🌳 Bipartisan $1.66 Trillion Budget Deal Reached; U.S. Spot Bitcoin ETFs Anticipate Imminent SEC Approval.

08 Jan 2024, Monday

3:00 AM

🌳 Bipartisan $1.66 Trillion Budget Deal Reached; U.S. Spot Bitcoin ETFs Anticipate Imminent SEC Approval.

BTC

ETH

S&P Futures 500

$43,684.99

$2,196.97

$4,743.00

(-1.34%)

 (-3.27%)

(+0.14%)

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

  • Congress reaches $1.66 trillion budget deal; robust jobs data sway Fed policy (More in Macro & TradFi)
  • SEC nears its ETF decisions with the amended filings; More than $1M worth of BTC sent to Satoshi’s Genesis Wallet (More in DeFi & CeFi)
  • Whale accumulates $LINK from Binance; prominent investor heavily invests in ETH's potential (More in On-Chain)
  • BTC's 7-day IV spikes; market braces for ETF decision, reflects in term structure (More in Crypto Derivatives)
  • BTC moves sideways while ETH sees slightly bearish patterns on the 1-hour chart (More in Crypto Technical Analysis)

Macro & TradFi

In a significant development, Republican and Democratic leaders in Congress have reached a bipartisan agreement on a $1.66 trillion federal spending level for 2024, aimed at averting a looming government shutdown. Announced by Chuck Schumer and Mike Johnson, this deal arrives just under two weeks before a critical budget deadline, signaling a potential resolution to avert a fiscal crisis. However, the agreement faces skepticism from Republican hardliners, who criticize its concessions and seek deeper budget cuts. This deal, while securing some reductions in federal spending, including a $10 billion cut to the IRS and a retraction of $6.1 billion in unspent COVID-19 relief funds, may not fully align with the fiscal expectations of some conservative factions. Despite the potential internal conflict, this development represents a crucial step towards maintaining government functionality and funding key priorities for American citizens.

Elsewhere, the latest U.S. jobs data, indicating a stronger-than-anticipated market, has impacted the expectations for the Federal Reserve's interest rate policies. In December, the economy added 216K jobs, surpassing the revised figure of 173K in November, while the unemployment rate remained stable at 3.7%. This robust job growth initially led to a market sell-off, contributing to one of the worst beginnings of the year for global stocks and bonds in a decade. However, following the release of ISM data showing a slowdown in the services sector, markets rebounded with renewed hope that the Fed might consider reducing interest rates sooner than expected. This situation unfolds amid a heated debate among economists and policymakers regarding the timing and pace of the Fed's interest rate reductions. As per recent meeting minutes, most Fed officials favor maintaining high borrowing costs for an extended period.

On Friday, U.S. blue-chip stocks experienced a choppy market. This shift reflects investors' conflicting sentiments, oscillating between anticipation of interest rate cuts and concerns that a robust economy might postpone such monetary adjustments. The Dow Jones Industrial Average saw a marginal increase of 0.07%, in stark contrast to the Nasdaq Composite and S&P 500, which experienced gains of 0.09% and 0.18%, respectively. As indicated by federal-funds futures contracts, the market’s expectations for an interest rate cut in March have decreased from a 90% probability in December to around two-thirds currently. Apple slipped by 0.40% after its key supplier Foxconn warned of a drop in Q1 revenue. Peloton surged by 9.62% on news of its partnership with TikTok. Attention is now pivoting towards the upcoming release of the U.S. Core Inflation Rate, scheduled for Thursday at 21:30 SGT.

DeFi & CeFi

  • Arthur Hayes foresees 30% BTC crash following the potential ETF approval
  • SEC moves closer to ETF approval with 19B-4 amendment filings
  • $1M in BTC was sent to Satoshi’s Genesis wallet
  • Solana’s Mango Markets faces regulatory inquiry
  • Zengo Wallet puts out 10 BTC worth of white hat bounty
  • Grayscale drops MATIC, adds AVAX, XRP in funds rebalance
  • Coinbase acquires Cyprus-based entity to expand EU derivatives offerings

U.S. spot bitcoin exchange-traded funds (ETFs) could be nearing approval as the exchanges set to list them have filed amended documents on Saturday, indicating anticipation of U.S. Securities and Exchange Commission (SEC) approval in the coming days. BlackRock, Grayscale, Fidelity, and other issuers have submitted amended 19b-4 filings, building on last month's amended S-1 filings and addressing feedback from the SEC. Currently, multiple issuers may be approved simultaneously, with insiders from two different issuers expressing optimism and expecting approvals next week. The SEC's final deadline for action on at least one application is Jan. 10, and Bloomberg reports that commissioners are expected to vote on exchange-rule filings next week.

Meanwhile, an anonymous Bitcoin user sent 26.9 BTC (worth $1.17 million) to the Genesis wallet, the first wallet ever created on the Bitcoin network by the pseudonymous Satoshi Nakamoto, the founder of Bitcoin, who has been absent since 2010.  The wallet was initially funded in a complex transaction involving multiple wallets, with most funds coming from a Binance-associated wallet. The transaction fee was unusually high at $100. While theoretically, Nakamoto could move or return the funds, it's considered unlikely given the historical inactivity of wallets associated with Nakamoto.

