🌳China's Economy Shows Signs of Recovery; SEC Chair Gensler Advocates Crypto Regulation in Senate

12 Sep 2023, Tuesday

2:48 AM

🌳China's Economy Shows Signs of Recovery; SEC Chair Gensler Advocates Crypto Regulation in Senate

BTC

ETH

S&P Futures 500

$25,205.50

$1,557.75

$4,482.50

(-1.90%)

 (-3.17%)

(+0.43%)

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

GM Treehouser 🌳

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August 2023 Market Recap

Our Daily View

What We Are Covering Today

  • China's economy rebounds; European Commission lowers EU growth forecasts amid challenges (more in Macro & TradFi)
  • SEC Chair Gensler pushes for crypto compliance; FTX court filing reveals $7B in assets, bankruptcy process to be completed by Q2 2024 (more in DeFi & CeFi)
  • Realized Profit and Loss reach 2020-like levels; 83.7% of Short-Term Holdings in the red (more in On-Chain)
  • BTC's implied volatility spikes; term structure suggests anticipation of major economic announcements (more in Crypto Derivatives)
  • BTC faces significant decline, tests support; ETH's drop underscores potential further bearish trends (Crypto Technical Analysis)

Macro & TradFi

China's economy is displaying signs of recovery after a substantial downturn, marked by improving credit demand, a decline in deflationary pressures, and a strengthening yuan. Recent measures aimed at supporting the real estate market seem to be driving increased household demand for mortgages and corporate loans, as evidenced by robust credit data released on Monday. Furthermore, consumer prices have returned to positive territory, albeit modestly, following a decline in July, and factory-gate deflation has moderated. The CSI 300 Index surged by 0.7% on Monday, breaking a four-day losing streak, while the yuan staged a recovery after reaching its weakest level against the dollar since 2007.

In other news, the European Commission recently revised its growth forecasts for the EU, projecting an expansion of only 0.8% in 2023 and 1.4% in 2024, notably down from its May predictions. This slowdown is attributed to factors such as high consumer prices impacting spending, an expected contraction in the German economy this year, and challenging economic conditions, including a downturn in manufacturing and weakened trade with China. Concurrently, the European Central Bank faces a critical decision on whether to raise interest rates to manage rampant inflation, which, though reduced from last year's peak, remains above target levels. These shifts in the EU's economic landscape underscore the mounting pressures on policymakers to stabilize growth and inflation.

Yesterday, U.S. stocks experienced an upswing, prominently driven by Tesla, which surged by 10% following a positive report from Morgan Stanley. The investment bank suggested that Tesla's Dojo supercomputer could enhance the automaker's market value by nearly $500B, primarily by supporting its ventures into robo-taxis and software services. The DJIA climbed by 0.25%, the S&P 500 recorded a 0.67% increase, and the NASDAQ registered sharp gains of 1.14%. The focus for this week lies on the upcoming consumer price index and producer price index reports, scheduled for Wednesday and Thursday, respectively.

DeFi & CeFi

  • SEC Chair Gensler pushes for crypto compliance ahead of Tuesday hearing
  • FTX court filing reveals $7B in assets, bankruptcy process to be completed by Q2 2024
  • Celsius successor taps former Algorand, WeWork and UBS execs for new board
  • India to decide on its crypto stance in the coming months
  • PayPal introduces crypto off-ramp feature
  • Friend.tech resurges & surpasses OpenSea’s trading volume

SEC Chair Gary Gensler is set to address the Senate Banking Committee, emphasizing that many cryptocurrencies should fall under the SEC's jurisdiction. Gensler contended that cryptocurrencies should adhere to the same regulations as securities, such as stocks, citing widespread noncompliance with securities laws in the crypto industry. He drew parallels to the 1920s before federal securities laws were established and highlighted the SEC's enforcement actions to hold wrongdoers accountable and protect investors. Gensler is expected to face questions about recent court decisions, including Grayscale's victory in having the SEC re-review its bid for a Bitcoin ETF and Ripple Labs' partial win in a lawsuit regarding the XRP token. He stated that he would not discuss ongoing litigation in his testimony.

