🌳 China Vows To Respond To US’s Tariff Hikes; Lido Co-Founders And Paradigm Backs A New Eigenlayer Alternative

15 May 2024, Wednesday

2:39 AM

🌳 China Vows To Respond To US’s Tariff Hikes; Lido Co-Founders And Paradigm Backs A New Eigenlayer Alternative

BTC

ETH

S&P Futures 500

$61,447.58

$2,868.45

$5,271.00

(-2.15%)

 (-2.63%)

(+0.52%)

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

  • China vows to respond to US’s tariff hikes; Fed hints at unchanged interest rates as US inflation persists (More in Macro & TradFi)
  • Lido Co-Founders and Paradigm backs a new Eigenlayer Alternative; Vitalik proposes EIP-7702 for account abstraction (More in DeFi & CeFi)
  • Pessimistic sentiment is prevalent in large-capitalization tokens; Whales seized the chance to amass more BTC during its downtrend (More in On-Chain)
  • Bitcoin ATM IV slightly rises; ETH skews stable despite regulatory scrutiny (More in Crypto Derivatives)
  • BTC’s RSI and Bolinger Band suggest neutral consolidation; ETH is in contact with lower Bollinger Band and $2.88K support (More in Crypto Technical Analysis)

Macro & TradFi

In light of the recent implementation of US tariffs on various Chinese imports, China has vowed to take necessary actions to protect its rights and interests. In the past, China typically matched the size and scope of US measures, analysts now anticipate a more restrained response. This shift is attributed to the prediction that Beijing's retaliation will avoid sharp escalation to preserve domestic and international confidence, especially amid President Xi Jinping's efforts to boost foreign investment in China.

In other news, Federal Reserve Chair Jerome Powell mentioned at an event in Amsterdam that the Fed is looking at maintaining the current interest rate policy for an extended period due to persistent US inflation. Powell cited patience and the restrictive policy as key factors in lowering inflation on a monthly basis in the future. In contrast, Europe currently has the opportunity to cut rates before the US with the easing of price pressures. Swiss and Swedish central banks have started to cut rates while the European Central Bank (ECB) is expected to cut rates during their meeting on June 6. However, since the US is the leading standard for global monetary policy and usually takes the lead on policy shifts, ECB’s divergence from the US could potentially have broader implications on the value of their currency and in turn domestic demand and inflation.

US equities closed on a positive note on Tuesday, with the Nasdaq 100 notching its seventh all-time high to close at $16.5K, appreciating by 0.75%. The Dow Jones Industrial Average and S&P 500 both increased by 0.32% and 0.48% respectively. Insulet Corp (PODD), a medical device company, surged by 6.99% following bullish sentiments by analysts and a positive first-quarter financial report reflecting their strong market presence. Investors should turn their attention toward the U.S. Consumer Price Index (CPI) data due later today, which is important data for evaluating the inflation trajectory.

CeFi & DeFi

  • Lido Co-Founders and Paradigm have reportedly funded an Eigenlayer competitor.
  • Vitalik proposes EIP 7702 as an alternative to EIP-3074 for better account abstraction.
  • State of Wisconsin Investment Board reveals $163 million in Bitcoin ETFs 
  • Cypher Protocol developer admits to taking and gambling funds recovered from exploit 
  • Tornado Cash developer found guilty of money laundering

The co-founders of Lido, along with venture capital firm Paradigm, are reportedly secretly backing a new Restaking competitor called Symbiotic in response to the rise of EigenLayer. Symbiotic aims to offer a permissionless restaking protocol compatible with various assets, including Lido's stETH, challenging EigenLayer's dominance. Internal documents reveal Symbiotic's strategy to collaborate with actively validated services and accept ERC-20 tokens as collateral, positioning itself as a decentralized alternative. The involvement of Lido's backers suggests a strategic move to address market shifts and maintain influence in the evolving DeFi landscape.

In other news, Vitalik Buterin and his co-authors introduced Ethereum Improvement Proposal (EIP) 7702 as an alternative to EIP-3074, aiming to enhance account abstraction on the Ethereum network. EIP-7702 proposes a transaction type allowing externally owned accounts (EOAs) to act as smart contract wallets temporarily, returning to their original state afterward. This proposal, designed to align with ERC-4337 standards, offers quantum resistance and improved compatibility with existing protocols. If adopted, EIP-7702 could reshape how account abstraction is integrated into future Ethereum upgrades, enabling sophisticated wallet functionalities like multi-factor authentication and token transactions.

