🌳 China Repurposes Nvidia Chips for AI; U.S. SEC Greenlights Spot Bitcoin ETFs

11 Jan 2024, Thursday

3:17 AM

🌳 China Repurposes Nvidia Chips for AI; U.S. SEC Greenlights Spot Bitcoin ETFs

BTC

ETH

S&P Futures 500

$46,661.81

$2,603.80

$4,825.25

(+1.79%)

 (+8.79%)

(+0.69%)

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


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What We Are Covering Today

  • Chinese firms repurpose Nvidia chips for AI; ECB warns of Eurozone downturn (More in Macro & TradFi)
  • SEC approves spot BTC ETFs; Analysts look at the prospect of ETH ETFs (More in DeFi & CeFi)
  • Solana's daily transaction volume reached the highest since October 2022; A whale was found to be bullish on ETH while bearish on BTC at a $11M notional volume (More in On-Chain)
  • BTC IV declines on ETF news; investors weigh CPI impact, seeking some protection (More in Crypto Derivatives)
  • BTC ascends within channel, nearing resistance; ETH breaks above key consolidation level (More in Crypto Technical Analysis)

Macro & TradFi

Chinese companies are adapting to stringent US export controls by repurposing Nvidia gaming chips for artificial intelligence applications. This innovative yet suboptimal strategy involves dismantling thousands of Nvidia graphics cards monthly to reuse their core components in AI circuit boards. While these gaming-focused products possess considerable computational power, they fall short in high-precision calculations needed for advanced AI tasks, such as training large language models. The demand for these repurposed components has surged, mainly among public enterprises and small AI labs lacking sufficient stockpiles of Nvidia server chips. However, this practice raises concerns over intellectual property rights violations and the potential ban of certain gaming cards in China. Nvidia has responded by releasing a slower version of its powerful gaming graphics board, the GeForce RTX 4090 D, specifically for the Chinese market, but this too is not ideal for large language model training. 

The European Central Bank's Vice-President, Luis de Guindos, has signaled a potential economic downturn in the Eurozone and a slowdown in the rapid pace of disinflation observed last year. Speaking in Madrid, de Guindos indicated soft indicators hinting at a contraction in December 2023, raising concerns over a technical recession in the latter half of the year and dampening near-term prospects. This outlook complicates the ECB's decision-making, particularly regarding interest rate cuts, as inflation remains persistently above the 2% target. The ECB's cautious stance on disinflation is echoed by Executive Board Member Isabel Schnabel, who emphasizes the need for additional data and vigilance due to geopolitical tensions impacting inflation risks. De Guindos' comments, aligning with the ECB's data-dependent approach, suggest a reduced likelihood of an interest rate cut in the first quarter, as inflationary pressures, influenced by factors like expiring energy subsidies, continue to be a concern. This scenario shows the ECB’s challenges in balancing economic growth and inflation control amidst an uncertain global environment.

Yesterday, US stock markets experienced a rise as investors awaited new inflation data, which is anticipated to provide greater insight into future interest rate trends. Notably, the Nasdaq increased by 0.69%, the S&P 500 by 0.57%, and the Dow by 0.45%. This upward trend was driven in part by significant gains in Big Tech stocks, with Microsoft surging by 1.86% and Meta by 3.65%, both recovering from earlier declines in the first week of 2024. Additionally, Boeing saw a modest increase of 0.92%, recovering part of its losses from a two-day downturn. Amazon's shares also rose by 1.56% following its decision to lay off several employees from its Prime Video and MGM Studios divisions. The focus now shifts to the upcoming release of the US Consumer Price Index (CPI) data, scheduled for tonight at 21:30 SGT, which is expected to be a key indicator for future economic and monetary policy directions.

DeFi & CeFi

  • SEC approves 11 spot BTC ETFs
  • Analysts look at the prospect of ETH ETFs
  • Bloomberg populates all 11 BTC ETFs
  • CoinGecko’s social media was compromised
  • Ripple Labs to buy back $285M stake in tender offer: Report

The U.S. Securities and Exchange Commission (SEC) has officially approved the United States' first spot Bitcoin exchange-traded funds (ETFs), a significant development after a decade of applications and rejections. This historic decision includes approvals for ETFs from major financial institutions like ARK 21Shares, Invesco Galaxy, VanEck, and others, allowing investors to gain direct exposure to Bitcoin's price without the need for actual purchase or self-custody. This approval follows a court case won by Grayscale in August 2023 against the SEC, which had previously cited concerns over market manipulation and fraud in denying such applications. The introduction of these ETFs is anticipated to significantly influence Bitcoin investments, with projections of substantial inflows in the coming year.

