Coinbase Sues SEC After Months of Silence; First Republic Reignite Bank Fears

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.

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

Our Daily View

What We Are Covering Today

• Stocks record its biggest intraday drop in two months; First Republic weigh up $100B asset divestment (more in Macro & TradFi)
• Coinbase takes legal action against SEC for regulatory clarity on crypto industry; StarkNet shares roadmap for 2023; DFlow raises $5.5m to improve trade execution for retail traders (more in DeFi & CeFi)
• BTC dormant whales move $11M worth of transactions after 9 years of inactivity (more in On-Chain)
• Traders look to skew reversion trade with bullish risk reversal (more in Crypto Derivatives)
• Both BTC and ETH bounce off from their respective support zones and move towards the upside (more in Crypto Technical Analysis)

Macro & TradFi

US consumer confidence dropped to a nine-month low in April, with the Conference Board’s index falling to 101.3 from 104 in March, lower than economists' expectations. A measure of expectations also fell to 68.1, the lowest since July. While current conditions improved, consumers are turning pessimistic about the economy, with concerns about the labor market and inflation. The drop reflected a deteriorating short-term outlook and a decreasing share of consumers planning to buy household appliances or go on vacations.

Meanwhile, President Joe Biden has launched his bid for re-election, but the US economy teeters on the brink of recession and voters feel the pinch of inflation, putting a significant hurdle in his path to winning a second term. In his campaign video, Biden emphasized on the themes of democracy and fighting extremism, which was likely his team's strategy to edge out the expected Republican nominee, Donald Trump. Despite being the preferred candidate of the Democratic party, polls indicate that voters are hesitant to support a president who would be 86 years old by the end of a second term. Notably, Trump is only four years younger than Biden.

US stocks suffered their biggest drop in two months while Treasury yields fell after First Republic Bank's disappointing earnings and potential $100B asset sales revived fears of banking crisis and credit contraction. The S&P 500 lost 1.6%, DJIA fell by 1% and the Nasdaq Composite slid 2%. Bank shares fell broadly as the KBW Nasdaq Regional Banking Index fell 3.5% with First Republic shares plummeting by 49% by end of session. However, tech stocks rallied in after-hours trading, with Microsoft and Alphabet reporting better-than-expected earnings, helping to ease some investor concerns. The yield on 2-year and 10-year US Treasury notes dropped to 3.954 and 3.397% respectively. The dollar climbed, while oil fell and gold remained largely unchanged.

DeFi & CeFi

• Franklin Templeton OnChain U.S. Gov. Money Fund surpasses $270 million in AUM
• Coinbase takes another step to seek regulatory clarity from SEC for the crypto industry
• Web3 payroll solution Rise Works closes $3.8 million seed round led by Sion Global Capital and Polymorphic Capital
• Bitget releases updated $BGB whitepaper with new utilities and buyback/burn mechanism
• StarkNet publishes 2023 roadmap, focusing on performance and user experience
• National Policy Committee of the National Assembly of South Korea passes the Virtual Asset Investor Protection Act
• Tiger Brokers intend to apply virtual asset license in Hong Kong
• Web3 education company TinyTap raises $8.5M with participation from Sequoia China and others
• DeFi protocol DFlow raises $5.5M to bring payment for order flow to crypto
• ARPA Network secures multimillion-dollar investment from DWF Labs

Coinbase is taking legal action against the SEC to push for a response to its rulemaking petition for guidance on the cryptocurrency industry. The exchange seeks regulatory clarity and transparency for the public on permissible activities within the industry. Under the Administrative Procedure Act, the SEC is required to respond "within a reasonable time." Coinbase is not asking the court to instruct the SEC on how to respond but only to fulfill its legal obligation to provide a decision.

StarkNet, an Ethereum Layer 2 network, has shared its roadmap for 2023, which focuses on improving network performance and user experience to support an expected increase in users and developers. The upcoming release of StarkNet v0.12.0 includes significant throughput and latency improvements, and the introduction of Volition in v0.13.0 will dramatically reduce transaction costs by targeting the main component of transaction cost: Ethereum Layer 1 data cost. Additionally, faster finality will be achieved with the introduction of a fee market in v0.14.0 and shorter and fixed block intervals in v0.15.0. By the end of this year, the network’s base layer is expected to reach a healthy and stable state in terms of functionality, performance, and UX. In 2024, decentralization will become the network’s focus, both in its operation and decision-making.

DFlow, a DeFi order flow marketplace, has raised $5.5m in a financing round led by Framework Ventures, with other investors like Coinbase Ventures, Circle Ventures, and Wintermute Ventures. DFlow aims to improve the costly and low-quality execution process of retail crypto traders by enabling market makers to purchase order flow directly from wallet applications. DFlow's model is similar to the payment for order flow practice in equities markets but blockchain technology brings transparency to the process through visible market-maker auctions and an open-source reputation tracking algorithm to score market makers.

On-Chain

A BTC whale from the Satoshi era was observed to have woken up after 12 years of inactivity. On-chain analytics have shown that the whale has sent around 360 BTC to one address and the remaining 40 BTC to various others, totaling approximately $11M in value. According to the analysis by @Whale_Alert, there have already been 3 BTC whales that have been reactivated with a transaction outflow in the last week, indicating the potential that some of the long-term HODLers may be cashing out their profit.

