BTC

ETH

S&P Futures 500

$51,942.62

$2,840.79

$5,042.25

(-0.78%)

 (+0.86%)

(+0.53%)

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

GM Treehouser 🌳

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January 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • UK enters recession, challenging Sunak; EU downgrades forecasts, expects gradual economic rebound (More in Macro & TradFi)
  • Coinbase sees share price surge over 12%; New anti-MEV AMM introduced (More in DeFi & CeFi)
  • $BLUR unlocks stimulate market; crypto whale's capital infusion impacts liquidity, prices (More in On-Chain)
  • ETH funding rate turns negative; BTC's 7 and 30-day ATM IVs reflect a decrease in IVs (More in Crypto Derivatives)
  • BTC consolidates near resistance; ETH trends up, nearing psychological resistance level (More in Crypto Technical Analysis)

Macro & TradFi

In 2023, the UK economy entered a technical recession, as evidenced by a 0.3% decrease in GDP in the last quarter following a 0.1% decline in the third quarter, as reported by the Office for National Statistics. This downturn marks a significant setback for Prime Minister Rishi Sunak's economic growth strategy amidst a persistent cost of living crisis affecting household spending and business operations. Despite this recession, characterized by some economists as stagnation rather than a deep downturn, the Bank of England's cautious stance on interest rate adjustments reflects a complex economic landscape, with minimal growth in 2023 starkly contrasting with more robust performances in the US and the eurozone. This situation underscores the challenges facing the UK's economic recovery and policy direction, highlighting the need for strategic adjustments to navigate the intricate balance between stimulating growth and managing inflationary pressures.

In other news, the European Commission has revised its 2024 economic forecasts for the EU and the eurozone downward due to the impact of high-interest rates on economic activity, projecting slower growth rates of 0.8% and 0.9%, respectively. Concurrently, it anticipates a significant reduction in inflation. It is expected to decrease to 2.7% from the previous year's 5.4%, attributing the decline to falling energy and commodity prices. Despite these adjustments, the Commission remains optimistic about a gradual economic rebound, fueled by diminishing inflationary pressures, increasing real wages, and a robust labor market. This cautious stance is echoed by ECB President Christine Lagarde, who emphasizes the need for more data and time before considering interest rate cuts to ensure inflation aligns with the 2% target. The revisions reflect broader economic challenges, including potential trade disruptions and varying mortgage cost impacts across the eurozone. 

Yesterday, the major U.S. stock indices saw notable increases, with the S&P 500 climbing by 0.58%, the Dow Jones Industrial Average by 0.91%, and the Nasdaq Composite by 0.30%. The S&P 500 reached a new record high, despite a downturn in Big Tech stocks, indicating a broader market strength. This surge came even as five of the seven major tech giants experienced declines, with only Meta and Tesla posting gains. In the bond market, the two-year Treasury yield, which is sensitive to interest rate forecasts, remained unchanged, suggesting a stable outlook for short-term rates. Meanwhile, the 10-year Treasury yield, associated with long-term growth expectations, decreased slightly by 0.03 percentage points to 4.23%, reflecting cautious optimism about future economic expansion.

CeFi & DeFi

  • Coinbase sees share price rise post earning reports
  • CoW DAO introduces anti-MEV AMM
  • Eigenlayer nearing $7B TVL
  • U.S. Court Allows Genesis to Liquidate $1.3B Worth of GBTC Shares

Coinbase experienced a notable surge of 12.7% in its share price in after-hours trading, buoyed by a robust fourth-quarter earnings report that not only exceeded Wall Street predictions but also marked the crypto exchange's first quarter of profitability since Q4 2021. The firm's net revenue for the quarter soared to $905 million, a significant 45.2% jump from the third quarter, surpassing the anticipated $825 million. This leap to a net income of $273 million contrasts sharply with the slight net loss reported in the previous quarter. A substantial part of this revenue, $529.3 million, was attributed to transaction revenue, driven largely by consumer crypto trading and a notable increase in institutional transaction revenue. This performance underscores Coinbase's successful expansion and adaptation in the fluctuating crypto market, setting a positive outlook for its future engagements and contributions to the broader discussions on compliance and regulatory frameworks in the crypto space.

CoW DAO has introduced a novel automated market maker (AMM) designed to safeguard liquidity providers from the predatory practices of arbitrage bots and the adverse effects of maximal extractable value (MEV). This initiative represents a significant advancement in the decentralized finance (DeFi) space, where liquidity providers often face losses due to arbitrageurs exploiting price discrepancies to rebalance liquidity pools, a phenomenon known as loss versus rebalancing (LVR). CoW DAO's AMM seeks to redistribute the MEV, which typically benefits these arbitrageurs, back to the liquidity providers. The AMM is designed to integrate seamlessly with CoW Swap, its aggregator.

