🌳August's Unexpected U.S. Wholesale Inflation and Retail Sales; 3AC Founders Hit with 9-Year Ban from Financial Activities in Singapore

15 Sep 2023, Friday

2:17 AM

🌳August's Unexpected U.S. Wholesale Inflation and Retail Sales; 3AC Founders Hit with 9-Year Ban from Financial Activities in Singapore

BTC

ETH

S&P Futures 500

$26,498.50

$1,625.75

$4,510.50

(+0.10%)

 (-0.54%)

(+0.71%)

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

GM Treehouser 🌳

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August 2023 Market Recap

Our Daily View

What We Are Covering Today

  • U.S. PPI rises unexpectedly; ECB's rate hike indicates inflation versus growth challenge (more in Macro & TradFi)
  • Three Arrows Capital founders hit with a 9-year ban from financial activities in Singapore; Circle and Grab partner up to integrate Web3 services into Grab app (more in DeFi & CeFi)
  • Realized Profit/Loss Ratio and Spent Output Profit Ratio both dip below 1 in an ongoing downtrend (more in On-Chain)
  • Term structure reveals contango; BTC skews indicate hedging and bullish trader sentiment (more in Crypto Derivatives)
  • BTC and ETH breaks above descending trendline as it attempts to find support above it (Crypto Technical Analysis)

Macro & TradFi

In August, the U.S. witnessed a higher-than-anticipated rise in wholesale inflation, with the producer price index (PPI) escalating 0.7%, surpassing the expected 0.4% and marking the largest monthly surge since June 2022. While core PPI, excluding volatile items like food and energy, aligned with projections at 0.2%, energy prices drove much of the increase, particularly gasoline surging by 20%. Concurrently, retail sales for the month outpaced expectations, growing by 0.6% against a predicted 0.1%, suggesting that consumer spending remains resilient despite inflationary pressures. Importantly, these inflationary trends, alongside other economic indicators, play a critical role in guiding the Federal Reserve's monetary policy decisions, with market data currently signaling a 42% likelihood of an interest rate hike in November.

Elsewhere, the European Central Bank (ECB) has increased its deposit rate by 25 basis points to a record 4%, marking its 10th consecutive rise aimed at tempering consumer prices. However, the euro dipped to a three-month low against the dollar following signals that the ECB's rate hike cycle might be nearing its conclusion. This decision, juxtaposed against a backdrop of reduced growth projections for the eurozone, indicates central banks' broader approach to mitigating inflation while being cautious of stalling economic momentum. The key takeaway is that while the ECB is actively addressing inflation, there are concerns over potential economic stagnation in the eurozone, emphasizing the delicate balance central banks must maintain between inflation control and growth promotion.

On Thursday, U.S. equity indices registered gains across the board: DJIA surged by 0.96%, the S&P 500 by 0.84%, and NASDAQ by 0.81%. Concurrently, the euro touched a six-month trough after the European Central Bank escalated interest rates to an all-time high, suggesting a potential cessation in monetary tightening. In the U.S., August retail sales outpaced forecasts, predominantly propelled by rising petrol prices, echoing the inflationary tendencies highlighted in the previous day's data.

DeFi & CeFi

  • Three Arrows Capital founders hit with 9-year prohibition orders
  • Circle partners Grab to integrate Web3 services in Singapore
  • Binance.US Head of Legal and Chief Risk Officer depart
  • Remitano exchange hacked for $2.7M; $1.4M frozen by Tether
  • Polygon releases 3 proposals on 2.0 upgrade
  • Visa highlights Solana’s technical advantage for payment business

The Monetary Authority of Singapore (MAS) has imposed 9-year prohibition orders on Three Arrows Capital founders Zhu Su and Kyle Livingston Davies. They are barred from engaging in regulated financial activities and from managing, directing, or holding substantial shares in capital market services firms. This action follows Three Arrows Capital's previous reprimand in June 2022 for misleading the public and violating the Securities and Futures Act 2001 (SFA) and the Securities and Futures Regulation (SFR). These penalties stemmed from the company's bankruptcy, which occurred due to the collapse of TerraUSD and Luna that year. According to a MAS press release, Three Arrows Capital was found at fault for failing to notify MAS about their new fund manager, falsely claiming he was not involved in regulated activities, and lacking an appropriate risk management system. Allegedly, Three Arrows owes up to $4.8B, including debts to creditors and liquidators.