BTC MVRV ratio has reached a new high in 11 months. MVRV has historically been excellent in identifying the tops and bottoms of the transitioning phase from a bear to a bull market cycle. The chart has shown that BTC is slowly moving away from the accumulation zone and towards the yellow line as people start to buy the dip in the market. Therefore, there is still room for BTC to grow later in the year before the 2024 halving (@cryptoquant).

Crypto Derivatives

• BTC and ETH funding rates remain positive
• 30-day ATM IV rose to 48.49% for BTC while falling to 52.10% for ETH
• 30-day 25-delta put skew eased to -0.39% for BTC while tightening to -4.09% for ETH

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

The futures market saw $77.86M in liquidations over the past 24 hours, with shorts accounting for the majority at $49.37 M.

In the options market, both BTC and ETH remain in contango while the IV falls across the curve for ETH. The skew between BTC and ETH seemed to diverge, BTC put skew eased to -0.39% while ETH put skew seemed to continue its post-Shapella trend towards put premium by hitting -4.07%. The 7-day variance risk premium remains relatively unchanged for BTC at 4.25% while flipping negative for ETH at -0.17%.

On the flow side, BTC volumes were mainly centered around end-of-month contracts on April puts and May calls. Looking into the 28 April contract for BTC, volume comes primarily from the $25K puts and $30K calls. As for ETH, despite the skew deeply favoring OTM puts, the sentiment around the 28 Apr contract seemed to be bullish on the $1.9K calls.

Noteworthy trades include 2 skew reversion trades with the buying of 625 BTC contracts of 26 May $25K/$30K bullish RR and 6.11K ETH contracts of 28 Apr $1.75K/$1.9K bullish RR being bought (@tradeparadigm).

Finally, the VIX spiked by 11.07% to 18.76 on recession fears regarding the First Republic.

Crypto Technical Analysis

On the TA front, BTC has held up well despite the drop in major US equity markets. On the 4H timeframe, the price has broken through the $27.8K support zone. If the bullish momentum continues, BTC will soon test the $28.7K strong resistance zone, which has been tested 5 times before, and was broken out earlier this month. This level also serves as the 50% Fibonacci retracement level from the recent dump, further reinforcing the resistance zone. The RSI has significantly increased as a result, currently at 61.9 for the 4H timeframe.

Similarly, ETH has followed a comparable price trajectory as BTC, with the price bouncing off the $1.83K support zone to the upside. Moving forward, the next resistance zone can be observed at $1.92K, which represents a further 2.5% upside from the current level. Zooming into the 1H timeframe, a broadening pattern can be observed as the market determines the short-term future direction of ETH price. There is also a minor resistance at the $1.88K level, which has not yet seen a clear breakout before moving towards the key resistance zones at the larger timeframe. The RSI, like that of BTC, is significantly higher than previous days, currently at 50.8 for the 4H timeframe.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• Wall St ends sharply lower, Treasury yields slide as recession fears mount

• First Republic Bank exploring up to $100 bln in asset sales - Bloomberg News

• Biden will veto US House Speaker McCarthy's debt bill if it passed Congress

• Texas Instruments forecasts downbeat second quarter on growing demand weakness

• NY Fed limits types of firms that can access its reverse repo facility

• TSX posts biggest decline in 6 weeks amid US bank jitters

• Microsoft results top forecasts, shares jump 8% as AI juices sales

• Google parent announces stock buyback, modest beat on ad sales

• Global retailers seek new ways to lure in shoppers as spending slows

• US new home sales soar to one-year high in March

• Japan's business services inflation hits 8-year high in fiscal 2022

Crypto

• NY Fed Policy Change Could Squash Stablecoin Issuer Circle’s Hope for Fed Access.

• UK FCA Wants to Work With the Crypto Industry to Develop Regulation, Executive Says.

• Europe ‘Ahead of the Game’ in Web3 After MiCA Law, U.S. House Finance Chair Says.

• Algorand Foundation Among Creditors Opposing Restructuring of Troubled Crypto Exchange Hodlnaut.

• Crypto Mining and Wallet Firm Poolin May Have Moved $150M in Bitcoin. CEO Disputes Data.

• Google Cloud to Help Web3 Builders Fast-Track Their Startups.

• Alchemy’s Venture Arm Wants to Align With 'Web3 Missionaries, Not Mercenaries’.

• Genesis Files for Mediator Assistance Over Amount of DCG Contribution to Reorganization.

• Pepe Coin’s Top Bull Also Has Millions in Shiba Inu, but Holdings Suggest Risk for Traders.

• Coinbase Asks U.S. Court to Force SEC Response to 2022 Rulemaking Petition.

• Majority of creditors want Hodlnaut liquidated.

• Google Cloud broadens Web3 startup program with 11 blockchain firms.

• Genesis settlement disrupted by new creditor demands, DCG says.

• Do Kwon seeks SEC charges dismissal as S.Korea rules LUNA a non-security.

• NFL crypto disaster was ‘hundreds of millions of dollars’ off target as NFT market collapsed

• Recursive looks to connect rollups with Eigen Layer-based Omni Network

• Ethereum DEXs attract most traders since 2021 as memecoin popularity soars

Deal Flow

• FTX's LedgerX Derivatives Exchange Sold to Miami International Holdings in Bankruptcy Auction.

• Binance.US backs out of $1B Voyager asset purchase, blames regulatory environment.

• S&P Global, Coinbase Back $6M Fundraise for Crypto Firm Credora.

Yours sincerely,
Treehouse Research 🌳