BTC Falls Below $23K In Early Asia Session; Dev Push Shanghai Upgrade On Mainnet To Early April

03 Mar 2023, Friday

3:48 AM

BTC	ETH	S&P Futures 500
$23,420.50	$1,643.50	$3,980.50
(-0.84%)	(-0.96%)	(+0.66%)
Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

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February 2023 Market Recap

Our Daily View

What We Are Covering Today

Nasdaq and other indexes rebounded after dovish rhetoric from Bostic; Citigroup cuts hundreds in its investment banking division (more in Macro & TradFi)
Ethereum developers target Shanghai upgrade on Goerli testnet by 14 March, mainnet upgrade to be pushed to first two weeks of April (more in DeFi & CeFi)
Enormous amount of BTC bulls were liquidated in the last few hours (more in On-Chain)
Term structure flip to backwardation as RV spike (more in Crypto Derivatives)
BTC and ETH pullback in today’s Asia opening (more in Crypto Technical Analysis)

Macro & TradFi

Two Federal Reserve officials expressed their views yesterday. Atlanta President Raphael Bostic lifted market sentiments by mentioning the need for the central bank to consider the lagged effect of past interest-rate increases on the economy. He did concede that his stance would be guided by incoming economic data while supporting further quarter-point increases in the near term. Governor Christopher Waller stated that he would endorse raising interest rates even more than his current outlook if payroll and inflation data do not slow down as projected. Elsewhere, Citigroup is cutting hundreds of jobs, including in its investment banking division, and US-based firm GQG Partners has invested $1.87 billion in Adani Group, buying shares in four firms at discounts ranging from 4.2% to 12.2% of Thursday's closing price. Chinese internet moguls have been replaced by chip researchers and engineers in key lawmaking and advisory bodies, highlighting Beijing's distrust for private enterprise. Singapore is increasing the threshold for global investors seeking permanent-resident status in an attempt to create more jobs and benefit locals due to an influx of wealth. The yen fluctuated after inflation in Tokyo decelerated, and the Bank of Japan is said to be leaning towards monitoring the impact of recent stimulus program tweaks rather than making another adjustment at Governor Haruhiko Kuroda's final policy meeting next week.

Nasdaq and other indexes rebounded after Fed Bostic comments, reversing initial declines. Major US indices ended the session higher with NASDAQ up by 0.7%, SPX by 0.8% and DOW by 1%. Treasury yields moved higher across the curve, with the 30-year rate following the 10-year maturity in piercing 4%, and the two-year rate climbing for a third day towards 5%.

DeFi & CeFi

Ethereum Goerli testnet to undergo Shanghai upgrade on 14 March, mainnet upgrade delayed to April
Insrt Labs closes $2.2M pre-seed round led by Hashkey Capital and Infinite Capital
Mt.Gox to begin first repayments to creditors from 10 March
Several crypto firms cut ties with Silvergate after the bank delayed SEC fillings
Sushiswap adds support for Base network
Conic Finance launches Omnipools for Curve LPs
StakeWise announces the launch of its V3 closed testnet called Atlantic
$XMON crashed as $SUDO lock period ends
Ethereum launches Account Abstraction, enabling no seed phrases wallets
Chainlink announces beta launch of Chainlink Function, connecting Web2 APIs to Web3

Several crypto exchanges distanced themselves from Silvergate after the crypto-friendly bank delayed the filling of its annual 10-K report with the SEC. Coinbase, Crypto.com, Bitstamp, Gemini, and Circle all ceasing to facilitate payments using the bank in U.S. dollars. Paxos stopped transfers to its account with Silvergate, while Cboe Clear Digital paused all transactions. The bank had previously reported a 68% drawdown of $8.1bn in deposits amid the collapse of FTX, a cryptocurrency exchange. The Department of Justice is now examining Silvergate's relationship with FTX, and the hedge fund of billionaire George Soros has bet against the bank.

