CPI Prints Affirmed Bullish Sentiment; BTC Whale Transaction Regains to pre-FTX level

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• CPI prints affirmed bullish sentiment; dollar weakness extends and risk assets flourished (more in Macro & TradFi)
• DCG is considering to sell its venture capital portfolio to partially cover Genesis $3B debt, according to Financial Times (more in DeFi & CeFi)
• $1M+ in BTC transaction regains to pre-FTX contagion levels (more in On-Chain)
• Carry collapses as RV makes a move up (more in Crypto Derivatives)
• BTC hits $19K after its five-day winning streak (more in Crypto Technical Analysis)

Macro & TradFi

The heavily anticipated US CPI data strike precisely at market expectation (actual 6.5% YoY vs consensus 6.5% YoY), leaving markets with only mild gains at close after wild swings intraday. Asia markets look set to open with a tailwind as Australian shares already opened higher and HK futures point to positive opening. US President Joe Biden is facing investigations on misclassification of confidential documents, as a second set of classified files were found inside the garage area of the president’s Delaware residence.

Risk assets rallied into CPI print at 930pm SGT last night and swung in a W fashion afterward, only to close with mild gains in major US indices: NASDAQ closed up 0.46% after trading in over 2% intraday range, SPX added 0.32% and DOW 0.59%. US Treasury yields and US dollar index showed firmer signs of market’s conviction on Fed’s upcoming slowdown of hikes; 10-year yield traded in a 16bps range before closing 8bps tighter, while JPY rallied 2.43% against USD leading the major non-dollar currency pack. Both oil benchmarks rallied ~1%.

DeFi & CeFi

• DCG considering the sale of its venture capital portfolio to offset Genesis $3B debt: FT
• Polygon plans hard fork upgrade to address reorgs and gas fee spikes
• Crypto lender Nexo subject to investigation in Bulgaria over alleged money laundering and tax violation
• Crypto derivatives exchange Blofin launches
• a16z launches testnet $ETH claim page to offer testnet $ETH
• SBF denies stealing FTX funds and blames “targeted attack” from Binance in new Substack post
• Optimism completes upgrade of Optimism’s Goerli testnet to Bedrock, inching closer to the creation of OP stack

According to Financial Times, Digital Currency Group (DCG) is reportedly looking to sell some of its venture capital portfolio holdings, valued around $500M. The assets sales will be used to offset the $3B debt owed by DCG subsidiary, Genesis. Most of the assets in the portfolio are illiquid and will likely take some time to offload. Its portfolio includes prolific names like Coindesk, Coinbase, Kraken, Blockchain.com, Dune, Etherscan, Fireblocks, The Graph, among many others.

On-Chain

Looking on-chain, the resumption of November 2022 levels for transactions involving $1 million or more in BTC indicates that whales are starting to take an interest in the market and will likely continue to fuel its ascent, marking a probable market bottom.

Elsewhere, ETH MVRV (1d MA) just reached a 3-month high of 1.053. The previous 3-month high of 1.051 was observed on 05 November 2022.

Crypto Derivatives

• BTC and ETH funding rate turns positive
• 30-day ATM IV fell for BTC to 47.38% while rising to 60.16% for ETH
• 30-day 25d put skew further eased for BTC to 0.57% and further tightened on ETH to -5.93%

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

For futures, total liquidations came in at $208.70M, with the majority coming from shorts at $119.43M.

On the options front, IV rose across the board as markets rallied off a consensus CPI print. Term structures of both majors are still in steep backwardation for the front end of the curve as near-term IV continues to catch a bid, while the curve continues flattening for medium to longer dated expiries. The 7-day 25d put skew goes deeper into positive territory for BTC, as the CPI print continues to add fuel to the rally. Post FOMC, carry on both BTC & ETH has collapsed to 14.37% and 16.48% as RV has spiked after being repressed for a long period of time.

On the flow front, BTC saw mixed flows as both bull and bear call spreads were the most bought structures over the past 24 hours. ETH saw more topside flows as bull call spreads and long ratio call spreads were the strategies of choice. Trades seem to expect more volatility and upside in the near term, as the reduction in positive gamma exposure at each strike seems to suggest large price fluctuations are becoming more probable (@blofin).

Lastly, the VIX puked to 18.83 as major indices rallied off the CPI data.

Crypto Technical Analysis

Onto TA, BTC had a strong performance on CPI day as price soared by 5.2% yesterday. This marks the fifth consecutive winning streak for Bitcoin, its longest run since FTX implosion. Upon the release of CPI data, price swung lower before recovering and even breaking higher to $19K resistance level. Price has now retreated to $18.8K and may look to consolidate in near-term as the weekend approaches.

Similar to BTC, ETH experienced a run-up prior to the CPI release before climbing even higher after a short retreat, capping off a volatile session. Overall, ETH rose about 1.9% and will likely consolidate around the $1.39K-$1.4K zone before its next decisive move.

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Daily Readings

TradFi

• IMF chief expects to keep 2023 global growth forecast steady at 2.7%

• Anti-ESG drive in U.S. could have cost taxpayers up to $708 mln - study

• Instant View: U.S. consumer prices fall in December

• Stocks rise, dollar stumbles after U.S. inflation data

• Britons splurge at Christmas but retailers brace for tougher 2023

• New economic 'regime' challenges central bankers to keep pace

• BOJ faces further test to its yield control as inflation creeps up

• China consumer inflation accelerates in Dec; PPI falls with soft demand

Crypto

• U.S. securities regulator charges Genesis, Gemini with unregistered offerings

• Bored Ape Collections Pump Ahead of Upcoming Sewer Pass NFT Mint.

• Crypto Markets Today: Bitcoin Tops $19K, Blockchain.com Cuts Jobs, Sam Bankman-Fried Blogs.

• SEC Alleges Gemini, Genesis Sold Unregistered Securities.

• Polygon’s Blockchain to Undergo Hard Fork.

• Canadian Crypto Exchanges Coinsquare, WonderFi in Advanced Talks to Merge: Bloomberg.

• Unstoppable Domains and Ready Player Me Team Up to Create Interoperable Metaverse Identities.

• Crypto Lender Genesis Owes Creditors Over $3B: FT.

• Crypto Lender Nexo Targeted in Bulgaria Probe Into Alleged Money Laundering, Tax Violations.

• Breaking: DCG owes creditors over $3B, considering $500M VC portfolio sale.

• Wyre lifts 90% customer withdrawal limit after securing new funding

Deal Flow

• Crypto Market Maker CyberX Gets $15M From Foresight Ventures.

• Alkimiya Raises $7.2M Funding Round to Grow Cash Flow Hedging Protocol for Miners, Stakers.

• Canadian Crypto Exchanges Coinsquare, WonderFi in Advanced Talks to Merge: Bloomberg.

Yours sincerely,
Treehouse Research 🌳