🌳 China Will Likely Not Give Large Economic Stimulus in 2024; ProShares Files For 5 More BTC ETFs With Indirect Exposures

18 Jan 2024, Thursday

2:55 AM

🌳 China Will Likely Not Give Large Economic Stimulus in 2024; ProShares Files For 5 More BTC ETFs With Indirect Exposures

BTC

ETH

S&P Futures 500

$42,648.79

$2,529.02

$4,771.00

(-1.04%)

 (-2.39%)

(-0.53%)

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


GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter, where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

Also, in case you have missed it, check out our latest research piece 👇

You can also access our research articles on the Bloomberg Terminal with the command “NH TRH < GO >"!


Our Daily View

What We Are Covering Today

  • Li Qiang signals that China will not give massive economic stimulus for growth; US officially classifies Houthi as a terrorist organization (More in Macro & TradFi)
  • ProShares files for Bitcoin ETFs; Ethereum's Dencun upgrade faces testnet challenges (More in DeFi & CeFi)
  • On-chain data reveals major profit-taking in BTC; Celsius Network liquidates MATIC amid reorganization (More in On-Chain)
  • Term structure contango becomes more pronounced; BTC 30-day ATM IV reached a new monthly low (More in Crypto Derivatives)
  • BTC continues retracement; ETH slips below 50-period MA (More in Crypto Technical Analysis)

Macro & TradFi

Speaking to other leaders at the World Economic Forum, Chinese Premier Li Qiang signaled that Beijing won't rely on massive stimulus to revive growth despite facing deflation concerns. While China achieved its approximately 5% growth target in 2023 without massive stimulus, the country recorded its worst deflationary streak since the Asian Financial Crisis, with home prices falling significantly. Li emphasized the need to avoid short-term growth while accumulating long-term risk and suggested that structural reforms are necessary. Chinese-listed stocks in the US fell following Li's comments, and the Hang Seng China Enterprises Index had its worst day since October 2022. Analysts warn that China may be underplaying downward economic pressures and risks making the same mistakes as Japan in the 1990s by not reacting to deflation.

Meanwhile, the United States has designated the Yemen-based Houthi rebels as a terrorist group, citing their recent attacks on US-operated vessels in the Red Sea region. The Houthi militia's actions have disrupted trade between Asia and Europe and heightened tensions in the ongoing conflict in the region. This designation is aimed at cutting off funding and weapons used by the Houthis in their attacks on ships. The Houthi movement remains undeterred, emphasizing its commitment to defending Yemen and supporting the Palestinian cause with its attacks prompting shipping lines to reroute vessels, causing significant disruptions in global trade and supply chains.

On Wednesday, stocks declined as central bankers emphasized caution in determining the timing and speed of interest rate cuts in 2023. Both the Nasdaq Composite and the S&P 500 fell by 0.6%, while the Dow Jones Industrial Average slipped 0.3%. Federal Reserve Governor Christopher Waller highlighted the need for flexibility and a careful approach to interest rate cuts, stating that there's no rush given the good state of the economy. European Central Bank President Christine Lagarde echoed these sentiments, cautioning against overconfidence in the timing and speed of rate cuts. Boeing led the Dow with a 1.3% rise, while Walgreens Boots Alliance fell 3.1%, and Walt Disney declined by 2.9%. Verizon dropped 1.1% following a $5.8 billion charge. Paypal, in the Nasdaq 100, also recovered with a 2.5% rise, while cybersecurity stocks like Crowdstrike, ZScaler, and Fortinet sank. Meanwhile, traditional safe-haven stocks gained, with insurers and food makers among the best performers.

CeFi & DeFi

  • ProShares files for five Bitcoin ETFs with indirect exposure
  • Ethereum's Dencun upgrade recently launched on the Goerli Testnet but encountered issues with finalization
  • VanEck to delist Bitcoin Strategy ETF, citing performance and investor interest
  • AltLayer to Launch $ALT and Plan Airdrop for EigenLayer Restakers and Celestia Stakers
  • District Judge Katherine Polk Failla heard arguments from attorneys for the SEC and Coinbase
  • JPM’s Jamie Dimon believes Satoshi Nakamoto will either increase or “erase” Bitcoin supply

ProShares, a major ETF issuer in the United States, has filed for the launch of five Bitcoin ETFs, offering indirect exposure to Bitcoin. This development coincides with the initiation of spot Bitcoin ETF trading on U.S. stock exchanges. The proposed ETFs include the ProShares Plus Bitcoin ETF and the ProShares Ultra Bitcoin ETF, which aim to achieve daily investment results of 1.5 times and 2 times the daily performance of the Bitcoin Futures Index (BGCI), respectively. Additionally, the ProShares UltraShort Bitcoin ETF, ProShares ShortPlus Bitcoin ETF, and ProShares Short Bitcoin ETF are designed to inversely track the BGCI's daily performance, targeting -2x, -1.5x, and -1x results, respectively. These filings signify ProShares' strategic move to diversify its offerings in the cryptocurrency space, providing investors with varied options to gain Bitcoin exposure through the ETF structure.

