BTC

ETH

S&P Futures 500

$60,931.85

$3,370.35

$5,521.00

(-1.39%)

 (-0.60%)

(-0.32%)

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

GM Treehouser 🌳


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May 2024 Market Recap

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Our Daily View

What We Are Covering Today

  • Yen weakens again, reaching close to its 38-year low; Blackrock partners with GeoWealth to offer private investments (More in Macro & TradFi)
  • U.S. government seizes and transfers Bitcoin; Justin Sun wins defamation case in China (More in DeFi & CeFi)
  • BTC’s MVRV nears levels suggesting major recovery; Post-Dencun, L2s have had record spikes in revert rates (More in On-Chain)
  • BTC’s 7 and 30-day 25 deltas continue to diverge; DVOL drops for both BTC and ETH (More in Crypto Derivatives)
  • BTC shows bearish momentum with descending trendline; ETH holds at key support levels (More in Crypto Technical Analysis)

Macro & TradFi

The Japanese yen nearly reached its 38-year low against the U.S. dollar on Wednesday, touching 160.82 yen per dollar according to FactSet data. This surpassed the previous record set on April 29 and marked the yen's weakest point since 1986. The sharp depreciation has, again, raised speculation about potential intervention by Japanese authorities to stabilize the currency. Japan's Ministry of Finance confirmed previous intervention in May, disclosing a substantial expenditure of 9.7885 trillion yen ($62.25 billion) from late April to late May to support the yen. Analysts, including Carol Kong from the Commonwealth Bank of Australia, suggest that upcoming U.S. economic data releases, such as the May personal consumption expenditures report, could trigger further yen weakness and potentially prompt Japanese intervention to mitigate currency volatility. Masato Kanda, Japan's top currency diplomat, expressed serious concern about the yen's rapid decline, attributing it largely to speculative activity and indicating readiness to take action if necessary. All eyes will be on the US Core PCE Price Index, the Fed's preferred inflation gauge, due this Friday at 20:30 SGT. 

Elsewhere, BlackRock Inc. is expanding its reach in private-market investing by partnering with GeoWealth to integrate private equity and debt funds into model portfolios for wealthy U.S. retail clients. This strategic move aims to meet growing investor demand for diversified and higher-yield assets, enhancing BlackRock's position as a comprehensive investment solutions provider. With the U.S. wealth market identified as a significant growth opportunity, BlackRock anticipates its model portfolio business to double in assets to approximately $10 trillion over the next five years, building on its existing $125 billion in managed model portfolios for U.S. clients.

On Wednesday, U.S. stocks showed a mixed performance with the Nasdaq Composite gaining 0.5%, the S&P 500 rising 0.2%, and the Dow Jones Industrial Average ticking up less than 0.1%. Amazon led the gains by crossing the $2 trillion market cap threshold for the first time, buoyed by news of its new discount shopping section to compete with Chinese rivals. Nvidia shares rebounded later in the day after CEO Jensen Huang highlighted the company's AI prospects at its shareholder meeting. FedEx surged 15.5% on strong quarterly results and strategic reviews, while Rivian soared following a $5 billion investment by Volkswagen. Conversely, General Mills disappointed with weak sales, dragging its shares down, along with AI-related stocks like Constellation Energy and Vistra. Moderna faced a decline after data suggested declining efficacy of its RSV vaccine over time l Investors will be looking out for the US Core PCE Price Index, the Fed's preferred inflation gauge, due this Friday at 20:30 SGT.

DeFi & CeFi

  • U.S. government sends 3,940 Bitcoin to Coinbase exchange
  • Justin Sun wins landmark case in the People’s Court of China
  • Marathon Digital mines $16M in Kaspa to diversify from Bitcoin
  • World’s largest bank ICBC praises the evolution of Bitcoin, Ethereum as innovative financial assets
  • Chiliz facing lawsuit filed by former employee over $10 million unpaid tokens, wrongful termination
  • Bitcoin Virtual Machine team rolls out ZK rollups service to scale Bitcoin

On Wednesday, the U.S. government transferred 3,940 Bitcoin, seized from convicted drug trafficker Banmeet Singh, to a Coinbase Prime wallet, according to Arkham Intelligence. Singh, who was extradited from London in 2023, ran a narcotics smuggling network from 2012 to 2017 and was forced to surrender over 8,100 Bitcoin, valued at approximately $150 million, marking the largest cryptocurrency seizure by the DEA. Following his April 2024 sentencing, Singh was released after receiving credit for time served and plans to return to India. This transaction has heightened market fears of government Bitcoin sell-offs, especially amid reports of the German government's Bitcoin sales and the Mt. Gox bankruptcy estate's upcoming liquidation of 140,000 Bitcoin. Despite these concerns, exchange balances are at six-year lows, providing some stability against potential market impacts.

