🌳 China's Economy Faces Deflation Risk as CPI Stalls while Central Bank Deploys Stimulus Measures; Arkham Pioneers On-Chain Marketplace for Intelligence Information

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Chinese economy close to deflation; UK consumers accelerate retail sales despite high prices (more in Macro & TradFi)
• Crust Network receives seven-figure funding from DWF Labs; Arkham launches on-chain intel exchange (more in DeFi & CeFi)
• Declining inscription activity leads to decreased transaction count and median fees on BTC network (more in On-Chain)
• BTC and ETH term structure exhibited minimal changes; Put-call skew drops further in the negative territory (more in Crypto Derivatives)
• BTC and ETH faces strong resistance; MATIC's breakout suggests potential bullishness (more in Crypto Technical Analysis)

Macro & TradFi

China's economy teeters on deflation as the consumer price index remained flat year on year and declined by 0.2% compared to the previous month. Factory gate prices fell at the fastest pace since 2016, indicating weakened demand for goods. The central bank is expected to implement further interest rate cuts and fiscal stimulus to support the post-Covid recovery. Property prices and exports are declining while global economic growth slows. Producer prices declined by 5.4%, driven by weaker commodity prices and online shopping discounts. As a result, Chinese economists urge a shift towards consumer-focused stimulus measures.

On the other hand, UK retailers experienced an acceleration in sales growth in June, driven by higher food prices and increased purchases of leisure items due to warmer weather. The British Retail Consortium reported a 4.2% year-on-year growth in like-for-like sales, surpassing May's expansion rate of 3.7%. Food sales surged by 9.8% in the second quarter, while sales of other goods only rose by 0.3%. However, declines were observed in non-food items such as home accessories, toys, and jewelry. The data provides insights into consumer spending trends ahead of upcoming reports on economic growth and inflation that will influence the Bank of England's interest rate decisions.

Investors are preparing for upcoming inflation data, including June's figures from the US, which will provide insights into the Federal Reserve's monetary policy decisions. In the US equities market, the Dow Jones Industrial Average increased by 0.62%, the S&P 500 rose by 0.24%, and the Nasdaq Composite gained 0.18%. Asia-Pacific markets are poised for a rise, following Wall Street's rebound after a three-day decline. The S&P/ASX 200 in Australia climbed by 0.22%, Japan's Nikkei 225 advanced by 0.6%, and South Korea's Kospi led gains with a 0.69% increase.

DeFi & CeFi

• Crust Network Secures Millions in Investment from DWF Labs
• Blockchain Analysis Platform Arkham Launches On-Chain Intelligence Marketplace
• Bitcoin Trading at 9% Discount on Binance.US, but Not Everyone Can Arbitrage
• BitDAO Proposes $200 Million Mantle Ecosystem Fund
• Polygon zkEVM TVL nears $50 million, Up over 20% in the last 7 days
• Legal proceedings start for Terraform Labs co-founder in South Korea
• Connext founder proposes ‘Sovereign Bridged Token’ standard after Multichain incident

Decentralized storage network Crust Network has secured a significant seven-figure funding from DWF Labs. The funding will be used to enhance Crust Network's infrastructure and support its expansion in the decentralized storage sector. Crust Network operates as a decentralized cloud storage protocol that incentivizes the utilization of storage nodes on IPFS networks. Already adopted by prominent Web3 projects like Uniswap and AAVE, Crust Network offers a robust decentralized storage solution and is integrated into the Polkadot ecosystem through the XCMP protocol. Additionally, Crust Network plans to launch its EVM Storage service, catering to EVM-based blockchains' decentralized storage needs. DWF Labs, a global digital asset market maker and Web3 investment firm, provides support to portfolio companies across various stages, including token listing, market making, and OTC trading solutions.

Blockchain analysis platform Arkham has unveiled the Arkham Intel Exchange, an on-chain marketplace for intelligence information, enabling users to anonymously buy and sell data about the owners of blockchain wallet addresses via smart contracts. The platform aims to facilitate the "intel-to-earn" economy by meeting the demand for on-chain analysis and providing an avenue for on-chain researchers to monetize their expertise. Users can post bounties to request on-chain information, while individuals with intelligence can offer their findings for sale through buy-it-now prices or auctions. The exchange is scheduled to launch on July 18.

On-Chain

BTC is experiencing a gradual decrease in on-chain activity as inscription activity begins to diminish. As per Glassnode, transaction counts were once at unprecedented heights, driven by inscriptions capitalizing on the SegWit discount. However, presently, we are witnessing a decline in daily volumes, aligning with the overall slowdown in inscription activity. Concurrently, there is an upward trend in the new address momentum, primarily driven by a decrease in address reuse among inscription traders. For context, it is frequently observed that users generate fresh addresses while conducting transactions on the BTC network. However, BRC-20 traders tend to reuse their addresses, possibly because they are more accustomed to account-based chains like Ethereum or Solana, and may have less familiarity with the Bitcoin UTXO system.