In addition, analysts are now optimistic about the prospects for spot Ethereum ETFs in 2024, with some predicting a high likelihood of approval by May. Bloomberg ETF analyst Eric Balchunas believes that spot Ether ETFs are almost certain to follow the path of Bitcoin ETFs, given their close market relationship. Digital asset lawyer Joe Carlasare anticipates approval but expects the SEC to establish a precedent to retain discretion over which digital asset ETFs are permitted. He also predicts that spot Ether ETFs might not start trading until the third quarter of 2024, although Hashdex, one of the applicants, anticipates a launch as early as the second quarter. The Ether price spiked following the Bitcoin ETF approvals, reflecting increased optimism in the market. The SEC's previous acceptance of Ethereum futures ETFs indicates an implicit acceptance of Ethereum as a commodity, further bolstering the case for spot Ether ETFs. Applications from major financial players like BlackRock, VanEck, ARK 21Shares, Fidelity, and Invesco Galaxy are pending, with key decision dates spanning from May to August 2024.

On-Chain

Amidst the optimism following the BTC Spot ETF approval, the transaction volumes of Solana-based tokens have reached their highest level in over a year, with the economic throughput of tokens using the SPL token standard increasing by 700% in the past 30 days. Solana's daily transaction volume in total has surpassed $40 billion, the highest since October 2022. Daily active wallets on Solana have also increased significantly, from around 120,000 in October 2023 to approximately 470,000 in January 2024. The surge is attributed to meme coins and Solana's performance as a high-performing altcoin in 2023.

Meanwhile, a whale appears to have adopted a bullish stance on ETH while expressing a bearish outlook on BTC. According to @lookonchain, this whale borrowed $11M worth of WBTC on Aave and exchanged them for ETH. This move is noteworthy, especially considering the recent BTC ETF announcement, where many anticipated BTC to outperform in the short term with increased institutional capital inflows. However, the market appears to align with a different sentiment, as ETH has surged more than BTC in the same period, possibly in anticipation of an ETH ETF approval following the US government’s position on crypto spot ETFs.


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH fell to 61.90% and 68.81%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC rose to -0.70%, while that of ETH rose to -0.78%.
  • The futures market witnessed $267.79M liquidations, with shorts representing 51.80%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

32.47%

ETH

Binance

dYdX

20.18%

SOL

OKX

dYdX

​​17.52%

BTC

Binance

dYdX

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.


The 7-day Implied Volatility (IV) for Bitcoin has plummeted, settling at 64.61% following the SEC's nod for BTC spot ETFs, which has mitigated short-term market uncertainty. Correspondingly, the 30-day IV has followed suit, receding to 59.29%. This trend is credited to a more stable and predictable forecast for BTC's performance over the upcoming month.

The BTC IV term structure is currently still in backwardation, however with a pronounced decline in IV for contracts expiring in one day. This sharp adjustment in the near-term structure can be attributed to the alleviation of market tension following the SEC's imminent decision on the ETF. However, there is still the CPI data release later today, which option traders are anticipating. Conversely, the more level term structure observed in longer-dated options indicates a stable long-term sentiment for Bitcoin, which is in line with the overall movement towards price equilibrium.

The BTC 25-delta 30-day and 7-day call-put skews have exhibited stability, with both metrics orbiting the neutral zero mark. The 30-day skew has risen to -0.7%, whereas the 7-day skew has declined significantly to -0.8%. This suggests that investors are maintaining a balanced view on the market direction while exhibiting a marginal preference for downside protection over the coming week.

During US Session Hours, @Paradigm highlighted option flows emphasized downside coverage with strategic put purchases and structured positions. For BTC, prominent trades included the purchase of 1298x 23-Feb-24 65/75k Call Spreads and the sale of 225x 29-Mar-24 46/60k Call Spreads. In parallel, ETH saw significant movements with the procurement of 39750x 23-Feb-24 2700/3100 Call Spreads and 5162x 26-Jan-24 3000/3400 Call Spreads, showcasing a strong demand for upside potential.

Crypto Technical Analysis

Moving on to technical analysis, analyzing the 4-hour chart for BTC, the price action is contained within an ascending channel, showcasing a consistent uptrend. Currently, the price is oscillating near the upper boundary of the channel, indicating a potential resistance zone around the $46.5K mark. If the price moves to the upper boundary, it coincides with the next resistance at the $48K region, which would represent approximately a 3.2% increase from the current level. On the flip side, should a reversal occur, the lower boundary of the ascending channel, coupled with historical price action, suggests a support level near $43K. The Relative Strength Index (RSI) is just below the 70 mark at 61.44, which typically suggests nearing an overbought condition; however, it has been decreasing recently, indicating a loss of upward momentum.

On the 4-hour chart, ETH has exhibited a bullish breakout from its prevailing horizontal channel, with the current price action standing above the resistance level of the channel at approximately $2.6K, a level identified back in May 2022, marking an approximate 7.7% increase from the current price point. This breakout is significant as it indicates a potential shift in market sentiment from consolidation to a renewed interest in upward price movement. The break above the channel suggests a newfound buying pressure that could lead to a test of higher resistance levels. Conversely, should the price fail to sustain above the breakout level and retrace, the upper boundary of the former horizontal channel, now acting as potential support, is expected to be near the $2.4K level. This would represent a decrease of about 5.59% from the current level, reinstating the importance of the breakout point as a pivotal price juncture. The RSI stands above the median line, currently around 69.23, which underscores the momentum behind the recent price appreciation but also brings attention to the potential for overbought conditions as the market assesses the sustainability of this breakout.

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