BTC

ETH

S&P Futures 500

$67,227.39

$3,574.96

$5,187.25

(-6.60%)

 (-8.50%)

(-0.60%)

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

GM Treehouser 🌳

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February 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Trump proposes 100% tariff on Chinese cars in Mexico; BOJ raises interest rates (More in Macro & TradFi)
  • Dubai’s DIFC passes comprehensive digital asset and new security laws; Coinbase UK CEO says that US Bitcoin ETFs are a ‘monumental milestone’, while ETNs in the UK are a ‘positive step’ (More in DeFi & CeFi)
  • The largest $BOME pre-sale participants saw more than $30M in profits; Large portion of BTC’s realized cap is owned by short-term investors (More in On-Chain)
  • Bitcoin's term structure remains in contango; Ethereum faces negative sentiment and regulatory uncertainty (More in Crypto Derivatives)
  • BTC and ETH RSI level below neutral zone (More in Crypto Technical Analysis)

Macro & TradFi

At a rally in Dayton, Ohio, Donald Trump announced his intention to impose a 100% tariff on cars manufactured in Mexico by Chinese companies, a significant increase from his previously suggested tariffs on automobiles and goods from China. This aggressive stance aims to address what he perceives as unfair trade practices and the threat posed by Chinese investments in the Mexican automobile industry to the U.S. auto sector. Trump's remarks underline his confrontational trade policies, emphasizing a reciprocal approach to international relations: "You screw us and we'll screw you." Amidst securing the Republican nomination for the upcoming presidential election, Trump's comments reflect his broader strategy to prioritize American manufacturing and labor, even as he dismisses concerns about potential retaliatory measures from China or other nations. This position not only highlights his commitment to economic nationalism but also sets the tone for a contentious trade environment should he be re-elected.

Elsewhere, the Bank of Japan (BOJ) is poised to raise its key short-term interest rate to between 0% and 0.1% on Tuesday, marking its first rate increase in seventeen years, as reported by Kyodo. This decision comes in the wake of labor-management pay negotiations that have culminated in a significant 5.28% average wage increase, the highest in 33 years. This wage growth is a critical component in fostering a sustainable cycle of wage increases and inflation, reflecting a shift towards a more robust economic stance. The anticipated adjustment in the BOJ's monetary policy also includes potential discussions on the future of yield curve control, a mechanism designed to cap the yield on 10-year Japanese government bonds below 1%. Despite this policy shift, the BOJ intends to maintain an accommodative stance by continuing its government bond purchases to mitigate any abrupt increases in long-term interest rates. 

Last Friday, US stock markets experienced a downturn, influenced by the expiration of a notable volume of options on Friday, which led to heightened market volatility. The S&P 500 index receded by 0.65% from its recent peak, while the Nasdaq Composite fell by 1.15%, showing a marginal outperformance compared to other indices. The Dow Jones Industrial Average also saw a decline, dropping by 0.49%. Adobe's stock took a significant hit, plummeting by 13.67% following its announcement of weaker-than-expected revenue guidance for the current quarter, attributing the shortfall to intense competition and lackluster demand for its artificial intelligence products. Similarly, Ulta Beauty's shares fell by 5.21% after the company projected full-year profits that fell short of analysts' expectations, with rising supply-chain expenses and increased promotional activities eroding profit margins. Investors are now attentively waiting for the Federal Open Market Committee's (FOMC) interest rate decision, which is scheduled for announcement this Thursday, 21 March, at 02:00 SGT, anticipating its potential impact on market dynamics.

CeFi & DeFi

  • Coinbase UK CEO says that US Bitcoin ETFs are a ‘monumental milestone’, while ETNs in the UK are a ‘positive step’
  • Dubai’s DIFC passes comprehensive digital asset law and new security law
  • Protocol Village: Space and Time Partners With Matter Labs to Launch on ZkSync
  • Prosecutors want a $11B judgment and 40–50 years in prison for Sam Bankman-Fried
  • Marathon to purchase 200MW Bitcoin mining center from Applied Digital for $87.3M

Coinbase CEO mentioned that the soon-to-be-available crypto exchange-traded notes are seen as a positive development for the United Kingdom (UK). He also discussed crypto ETNs with the UK’s Economic Secretary to the Treasury on how it would be beneficial for the industry and the UK as a crypto hub. With regards to the Bitcoin ETF, he also had positive sentiments towards it and sees it as a monumental milestone for the crypto industry as a whole. BTC ETF offered a new avenue for traditional investors to enter the cryptocurrency market, which led to an influx of institutional capital. This trend is likely to continue as more crypto-related products become available. Major asset managers like BlackRock and Fidelity are now discussing Bitcoin ETFs with their clients, further fueling investor interest.