In other news, TRON founder Justin Sun won a landmark defamation case in the People’s Court of China against the Chongqing Business Media Group. The court ruled that the Media published unverified and defamatory information about Sun, compelling them to issue a public apology and retract all false content. This decision followed a thorough two-year legal process, underscoring the necessity for media to verify information before publication. Sun's victory not only restores his reputation but also sets a precedent for protecting individuals against false media reports, emphasizing the legal obligations of news agencies to uphold truth and accuracy.

On-Chain

In today’s on-chain analysis from CryptoQuant, we observe a significant shift in Bitcoin's MVRV ratio. Previously, around March 2024, the MVRV soared to 2.8, indicating an overheating in Bitcoin's market relative to its realized value, suggesting a peak in recovery. Currently, the MVRV has cooled down to approximately 1.99, less than twice the realized value. This decrease brings the MVRV closer to the middle point of the Bollinger Bands and near the 4-year moving average, both important indicators in Bitcoin's four-year cycle, positioned at 1.89 and 1.82, respectively. Historically, such adjustments in the MVRV ratio have often preceded major market recoveries.

Another analysis regarding L2 gas fees highlights significant spikes in revert rates and the unique dynamics of Miner Extractable Value (MEV) on these platforms. Post-Dencun upgrade, Layer 2 solutions like Base saw revert rates increase dramatically, occasionally peaking at 30%, with Arbitrum and Optimism experiencing similar trends. This surge primarily impacts MEV bots. Moreover, L2's unique architecture—featuring a single sequencer—limits typical MEV strategies, shifting the focus towards arbitrage opportunities rather than transaction ordering.

Derivatives

  • Funding rates remained positive for BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH declined slightly to 46.95% and 59.75% respectively.
  • The 30-day 25-delta skew (C-P) for BTC dropped to 0.13 while ETH dropped to 3.82.
  • The futures market witnessed $93.71M, with longs representing 53.8%.

Net Annualized APR

Perp (USDT pair)

Long on

Short On

19.05%

BTC

Bybit

dYdX

18.14%

BTC

Bybit

Binance

12.39%

BTC

Bybit

OKX

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.

Today's BTC ATM implied volatility (IV) chart shows a continued decline following the pronounced spike in the 7-day IV a few days ago, pointing to a quick stabilization of volatility expectations as the market price in the Mt Gox announcement. Meanwhile, the longer-term maturities, as represented by the 30-day IV and beyond, exhibit less volatility, maintaining a more gradual and stable curve, reflecting a steadier medium to long-term market outlook.

Today's BTC Shadow Term Structure exhibits a contango shape and no significant deviations from the previous day.

BTC's 25-delta skews display a notable divergence in the 7-day and 30-day skews. The 7-day skew demonstrates a significant downturn, suggesting a sharp change in bearish sentiment, contrasting with the relatively stable or slightly bearish trend observed in the 30-day skew. This divergence points to the market's current reactionary sentiment to immediate risks or news events, while their medium-term outlook remains more tempered. Lastly, @Paradigm’s option flows from yesterday highlighted significant options strategies with an emphasis on bullish outlooks and custom positioning. In the BTC market, trades included the purchase of 200x 28-Jun-24 $55K/$60K Call Spreads, the sale of 125x 5-Jul-24 $65K/$68K Call Spreads, and the acquisition of 100x custom strategies involving July 5, 2024, calls at $63K and $65K. In the ETH space, activities focused on bearish spreads with the sale of 3,400x 5-Jul-24 $3.8K/$4.1K Call Spreads and 1,000x 5-Jul-24 $3.4K/$3.8K Call Spreads, indicating a cautious stance towards near-term price movements.

Crypto Technical Analysis

Moving on to technical analysis, BTC’s price is hovering around $61K, currently showing a descending trendline that has persisted since mid-June. This trendline suggests a bearish momentum, with price action consistently hitting lower highs. Should this trendline be breached, the next significant resistance level is at $66K, indicating a potential rise of approximately 8.2% from the current price levels. Conversely, the immediate support level is at $60K. The RSI is at 39, indicating a bearish trend and suggesting that BTC is nearing oversold conditions.

ETH is currently hovering around $3.38K. The price action indicates a series of lower highs and lower lows but without a dominant descending trendline. Should the price break above the immediate resistance at 3.7K, it could signify a potential rise of approximately 9.86% from the current levels. Conversely, the immediate support level lies at $3.3K, indicating a downside of 1.93%. The RSI stands at 44, indicating a moderately bearish trend, though not yet in oversold territory.

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