DCG’s Growing List Of Trouble; Huobi Lays Off 20% Workforce Amid FUD; Market Regained Strength On Slower Wage Growth

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Headline NFP beat with cues on slower US wage growth led to global rally (more in Macro & TradFi)
• Huobi to cut 20% of its workforce as reserve assets suffer huge outflows; internal transfer between DCG and Genesis probe by DOJ and SEC (more in DeFi & CeFi)
• Decrease in numbers of stablecoin whales account (more in On-Chain)
• IV moves higher for BTC and ETH as markets rally (more in Crypto Derivatives)
• BTC and ETH continues on an upward trend (more in Crypto Technical Analysis)

Macro & TradFi

Strong NFP (223k actual vs 200k consensus), slower wage growth (hourly wage growth 4.6% YoY actual vs 5% consensus) and downward-revised previous month NFP (263k revised down to 256k) revived market’s expectation of a scenario of US economy’s soft landing while inflation drifts lower as wage growth slows down. Equities and bond prices rallied while the dollar weakened. China officially removed all border quarantine measures today for inbound travelers after almost 3 years of strict measures making trips to China unbearably cumbersome; the state insurance failed to negotiate with Pfizer to include Paxlovid into insurance-covered medication but said talks will continue.

All three US indices jumped after NFP data delivered an upside beat on headline data but cues for optimism in the details. NASDAQ +2.5%, SPX +2.1% and DOW +2%, while DXY sold off almost 1.2%. US Treasury bonds had a wild session with 10-year benchmark yield trading in a 25bps intraday range; it closed 20bps tighter around 3.55%. Oil was stable.

DeFi & CeFi

• Ethereum developers to launch public testnet for Shanghai/Capella upgrade in February, mainnet in March
• Mastercard partners with Polygon to launch Web3 musician accelerator program
• DCG is allegedly facing US court investigation over internal transfer
• Huobi to cut 20% of its workforce, reserve assets shrunk considerably
• Metamask remove Wyre from its mobile aggregator
• Kava 12 to launch on 19 January, developing its on-chain DAO
• RPG chain game Illuvium launches private alpha for its mobile and desktop game Zero

CEX Huobi announced that it plans to lay off 20% of its workforce, a week in 2023. This comes after year-end bonuses were cancelled. Huobi’s assets under reserve suffered a huge hit as well. On Friday, its reserves saw an outflow of more than $85M. In addition, $HT (Huobi’s exchange token), which made up 30% of their entire reserve, also suffered a huge drop in price. Despite the ongoing negative reports on Huobi, Justin Sun has released multiple Twitter posts that Huobi’s business remains strong and safe. The Huobi advisor has also deposited $100M worth of stablecoins onto the exchange.

Troubles continue to pile on for DCG as there are reports of early-stage inquiries into the financial transactions between DCG and its Genesis unit from DOJ and SEC. The prosecutors with the DOJ’s Eastern District of New York office have requested interviews and documents from DCG and Genesis while the SEC is also looking to investigate. The investigation, however, remains private. Both DCG and Genesis have yet to be accused of any criminal conduct by authorities.

On-Chain

Looking on-chain, BTC Hourly Median Transaction Volume (change-adjusted) (7d MA) reached a 2-year low of $259.22.

Elsewhere, the amount of Supply Last Active 2y-3y (1d MA) just reached a 1-month high of 9,816,160.365 ETH and can be indicative of renewed interest in on-chain

Crypto Derivatives

• BTC and ETH funding rate remain positive
• 30-day ATM IV rose for both BTC and ETH to 38.02% and 50.29% respectively
• 30-day 25d put skew eased for BTC to -2.92% while tightening on ETH to -6.66%

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

For futures, total liquidations came in at $136.53M, with the majority coming from shorts at $126.91M.

IV slightly rose across the curve for both BTC and ETH, as IV caught a bid while markets rallied over the weekend. Term structures are still in contango but continue to flatten for longer-dated maturities. VRP widens for both BTC & ETH to 19.54% and 20.0% respectively, as RV remains depressed.

On the flow front, front-end vol buying continued on Friday, with large clips of 20 Jan and 27 Jan calls being purchased (@tradeparadigm). BTC and ETH were dominated by bullish flows, with bull diagonal spreads being the most heavily utilized strategy in the past 24 hours. Traders seem to be betting on continued bullish sentiment in the medium term as the macro environment seems to be settling down.

Lastly, the VIX fell to 21.14 from 22.70 as US indices rallied on Friday.

Crypto Technical Analysis

Onto TA, BTC has been on an upward trend since the start of the year with higher highs and lows. It has now broken through the previous price resistance of $16,920 and with the RSI above 70, the momentum is in favor of the bulls. The price to watch out for is the $17,220 resistance.

Meanwhile for ETH, it has also been trending upwards with higher highs and lower lows with a distinct spike up and sideway movement each time. The RSI being relatively high at 68 might indicate further upside momentum in the short-term. With ETH being on an upward trend, the next price to watch out for is the $1,325 resistance level.

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Daily Readings

TradFi

• Ant Group says no plan for IPO, focusing on business optimisation

• UK becoming less attractive for investment, manufacturers warn

• Morning bid: Soft landings and re-openings

• Asia shares rally on U.S. rate hopes, China reopening

• Morning bid: Soft landings and re-openings

• Fed faces 'difficult' call to avoid overdoing rates shock, Romer says

• Argentina and China formalize currency swap deal

• Asia-Pacific markets rise as China reopens borders with Hong Kong.

Crypto

• Digital Currency Group under investigation by US authorities: Report.

• Ferrari cuts ties with crypto sponsor ahead of 2023 Formula One season.

• FTX asset sales challenged by U.S. Trustee: Report.

• Hedge funds subpoenaed by US prosecutors as Binance probe unfolds: Report.

• SuperRare cuts 30% of staff as growth slows during crypto winter.

• Mastercard partners with Polygon to launch Web3 musician accelerator program.

• $3.9 billion lost in the cryptocurrency market in 2022: Report.

• Silvergate gets more bad news as Moody’s slashes its ratings.

• Solana Foundation RPC endpoints go offline

• Ethereum developers eye February public testnet for Shanghai upgrade

Yours sincerely,
Treehouse Research 🌳