On a similar note, we are now observing a gradual and consistent clearance of mempools, resulting in a notable decline in on-chain transaction fees. According to Glassnode, USD-denominated transaction fees on the Bitcoin network have plummeted by more than 96% since the peak of the BRC-20 frenzy in May. Presently, the average fee paid stands at a modest $1.33, while median fees have significantly reduced to a mere $0.16.

Crypto Derivatives

• Funding rates turn positive for both BTC and ETH
• Deribit Implied Volatility Index (DVOL) is 44.34% and 42.32% for BTC and ETH * respectively
• 30-day 25-delta skew (C-P) for BTC and ETH is at 1.32% and -0.79% respectively
• The futures market witnessed $92M worth of liquidations, with short positions representing 52.6% of the total.

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

The 7-day ATM IV continues to rise, reaching 40.97%, as the market increases in interest on instruments that hedge for potentially large volatilities as BTC break through the current trading range. 30-day ATM IV, on the other hand, remains relatively flat and has yet to be impacted by the short-term volatilities.

Both BTC and ETH continue to exhibit a contango term structure. There were no significant changes observed between the mark and shadow IVs over the past day, except for slight variations in the 3-day and 10-day contracts.

Analyzing the BTC Constant Maturity Skew (P-C) at 25 Delta, both the 7-day and 30-day skew have further declined into negative territory, reaching a put-call skew of 1.41% and 1.68%, respectively. This indicates a slightly more positive market sentiment as the flow for call options increases.

During the previous US trading session, @Paradigm reported the top BTC structure to be the purchase of 624x 28-Jul-23 $28K/$33K Bull Risk Reversal, the sale of 500x 28-Jul-23 (tied) Call, and the purchase of 312x 28-Jul-23 $29K/$33K Bull Risk Reversal, which demonstrates investors' optimism regarding BTC's price movements by the end of the month.

Crypto Technical Analysis

BTC displayed frequent price spikes on the 1-hour chart, often followed by swift drops, indicating active trading within the range of $31K resistance and $30K support. Traders capitalize on these fluctuations, contributing to a solid demand base within the consolidation range.

On the 4-hour chart, ETH has taken a downturn, falling below the $1.9K level after a short-lived rally of 1% the last night. This $1.9K threshold has now established itself as a crucial resistance point for ETH. If ETH struggles to breach this level, we may observe a further trend toward the $1.8K support.

On the daily chart, MATIC has shown a promising shift in trend as it breaks out of the descending channel, signaling a potential end to the previous downtrend. Furthermore, the RSI reached extreme oversold levels in mid-June, and the bullish crossover above the 50-day moving average provides additional confluence for a potential bottom and price reversal.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• South Korea asks banks to prepare $4 bln to support credit union -sources

• China's deflation pressure builds as consumer prices falter

• Morgan Stanley hires JPMorgan's North America M&A head -sources

• Fed's Mester: More hikes needed to bring inflation back down to target

• US House hardliners step up spending pressure as showdown looms

• Ukraine's NATO membership path: Allies wrangle, Kyiv sees progress

• UK's Hunt says government and BoE will tame inflation

• NY Fed survey finds waning near-term inflation expectations

• SVB Financial sues FDIC to recover $1.93 bln seized in bank rescue

• Countries repatriating gold in wake of sanctions against Russia, study finds

• Bank of Canada seen hiking rates quarter point to tame stubborn inflation

• Japan logs current account surplus for fourth month as trade gap narrows

Crypto

• Twenty-four central banks will have digital currencies by 2030 - BIS survey

• Pink, Pussy, Venom, Inferno — Drainers coming for a crypto wallet near you.

• Arkham on-chain ‘Intel Exchange’ labeled ‘snitch-to-earn’ by Crypto Twitter.

• BOE governor trashes crypto, stablecoins in favor of ‘enhanced digital money’.

• US lawmakers allege CCP connection in calling for SEC, DOJ investigation of Prometheum.

• Connext founder proposes ‘Sovereign Bridged Token’ standard after Multichain incident.

• Parliamentary report recommends Canada recognize, strategize about blockchain industry.

• Grayscale lawyers refer to SEC allowing Volatility Shares’ investment vehicle in push for ETF.

• Legal proceedings start for Terraform Labs co-founder in South Korea: Report.

• 48% fewer new crypto coders last year: Report.

• Mantle Network is voting to form a $200 million ecosystem fund

Deal Flow

• Crust Network Secures Millions in Investment from DWF Labs

Yours sincerely,
Treehouse Research 🌳