Dogecoin Surges as Elon Musk Cements Control of Twitter; Earnings Session Buoyed Stocks, PCE Aligned With Expectations

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• UN, Turkey, and Ukraine push ahead with Black Sea grain deal after Russia suspends its participation; PCE matched expectation, edging lower from August (more in Macro & TradFi)
• DefiLlama launches NFT lending protocol LlamaLend; Dogecoin surged more than 150% in the past week (more in DeFi & CeFi)
• Exchange Inflow Volumes have risen with price, gesturing potential selling pressure (more in On-Chain)
• BTC front-end of the term structure flipped into backwardation as FOMC nears (more in Crypto Derivatives)
• ETH exhibiting pre-merge strength against BTC (more in Crypto Technical Analysis)

Macro & TradFi

GM! Japan’s September factory output posted its first fall in 4 months due to rising costs of raw materials. Factory output fell 1.6% vs. a forecasted fall of 1%. On the other hand, the third-largest economy saw retail sales grow 4.5% against a 4.1% forecast. The government has announced a stimulus package of 39 trillion Yen ($264B USD) to support the economy.

Elsewhere, the United Nations, Turkey, and Ukraine are proceeding with the Black Sea grain deal despite Russia suspending its participation in the agreement. In the US, the Fed’s core inflation indicator, the PCE index rose 0.5% in line with expectations meanwhile, consumer spending in the US rose 0.6% last month vs. a 0.4% forecast.

On Friday, Wall Street jumped sharply to end the week higher ahead of the Fed meeting on 2 November as Apple's earnings report fueled investors’ risk appetite. The S&P 500 and NASDAQ closed their second consecutive week in the green after all 3 indices saw more than 3% gains. 10Y Treasury yields picked up on Friday after falling throughout the week, as it now sits at 4.03%. WTI was down 1.85% on Friday.

Economic Calendar for the Week:

• Monday - Chinese Manufacturing PMI, Euro CPI
• Tuesday - Caixin Manufacturing PMI, RBA Interest Rate Decision, UK Manufacturing PMI, US ISM Manufacturing PMI, US JOLTs Job Openings
• Wednesday - German Manufacturing PMI, US ADP Non-farm Employment Change, US Crude Oil Inventories, FOMC Meeting
• Thursday - US ISM Non-Manufacturing PMI, BOE interest rate decision
• Friday - US NFP, US Unemployment Rate

DeFi & CeFi

• DeFi TVL up 1.39%; Ethereum TVL up 0.42%
• Aptos ecosystem NFT marketplace Souffl3 closes $2M seed round
• Sui Network launches Sui Foundation
• DefiLlama launches NFT lending protocol LlamaLend
• Harmony selects LayerZero as its partner to resume the Horizon Bridge
• Sei Network announces that 1% of tokens will be allocated to incentivized testnet
• Dogecoin is now the 8th largest cryptocurrency by market capitalization as it surged 150% in the past week

LlamaLend is an NFT lending protocol that allows borrowers to borrow $ETH at a fixed interest rate against their NFTs. Lenders can lend against any NFT collection, create their own pools, and select the LTV, maximum loan duration, and the interest rate they want to pay. Borrowers can borrow for as long as they want and receive $ETH equal to the minimum floor price over the last 7 days.

Elsewhere, DOGE has soared dramatically in the last week, rising from $0.0594 to a monthly high of $0.15 on Sunday. DOGE appears to be rallying on news of Elon Musk's acquisition of Twitter. Elon Musk has previously stated that the token will be used to limit spam and bots on Twitter, as well as charge users for their Tweets. However, nothing has been confirmed, leaving room for speculation and volatility.

On-Chain

BTC's Exchange Inflow Volume (7d MA) has reached a one-month high of $28.3 million signaling a higher probability of selling pressure moving forward. Similarly, Exchange Inflow (mean) has risen and with Ethereum prices have been bullish recently, the deliberate move upwards during the bear market could be signs of exit moves before a bigger fall.

Crypto Derivatives

• Funding rate turned positive for BTC perps and remained positive for ETH perps
• 30-day IV increase for BTC and ETH to 54.5% and 78.3% respectively
• 30-day 25d put skew eased in magnitude for BTC to -0.5% while tightening for ETH to -2.1%

Total liquidation totaled in the past 3 days amounted to $771.04M, with $457M of that being short liquidations on Saturday.

On the options front, term structure for BTC remains in contango, with a kink in the month of November as FOMC nears on 2 November. Meanwhile, for ETH, term structure flattens post-November but remains in contango. Put skew continues to ease for BTC and ETH while briefly turning positive on Saturday. Put-Call ratio for BTC and ETH decreased to 0.67 and 0.65 respectively.

On the flow side, popular traded structures include reverse iron condor for BTC while ETH sees long strangle and bull diagonal spreads (calls). Flows continue to exhibit bullish sentiment for both BTC and ETH with calls spread being purchased through Paradigm.

Crypto Technical Analysis

BTC closed 1.66% higher over the weekend at $20,631. On the H4, it found support at 20K on Friday which has historically proven to be a key level for BTC. However, it was unable to close above the $21,050 resistance. A close above $21,050 could lead to a move up to the $21,400-$21,700 zone.

On the other hand, ETH closed 4.99% higher over the weekend at $1589.90. On the H4, it found support at $1480 as it bounced off the level on Friday. Over the weekend, it attempted to break above the $1660 level but failed. A close above $1660 could lead a move up to $1757.

Meanwhile, for ETHBTC, it has managed to close above the key level of 0.0769 on Saturday, which it had last done on 13 September. It retested the level on Sunday and was still able to remain above it. Should it continue to show strength, we could witness a move up to the pre-merge level of 0.0811.

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Daily Readings

TradFi

• Japan's September factory output posts first fall in four months

• ECB's next rate move likely between 50 and 75 bps, Knot says

• Morning Bid: Fed up? Stocks up!

• Brazil's Lula defeats Bolsonaro to win presidency again in stunning comeback

• Goldman Sachs sees Fed rates peaking at 5% in March, Bloomberg reports

• Saudi Shares fall on weak earnings, volatile oil

• Stock futures are little changed with Dow on track for best month since 1976.

• Asia-Pacific markets rise ahead of China factory activity data.

Crypto

• Surging Popularity of Ethereum Staking Keeps Lid on Yields.

• FTX CEO dissects Mark Zuckerberg's intent to pump $10B/year into Meta.

• The Merge brings down Ethereum’s network power consumption by over 99.9%.

• Terra co-founder Do Kwon faces $57-million lawsuit in Singapore.

• Crypto exchange Coincheck plans Nasdaq listing in July 2023.

• Binance may form a team to support Twitter’s blockchain efforts.

• The week in markets: Crypto prices soar in value and cause billions in liquidations

• Cosmos to vote on new security model for network's Hub next week

Yours sincerely,
Treehouse Research 🌳

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