🌳Bank of England’s First Rate Hike Pause in Nearly Two Years; Tether Moves into AI in $427M Deal with Northern Data

22 Sep 2023, Friday

2:38 AM

🌳Bank of England’s First Rate Hike Pause in Nearly Two Years; Tether Moves into AI in $427M Deal with Northern Data

BTC

ETH

S&P Futures 500

$26,640.00

$1,591.00

$4,371.25

(-1.82%)

 (-2.06%)

(-1.45%)

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

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August 2023 Market Recap

Our Daily View

What We Are Covering Today

  • Bank of England first rate hike pause in nearly two years; Oil prices resumes rally as Russia temporarily bans exports of gasoline and diesel (more in Macro & TradFi)
  • Tether ventures into AI in $427M deal with Northern Data; Mt. Gox extends repayment deadline to 31/Oct/24 (more in DeFi & CeFi)
  • Shifts in Bitcoin ownership suggest market democratization; Wintermute's potential $BLUR liquidation may pressure token prices (more in On-Chain)
  • Implied volatility remains subdued despite market’s plunge; BTC skew flips to near negative (more in Crypto Derivatives)
  • BTC declines towards descending channel's trendline; ETH retraces, challenging previous 1.6K support (Crypto Technical Analysis)

Macro & TradFi

The Bank of England held interest rates steady at 5.25% yesterday, marking a crucial moment after almost two years of rate hikes. Following the announcement, the pound hit a six-month low against the dollar as investors scaled back expectations for further rate hikes. The rate pause may also lead to a potential drop in mortgage rates, in line with cuts made by several lenders earlier in the week. The Bank's Monetary Policy Committee, swayed by unexpectedly positive inflation data the previous day, was split, with five members favoring rate stability and four opposing it. The decisive vote was cast by BoE governor Andrew Bailey. This pause arrives after 14 consecutive rate hikes that commenced in December 2021 as part of the tightening cycle.

Meanwhile, oil prices surged as Russia temporarily banned gasoline and diesel exports, tightening the global fuel market further. European diesel prices jumped nearly 5% to over $1,010 per tonne, while Brent crude rose 1% to $94 per barrel. Russia, a major diesel and crude producer, had already reduced crude exports through OPEC+ agreements, contributing to a 30% price increase since June. This move raises concerns about tightening oil supply amid central banks' efforts to control inflation, potentially pushing crude prices above $100 per barrel for the first time in 13 months.

U.S. equities tumbled on Thursday as the Federal Reserve's hawkish stance weighed on markets. All three major stock indices recorded losses of over 1%, with Amazon.com, Nvidia Corp, Apple Inc, and Alphabet leading the downturn. This led to the S&P 500 and NASDAQ reaching their lowest levels since June. Specifically, the DJIA fell by 1.08%, the S&P 500 decreased by 1.64%, and the NASDAQ dropped by 1.82%. Additionally, the yield on the benchmark 10-year U.S. Treasury bond surged to a 16-year high of 4.504% the day after Fed Chair Jerome Powell cautioned that inflation still had a considerable distance to cover before aligning with the central bank's 2% target.

DeFi & CeFi

  • Tether moves into AI in $427M deal with Northern Data
  • Mt. Gox extends repayment deadline to late 2024
  • Base rolled out Pessimism to enhance security for all OP Stack chains
  • Binance plans to delist stablecoins in Europe
  • Tether resumes lending $USDT to customers
  • Uniswap launches educational platform with DoDAO
  • Crypto gaming company Proof of Play closes $33M seed round led by a16z and Greenoaks

Stablecoin issuer Tether is making a move into artificial intelligence through its subsidiary, Damoon Designated Activity, in partnership with Bitcoin miner and data cloud provider Northern Data Group. Northern Data acquired a majority stake in Damoon in July, and the subsidiary has purchased around $427M worth of Nvidia graphic processing units. These units will be used through Northern Data's cloud service, Taiga Cloud, which plans to offer access to customers starting in late Q4. Tether has been diversifying its investments this year, getting involved in BTC mining and a payment processor in Georgia. The company stated that this AI investment will not impact the backing reserves of its stablecoins, amid a recent and controversial finding of it lending its stablecoin USD Tether (USDT) to customers.

