S&P Futures 500
Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)
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Our Daily View
What We Are Covering Today
- Market closes in green as EU clears Microsoft's $69 Billion Activision Blizzard acquisition (more in Macro & TradFi)
- Jump Trading involved in secret deal with TerraUSD, according to SEC; US DOJ to target shady crypto exchanges and DeFi hackers (more in DeFi & CeFi)
- Bitcoin daily transaction count near its all-time high (more in On-Chain)
- BTC term structure shows IV increase across the board while ETH sees a kink in the 26th May contracts with lower IVs on future dated contracts (more in Crypto Derivatives)
- BTC and ETH near mid-range on higher time frame; Tuesday Asian morning triggers mini sell-off (more in Crypto Technical Analysis)
Macro & TradFi
On Monday, Treasury Secretary Janet Yellen reiterated to Congress that the United States could potentially default on its debt by June 1, 2023. This statement coincided with upcoming discussions between the White House and congressional leaders regarding potential spending cuts in exchange for a debt ceiling increase. Despite conflicting reports about the progress of negotiations, President Joe Biden expressed optimism over the weekend about reaching a deal with Republicans to avoid an economic fallout from a potential debt default. However, the Speaker of the United States House of Representatives, Kevin McCarthy, stated that Congress is currently "far apart" and expressed doubt about the possibility of a deal.
European Union regulators granted approval on Monday for Microsoft's proposed $69 billion acquisition of gaming company Activision Blizzard. The European Commission, the EU's executive body, indicated that Microsoft addressed antitrust concerns related to cloud gaming by offering remedies. These remedies primarily involve allowing users to stream Activision games they purchase on any cloud streaming platform. This approval from Europe follows the previous blockage of the deal by the UK's top competition authority. Regulators worldwide have been investigating whether Microsoft's acquisition could create unfair competition in the console and cloud gaming market, specifically examining the potential for Microsoft to keep Activision games exclusively on its own platforms.
In the stock market, Monday's regular trading session ended on a positive note. The tech-heavy Nasdaq Composite led the gains with a 0.66% increase, while the S&P 500 rose by 0.3%. The DJIA was up 0.14% and broke a five-day streak of losses. Market participants are eagerly awaiting the release of April's retail sales data, scheduled for 8:30 a.m. ET on Tuesday (8:30 p.m. in Singapore), which will provide insights into consumer behavior. Additionally, Warren Buffett's company, Berkshire Hathaway, revealed new positions in Capital One Financial and expanded its existing holdings in Bank of America and Apple during the first quarter. Following the market close, Capital One Financial saw a 5.5% increase in its stock price.
DeFi & CeFi
- SEC alleges that Jump Trading has been involved in secret deal to prop up TerraUSD
- US Department of Justice to target crypto exchanges and DeFi hackers
- Introduction of DRC-20 lead to parabolic movement in the price of Dogecoin
- North Korean hackers steal another $497M in Crypto from international businesses
- Bankrupt lender Celsius allegedly restaked $57M worth of ETH in Figment
- Litecoin approaches its third halving event
Jump Trading, a U.S. high-frequency trading firm, secretly supported the TerraUSD stablecoin, netting about $1 billion profit from private dealings with Terraform Labs. This was brought to public attention through court filings that were unveiled in the SEC's ongoing fraud lawsuit against Do Kwon. While Jump Trading isn't accused of any illegal activities, it allegedly intervened to stabilize TerraUSD's price without public disclosure, misleading investors about the coin's stability. The document has also revealed Jump’s undisclosed options to buy Luna at low prices amidst its later surge which raises further concerns.
According to Nikkei-sponsored Elliptic analysis, North Korean state-sponsored hackers have reportedly stolen $497 million in cryptocurrencies from U.S. businesses since 2017. This hacker group, the Lazarus Group, is notorious for exploiting DeFi projects and making it away with liquidity. Globally, they've stolen $2.3 billion in crypto assets over the last five years, with Japan, Vietnam, and Hong Kong being primary targets. The hackers mainly rely on ransomware payments and direct hacking of crypto exchanges. A UN report also claims North Korea-backed cybercrime helps fund its missile program, with over $1 billion in crypto assets stolen in 2022.
As a result, on May 15th, the U.S. Department of Justice (DOJ) is intensifying its scrutiny of cryptocurrency platforms, including exchanges in response to the increasing crime rate in the sector. Eun Young Choi, the director of the national cryptocurrency enforcement team, is focusing on certain exchanges and services that potentially mix identifiable or 'tainted' funds with others to obscure the trail back to the fund's origin. The DOJ is also focusing on DeFi hacks, especially chain-bridge hacks, due to their prevalence and significant financial losses. In 2022, such attacks led to over $2 billion in losses, often linked to North Korea-backed hackers.
