ETH Mainnet’s “Shanghai” Fork Targeted In March ‘23; SMBC Dipping Toes In Soulbound Tokens; Indices Rebound On Weakening PPI Data

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• US stock rebounded into Nov PPI tonight; China & HK stocks might rally more on Shenzhen/HK border reopening rumors (more in Macro & TradFi)
• Ethereum next hard fork “Shanghai” target release on March 2023, allowing withdrawals of staked ether; Japan bank SMBC plans to make its foray into Web3 by issuing Soulbound Tokens (more in DeFi & CeFi)
• Declining BTC and ETH supply and rising stablecoin supply suggest lower risk of selloff (more in On-Chain)
• IV falls across crypto and equities as risk assets edge higher (more in Crypto Derivatives)
• BTC and ETH show end of week strength, but can they reclaimed key levels by end of the week? (more in Crypto Technical Analysis)

Macro & TradFi

Global risk assets bounced back with China/HK equity indices again leading the push higher; HSTECH added 6% and HSI 2% amid more policy loosening around mask requirements in China and HK. Rumors are being thrown around that the borders between HK and Shenzhen (and potentially Macau) might be reopened next week, scrapping the quota system that has essentially halted tourism inflow from mainland China to HK. Chinese shares’ ADR index rallied 5.6% as well. The market will keep a close eye on Nov US PPI tonight.

US stocks bounced back after a 5-day losing streak; NASDAQ added 1.23%, S&P 0.79% and DOW 0.56%. On the M&A front, US FTC is reported to be blocking Microsoft’s pursuit to acquire Activision Blizzard, a deal worth potentially $69bn. US Treasury yields ticked up as risk-aversion demand faded; 10-year yields closed ~5bps wider, still below the 3.5% level, which might be a sign of the now-strong bid in duration in the face of US recession. Oil prices couldn’t follow equities higher, grinding to an almost flat close.

DeFi & CeFi

• Ethereum developers aim to complete next hard fork by March 2023
• Osmosis launches a protocol for stablecoin trading
• Blur to offer 50% refund to some NFT traders after ETH losses from UI’s bug
• Sumitomo Mitsui Financial Group (SMBC) plans to issue Soulbound Tokens
• WAVES fell upon investment warning announcement by Digitial Asset eXchange Alliance (DAXA)
• Ethereum Foundation to allocate $8.04M to ecosystem projects in 3Q22
• Telegram to allow no-SIM accounts by using blockchain-based anonymous numbers
• Sui to launch Community Access Program, allowing early access to $SUI

In its latest All Core Developers call, Ethererum next hard fork “Shanghai” has been scheduled to release in March 2023. The upgrade will include EIP 4895, which will enable Beacon Chain staked ether withdrawals. The developers will also address the implementation of EVM Object Format (EOF), a collection of Ethererum Improvement Proposals (EIPs) that upgrades the Ethereum Virtual Machine (EVM). However, if the implementation of EOF is too rushed by the next call planned in 5th January, it will be delayed to the fall.

Elsewhere, SMBC plans to explore the Web3 world by issuing Soulbound Tokens (SBT). SBT refers to a digital identity token that is designed to represent the identity or reputation of an entity. As such, it is non-transferable and can be used as authentication for various purposes. SMBC will partner up with HashPort to study the use cases of SBT.

On-Chain

Looking at on-chain, supply of BTC and ETH in circulation continue to hit lower lows, as seen in the graph. At the same time, Tether balances on exchanges continue to increase significantly suggesting large buying power on exchanges and lower risk of selloff due to lower amounts of circulating BTC and ETH ((@santimentfeed).

Crypto Derivatives

• Funding rate remains on BTC and remains positive on ETH
• 30-day IV rose for both BTC and ETH to 48.56% and 65.25% respectively
• 30-day 25d put skew eased for both BTC and ETH to -8.44 % and -10.04% respectively

For futures, total liquidations yesterday amounted to $40.93M, with $31.91M of that being long liquidations.

On the options front, IV fell across the board for BTC and ETH as markets rallied. Term structure remains in contango, with kinks on the 16 Dec maturities. Put skew also continued to ease higher on BTC and ETH.

On the flow side, bearish structures continued to dominate flows as short strangles and bear put spreads were heavily purchased on both BTC and ETH. Put spreads are currently the strategy of choice for block traders, as they adopt more conservative strategies as IV remains relatively low.

Lastly, the VIX ended its winning streak, dipping slightly to 22.28.

Crypto Technical Analysis

Looking at TA, BTC reclaimed $17K overnight but briefly stopped on its way up at $17.2K. The RSI on the H4 has moved up but continues to put in a lower high, maintaining its downward trend. On the daily, $17.4K looks to be the next level of resistance with support level at $16.7K. The RSI on the daily continues to show little momentum change as it hovers at the neutral level.

Looking at ETH, price moved similarly, but without reclaiming any significant levels. ETH moved up to $1,279 just above the high earlier this week of $1,277 but short of the high on Monday at $1.3K. As RSI on the H4 reverses its direction, the next key level for ETH would be $1.3K again.

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Daily Readings

TradFi

• Morning Bid: Markets eye China PPI, CPI

• China's November producer prices fall for second month

• U.S. SEC issues new guidance on disclosing crypto risks

• Yellen: U.S. can avoid recession, on 'right track' to lower inflation

• ECB to raise deposit rate by 50 bps on Dec 15 as bloc enters winter recession

• Democrats in U.S. Congress aim to pressure Republicans with go-it-alone funding bill

• Dollar weakens versus euro; investors cautious as inflation data ahead

• Canadian regulator raises banks' domestic stability buffer to 3%

• China's reopening from Covid won't be a straight path forward.

• Asia-Pacific shares rise as China reports inflation data in line with expectations.

Crypto

• First Mover Asia: Tokocrypto Token Holders Benefit From Reports of Binance Acquiring the Indonesian Exchange.

• Starbucks Launches Beta of Web3 'Odyssey' Loyalty Program.

• Crypto Markets Today: Record Grayscale Bitcoin Trust Discount Widens Industry Woes.

• Chainlink’s First Staking Pool Pulls in $170M of LINK Tokens, Hitting Community Limit After 2 Days.

• SEC Tells US-Listed Companies They’d Better Disclose Crypto Damage.

• How Confident Are Institutional Investors About Bitcoin? COT Report May Offer Clues.

• US Watchdog Says Banks Shying Away From Stumbling Crypto Industry.

• NFT Marketplace Magic Eden Pushes Further Into Gaming With New Hire.

• Ethereum Developers Target March 2023 for Release of Staked Ether.

• FEC probe demanded after SBF 'admitted' making dark money donations.

• Ren protocol warns users to unwrap tokens or risk losses as upgrade looms.

• Paradigm releases 'Ethereum for Rust' to help ensure network stability.

• Nomad releases bridge relaunch guide after patching contract vulnerability.

Deal Flow

• Bitcoin miner 360 Mining raises $2.25 million as it scales natural gas production

• a16z leads $6.9 million investment in decentralized video platform Shibuya

Yours sincerely,
Treehouse Research 🌳

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