On-Chain

Santiment’s on-chain data reveals a prevailing pessimistic sentiment among investors toward large-capitalization tokens. This negativity manifests through the absence of sustained price recoveries and the consistently negative weighted sentiment surrounding tokens such as Bitcoin and Ethereum. Additionally, disruptions in service and withdrawal limitations on the Coinbase platform exacerbate this negative sentiment. However, it's important to note that this period of negativity may be transitory, with potential for a future rebound.

In another analysis, Lookonchain’s on-chain data revealed two opportunistic whales who purchased 791 BTC worth $49.8M at the bottom today. Commencing on March 19, 2024, the address 1LXdAT has cumulatively acquired 4,736 BTC, with an average purchase price of $65,264 per BTC, representing a total investment of approximately $309M. In a separate transaction history, the address bc1qr4 has accumulated 791 BTC since November 19, 2023. The average price per BTC for these transactions was $45,156, resulting in a total investment of approximately $35.7M. This reflects the trader’s accumulation of BTC during this period of broader negative market sentiment on large-capitalization tokens.

Crypto Derivatives

  • Funding rates remained positive for BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 55.84% and 63.03%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC tumbled to -1.43% while ETH tumbled to -2.79%.
  • The futures market witnessed $144.05M in liquidations, with longs representing 78.93%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

15.32%

SOL

Binance

dYdX

14.10%

AVAX

Bybit

dYdX

13.79%

AVAX

OKX

dYdX

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.


Bitcoin ATM implied volatilities showed minimal changes, with the 7-day implied volatility (IV) marginally rising to 51.90% and the 30-day IV slightly increasing to 53.00%.

The persistent contango in Bitcoin's term structure highlights that market participants anticipate future volatility to surpass present levels. The term structure currently displays an almost linear upward trajectory. However, a general decline in implied volatilities (IVs) across the curve indicates a market consensus toward potential Bitcoin price stabilization.

Bitcoin's 7-day and 30-day skews have experienced significant declines, falling to -5.57% and -1.43% respectively. This trend likely stems from BTC’s spot price dipping from $63K to $61K. The negative skews indicate that investors are anticipating reduced volatility or fewer dramatic price swings in the short term, indicating a cautious rather than pessimistic perspective on Bitcoin's price stability.

Despite the SEC's recent issuance of a Wells notice to the Ethereum-based protocol Uniswap on April 10, which suggests potential regulatory scrutiny of Ether as a security, ETH 7-day and 30-day skews have remained unchanged, maintaining levels at -6.14% and -2.78%, respectively. This stability in skew indicates that options investors may have already anticipated the challenges facing Ethereum ETF applications in the U.S., likely pricing in the reduced likelihood of their approval. 

Lastly, @Paradigm highlighted option flows yesterday emphasizing custom strategies and call purchases. Key BTC trades encompassed the procurement of 300x 27-Dec-24 110k Calls, 150x 27-Dec-24 105k Calls, and a notable transaction involving 150x 27-Dec-24 70k/100k Call Spreads. Additionally, intricate strategies included the purchase of a Custom Strategy with 150x 17-May-24 and 31-May-24 components, as well as a Strangle involving 125x 26-Jul-24 60k/67k. Meanwhile, major ETH trades featured significant activity with Custom Strategies, including 3000x 31-May-24 and 28-Jun-24 components and the sale of 1000x Custom Strategy with 17-May-24 and 24-May-24 3000 Calls, alongside the sale of 1000x 17-May-24 2900 Calls.

Crypto Technical Analysis

Moving on to Technical Analysis, BTC is trading around $61.5K, maintaining the established support at approximately $60K and facing resistance near $64K and $65K on the 4-hour chart. The Relative Strength Index (RSI) has moderated to 52.78, reflecting a shift from mild bullishness to a more neutral sentiment, indicating potential consolidation within these levels. Bollinger Bands suggest balanced volatility, as BTC trades close to the middle band, highlighting a period of less intense price movement.

Currently, ETH is trading around $2.88K on the 4-hour chart, touching the lower Bollinger Band and a defined support level at around $2.88K. The Relative Strength Index (RSI) stands at 36.81, nearing oversold territory, which suggests that ETH might be primed for a short-term rebound, particularly if it can sustain above this support. Resistance is set around $3.1K, and a successful breach of this level could signal a shift towards a bullish outlook.

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