The Bitcoin daily transaction count continues to hover near its all-time high at roughly 682k transactions per day, higher than the previous peak of 490k by nearly 40%. This surge in demand for blockspace can mainly be attributed to the introduction of BRC-20 tokens. Given the small payload of the ordinal inscriptions embedded in these tokens combined with the much higher fees that users of the token were willing to pay, miners were able to fill blocks with a very large amount of transactions. This large increase in Bitcoin transaction activity was met with a surprising cyclical low in active addresses (566k). As @tsypruyan noted, compared to the usual 50% re-use in Bitcoin addresses, the current level stands at 71% re-use.
On a related note, the increasing popularity of text-based inscriptions in BRC-20 tokens over image and file-based inscriptions as well as the SegWit discount (protocol upgrade to increase transaction efficiency by discounting witness data) resulted in a near all-time low for mean transaction size at about 385 bytes. This is in stark contrast to the nearly 1.5 kilobytes in mean transaction size, mainly attributed to the explosion in image-based inscriptions seen earlier in the year. All in all, even when image-based inscriptions seemingly dominated the Bitcoin network in Q1, they only made up about 10% of confirmed transactions. Currently, however, text-based inscriptions have accounted for over 50% of the total confirmed transactions and the total number of text-based inscriptions has now surpassed 5 million.
- BTC and ETH funding rates diverted as ETH funding rate turns negative
- 30-day ATM IV rises to 49.51% and 48.37% respectively for BTC and ETH.
- 30-day 25-delta skew flips to a call premium of 1.93% for BTC. While ETH remains in put premium, the skew also recovered significantly to -2.77%
Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:
Net Annualized APR
Perp (USDT pair)
Source: @CexyArbBot Telegram
1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, DOGE vs USDT perps
2) CEX observed include Binance, Bybit, OKX & DYDX
@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo
The futures market saw $51.47M in liquidation over the 24 hours with 59% coming from shorts at $30.34M.
BTC term structure has seen a significant increase in IV across the board for all maturities since yesterday. IV in the short term also increased in larger magnitudes with contracts expiring tomorrow having risen as much as 8%. This is driven by the positive sentiment in the market as skew flips from a put premium to a call premium of 1.63%, indicating that investors are pricing call options more in the near future. 30D Variance risk premium has also increased as a result of the IV increase with it currently at 6.37%.
ETH’s term structure, on the other hand, has experienced a different trajectory of change. While near dated IVs have increased, further dated contracts saw a slight drop in IV since yesterday. A kink is also observed for contracts expiring on 26 May. RV dropped to 38.87% and 7D ATM IV rose to 48.03% which increases the variance risk premium by roughly 9.1%.
On the flow side, BTC call volume in the last 24H was concentrated on end-of-week call contracts as investors bet on the possible rebound from the recent bear rally. Examining more closely on the strike prices, more calls are bought at the $28-29K strike prices compared to the end-of-month contracts. However, the majority of the strike prices remain to be around the $32K level which will likely expire worthless unless BTC comes back with a large bull rally and rises above the local high. Max pain was also observed to be higher for the end-of-week contracts than the end-of-month ones at $27.5K and $27K respectively.
The market, in general, is considered relatively quiet with the contracts bought in smaller sizes. Some noteworthy trades include the purchase of 300 BTC call contracts for 19 May at $28K, 200 BTC call contracts for 2 Jun at $31K, and the writing of 1500 ETH put contracts at $1.8K for 26 May. (@tradeparadigm).
Lastly, VIX rose slightly to 17.12.
Crypto Technical Analysis
Shifting our focus to technical analysis, BTC made an attempt to surpass the trendline indicated on the 4-hour chart. However, it failed to sustain above it and broke below the key $27K level. On a higher time frame, BTC is seen bleeding lower after being rejected at its upper range boundaries in mid-April. Likewise, the Stochastic RSI indicator is also showing a downward trend. It is probable that BTC might consolidate strongly around the middle range of $23.5K, which is where the Stochastic RSI might reach its lowest point in the coming days or weeks.
For ETH, similar to BTC, it failed to break above the ascending trendline. As the Asian markets opened this morning, ETH once again dropped below the $1.8K level after experiencing a strong push higher yesterday at similar timings. Looking at a higher time frame, ETH is approaching its mid-range of $1.75K. Price action is likely to exhibit volatility around this level as ETH seeks to find support. A positive rebound above this level would be considered bullish for the token. Conversely, if it breaks below, it would indicate ongoing downward pressure, potentially revisiting March lows of $1.37K
Access institutional-grade commentary on TradFi × Crypto markets
By Treehouse Research
Treehouse Research 🌳