China Removes Inbound Quarantine; BitKeep Wallets Exploited; Alameda’s Caroline Confesses

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• China dismantles COVID Zero policies furthermore, leading to early market gains; US markets to resume trading today (more in Macro & TradFi)
• BitKeep wallets become latest victims in hack; Ex-Alameda CEO Caroline Ellison confesses to knowingly misappropriating client funds highlighted in a disclosed court transcript (more in DeFi & CeFi)
• Accumulation of ETH and BTC continues despite markets remaining relatively flat (more in On-Chain)
• ETH traders expect price movement in the near term with bear diagonal spread and bull diagonal spread (more in Crypto Derivatives)
• BTC and ETH hold support levels during Christmas weekend with little price action (more in Crypto Technical Analysis)

Macro & TradFi

Treehouse Research hopes all our valued readers have enjoyed a wonderful Christmas holiday!

Markets have been mainly in recess mode since our last publication with US trading resuming today. Chinese authorities announced late last night (Monday Dec 26th) that the country will scrap inbounding quarantine measures for international travelers; China A50 index futures are up by more than 1.6% before cash market open after adding 0.5% in yesterdays’ session, while HK’s cash and futures market remains shut for Christmas recess.

DeFi & CeFi

• BitKeep wallets drain $8m in latest hack
• Former CEO of Alameda Research admits to defrauding lenders
• Defrost Finance receives back hacked funds
• Kraken launches NFT marketplace in Beta, offering over 110 popular NFT collections
• Bitget launches MegaSwap, its DEX aggregator
• The BitDAO community opens voting on a $BIT purchase program
• Trader Joe launches its governance system
• Platypus announces test for its native stablecoin, $USP, on December 28th
• Aave announces $GHO Stablecoin Public Testnet launch in January

Defrost Finance receives back the hacked funds. Users will recover their assets shortly. Defrost Finance was exploited by a bogus collateral token, and a fraudulent pricing oracle liquidated existing users. Losses surpassed $13 million. Defrost Finance was prepared to negotiate with the hacker(s) and share around 20% of the funds for the majority of assets.

Similarly, BitKeep lost about $8 million to its hackers. The Web3 multi-chain wallet released an announcement saying that the cause was due to an “extremely bad mass theft incident”. The APK package downloads were hijacked by the attackers, resulting in an unofficial release version.

$JOE holders may propose and vote for new liquidity pools on the Liquidity Book AMM using DEX Trader Joe's governance system. Community members may propose adding a base asset or combining base with quote assets. If a proposal passes, Trader Joe core team will set the new pool configurations. Before an on-chain vote, all proposals must be debated for at least 48 hours and informally voted on in the forum. 1 $JOE equals 1 vote. Trader Joe plans to integrate $veJOE in governance.

Lastly, Caroline Ellison has admitted in court that she and SBF had agreed to hide the firm borrowings from lenders by creating false financial statements. Alameda had an arrangement with FTX, where the hedge fund was able to access an unlimited line of credit without posting collateral, without having negative balances and without being subjected to liquidations on FTX.com.

On-Chain

Looking on-chain, BTC Crabs (addresses that own between 1-10 BTC) are continually accumulating BTC. Their pace of accumulation since November has been increasing as compared to the rest of the year, seemingly unperturbed by FTX and broader macro conditions.

Elsewhere, the ETH number of addresses holding 10+ ETH just reached an ATH of 351,788, which can indicate that the accumulation of ETH is also still occurring despite the more bearish events in recent months.

Crypto Derivatives

• BTC and ETH funding rate remain positive
• BTC 30-day ATM IV fell from 47% to 46% while ETH remained constant at 60%
• 7-day 25-delta put skew tightened significantly for both BTC and ETH, going from -4.46% to -1.35% and -5.74% to -2.37%

For futures, total liquidations came in at $7.71M, with the majority coming from shorts at $6.27M.

IV fell slightly across the curve for both BTC and ETH. Term structure is still in contango, largely unchanged. The 30-day RV for BTC continues to fall and is now at 22%. Put/call ratio for BTC and ETH remains relatively unchanged at 0.51 and 0.23 respectively.

On the flow front, most of the volume comes from long-dated options expiring. On the ETH side, the most predominant strategy is bull call spread. It seems that traders are expecting some price movement to the upside for the next few months.

Lastly, the VIX fell lower and is now trading at 20.86

Crypto Technical Analysis

Looking at TA, the long weekend gave BTC low volumes and left the asset hovering at its key support level of $16.8K. With the H4 RSI remaining flat, little signals have been given to the direction it may take as the year ends. This morning, BTC attempted to break past $16.9K but has been having trouble gaining momentum past it.

Looking at ETH, it also traded at low volumes and sideways. Prices ranged in the upper half of its range between $1,154 and $1,239 as ETH found support at 1,196 throughout the weekend. Similar to BTC, RSI looks flat on the H4 as price continues to hold these levels.

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Daily Readings

TradFi

• South Korean inflation expectations hit 7-month low

• Japan retail sales up for 9th month led by tourism help

• BOJ Kuroda dismisses near-term chance of exiting easy policy

• Japanese shares end higher on Wall Street gains, financials weigh

• U.S. retail sales grows 7.6% in holiday season -Mastercard data

• Dollar retreats as risk appetite improves; Australia, NZ currencies rise

• Most Gulf markets subdued on economic concerns; Dubai gains

• Asia markets rise as China says it will end quarantine for inbound travelers.

• Stock futures rise heading into the final trading week of 2022.

Crypto

• First Mover Asia: Bitcoin Ho Ho Holds Near $16.9K.

• Top Solana NFT projects DeGods & y00ts are headed to Ethereum and Polygon

• Bitcoin mining hash rate plunges more than 30% amid America's big winter storm

• Crypto Lender Vauld Calls Off Potential Acquisition by Rival Nexo.

• Bitcoin Miners Powered Off as Winter Storm Battered North America.

• Project Hamilton has concluded, weeks after legislators’ enquiry, according to Boston Fed.

• Andre Cronje says Fantom will focus on DApp ecosystem expansion in 2023.

• Bitcoin mining pool BTC.com reports $3M cyberattack.

• North Korean hackers stealing NFTs using nearly 500 phishing domains.

• 400M Twitter users’ data is reportedly on sale in the black market.

• BitKeep crypto wallets hacked after thieves create 'unofficial' Android app

Yours sincerely,
Treehouse Research 🌳