On-Chain

According to SpotOnChain, 48.66 million $BLUR tokens, valued at approximately $35.56 million, were transferred from a lockup contract to Coinbase for distribution. This transaction marks the latest in a series of releases, with a total of 583.4 million $BLUR tokens, now worth around $437.6 million, having been unlocked in nine monthly installments since June 2023. Historically, these unlocking events have been followed by bullish trends in the token's market performance, suggesting a pattern where the release of tokens potentially stimulates investor confidence and drives market activity. This trend highlights the impact of strategic token distribution on market dynamics and investor sentiment within the cryptocurrency ecosystem.

Lookonchain reports a significant activity by a notable crypto whale, who has resumed infusing capital into the cryptocurrency market. Over the past 26 hours, this individual or entity received 148.5 million $USDT directly from the Tether Treasury and subsequently transferred these funds to various exchanges. Since October 20, 2023, this whale has injected a staggering total of 3.22 billion $USDT into the market. Such large-scale transactions are noteworthy because they can have a substantial impact on market liquidity and potentially influence cryptocurrency prices. The actions of such whales are closely monitored by the community, as they often precede significant market movements.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 55.10% and 59.69%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH remains positive, with a slight decrease to 4.50% and an increase to 6.13%, respectively.
  • The futures market witnessed $152M liquidations, with longs representing 55.9%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

44.14%

SOL

Bybit

dYdX

38.20%

SOL

Binance

dYdX

31.01%

ADA

Bybit

OKX

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.

BTC's 7 and 30-day ATM IVs reflect a decrease in IVs. With Bitcoin’s price rallying above $52k, signs of a slowdown in the U.S. economy, and the United Kingdom and Japan entering a technical recession, traders are more certain about the direction the price of Bitcoin is going. The 7-day maturity is indicative of this sentiment as it dips to 49.68%, similar to the timeline of Bitcoin gaining 21.2% the past week. As such, the IV for this short-term period is diminished. The 30-day maturity displays a similar trend, while remaining at a higher IV, showing that the current momentum is encouraging, but demands a balanced perspective.

The Shadow Term-Structure chart for BTC shows a contango setup, with minimal changes across all tenors.

The 25-delta skew shows a downtrend across the 7-day and 30-day skews, indicating that sentiment for near-term price action is positive, but may be waning. The recent bullish surge in BTC's price is likely also contributing to these fluctuations in skew, with an inclination towards bullishness in the short-term, and uncertainty due to macroeconomic conditions in the medium-term.

Lastly, @Paradigm highlighted that during the Asia/Europe Session Hours, the skew at the front of the curve reduces steepness in favor of calls but has steepened at the back end starting from June onwards in both BTC and ETH. Key BTC trades are the 400x 29-Mar-24 52k straddle bought and 300x 28-June-24 80k call sold. Noteworthy ETH strategies included 3000x 23-Feb-24 3000 call bought, and a 2500x (Inverse) 29-Mar-24 3200 / 26-April-24 4000 call calendar bought.

Crypto Technical Analysis

On the Bitcoin 4-hour chart, the price is consolidating around the $51.9K level after a brief surge above the resistance range, topping near $53K. The price action suggests a retracement from that peak. Should this resistance be decisively broken, the next significant resistance could likely be established at the recent high of around $53K, marking a potential increase from the current levels. Conversely, the support is firmly placed at around $45K, which is approximately 9.08% below the current price. The RSI is currently hovering near 68.99, which is below the overbought threshold and on a slight downtrend, reflecting a cooling off of buying momentum after the recent price increase. This technical posture may signal a consolidation phase or a possible setup for further directional movement.

Moving on to ETH, the price is currently adhering to an ascending trendline, indicating a short-term uptrend. As it stands, ETH is trading at approximately $2.83K, just below the psychological resistance level of $3K. The ascending trendline has supported the price action, creating higher lows as it progresses. Should ETH break below this trendline, there might be a retest of the next significant support level near the $2.45K mark, representing approximately a 13.7% decline from the current price. On the flip side, resistance can be anticipated near the $3K threshold. The Relative Strength Index (RSI) is hovering around 72.95, which suggests that the market is nearing overbought conditions. This could imply a potential pullback or consolidation in the near term, especially if the RSI continues to rise and crosses into overbought territory. Monitoring the RSI for signs of divergence that could precede a change in momentum is crucial. However, as long as the price maintains its trajectory above the ascending trendline, the immediate bullish sentiment remains intact.

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