Meanwhile on a more positive note, Ethereum developers are aiming for March 14 to upgrade the Goerli test network, allowing for the withdrawal of staked ether (ETH). This test will be closely watched, as it is the largest public Ethereum testnet and the last opportunity for staking providers to ensure staked ETH is withdrawable before the Shanghai upgrade reaches the mainnet. During the execution layer 156 meeting, the Shanghai upgrade on the mainnet will come three to four weeks after Goerli, likely to occur in the first two weeks of April. This upgrade is crucial for allowing users to withdraw their staked ETH, which has reached a total of $28.7 billion since staking began in December 2020. The largest entities currently staking with Ethereum are intermediary staking services like Lido and crypto exchanges, such as Coinbase, Kraken, and Binance. These companies pool together customers' ETH to stake and earn passive rewards, accounting for 56% of all ETH staked with the network. The Shanghai upgrade alone could generate significant revenue for these companies, with JP Morgan predicting that it could earn Coinbase between $225 million and $545 million in revenue per year. Ethereum's core developers have removed other anticipated improvements to the Ethereum network from Shanghai to hasten its release and even avoided adding minor technical tweaks to Ethereum's encoding methods to the upgrade, which may create technical debt for the network in the future.

On-Chain

Looking on-chain, the large downward price swings in the past hour took the bulls by surprise. According to on-chain data, $56.1 million of long positions were liquidated in just the last hour alone. This figure also continues to go up as the price correcting continues (@OnChainCollege).

New data collected by Santiment shows an interesting phenomenon regarding stablecoin supply. Following the news on the SEC’s lawsuit on Paxos and its effect on Binance’s BUSD stablecoin, the supply movement between USDC and BUSD seem to be highly correlated with the news around the lawsuit where the whales are flipping between the two stablecoins based on the perception of the possible outcome. This serves as a good fear indicator for the market sentiment and other matters relating to the lawsuit.

Crypto Derivatives

BTC and ETH funding rates has seen a slight increase in the past 24 hours
30-day ATM IVs decreased to 50.20% and 54.61% for BTC and ETH respectively
30-day 25 delta skewed towards put option for BTC at 0.22% while put skew widened to 3.48% for ETH

Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:

Net Annualized APR	Perp (USDT pair)	Long on	Short On
16.76%	DOGE	BINANCE	OKX
14.04%	BNB	OKX	BINANCE
10.17%	LTC	DYDX	OKX
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

For futures, total liquidations over the past 24 hours has increased slightly to $53.04M, the majority coming from longs.

On the options front, both BTC and ETH term structure flipped to backwardation with near-term lV soaring as the market tanks. 7-day RV has also jumped to 46.47 for BTC and to 48.99 for ETH. The variance risk premium also saw an increase yesterday with it dropping to 4.8% for BTC and 3.5% for ETH.

On the flow side, put options are in focus as more orders were placed for maturities in the next 7 days. Taking a closer look at the strike prices for contracts traded within the last 24 hours, the bulls were taking the lead in the majority of the open interests with strike prices mostly concentrated on the 24K level. On the other hand, a large number of puts were bought at the 24K level which indicates a relatively large portion of the market is also hedging their position in case of a large downturn in BTC price. The top trading strategy in the last 24 hours was the short risk reversal with a $33.68M notional amount.

Lastly, the VIX dropped again to 19.6.

Crypto Technical Analysis

Onto TA, both BTC and ETH traded largely sideways overnight despite the news on Silvergate. However, BTC plummeted by 4.5% on the hourly time frame during the first hour of today’s Asia session. 1H RSI dipped to a low of 18 while H4 RSI fell into oversold territory. Currently, BTC broke through the $22.65K - $22.95K support zone and if the crash continues to snowball, the next zone of support can be seen at the $21.5K to $21.8K level.

As for ETH, it has broken past the rising channel’s bottom. Hourly RSI has also entered the oversold territory at 25 while the H4 RSI dropped to 34. If ETH continues to spiral downwards, the next support zone is further down at $1,480 - $1,500.