In other news, FTX aims to complete its bankruptcy process in the second quarter of the next year, according to court filings made on September 11. Over 75 firms, including existing crypto exchanges and financial buyers, have expressed interest in FTX. Notably, the defunct exchange has disclosed its assets in the amount of $7B. Its portfolio of digital assets totals around $3.4B, with the top assets being $1.16B in SOL, $560M in BTC, $192M in ETH, and $119M in XRP. FTX also holds hundreds of millions of dollars comprising over 1,300 lesser-known assets. The firm has 438 venture investments totaling approximately $4.5B, including equity investments in companies like Yuga Labs, Chipper, Toss, and Genesis Digital Assets. The company owns 38 Bahamian properties valued at around $200M. It also maintains a securities portfolio worth $529M, primarily held with firms like Grayscale, Bitwise, and BlackRock.

On-Chain

Turning our focus to on-chain data, as reported by @Glassnode, the cryptocurrency markets have displayed notable apathy, with realized volatility remaining subdued. On-chain realized values have maintained an exceptional degree of calm, with minimal profit or loss being recorded, indicating that the majority of Bitcoin transactions are occurring close to their acquisition price. The Realized Profit and Loss metric currently mirrors the levels observed in the 2020 market, at approximately $156M, a period characterized by prolonged sideways price movement, vastly different from the bull market seen in 2021.

At the same time, by utilizing the True Market Mean price of $29.6K, Short-Term Holders find themselves holding large unrealized losses. The Short-Term Holder supply in Profit metric reveals that a significant majority of their holdings, approximately 83.7%, are currently out-the-money, leaving only 16.3% of their holdings in profit.

Crypto Derivatives

  • Funding rate flipped to positive on BTC while it remains negative on ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC rose to 43.61%, while it rose to 41.79% for ETH.
  • 30-day 25-delta skew (C-P) rose on both BTC and ETH to -3.42% and -4.38%, respectively.
  • The futures market witnessed $163.53M worth of liquidations in the last 24 hours, with longs representing 88.74% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

21.25%

SOL

OKX

dYdX

14.34%

BNB

Bybit

Binance

6.62%

LTC

OKX

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.

Bitcoin's 7-day implied volatility notably surged, reaching a peak of 35.17%. Furthermore, the 30-day implied volatility revisited levels last seen on September 4th, possibly in reaction to discussions surrounding FTX liquidations and the macroeconomic news releases.

Looking at the term structure of BTC, implied volatility increased slightly across all tenors, which shows us that the market is anticipating volatility to come in later this week, with the US releasing August CPI and PPI data on Wednesday, and the ECB announcing its interest rates decision on Thursday. In general, the structure continues to maintain a contango shape.

Elsewhere, the 30-day (call-put) skew on BTC rose slightly to -3.42%, This suggests that traders are still largely bearish on the outlook of BTC.

Lastly, @Paradigm highlighted distinct trading strategies this week. Key BTC trades included a 625x 14-Sep-23 $24.5K/$23.5K put spread purchase and a 525x 27-Oct-23 $30K call acquisition. For ETH, the focus seemed to be on hedging, with noteworthy trades such as the 2,961x 27-Oct-23 $1.6K/$1.4K put spread buy and a prominent 2,000x 29-Sep-23 $1.4K put purchase.

Crypto Technical Analysis

Moving on to technical analysis of BTC's daily chart, there was an observed pronounced 2.74% decline in its price yesterday. This drop pushed BTC toward the depths of its current support range, spanning between $25.8K and $24.8K, following its inability to surpass the upper channel boundary late last week. The established resistance remains tenaciously at $28K. A breach of the present support could precipitate a potential slide to the subsequent significant support threshold at $21.1K, translating to an 18.14% setback from its current position at $25.1K. Concurrently, the RSI has receded to 33.13, veering into the oversold territory. Furthermore, BTC's price has exited its horizontal channel, which has been intact since August 17th, indicating that bearish sentiment may be gaining traction.

ETH, on the other hand, registered a notable 5.29% decline in the past 24 hours, pushing its price below the previously established support of 1.6K, which now serves as a critical resistance point. This movement also represents a significant breach of the descending triangle pattern identified earlier this week, suggesting potential further bearish trends in the short term. The forthcoming support for ETH stands at 1.47K, signifying a potential 5.23% descent from its current position. Concurrently, the RSI has plummeted to 26.51, indicating that ETH is venturing into oversold territory.

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