🌳Fed Chair Powell Poised to Tighten Policy if Inflation Persists; BlackRock Advisors File for ETH Spot ETF

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Jerome Power said the Fed will amend monetary policy with caution to bring down inflation; China experienced a larger-than-expected CPI drop in October (More in Macro & TradFi)
• BlackRock Advisors file for iShares Ethereum Spot ETF; Celsius Network cleared to exit bankruptcy (More in DeFi & CeFi)
• Whale activity boosts altcoin market; Tether Treasury's capital movements suggest market growth (More in On-Chain)
• Bitcoin volatility eases as Ethereum reacts to BlackRock's filing; BTC and ETH term structures reflect diverging market expectations (More in Crypto Derivatives)
• Both BTC and ETH broke above their respective resistances following the ETH ETF news with BTC making a swift pullback soon after the surge (More in Crypto Technical Analysis)

Macro & TradFi

Federal Reserve Chair Jerome Powell emphasized that the central bank will continue to approach monetary policy carefully, but will not hesitate to further tighten if necessary, to control inflation. Powell's remarks were prepared for an International Monetary Fund conference in Washington. He stated that the Fed would continue to move carefully, addressing the risk of being misled by short-term data fluctuations while avoiding over-tightening. Although financial markets and many economists have suggested that the Fed has completed its rate hikes, Powell's comments indicated that policymakers are not ready to end the tightening cycle. Treasuries declined after Powell's speech, with the market pushing the timing of the first expected rate cut to July 2024 from June. Powell also suggested a new policy framework review beginning in 2024, focusing on factors that led to low interest rates before the pandemic.

Meanwhile, China's consumer prices declined in October, with the consumer price index shrinking by 0.2% year-on-year, a larger drop than expected. This follows a flat CPI in September, indicating the need for further policy support. Producer prices also fell by 2.6%, marking the 13th consecutive month of decline. These deflationary trends are due to sluggish domestic demand and persisting factory deflationary pressures. Beijing has provided targeted policy support, but China's economic growth has remained slow, partly due to an ongoing debt crisis in the real estate sector, which accounts for about 30% of China's economy. The upcoming Singles Day shopping festival will be closely watched for insights into Chinese consumption, although some experts believe excitement for the event has waned, impacting sales.

Lastly, US stocks fell on Thursday, ending the S&P 500 and Nasdaq's longest winning streaks in two years. Specifically, the Nasdaq closed 0.9% lower, the S&P 500 fell 0.8%, and the Dow Jones Industrial Average lost 0.7%. Treasury yields experienced fluctuations, initially dipping below 4.5% before rebounding to more than 4.6%. Oil prices stabilized after declining earlier in the week. Disney shares surged after reporting better-than-expected fiscal fourth-quarter earnings and the addition of 7 million subscribers to its streaming service. The healthcare sector was the worst performer, with Amgen shares falling 3.4%.

DeFi & CeFi

• BlackRock Advisors file for iShares Ethereum Spot ETF
• Celsius Network cleared to exit bankruptcy
• FTX’s FTT token jumps 90% on Gensler’s comments
• Ark snaps up $9.5M of HOOD after Robinhood’s European expansion
• Financial Supervisory Commission of Taiwan awards first securitized token license
• Spartan Capital invests in Pendle to drive DeFi growth
• Lightspeed Faction launches $285 million inaugural crypto venture fund

BlackRock is reportedly planning to launch an exchange-traded fund (ETF) that holds Ether (ETH). The news catalyzed a 10% surge in the price of ETH to around $2,100. The company's filing with Nasdaq indicates that the corporate entity "iShares Ethereum Trust" was registered in the state of Delaware, where iShares is the name of BlackRock's ETF division. Coinbase would serve as the custodian for the ETH held by the product, and a third party would hold its cash. BlackRock has a market-surveillance agreement with Coinbase, which appears to be a crucial element for SEC approval. The filing attempts to address potential SEC objections, stating that CME Group's Ether futures prices closely match spot ETH prices.

In other news, failed crypto lender Celsius Network has received bankruptcy court approval for its plan to transform into a creditor-owned Bitcoin mining company. The approval allows Celsius to repay customers through a combination of crypto-assets and stock in the new Bitcoin mining entity, which is set to become publicly listed. This move follows Celsius' bankruptcy last year and the company's effort to navigate Chapter 11 despite fraud allegations against former executives, including former CEO Alex Mashinsky. The approval paves the way for Celsius to distribute assets early next year.

On-Chain

In a recent report by @Santiment, attention has been drawn to the patterns of whale transactions. Particularly in altcoins like 1INCH, ELON, MATIC, and WOO, transactions exceeding $100K have been noted, signaling a notable surge in activity. Such spikes in whale transactions often suggest a high probability of price reversals which highlights the importance of monitoring whale behaviors as indicators of market sentiment and possible predictive factors for future price dynamics.

On the other hand, @Lookonchain has highlighted a significant transfer of funds within the crypto market. A whale received an additional 30M USDT from Tether Treasury, accumulating a total of 580M USDT recently, and moved these funds into various exchanges. This activity was followed by Tether Treasury creating 1B USDT. The influx of such substantial capital raises questions about the potential impact on the cryptocurrency market, hinting at increased market liquidity and possibly anticipating a more active trading environment.