On-Chain

Moving on to on-chain, notable cryptocurrency transactions were recently identified by Lookonchain. According to their analysis, a large entity, possibly a single whale or institution, has accumulated a substantial amount of Chainlink (LINK). This entity used 12 new wallets, believed to be connected to the same owner, to withdraw 1,287,492 $LINK, valued at approximately $17.5 million, from Binance. This movement of funds occurred over three days. Such significant transactions often attract attention in the crypto community, as they can indicate strategic investment moves by major players and potentially impact the market dynamics. 

In other news, a prominent whale, identified by the wallet address 0x931, has recently made a substantial investment in ETH. This whale purchased 21,192 ETH at an average price of $2,265, amounting to a total expenditure of $48 million. This latest acquisition is part of a larger investment strategy, as the whale has accumulated 79,500 ETH since January 13, 2023, primarily from DEX and Binance, at an average price of $1,790. This sizable Ethereum portfolio, acquired for approximately $142.16 million, currently holds an unrealized profit of $36.84 million, reflecting a 25.9% increase in value. The funding for these purchases has been obtained through revolving loans from DeFi platforms such as Aave and Liquidity. This borrowing strategy indicates that the whale is likely adopting a long position on Ethereum, expecting the cryptocurrency's value to rise. Such significant market activities by large-scale investors can have notable implications on the cryptocurrency market, particularly regarding price movements and market sentiment.


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH rose to 71.60% and 74.20%, respectively.
  • The futures market witnessed $145.71M liquidations, with longs representing 78.08%.
  • The 30-day 25-delta skew (C-P) for BTC decreased to 0.69%, while that of ETH decreased to 0.28%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

29.93%

SOL

OKX

dYdX

26.20%

BTC

OKX

dYdX

20.46%

BNB

Binance

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.


BTC short-term 7-day Implied Volatility (IV) has encountered another spike to 86.79%, reaching a new monthly high as its price returns to the previous level before the ETF rejection rumors. Meanwhile, the 30-day IV has risen considerably to 70.64%. The elevated short-term IV, in particular, could reflect market speculation or insider expectations that a decision regarding a BTC ETF might be announced within the next 7 days. Such events often lead to increased trading activity as market participants look to hedge their positions or speculate on the outcome.

The term structure of IV for both BTC and ETH is exhibiting increased backwardation. This is concurrent with sustained elevated levels of IV. The term structure shows a distinct inflection point for contracts expiring in 2 days, inferring a likelihood of an SEC decision on the ETF during the upcoming days. Contrastingly, the flatter term structure at longer maturities reflects a consistent long-term outlook for BTC, which aligns with the recent recovery in its price. This stability in the longer-dated IV suggests that market sentiment regarding the fundamental value and long-term expectations for BTC remains stable, despite short-term uncertainty.

Both the BTC 25-delta 30-day and 7-day call-put skew have dipped recently over the weekend, maintaining a call premium state, with the 30-day skew falling into the negatives at 1.66%. This pattern reflects a cautious stance among traders and investors, who are increasingly hedging against the potential downside risk associated with the uncertainty of a BTC ETF approval.

Lastly, the report by @Paradigm highlighted option flows this week, emphasizing downside coverage with strategic put purchases and structured positions. Key BTC trades included the acquisition of 575x 29-Mar-24 100k Calls, and a complex 289x 6-Jan-24 Call fly (Call Butterfly Spread) involving +1.00 Put-12 Jan 24 42k, +1.00 Call-12 Jan 24 45k, -1.00 Put-26 Jan 24 38k, and -1.00 Call-26 Jan 24 50k. In the ETH market, significant movements were observed with the sale of 2625x 26-Jan-24 / 29-Mar-24 2.4/2.5k Call Calendars and the purchase of 1750x 29-Mar-24 2.2/2.3k Strangles.

Crypto Technical Analysis

Moving to technical analysis, BTC remained mostly sideways over the weekend. As such, our analysis from last week continues to be valid as the price oscillates within the identified parallel channel's mid-range and slowly approaches the $45.5K resistance formed by the channel's upper boundary and the resistance observed since early 2022. Despite the lack of clear technical indicators, the price could swing rapidly given any developments in the BTC ETF, potentially breaking above this resistance or moving towards the $40.7K support zone before potentially reaching the $39.5K level identified by the lower trendline formed by local higher lows. RSI stands at 47.37, which indicates that the market is currently neither overbought nor oversold, suggesting a neutral momentum and providing little directional bias from this indicator alone.

ETH, on the other hand, while showing a similar sideways movement on the 4-hour chart, is demonstrating a slightly bearish pattern as the price currently trades at the lower half of the channel. The movements over the weekend on the 1-hour chart also exhibit a small downward channel, with the price currently nearing the bottom of the range. Consequently, ETH may inch towards the lower boundary on the higher timeframe, with immediate support at $2.15K. However, a swift green candle can be expected if the BTC ETF is approved, which may move ETH quickly toward the resistance at the upper boundary at around $2.4K. The RSI stands at 37.90, which indicates a slightly bearish momentum, approaching the oversold territory and potentially signaling a price reversal or stabilization.

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