Also in Singapore, Circle has announced a strategic partnership with Grab to integrate Web3 services into its mobile application. Singaporean users now have the option to create a blockchain-enabled "Grab Web3 Wallet," allowing them to earn rewards, collectibles, and utilize NFT vouchers, including the SG Pitstop Pack for the upcoming F1 Singapore Grand Prix. This collaboration between Circle and Grab in Singapore is a pivotal component of Circle's broader expansion initiatives within the country. In June 2023, Circle achieved a Major Payment Institution license from the Monetary Authority of Singapore, marking a significant milestone in its regulatory compliance efforts and its growing presence in Singapore. Circle officially established its office in Singapore in May, underlining its commitment to the region, and is actively advancing its involvement in Web3 innovations.

On-Chain

For on-chain, the Realized Profit/Loss Ratio recently dipped below 1.0. This comes after it had been above 1.0 for most of the year and has been on a downward trend since mid-July, coinciding with a decline in spot markets. The Realized Profit/Loss Ratio is a fundamental metric for identifying potential shifts in market behavior. In prolonged uptrends, this ratio consistently remains above 1.0, indicating a decrease in sellers realizing losses and strong demand that can counteract those seeking to capitalize on profits. Presently, this signals a market in a state of uncertainty, lacking a clear direction.

Similarly, the Spent Output Profit Ratio (SOPR) has recently crossed below 1.0, which indicates a shift away from the previous pattern of modest profit-taking that had been prevalent throughout the year. Although spot markets have yet to display a significant downward trajectory, the trend has already shifted and is currently in a phase where the majority of transactions are in losses. If the SOPR remains below 1.0 for an extended period, it becomes increasingly difficult for the market to return to a state dominated by profit-taking.

Crypto Derivatives

  • Funding rate is negative for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC rose to 41.67%, while it maintained at 37.95% for ETH.
  • 30-day 25-delta skew (C-P) rose on BTC and ETH to 0.35% and 0.74%, respectively.
  • The futures market witnessed $51.99M worth of liquidations in the last 24 hours, with shorts representing 70.66% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

83.30%

SOL

dYdX

Bybit

11.64%

DOGE

dYdX

Binance

10.98%

BNB

Bybit

Binance

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.

In the options market, BTC's 30-day implied volatility (IV) marginally declined to 36.38 following today's PPI release, indicating that such economic data releases exert minimal influence on IV.

Examining the term structure, it consistently exhibits a contango shape. Near-dated options witnessed a slight dip in IV, predominantly attributed to the revelation that the recent inflation surge was driven by escalating crude oil prices.

In related metrics, BTC's 30-day (call-put) skew remained steady at 0.27%, while the 7-day skew shifted to -1.62%. This trend suggests that traders are proactively hedging risks, displaying an overall bullish sentiment towards BTC.

Lastly, @Paradigm highlighted diverse options trading patterns. Key BTC transactions include a 350x 27-Oct-23 $23K/$20K put spread sale and a bespoke 200x strategy featuring the sales of a 29-Sep-23 $28K call and three 29-Sep-23 $30K calls. On the ETH front, notable trades encompassed a 2,000x 29-Sep-23 $1.9K / 24-Nov-23 $1.9K call calendar purchase and a 2,000x 24-Nov-23 $2.4K call acquisition.

Crypto Technical Analysis

Moving onto technical analysis, on Thursday, BTC experienced a modest increase in price of approximately 2.5%, reaching a monthly high of $26.88K, only to relinquish some of its gains during the U.S. trading session. If BTC rebounds off the descending trendline and proceeds with an upward trajectory, this could signal the initiation of another upward phase, as the bearish structure would have changed. On the contrary, a breach below the descending trendline would necessitate vigilance for the subsequent support level at $25.9K, which also happens to be September's opening monthly value.

In a similar fashion, ETH enjoyed a surge in value on Thursday but encountered resistance at the $1.64K level, coincidentally corresponding to the September opening price. In line with BTC, ETH must establish a foothold above the descending trendline in order to establish a shift in its bearish market structure. Conversely, a downward breach would mean a test of its quarterly lows at $1.54K.

Access institutional-grade commentary on TradFi × Crypto markets

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Treehouse Research 🌳