S&P Futures 500
Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)
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Our Daily View
What We Are Covering Today
- Credit crunch fears arise as lenders tighten standards and investors accumulate record cash reserves in money market funds (more in Macro & TradFi)
- Bittrex files for bankruptcy; MakerDAO launches its new lending protocol called Spark (more in DeFi & CeFi)
- BTC Taproot adoption reaches a staggering 75%; Tether in circulation edging closer to all-time highs (more in On-Chain)
- Volatility remains suppressed across Crypto and TradFi (more in Crypto Derivatives)
- BTC and ETH trade sideways, offering long entry points near key support levels (more in Crypto Technical Analysis)
Macro & TradFi
The Federal Reserve expressed concerns that the ongoing banking chaos might ignite a widespread credit crunch, posing risks to the slowing US economy. Concurrently, lenders informed the central bank of their intentions to tighten lending standards due to apprehensions about loan losses and deposit withdrawals. The Federal Stability Report and the Senior Loan Officer Opinion Survey, released by the Fed on Monday, emphasized the growing concerns that the March collapses of Silicon Valley Bank and Signature Bank, along with the recent failure of First Republic, could result in lending cutbacks and plummeting asset prices.
Meanwhile, investors persist in accumulating cash at record levels, with no signs of the trend reversing, due to high interest rates and weakened investor sentiment toward the stock market. Money market fund assets have skyrocketed to a record $5.3 trillion, with inflows increasing by $588 billion over the past ten weeks, according to a recent note from Bank of America. This increase in cash held by investors ensued from a flight-to-safety response to the regional banking crisis, in which three banks with combined assets of nearly $550 billion collapsed within a two-month span. The recent fund flow surge into money market funds surpassed the $500 billion inflows observed after the Lehman Brothers collapse in 2008 and amounted to roughly half of the $1.2 trillion influx into money market funds during the onset of the COVID-19 pandemic.
The S&P 500 ended marginally higher by 0.04%, while the Nasdaq Composite advanced by 0.2%. US regional bank stocks, initially rallying in early trade, failed to maintain their gains. PacWest shares initially surged nearly 30% after announcing a dividend cut late last week but ultimately closed 3.6% higher. Western Alliance added 0.6%, having traded as much as 11% higher earlier in the session. The KBW Regional Banking index, after initially advancing by 1.1%, ultimately slid 2.8%. These fluctuations followed a rebound at the end of last week for US banking stocks, which had been rattled by concerns over the collapse of lender First Republic.
DeFi & CeFi
- MakerDAO launches a new lending protocol called the Spark Protocol
- Webb Protocol closes a $7M seed round led by Polychain Capital and Lemniscap
- 154M $OP to unlock on May 31st
- Blockchain gaming studio Aether Game closes $4.5M funding lab involving Mystenlabs
- Bittrex files for Chapter 11 bankruptcy
- Coinbase adds Sui ($SUI) to its listing roadmap
Bittrex Inc., formerly one of the largest cryptocurrency exchanges in the US, has filed for Chapter 11 bankruptcy protection, less than a month after being sued by the Securities and Exchange Commission (SEC) for allegedly operating an unregistered exchange. This filing came unsurprised as Bittrex has previously announced the intention to leave the US due to its unstable regulatory environment. The company stated assets and liabilities each worth between $500 million and $1 billion, with over 100,000 creditors. Bittrex Global, however, will continue operations as usual to serve clients that are outside the US.
MakerDAO has launched Spark Protocol, a DeFi product deployed on Ethereum that allows for borrowing and lending on$ETH, stETH, $DAI, and sDAI. The first version of Spark Protocol is called Spark Lend, which is a lending marketplace designed specifically for lending and borrowing crypto with a focus on $DAI. The Spark Protocol is connected with Maker’s D3M, a direct wholesale credit line in $DAI that injects and automatically balances fresh $DAI liquidity into Spark Lend, enabling users to access the best rates in the market. Users can borrow $DAI at an initial rate of 1.11% due to the direct injection of liquidity from Maker which does not increase with utilization, regardless of the size of the borrowing.
For on-chain, recent data unveils that Taproot, an upgrade implemented in 2021 to amplify transfer efficiency and speed, was used in over 75% of on-chain Bitcoin transactions on May 8, marking a remarkable surge from the mere 1.5% at the start of the year. This reverberating adoption of Taproot has contributed to the rise in network activity, propelling transaction counts that eclipses numbers seen in 2022. In addition, BTC had its first-ever block (788,695) since 2017 in which transaction fees exceeded the block subsidy, due to highly competitive block space demand (@IIICapital). Amidst the fervor surrounding BRC-20 and the emergence of Ordinals, miners' revenue from fees has skyrocketed, reaching levels not seen since the bullish markets of 2021 and 2017.
Elsewhere, according to the data from @glassnode, the circulating supply of Tether is edging closer to its historical peaks, reminiscent of the levels observed last May. On the contrary, the circulating supply of Circle has been steadily declining, with a noticeable acceleration since the advent of the regional banking turmoil in March, which temporarily caused the stablecoin to deviate from its peg. In an environment where stablecoin supply is decreasing as investors swap their stable holdings for risky crypto assets or exit entirely from the space, Tether is benefiting from the macroeconomic uncertainties and gaining more and more market share to reinforce its position as the market leader.
- BTC and ETH funding rates remain positive
- 30-day ATM IV remains relatively unchanged with BTC and ETH at 48.35% and 49.12%
- 30-day 25-delta BTC call skew fell to 0.03% while ETH put skew tightens to -2.18%
Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:
Net Annualized APR
Perp (USDT pair)
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 $228.47M in liquidation over the past 24 hours with the majority coming from longs at $197.487M.
Currently, BTC 30-day realized volatility is trading below the 25th percentile compared to the past 3 years. The 30-day IVs for BTC and ETH are cheap as it trades near all-time lows. This decline in volatility is also seen in the traditional market as VIX reached 17%, the lowest since December 2021. With BTC call skew close to flipping to put premium at 0.03% and ETH put skew tightening to -2.18%, traders might be positioning for possible drawdowns.
On the flow side, traders seemed to still be relatively bullish on the mid to near-term with the end-of-month May and June having significantly more call volume than puts. However, looking at the near-term with the end-of-week 12 May contract, it could be seen that there is equal volume between the calls and puts which might imply uncertainty in the near future.
Some noteworthy trades include 600 BTC contracts of 30 Jun 50K outright calls being bought and a play towards ETH downside with 15K contracts of 30 Jun 1.9K ATM put (@tradeparadigm).
Crypto Technical Analysis
For BTC, the four-hour chart analysis reveals a significant accumulation/distribution area between $27.1K and $29.9K, indicating strong support and resistance levels. The recent breakdown of the symmetrical triangle pattern suggests a potential bearish move, with BTC now trading close to the support level at $27.1K. However, if BTC can maintain this support level and consolidate within the horizontal structure, a reversal opportunity may arise with an upside potential of 9.26% to the $29.9K level. It is worth noting that a breach of $26.7K would break the support structure, and further bearish movement may occur, with the $25K level being a crucial area of support on the higher time frame on the BTC daily chart.
As for ETH, the four-hour chart highlights the ongoing uptrend since the March 2023 bottom at $1.37K. ETH is currently trading within a sideways range between $1.80K to $1.95K, with a potential invalidation of the uptrend if the price falls below the $1.8K support level, potentially indicating a reversal pattern. If this occurs, the next support level at $1.73K becomes crucial, being a key area of support on the higher time frame on the ETH daily chart.
Access institutional-grade commentary on TradFi × Crypto markets
By Treehouse Research
Treehouse Research 🌳