🌳Evergrande Faces Court-Driven Liquidation Threat; VanEck Revises Bitcoin ETF Application for Direct Funding

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Our Daily View

What We Are Covering Today

• Evergrande faces potential liquidation; Israel escalates conflict with northern Gaza invasion (More in Macro & TradFi)
• VanEck amends application for spot Bitcoin ETF; Brazil’s 2023 USDT adoption soars to 80% of its crypto transactions (More in DeFi & CeFi)
• Litecoin's on-chain activity surges; LastPass breach leads to $4.4M cryptocurrency theft (More in On-Chain)
• BTC's implied volatility rises with ETF developments; options market reacts to macroeconomic events (More in Crypto Derivatives)
• BTC and ETH sideway movements over the weekend, with BTC forming a triangle pattern, signaling potential short-term price volatility. (More in Crypto Technical Analysis)

Macro & TradFi

China Evergrande Group, facing approximately $327 billion in liabilities, confronts a pivotal court hearing in Hong Kong against creditor requests for liquidation, marking a potential landmark in China's turbulent real estate sector. A previous supportive group of creditors, holding over $6 billion of Evergrande's offshore notes, is now uncertain about opposing the liquidation following abrupt changes to Evergrande's restructuring terms. A liquidation verdict could further destabilize an already fragile industry plagued by declining sales and liquidity challenges, while casting doubt over the future of restructuring for Chinese firms. The decision on Evergrande's fate may send ripples across the global economy, exacerbating concerns about the health and stability of the Chinese property market, and potentially affecting investor sentiment and market confidence.

In other news, Israel has initiated a ground invasion of the northern Gaza Strip, marking a significant escalation in its conflict with Hamas following an attack by the militant group that killed 1,400 individuals. This measured approach, which could last between six weeks to six months, aims to dismantle Hamas entirely. Amidst international pressure, a mounting humanitarian crisis in Gaza, and increasing domestic scrutiny on Prime Minister Netanyahu, the ongoing conflict poses significant economic repercussions. Gaza's already fragile economy faces further devastation due to infrastructural damage and trade disruption, while Israel's economy might experience strains from military expenditures and potential declines in tourism and foreign investment. The prolonged conflict could heighten dependency on international aid in both regions and deter future investments, impacting regional trade dynamics.

On Friday, stock market indices showed varied performances. The DJIA declined by 1.2%, the S&P 500 fell by 0.5%, while the NASDAQ increased by 0.4%. A significant driver of the NASDAQ's positive trajectory was the strong earnings report from Amazon. The e-commerce giant's shares surged by 8% after announcing robust third-quarter earnings that exceeded analysts' expectations. Additionally, Amazon's cloud platform, AWS, reported a revenue of $23.1 billion, a 12% increase from the same quarter of the previous year. Meanwhile, the oil and gas markets experienced volatility, with West Texas Intermediate oil prices spiking by 3.2% to over $85 a barrel due to concerns over potential disruptions following Israel's ground invasion of Gaza.

DeFi & CeFi

• VanEck amends application for spot Bitcoin ETF
• Brazil’s 2023 USDT adoption soars to 80% of all crypto transactions
• VanEck predicts a 10,600% Solana price rally by 2030
• Kraken to suspend trading for USDT, DAI, WBTC, WETH and WAXL in Canada
• Gemini sues Genesis over GBTC shares used as Earn collateral, now worth $1.6B
• Taiwan draft crypto bill passed the first reading
• dYdX Released dYdX Chain Alpha Mainnet

Asset manager VanEck has submitted an amended application for a spot Bitcoin exchange-traded fund (ETF) to the U.S. Securities and Exchange Commission (SEC). The revised filing indicates that a seed capital investor purchased Seed Creation Baskets, which are blocks of 50,000 shares of the proposed ETF, with Bitcoin, using the MarketVector Bitcoin Benchmark Rate as the reference price. Unlike other spot Bitcoin ETF proposals with cash seeding, this suggests that VanEck's ETF will be funded with Bitcoin directly. Many asset managers are updating their applications for spot Bitcoin ETFs, signaling potential progress in negotiations with regulators. The SEC is expected to make decisions on various spot Bitcoin ETF proposals within the coming weeks.

Meanwhile, stablecoin Tether (USDT) has witnessed a substantial surge in adoption in Brazil, making up 80% of all cryptocurrency transactions in the country, according to data from Brazil's revenue service agency. As of mid-October, USDT transactions in Brazil for 2023 amounted to 271B Brazilian reais (US$55B), nearly double the volume of Bitcoin transactions, which was 151B Brazilian reais (US$30B). Brazilian USDT adoption has been rising since 2021, crossing Bitcoin volume for the first time in July 2022 when crypto lenders Three Arrows Capital and Voyager Capital collapsed.

On-Chain

According to @Santiment, Litecoin experienced a notable surge in on-chain activity towards the week's close, with address engagement and whale movements reaching levels previously observed in June. Concurrently, previously dormant LTC holdings exhibited a significant uptick, suggesting an increased circulation of coins in the market. The surge in on-chain activity signals renewed interest or speculative behavior around Litecoin.

