🌳Chinese Stocks Experienced a Downturn after PBOC's Conservative Interest Rate Adjustments; Coinbase Acquires Minority Stake in Circle

22 Aug 2023, Tuesday

3:07 AM

🌳Chinese Stocks Experienced a Downturn after PBOC's Conservative Interest Rate Adjustments; Coinbase Acquires Minority Stake in Circle

BTC

ETH

S&P Futures 500

$26,097.75

$1,666.75

$4,407.50

(-0.08%)

 (-0.86%)

(+0.46%)

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

GM Treehouser 🌳

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What We Are Covering Today

  • China's restrained monetary moves unsettle markets; UK core inflation eases to 6.8% in July, contrasting last week’s inflation data (more in Macro & TradFi)
  • Coinbase gets stake in Circle, adds 6 new blockchains; Binance limits payments in Europe (more in DeFi & CeFi)
  • Growing confidence in $OP, 5th most active day in 2023; vitalik.eth 600 $ETH transaction to Coinbase (more in On-Chain)
  • Minimal change in term structure with 7-day C-P skew seeing a gradual recovery (more in Crypto Derivatives)
  • BTC and ETH navigate tight post-dip ranges; resistance and RSI levels signify recovery potential (more in Crypto Technical Analysis)

Macro & TradFi

Chinese stocks declined sharply after the People’s Bank of China (PBOC) announced smaller-than-anticipated interest rate adjustments, with the one-year loan prime rate dropping by only 0.1% to 3.45% and the pivotal five-year rate, crucial for mortgages, remaining unchanged at 4.2%. This restrained monetary policy stance has diminished investor confidence in a stimulus-driven economic rebound, especially as major property developers like Country Garden Holdings grapple with liquidity issues. With leading indices such as Hong Kong’s Hang Seng Index shedding 1.8% and UBS economists revising China’s 2023 GDP growth projection down to 4.8%, concerns intensify regarding China's capability to return to its pre-pandemic economic vigor.

Elsewhere, the Office for National Statistics (ONS) revealed that core UK inflation, employing a refined statistical analysis, declined to 6.8% in July from 7% in June and 7.3% in May. This contrasts with last week's traditional inflation data showing 6.9% in July. This new ONS methodology evaluates the "common trend component" of price increases across all products and services. Interestingly, restaurant prices, reflecting broad economic factors such as rent and labor costs, have emerged as strong indicators of underlying inflation trends. This data could buoy the Bank of England and government's hopes for more predictable inflation patterns for the year.

Yesterday, US equities extended their losses for a third session as investors evaluated earnings and economic data amid rising interest rates. DJIA dropped by 0.11%. In contrast, the S&P 500 and the Nasdaq Composite rose 0.69% and 1.56% respectively. US government debt sold-off, pushing yields on benchmark Treasuries to a 16-year peak, with the 10-year note reaching 4.35%, as investors anticipate potential policy shifts from the upcoming Jackson Hole conference. Meta advanced by 2.35% upon revealing plans to launch the web version of Threads, while Tesla recovered with a 7.33% rise after its earlier slump last week due to further price reductions in China.

DeFi & CeFi

  • Coinbase gets stake in Circle, USDC adds 6 new blockchains
  • Binance limits payments in Europe
  • Friend.tech gains 100k users in days, including NBA influencers
  • Bitget tightens ID requirements over fraud concerns

Cryptocurrency exchange Coinbase is acquiring a minority stake in Circle Internet Financial and dissolving their partnership in the Centre Consortium that issued USD Coin (USDC), the second-largest stablecoin. Consequently, Circle will take over USDC issuance and governance back in-house, while expanding its support to six more blockchains. The exact stake that Coinbase acquired was undisclosed and the acquisition was reportedly done without cash payments. Previously, Circle raised $400 million in a funding round last year with well-known investors like BlackRock and Fidelity.

