🌳Bank of England Anticipates Rate Hike Amid Economic Concerns; US Committee Scrutinizes Central Bank Digital Currency Proposals

18 Sep 2023, Monday

3:07 AM

🌳Bank of England Anticipates Rate Hike Amid Economic Concerns; US Committee Scrutinizes Central Bank Digital Currency Proposals

BTC

ETH

S&P Futures 500

$26,474.00

$1,613.50

$4,505.75

(-0.09%)

 (-0.72%)

(-1.17%)

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

  • The Bank of England set to hike rates later this week; Bank of Montreal shuts down retail auto operations (more in Macro & TradFi)
  • US lawmakers advance legislation blocking the digital dollar; FTX reopens claims portal with improved security following cyber breach (more in DeFi & CeFi)
  • Highstreet withdraw 3M $HIGH to Binance; $TRB risen 360% in 30 days, underscored by significant whale movements (more in On-Chain)
  • Term structure remains in contango; BTC skews indicate careful hedging (more in Crypto Derivatives)
  • BTC approaches channel's peak, signaling bullish potential; ETH challenges support after pattern breach (Crypto Technical Analysis)

Macro & TradFi

The Bank of England is poised to increase interest rates this week, possibly concluding one of the most significant tightening phases in the past century as economic slowdown concerns grip policymakers. Nearly all of the 65 economists surveyed by Reuters recently anticipate the BoE raising the Bank Rate to 5.5% on Thursday, up from 5.25%, marking its highest level since 2007. The data from the past week has underscored Governor Andrew Bailey's recent statement that the Bank of England is rapidly approaching the conclusion of its tightening cycle. Economic output in July declined more than expected, even after accounting for one-off factors like strikes. Additionally, the unemployment rate exceeded the Bank of England's third-quarter projections. The Bank of England's anticipated rate hike reflects its proactive approach to addressing mounting economic challenges and inflationary pressures.

Elsewhere, the Bank of Montreal (BMO) is discontinuing its retail auto finance operations in Canada and the U.S., leading to unspecified job cuts. This shift comes as BMO's bad debt provisions in retail trade reached C$81M for the quarter ending July 31, reflecting a 34% increase in gross loans in the retail auto sector, totaling C$17.36B. This segment accounted for 2.7% of BMO's overall loan portfolio, as reported in their August financial statement. The rise in interest rates in the Canadian economy has compelled banks to bolster reserves in anticipation of increased non-performing loans. In the previous month, BMO reported a substantial provision for credit losses, rising to C$492M from C$136M the previous year.

Last Friday, U.S. equities ended lower over concerns about weakened consumer demand impacting chipmakers. The DJIA index fell by 0.83%, the S&P 500 by 1.22%, and the NASDAQ by 1.56%. Meanwhile, leading chip manufacturers, such as Nvidia and Advanced Micro Devices, experienced losses of 3.7% and 4.8%, respectively, causing a nearly 3% drop in the Philadelphia Semiconductor Index. On the other hand, oil prices reached a 10-month high on Friday, driven by supply constraints resulting from Saudi Arabian production cuts and optimism regarding Chinese demand for crude. Brent crude rose by 0.3% to settle at $93.93 per barrel, while WTI increased by 61 cents, closing at $90.77 per barrel.

DeFi & CeFi

  • Ethereum’s Holesky testnet fails to launch
  • FTX reopens claims portal with improved security following cyber breach
  • US lawmakers advance legislation blocking the digital dollar
  • First DVT-based Ethereum liquid staking protocol ClayStack goes live
  • Lido partners with Axelar and Neutron to bring $wstETH into Cosmos Ecosystem
  • Yearn launches index token yETH
  • EIP-7514 to be included in Ethereum Cancun upgrade

The United States House Financial Services Committee is taking steps to impede the issuance of a central bank digital currency (CBDC). Chairman Patrick McHenry announced that on Sep 20, the Committee will review two bills related to the digital dollar. One of these bills, the Digital Dollar Pilot Prevention Act, seeks to prevent the Federal Reserve from conducting CBDC pilot programs without Congress's approval. The second bill proposes an amendment to the Federal Reserve Act, which restricts Fed banks from offering specific services to individuals and prohibits the use of CBDCs for monetary policy purposes. The debate over a digital dollar continues to be contentious, with concerns about financial privacy raised by figures like presidential candidates Robert F. Kennedy Jr. and Ron DeSantis, while proponents argue it could bolster the dollar's global standing and advance cryptocurrency adoption.