In other news, the Dencun upgrade, a significant milestone for Ethereum, was deployed on the Goerli testnet but encountered a hiccup by failing to finalize blocks as expected. This missed finalization, as Ethereum core developer Parithosh Jayanthi noted, was primarily due to a bug in Prysm nodes, which has since been rectified. The importance of finality in blockchain refers to the irreversibility of transactions once confirmed. Dencun's deployment is a key part of a broader three-phase strategy to introduce proto-danksharding, a new method aimed at reducing data storage costs on the main Ethereum blockchain and facilitating the growth of layer-2 blockchains. These secondary networks offer a more cost-effective alternative for transaction processing but currently face limitations due to high data costs. Following Goerli, the next phases involve upgrades to the Sepolia and Holesky testnets. Dencun represents the most significant change for Ethereum since last March's Shapella upgrade, which marked a crucial step in Ethereum's transition to a proof-of-stake blockchain. 

On-Chain

Moving on to on-chain, Glassnode's on-chain data reveals a notable profit-taking occurrence, as older cryptocurrencies re-enter the market, marking the most significant event of such since the all-time high in November 2021. January 2024 saw the cycle's peak in Realized Profit, with over $1.3 billion per day, indicating that long-held cryptocurrencies are being sold at higher prices. This is a common trend where holders of long-dormant coins capitalize on major market shifts such as new all-time highs, cycle tops and bottoms, and significant structural changes, including exchange incidents, halvings, and the introduction of spot ETFs. The ability of new demand to absorb this sell-off is crucial for the market's continued upward trajectory, making it a key indicator of whether prices can be sustained as these older coins are liquidated for profit.

Elsewhere, Spotonchain’s analysis showed that Celsius Network has recently transferred 25.75 million MATIC, valued at approximately $21.26 million, to centralized exchanges (CEXs) at an average price of $0.826, coinciding with a drop in the token's price. Of this amount, 22.73 million MATIC worth around $18.79 million were sent to Binance, while Crypto.com received 3.02 million MATIC, amounting to $2.47 million. Despite these transactions, Celsius Network's holdings still include about 34.09 million MATIC, currently valued at $27.56 million. These movements suggest that Celsius might be liquidating its MATIC assets to repay creditors following the creditor vote in September 2023, where there was a 98% approval for the company's reorganization plan, signaling progress in their efforts to emerge from bankruptcy and begin returning funds to their customers.


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped to 50.34% and 53.29%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC stayed relatively flat at -1.13% while ETH declined to -1.80%.
  • The futures market witnessed $99.12M liquidations, with longs representing 72.89%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

22.48%

BNB

Binance

Bybit

20.84%

BNB

Binance

OKX

19.52%

SOL

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.


BTC’s ATM IV continued its decline throughout yesterday, with the 7-day IV dropping to 44.62, aligning with the levels observed before the ETF deadline. The 30-day IV also decreased to 47.28, marking a new low in the last 30 days. This suggests a lack of catalysts for BTC and crypto market-wide volatilities in the near future.

The contango state of the BTC term structure has become more pronounced, particularly with short-dated IVs experiencing a significant decline in the last 24 hours. The most notable decrease is observed in contracts expiring between 1-15 days, with a decline as high as 7%. Further-dated contracts have also seen a decline in ATM IVs, although less pronounced. This development aligns with earlier observations, indicating a return to normalcy in the market after the resolution of expectations surrounding the BTC ETF approval, as participants look for the next narrative.

The BTC 25-delta call-put skews for both 30-day and 7-day have remained relatively flat in the last 24 hours. This suggests a market sentiment that BTC may be fairly priced at the moment, with options traders taking a neutral stance on near-term price movements.

During yesterday’s Asia/Europe Trading Session, the options market generally maintained its stance of short-term bearishness and long-term bullishness, as reported by @Paradigm. Several notable transactions included the purchase of 633x 26-Jan-24 42K/44K BTC Strangle, 5,000x 23-Feb-24 3K/ 28-Jun-24 3.5K ETH Call Calendar, and the selling of 6,000x 28-Jun-24 3K ETH Call.

Crypto Technical Analysis

Moving on to technical analysis, we look at the 4-hour chart of BTC. Price has started to decline following its rise towards the previous resistance of the ascending channel. BTC's price is currently hovering around $42.6k, with a potential bearish continuation that may retest the imminent support level at $42k. A breach below this pivotal point could signal a further descent towards the substantial support mark at $38k, reflecting a downside of 10.84%. Reflecting on yesterday's TA, BTC's approach to the upper boundary of the Bollinger Bands has culminated without a breakout, suggesting a rejection at higher price levels. Concurrently, the RSI has taken a downturn to a current level of 43.49, a decline from yesterday, which indicates mounting selling pressure.

Turning our attention to ETH, it is presently trading at approximately $2.52K, reflecting a 2.3% dip from the previous day's value. Notably, ETH has breached beneath the 50-period moving average on the 4-hour chart, which may be indicative of the genesis of a bearish trend, casting doubts on the short-term bullish sentiment that had been prevailing. Investors should keep a close eye on the forthcoming key support level at around $2.4K—a pivotal point where the price previously stabilized, paving the way for the last leg of the uptrend. A decisive move below this threshold could steer the price toward the dynamic support provided by the 200-period moving average. Complementing this perspective is the RSI, which has undergone a substantial decline to 45, marking a 24.8% decrease from the previous day’s reading of 59.86, suggesting a growing bearish momentum or a cooling off from previously overbought conditions on 11 Jan.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

Crypto

Yours sincerely,
Treehouse Research 🌳