Shifting our focus to Europe, Binance’s customers are reportedly facing challenges with fiat withdrawals due to problems with Single Euro Payments Area (SEPA) transfers. Binance has suspended euro withdrawals and deposits via SEPA due to issues with its payment provider, as acknowledged in a now-deleted tweet. Binance stated it is actively working to resolve the matter but didn't provide a specific timeline. The situation arose after Binance's current euro banking partner, Paysafe Payment Solutions, discontinued support for the exchange. Binance confirmed that SEPA services will continue until September 25 and assured users of alternative solutions before the service's end.

On-Chain

According to @santimentfeed, Optimism’s ($OP) price uptick in the last 24 hours coincided with a sudden surge of 22.9k daily active addresses, marking one of its most active days this year (5th highest). Equally compelling is the continued confidence shown by major holders (100k-1M $OP) who continue to maintain their positions, with their combined holdings valued at approximately $781.9M, being worth a remarkable three times greater than they did compared to a year ago. Such robust activity, particularly throughout the volatility over the last week, suggests growing confidence in $OP's market positioning and potential trajectory.

Recent on-chain data from @lookonchain spotlights activity from vitalik.eth, where a repayment of 251k $RAI on Maker followed by a withdrawal of 1,000 $ETH ($1.67M) took place. A 600 $ETH transaction was then made to Coinbase, which may indicate a strategic reallocation of assets or a broader portfolio rebalancing strategy. Given Vitalik's considerable influence, recent activity has the potential to further influence market sentiment, especially as it follows closely on the heels of intense market volatility.

Crypto Derivatives

  • BTC funding rates remain negative while ETH funding rates have turned positive in some exchanges.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped slightly after the sell-off, currently at 42.69% and 39.94%, respectively.
  • 30-day 25-delta skew (C-P) for BTC decreased further to -2.64% while that of ETH pulled back slightly to -5.30%.
  • The futures market witnessed $59.49M worth of liquidations since Friday with longs representing 70.8% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

14.61%

DOGE

dYdX

Bybit

12.77%

LTC

Binance

dYdX

12.37%

BNB

OKX

Binance

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 ATM IV continues to maintain its elevated state, even in the face of bearish momentum deceleration across the market. Currently, the 7-day and 30-day ATM IVs stand at 37.3% and 37.9%, respectively. These figures underscore a prevailing apprehension among traders regarding significant volatilities in the short term, a sentiment stemming from the recent market crash.

The term structures for both BTC and ETH persist in contango, revealing minimal shifts in IVs across the curve over the last 24 hours. A marginal decrease is observed in near-dated options, countered by a slight uptick at the other end of the curve.

Meanwhile, the 30-day (C-P) skews for BTC exhibit modest retractions, settling at -5.38, reflecting traders' steadfast embrace of bearish inclinations toward the token. Conversely, the 7-day skew demonstrates gradual recovery since the crash, presently resting at 4.58.

Lastly, @Paradigm reported that BTC structure flows showed mixed sentiments during the previous trading session in Asia and Europe. Some of the notable trading structures include the purchase of 225x 25-Aug-23 26500 Call, 200x 29-Dec-23 25000/27000 Strangle, and the sale of 150x 29-Dec-23 25000/30000 Strangle.

Crypto Technical Analysis

In our most recent 4-hour technical analysis of BTC, subsequent to its downturn on August 17th, the cryptocurrency has confined its trading activity within a narrow range. This range is delimited by the resistance zone spanning $26.5K to $26.8K and the foundational support level at $26K. As it currently hovers close to the $26K support, a potential rebound will likely confront the previously mentioned resistance band. With the RSI rebounding to 31.9, an inference can be drawn that BTC is gradually reinstating equilibrium within the broader market landscape.

Following its recent retracement, ETH has also been maneuvering within a constricted range, primarily oscillating between $1.66K and $1.69K. It is presently probing the $1.6K support, a level endowed with historical significance owing to its association with past troughs in April, as well as its transformation from resistance points during the span of January through March. Breaching this juncture could render ETH susceptible to a potential descent to $1.5K, connoting an approximate 10% downturn. In the event of a bullish reversal, resistance is anticipated around the $1.74K threshold. It's noteworthy that the RSI registers at 36.37, signifying a modest resurgence from the oversold territories, potentially heralding a shift in sentiment.

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