In other news, Mt. Gox trustee Nobuaki Kobayashi has extended the deadline for repaying the exchange's creditors from October 31, 2023, to October 31, 2024, with permission from the Tokyo District Court. He also mentioned that repayments would begin for rehabilitation creditors who have provided the necessary information as early as the end of this year. Currently, the Mt. Gox estate holds around 142K BTC, 143K BCH, and 69B Japanese yen. A major cryptocurrency exchange in its heyday, Mt. Gox collapsed in 2014 following a major hack in 2011, resulting in the loss of 850K BTC and impacting around 24K creditors.

On-Chain

According to @Santiment, the shift in Bitcoin ownership patterns, with smaller holders now controlling a record 41.1% of the circulating supply, offers several insights into the current state of the cryptocurrency market. Firstly, this distribution suggests a democratization of Bitcoin ownership, indicating increased adoption among retail investors. Such widespread distribution can potentially enhance market stability as the concentration risk associated with a few whales is reduced. Conversely, the decline in holdings among larger entities, those possessing between 100 to 100K BTC, to a mere 55.5%—the lowest since May—may hint at institutional profit-taking, diversification strategies, or a reallocation of assets.

In other news, @lookonchain identified that Wintermute's recent transfer of 7.3M $BLUR, valued at $1.3M, to centralized exchanges Kraken and Coinbase could signal an intent to liquidate a portion of their holdings. Their depositing activities over the past 30 days, amounting to 46.6M $BLUR (equivalent to $8.33M), further underscore this possibility. Liquidating such substantial amounts can influence the market, especially if the token's liquidity isn't robust. Typically, large-scale liquidations might exert downward pressure on the token's price, as seen from the price of BLUR since the start of the selling. Market participants should be wary of such significant moves as they can have ripple effects across the trading ecosystem.

Crypto Derivatives

  • Funding rate steadies at positive for both BTC and ETH
  • Deribit Implied Volatility Index (DVOL) for BTC steadies at 42.72% while it retreated on ETH to 36.17%
  • 30-day 25-delta skew (C-P) on both BTC and ETH plunged to 0.16% and -4.50%, respectively
  • The futures market witnessed $64.1M worth of liquidations in the last 24 hours, with longs representing 83.41% of the total

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

23.82%

SOL

dYdX

Binance

14.29%

BTC

dYdX

Binance

14.16%

ETH

dYdX

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, despite a dip in the spot price below $27K, both 7-day and 30-day implied volatilities (IV) on BTC have remained subdued. Nevertheless, a striking contrast emerges in the volatility landscape, with longer-term IV, notably the 180-day period, steadily climbing, surging by nearly 9% since the month's outset.

Meanwhile, the term structure of BTC remains in contango without any significant changes, although the implied volatility (IV) has seen a slight decrease across the curve compared to the previous day.

Elsewhere, the 30-day 25 delta (C-P) skew on BTC took a dive, returning to near-neutral levels after staying significantly positive, hovering above 3% for the past few days. This shift follows a more than 3.5% decline in the spot price from its weekly high. Similarly, the 30-day skew on ETH has become even more negative, indicating a near-term bearish sentiment for both major cryptocurrencies.

Lastly, @Paradigm reported mixed trades despite the market's downward price movement. Notable BTC trades include the purchase of 1,500x 29-Sep-23 $23K / 13-Oct-23 $24K put calendar options and 900x 27-Oct-23 $29K / 24-Nov-23 $32K call calendar options. Regarding ETH, they involve the sale of 8,000x 27-Oct-23 $1.6K / 29-Dec-23 $2K call calendar options and the purchase of 7,500x 29-Sep-23 $1.55K put options.

Crypto Technical Analysis

Moving on to TA, BTC has declined to approximately 26.6K, representing a 3.49% drop from the previous day. It is now gravitating towards the descending channel's lower trendline. A breach below this trendline may pave the way for further downside, with an immediate support level at 25.8K—a potential decrease of 2.30%. Further, 24.8K emerges as a critical support, challenging bearish sentiments. The 4-hour chart presents an RSI of 43.18, positioning the asset within a balanced selling territory.

Transitioning to ETH's trajectory, the digital asset retraced to 1.59K, undercutting the 1.6K support. This previous support is a resistance barrier that bullish proponents must navigate. A continued downturn might see ETH approaching its next significant support at 1.41K, which equates to a potential 7.05% decrement. The current RSI, registering at 32.94, underpins the prevailing bearish momentum.

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