The Dubai International Financial Centre (DIFC) has made a significant stride in regulating digital assets by passing a new digital asset law, a new security law, and making amendments to existing laws. This legislative move aims to provide clarity and legal certainty for investors and users of digital assets, representing the first legislative effort to comprehensively delineate the legal characteristics of digital assets within the framework of property law, reflecting the DIFC’s commitment to aligning with the fast-evolving landscape of international trade and financial markets. The Digital Assets Law, detailed in a seven-page document along with appendices, complements the introduction of the Security Law 2024, which updates and replaces legislation from 2005 and its 2019 amendment.

On-Chain

According to an analysis on @lookonchain, sundayfunday.sol, the largest participant in the $BOME pre-sale, has achieved a remarkable return, transforming an initial investment of $72K into $30.2M in just three days. Originally investing 421 $SOL ($72K), sundayfunday.sol received 1.43B $BOME tokens. Recently, they sold 190M $BOME for 19,646 $SOL ($3.66M) to secure profits, retaining another 1.24B $BOME ($26.57M) in their wallet. Trading low-capitalization coins carries a high level of risk, and there is a significant potential for loss. The performance of early investors, such as the rapid growth seen in specific instances, is not typical and should not be expected as a common outcome.

Meanwhile, another analysis on @cryptoquant reveals that nearly 50% of Bitcoin's Realized Cap is now owned by short-term holders, indicating a significant increase in enthusiasm and accumulation among new investors following the recent price surge. Despite a notable decrease in Bitcoin's price since last Friday, the dominance of short-term capital in the market has remained strong, suggesting a persistent bullish sentiment among investors. It is imperative to closely monitor the behavior of short-term holders and the potential impact of their movements on the Bitcoin market in the days ahead.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH decreased to 76.40% and 71.06%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH decreased to 0.11% and -5.24%, respectively.
  • The futures market witnessed $289.86M in liquidations, with longs representing 55.97%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

54.80%

AVAX

OKX

dYdX

52.29%

AVAX

Bybit

dYdX

38.65%

SOL

Bybit

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.

Over the recent weekend, Bitcoin's 7-day and 30-day ATM Implied Volatility (IV) experienced a notable uptick, reaching 75.80% and 74.84%, respectively. This increase underscores a growing trend of caution among traders, who appear less inclined to assume the role of takers in the short term due to Bitcoin's heightened volatility. This shift in trader behavior signals a potential reassessment of risk and strategy adjustments in response to unpredictable price movements.

The term structure of Bitcoin has predominantly remained in a contango state, with the curve illustrating volatility across short to long-term tenures. Notably, there has been a significant spike in IV for tenors up to 4 days, likely influenced by the anticipation of the FOMC meeting scheduled within this timeframe.

The BTC 25 Delta skews (Call-Put) have seen a swift decline, with skews remaining in negative territory, indicating -1.49% for 7-day maturities and -0.11% for 30-day maturities. This disparity between the 7-day and 30-day maturity skews suggests that options investors are adopting a bearish stance on Bitcoin in the short term while displaying a cautiously optimistic outlook for the mid-term. Conversely, Ethereum (ETH) presents more cause for concern, as perpetual funding rates have turned negative, accompanied by a pronounced downside skew in 7-day maturities at -8.09% and -5.24% for 30-day maturities. This pessimistic view is further compounded by the decreased probability of an Ethereum ETF approval by the SEC in May, now pegged at 32% on Polymarkets.

Lastly, during the Asia/EU Trading Session, @Paradigm reported option flows emphasizing strategic call purchases and structured positions to hedge against risk. Key BTC trades encompassed the procurement of 250x 27-Sep-24 100/115k Call Spread, 250x 22-Mar-24 66/56k Put Spread, and notable ETH transactions involved 2500x 26-Apr-24 2600/5000 Bull Risk Reversal, along with 2500x 17-Mar-24 3800 Call.

Crypto Technical Analysis

In technical analysis, BTC declined further over the weekend, before rebounding to $67.7K and forming a support level between $64.7K to $65.4K. The Relative Strength Index (RSI) indicates that BTC is trending towards oversold territory and is currently resting at 44.92, below the neutral zone of 50. Looking ahead, the immediate resistance persists at the recent all-time high of $70K, suggesting a 3.3% upside.

Moving to ETH, its price movements mirrored those of BTC's, declining over the weekend and breaking the previously formed trendline formed by the lower lows to rebound at $3.4K, potentially forming a support level currently at $3.6K. The RSI has rebounded after reaching oversold territory at 27 and is currently resting at 41.31. Looking forward, the immediate resistance level is $4K, which is also observed to be the same resistance level in January 2022, offering an 11% potential upside.

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