ZachXBT, a prominent on-chain investigator, has reported that approximately $4.4M was extracted from over 25 individuals due to the LastPass security breach. It's believed that the culprit(s) has transferred the misappropriated funds to the BSC chain. ZachXBT strongly advises: "For anyone who might have saved their seed phrase or private keys in LastPass, it's imperative to transfer your cryptocurrency holdings right away." A comprehensive list of associated addresses compiled by ZachXBT and @tayvano_ from October 25 can be accessed here.

Crypto Derivatives

• Funding rates remained positive for BTC and ETH.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 54.12% and 49.37%, respectively.
• 30-day 25-delta skew (C-P) for BTC rose to 5.64% while ETH fell to 2.55%.
• The futures market witnessed $50.95M worth of liquidations since Friday, with shorts representing 70.32% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Over the weekend, BTC's implied volatility (IV) saw an increasing trend, with the 7-day IV reaching 54.64%, and the 30-day IV reaching 51.68%. This is possibly due to asset managers like VanEck amending their application for a spot Bitcoin ETF, indicating potential for direct investment in BTC which heightens IV as it signals increased institutional interest in BTC.

Meanwhile, BTC’s term structure entered a state of slight backwardation. Notably, contracts within 3-day expiries exhibit significantly higher volatilities as China's Evergrande will seek to fend off creditor requests for liquidation in court today. Additionally, the US Treasury Dept will unveil its quarterly bond sales plan on Wednesday, which may affect treasury yields on the macro credit market. On the other hand, IVs for longer-dated contracts have remained relatively stable.

Both the 7-day and 30-day 25-delta (call-put) skews have risen over the weekend. In particular, BTC's 7-day skew, which reflects short-term trader expectations, has risen to a considerable 6.73. This suggests that options traders are increasingly buying call options in anticipation of further upside for BTC’s price.

During last Friday’s trading sessions, @Paradigm highlighted that trading flows primarily emphasized ETH, surpassing BTC's volatility. Significant trades predominantly targeted December expiries, encompassing the sale of a 719x 24-NOV-23 32000/38000 BTC Bear Risk Reversal and a 604x 29-DEC-23 30000/42000 BTC Bear Risk Reversal. On the ETH front, trades included the acquisition of a 5000x 29-MAR-24 2500 ETH Call and the purchase of a 3000x 10-NOV-23 1750/1850 Bull Risk Reversal.

Crypto Technical Analysis

On the 4-hour chart, BTC has maintained a relatively sideways movement since its surge last week. Throughout the weekend, the price has formed a triangle pattern, characterized by higher lows and lower highs, with the current position near the upper boundary. This configuration signals potential high volatility as the price approaches the apex of the triangle. The RSI, while it has declined from its recent peak, still resides in the higher levels. If the price breaks through the imminent upper boundary of this triangle, BTC is likely to advance towards the $35.5K level, which corresponds to the upper trendline observed in the daily chart, tracing back to the highs last witnessed in July. Conversely, if the price fails to breach this upper boundary, BTC may retrace to around the $33.6K level. This level is significant as it serves as a strong support, with the lower boundary of the triangle intersecting with the lower trendline formed by the local higher lows.

ETH, on the other hand, has displayed a similar sideways movement throughout the weekend, with the price maintaining close proximity to the previously identified trendline. The RSI has similarly returned to normal levels on both the 4-hour and daily charts. Should ETH rebound from this level, it is likely to test the local highs that were tested twice during the previous surge at $1.85K, representing a potential 3% increase. On the other hand, if the trendline fails to provide support, the next immediate level of support is at $1.74K. This level was last observed as a resistance zone at the beginning of October, indicating a potential 3% downside.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Israel Deepens a War With Hamas That Has No End in Sight

• Evergrande Faces Make-or-Break Moment in Winding-Up Hearing

• Australia Walks Away from Trade Talks With EU Over Agriculture

• China’s Top Envoy Warns of Bumpy Road to Planned Biden-Xi Summit

• Former Vice President Pence quits the presidential race after struggling to gain traction. 'This is not my time,' he says

• Global bond rout looks tremendously dangerous for stocks, hedge fund manager warns

• Thousands break into UN warehouses in Gaza; satellite images show destruction in Gaza.

• US Treasury seen boosting auction sizes as budget deficit worsens

• Asia markets trade lower ahead of Japan's BOJ decision and South Korea inflation this week.

• Standard Chartered-owned crypto firm Zodia launches in Hong Kong.

Crypto

• VanEck amends application for spot Bitcoin ETF.

• Brazil’s USDT adoption soars in 2023, makes up 80% of all crypto transactions.

• Ripple CEO criticizes former SEC Chair Jay Clayton’s comments.

• Bitcoin-friendly El Salvador can become ‘Singapore of the Americas’ — VanEck adviser.

• Sam Bankman-Fried’s perspective on FTX fall.

• Crypto Biz: BlockFi emerges from bankruptcy, Worldcoin halts USDC payments and more.

• VanEck predicts a 10,600% Solana price rally by 2030.

• Ripple exec and XRP community back SEC commissioner’s LBRY lawsuit dissent.

• Kraken to suspend trading for USDT, DAI, WBTC, WETH and WAXL in Canada.

• Gemini sues Genesis over GBTC shares used as Earn collateral, now worth $1.6B.

• Taiwan Draft Crypto Bill Passed the First Reading

• dYdX Released dYdX Chain Alpha Mainnet

Yours sincerely,
Treehouse Research 🌳