Crypto Derivatives

• Funding rates remained positive for BTC and ETH.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH rose to 58.87% and 64.58%, respectively.
• The 30-day 25-delta skew (C-P) for BTC remained flat at 8.80% and 30-day 25-delta skew (C-P) ETH rose to 9.35%.
• The futures market witnessed $493.04M liquidations in the last 24 hours, with longs representing 55.52% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

BTC 7-day implied volatility has decreased from 59.13% to 52.91%, signaling a reduction in short-term market volatility, while the 30-day implied volatility has also decreased from 59.05% to 54.29%, suggesting a steadier outlook for the month ahead. In contrast, ETH 7-day volatility has jumped from 58.74% to 62.56%, with the 30-day volatility following suit, moving from 57.08% to 60.79%, likely energized by BlackRock's announcement of an upcoming ETH-based financial product.

Meanwhile, BTC's term structure has mostly maintained a contango state. However, there has been a decrease in near-term volatility compared to yesterday. Contracts with expiries of 7 days and beyond, however, have exhibited a more stable IV outlook. In contrast, ETH's term structure presents a more intricate situation as it transitions into backwardation, accompanied by a notable surge in short-term implied volatility. Additionally, medium-term contracts beyond the 49-day threshold have shown IV increases of around 2 to 3% compared to yesterday's levels.

BTC’s 25-delta 7-day skew has seen a notable decrease from 13.78% to 8.11%, suggesting a reduction in short-term bullish sentiment, while its 30-day skew also dropped slightly from 9.93% to 8.80%, indicating a tempering of confidence over the coming month. ETH, by contrast, experienced a marginal decline in its 7-day skew from 12.79% to 12.11%, pointing to a relatively stable immediate bullish outlook. Its 30-day skew, however, edged up from 8.83% to 9.35%, reflecting a growing medium-term optimism. The shifts imply a more cautious market attitude towards BTC, whereas sentiment towards ETH remains comparatively more optimistic in the medium term.

Lastly as reported by @Paradigm, BTC options show a complex sentiment; 1,787 custom contracts were bought, signaling optimism, with a call for December 29, 2023, at $43,000 and a paired short call for January 26, 2024, at $50,000. In contrast, bearishness is indicated by the sale of 1,000 call spreads for December 29, 2023, between $38,000 and $45,000. ETH's options activity is cautiously optimistic, with 14,000 call spreads bought for November 24, 2023, at $2,300/$2,700, while the sale of 7,750 calls for December 29, 2023, at $2,100 suggests hedging against potential price drops.

Crypto Technical Analysis

Turning to technical analysis, BTC experienced a swift break above the upper boundary of the channel following the news of Blackrock's ETH ETF filing. However, this price movement appeared to be a fakeout, as it quickly retracted and now hovers slightly above the channel's upper boundary. RSI displayed similar behavior, briefly venturing above the threshold towards the overbought zone before retracting, currently resting at around 64.90. If bullish momentum continues in the short term, BTC is likely to rebound from its current level and potentially encounter resistance of around $41K, marking an 11% potential gain from this point. Conversely, should BTC reenter the rising channel, the price is expected to continue oscillating within that range, with the next support at the lower boundary, approximately at $34.6K.

ETH, on the other hand, has displayed an even more robust bullish momentum, surging by over 10% just within 8 hours of the news. Consequently, ETH has convincingly confirmed its breakout from the ascending wedge formation and currently encounters resistance at the approximately $2.10K level. This resistance zone was last observed in April on the daily chart. However, in the event of a price retreat from this level, ETH is likely to retrace towards the $1.91K to $1.93K range, which has now transformed into a support zone, marking a potential 9% decline from the current level.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Powell Says Fed to Be Careful, Won’t Hesitate to Hike If Needed

• Exclusive: Russian fuel export ban to be lifted next week

• SoftBank posts $6.2 billion quarterly loss as WeWork collapse, tech slump drag bottom line

• ICBC Tells Clients to Reroute Some Trades After Cyber Issue

• Long before rescue talks, Country Garden struggled to build homes, pay bills

• Israel says unidentified drone hits Red Sea city of Eilat

• China's Zeekr reveals wider loss, Beijing influence in US IPO paperwork

• MGM Resorts reaches historic labor deal with Las Vegas unions, averts strike

• More junk-rated companies downgraded than upgraded in October -JPM

• New US jobless claims edge down; continued claims on the rise

• BOJ debated groundwork for future easy-policy exit at Oct meeting

• China’s consumer prices swing to declines in October

Crypto

• BlackRock's Ethereum ETF Plan Is Confirmed in Nasdaq Filing.

• Failed Crypto Lender Celsius Network Cleared to Exit Bankruptcy

• EU Parliament Approves Data Act With Smart-Contract Kill Switch Provision.

• Blockchain Staking Firms Update Best Practices Amid 'Increased Scrutiny'.

• FTX's FTT Token Jumps 90% on Gensler Comments.

• Competition in Digital Markets Hits G7 Nations' Radar.

• Cardano-Based DEX MuesliSwap to Open Refund Site 'Soon' as Some Users Voice Concerns.

• India's Central Bureau of Investigation Appoints Liminal to Manage Seized Digital Assets.

• ARK Snaps Up $9.5M HOOD Shares Day After Robinhood Announces European Expansion.

• Financial Supervisory Commission of Taiwan awards first securitized token license.

Deal Flow

• Crypto VC firm Spartan Capital invests in Pendle to drive DeFi growth.

• Crypto VC Maven 11 targets $100 million for third fund

• Lightspeed Faction launches $285 million inaugural crypto venture fund

• Polygon Village launches $90 million fund for ecosystem development

• Standard Chartered unit, SBI Holdings team up to invest $100 million in crypto startups

Yours sincerely,
Treehouse Research 🌳