In other news, bankrupt cryptocurrency exchange FTX has reactivated its customer claims portal with enhanced security measures after a cyberattack temporarily shut it down. Customers who held assets on the exchange prior to its insolvency can now submit their claims. The breach exposed non-sensitive customer data, but account passwords and funds remain unaffected. Approximately 36,075 customer claims worth $16 billion have been filed against FTX and FTX US, with 10% approved. Another 2,300 non-customer claims totaling $65 billion have also been submitted. The United States Bankruptcy Court for the District of Delaware has also approved weekly batch sales of FTX's digital assets through an investment adviser.

On-Chain

According to @lookonchain, Highstreet Treasury & Reserve Wallet has exhibited significant activity on Binance. Just recently, they transferred a substantial 3M $HIGH, equivalent to $3.93M, to Binance. More striking is the cumulative deposit of 6.27M $HIGH (valued at approximately $8.15M) over the past month. Such a concentrated movement of funds suggests potential strategic movements that market participants could monitor closely for possible copy trading.

Moreover, over the past month, $TRB has witnessed an impressive surge of 360%. Notably, since August 30, a dominant player has been aggressively accumulating, now holding 540,777 $TRB, representing a staggering 22% of the total supply, valued at approximately $21.24M. This movement was coupled with significant withdrawals by other major holders; on September 14, four whales accounted for a transfer out of Binance totaling 7% of the circulating supply. These pronounced activities suggest a strong influence by significant individual holdings, underscoring the need for investors to remain vigilant.

Crypto Derivatives

  • Funding rate is positive for BTC but has flipped to negative for ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH decreased to 40.00% and 35.97%, respectively.
  • 30-day 25-delta skew (C-P) fell on BTC and ETH to -0.05% and -1.5%, respectively.
  • The futures market witnessed $40.24M worth of liquidations in the last 24 hours, with longs representing 83.37% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

41.22%

SOL

dYdX

Binance

11.96%

BNB

Bybit

Binance

6.75%

XRP

OKX

Bybit

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) maintained a steady 35.04, in anticipation of interest rate changes by the Fed, Bank of England, and the Bank of Japan.

Examining the term structure, it continues to exhibit a contango shape with no significant deviation in shape from last Friday.

In related metrics, BTC's 30-day (call-put) skew dropped to -0.05%, while the 7-day skew shifted to -2.35%. This trend suggests that traders are proactively hedging risks.

Lastly, @Paradigm recorded diverse options trades during the Asia/Europe session on 15-Sep-23. Leading BTC movements include a 243x 22-Sep-23 $24K put sale, a 243x 22-Sep-23 $28.5K call sale, and a distinctive 200x 22-Sep-23 $25.5K/$27.5K strangle sale. Meanwhile, ETH spotlighted trades involve a substantial 2,500x 22-Sep-23 1,635.8 Call sale and a customized 1,000x strategy incorporating a 27-Oct-23 $1.4K put, a 27-Oct-23 $1.8K call, and a 27-Oct-23 $2.1K call purchase.

Crypto Technical Analysis

Moving onto BTC's daily chart, the asset's price notably gravitates around the 26.4K mark, seemingly inching closer to the channel's upper limit set at 27.2K. Should this channel threshold be surpassed, it could potentially usher in bullish momentum, propelling the price towards the subsequent resistance level at 28K—a potential ascent of 5.59% from its present valuation. However, caution is advised, given the recent diminutive retractions observed in candle patterns over the preceding three days, hinting at a possible deceleration in bullish vigor. The foundational support for BTC presently stands at 25.8K. Furthermore, the Relative Strength Index (RSI) is currently gauged at 51.13, suggesting that BTC remains within a balanced selling domain. It is also evident that BTC has actualized the Death Cross (50SMA moving below the 200SMA), which showcases a bearish outlook.

Upon analysis of ETH's daily chart, the asset is presently positioned around the 1.61K mark, having notably breached its descending triangle pattern for a second instance. Currently, ETH is challenging its support threshold at 1.6K. If this pivotal support gives way, we may witness ETH gravitating towards its subsequent support stationed at 1.46K, which would represent an 8.97% retreat from its existing valuation. On the contrary, the immediate resistance to monitor lies at 1.95K. Additionally, the Relative Strength Index (RSI) registers at 42.62, indicating a prevailing downtrend in momentum.

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Treehouse Research 🌳