining revenue, currently standing at around $63.8 million. The rise in fees not only signals enhanced profitability for miners but also suggests greater network utilization and transaction volume due to the surging interest in BRC-20 inscriptions.

Crypto Derivatives

Funding rates remained positive for BTC and ETH.
Deribit Implied Volatility Index (DVOL) for BTC and ETH rose to 59.79% and 61.12% respectively.
The 30-day 25-delta skew (C-P) for BTC fell to 1.60% while ETH fell to 2.06%.
The futures market witnessed $254.93M liquidations, with shorts representing 80.42%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR	Perp (USDT pair)	Long on	Short On
32.57%	BNB	Binance	OKX
29.02%	XRP	OKX	Bybit
26.73%	SOL	Binance	dYdX
Source: @CexyArbBot Telegram Bot 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 30-day implied volatility (IV) for BTC has increased to 57.16%, indicative of a market expectation for heightened medium-term price volatility. In contrast, the 7-day IV has increased 46.07%, reflecting a market sentiment of diminished short-term volatility. The divergence continues, suggesting that market participants expect more variability in BTC prices over the next month, where there may be a potential BTC ETF approval.

Similarly, we see the same divergence pattern for ETH, which reflects a market outlook where short-term conditions are seen as less volatile, while medium-term expectations account for higher variability, possibly due to potential further developments in ETH spot ETFs anticipated to affect prices.

The Bitcoin implied volatility term structure exhibits a persistent contango, except for a pronounced spike at the 16-day mark, where the IV exceeds the broader term levels. This anomaly sharply highlights market anticipation of increased volatility, likely triggered by expectations surrounding a pivotal event, such as the potential approval of a Bitcoin ETF, which traders seem to be positioning around.

The 25-delta 30-day call-put skew has fallen to 1.60% and the 7-day skew fell to 0.41%, highlighting a reduction in the premium for calls relative to puts. This suggests a shift in market sentiment towards a more balanced view on potential upward versus downward movements in the BTC over these time horizons. This trend may reflect investors hedging against potential downside risk in the near to medium term.

During @Paradigm’s Asia / Europe Session Hours, option flows this week showed a defensive bias with strategic acquisitions and structured positions. In the BTC space, noteworthy transactions included 900x 29-Dec-23 45K Calls bought, and a complex 325x (Inverse) 26-Jan-24 47K / 29-Mar-24 65K Call Calendar also bought. Meanwhile, ETH option activity was headlined by a massive 13.5Kx 29-Dec-23 2250 Puts purchase, along with a significant 2Kx 29-Dec-23 2300 / 26-Jan-24 2500 Call Calendar bought.

Crypto Technical Analysis

Transitioning to technical analysis, our earlier assessment unfolded on the BTC daily chart, revealing a pronounced double-top pattern as the price extended its decline. Simultaneously, the RSI has descended further, lingering just above the oversold territory on the 4-hour timeframe. Should the bearish momentum persist, we can anticipate price finding support in the $40K-$40.5K range, signifying both the neckline of the double-top pattern and a key psychological support zone. A breach of this level could potentially propel the price toward the $39K mark, aligning with the lower trendline traced by recent local higher lows. Conversely, in the event of a market shift towards a bullish outlook, the price may ascend towards the $45K level. Notably, this level has maintained its status as a significant resistance point since the beginning of the year, serving as a pivotal psychological barrier in the market dynamics.

ETH, on the other hand, presents an even more bearish scenario. Although not yet confirmed, the extended decline following BTC movements has breached the previously discussed support at the lower trendline. Concurrently, the RSI has mirrored this downward movement, approaching the oversold territory and currently hovering around 38. If this trend persists, the price is poised to move towards support at approximately $2.1K, aligning with previous highs established since late April. Meanwhile, the upper resistance remains steadfast, coming into play if the market transitions to a bullish trend at $2.4K, posing a challenge to the year-to-date high.

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Sleepless AI receives investment from Foresight Ventures

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Treehouse Research 🌳

🌳Tension In The Middle East Intensifies With The Houthi Attacks And US Strikes; KyberSwap Lays Off 50% Of Its Staff Following The November Exploit