🌳Fed Increased Interest Rates To A 22-Year High; Singapore Rules Crypto Assets As Properties

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter, where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

Also, in case you have missed it, check out our latest research piece 👇

Our Daily View

What We Are Covering Today

• The Fed increased interest rates to a 22-year high; Meta posted positive results that topped analyst consensus (more in Macro & TradFi)
• Singapore court rules crypto as property; Binance's FDUSD delays launch (more in DeFi & CeFi)
• BTC exchange supply reaches its lowest since Nov 2018; whale volume on exchanges saw the largest 30-day net position decrease in history (more in On-Chain)
• Options IVs retreat after Fed's rate decision; option flows indicate short-term market optimism (more in Crypto Derivatives)
• BTC and ETH whipsaws post FOMC; DOGE pulls back in anticipation of another leg towards $0.089 (more in Crypto Technical Analysis)

Macro & TradFi

The Federal Reserve has resumed raising interest rates, with Chair Jerome Powell indicating that the government will base further increases on incoming data showing a resilient US economy. The recent quarter-percentage-point hike was the 11th increase since March 2022, bringing the benchmark federal funds rate to 5.5%, the highest in 22 years. Powell acknowledged that the rate hikes are helping to curb inflation, but they still have a long way to go to achieve the 2% goal. The timing of future rate hikes will depend on economic reports due before the September meeting, and Powell emphasized that decisions will be made on a meeting-by-meeting basis. The Fed's move was generally well-received in the markets, with stocks rising while Treasury yields and the dollar fell. Powell's somewhat dovish performance suggests the possibility of skipping a rate hike in September if inflation data remains soft.

Meta Platforms Inc., the parent company of Facebook and Instagram, surpassed expectations for second-quarter sales and provided a positive outlook for the current period, indicating success in migrating advertisers to its new Reels short-video feature. Meta expects sales in the current quarter to be between $32B and $34.5B, surpassing average estimates. The company's focus on Reels has paid off, drawing more attention to its social networks and reigniting advertiser spending. Despite cutting jobs and teams to increase efficiency, Meta invests heavily in artificial intelligence and virtual reality. The Reality Labs division, responsible for realizing Zuckerberg's vision for the metaverse, is incurring substantial losses due to product development and technology growth costs. While the established social networks are growing slower, Meta is exploring new ventures, such as Threads, the Twitter competitor, which has attracted many users. Although Threads is currently ad-free, it could become a powerful revenue generator.

On Wednesday, the Dow Jones Industrial Average achieved the 13th consecutive daily gain, the first since January 1987. The DJIA had a modest 0.2% increase, while the S&P 500 edged slightly lower, and the tech-heavy Nasdaq Composite fell 0.1%. Bond traders were relatively unaffected by the rate hike, with yields on 10-year Treasurys slipping to 3.850%. Despite the mixed market performance, there is growing optimism about the economy and corporate earnings, and investors are closely monitoring factors like rising oil prices for potential impacts on inflation.

DeFi & CeFi

• Singapore High Court recognized crypto as a property
• Binance to halt trading for FDUSD
• Deloitte partners with Chainalysis to boost blockchain tracking capabilities
• Italian central bank backs DeFi tokenization project with Polygon, Fireblocks
• KuCoin denies mass layoffs

Judge Philip Jeyaretnam of Singapore's High Court ruled that individuals can hold cryptocurrency as property in trust despite its intangibility. Jeyaretnam issued this precedent-setting decision in a case where former employee Ho Kai Xin was ordered to return 4.2M Tether illicitly transferred from crypto exchange Bybit. The court's classification of cryptocurrency as a "thing in action" or a right over intangible property under common law could significantly impact the legal status and integration of digital assets in future frameworks.

Binance postponed the listing of the recently introduced stablecoin, First Digital USD (FDUSD), due to technical issues experienced by liquidity providers. Initially planned for 26 July 2023, Binance delayed the launch to ensure user protection and accommodate the resolution of these technical difficulties. Backed by cash and equivalents, FDUSD is held in segregated accounts within regulated institutions and can be redeemed at a 1:1 value with U.S. dollars. The stable is designed to interact with financial intelligent contracts, escrow services, and insurance, enabling solutions for everyday transactions through its compatibility with Web3 technologies. To promote FDUSD trading, Binance offered a promotion with zero maker fees for all FDUSD pairs.

On-Chain

Data by @Santiment shows that Bitcoin's supply on exchanges has reached its lowest since November 2018, with 1.17M BTC currently held on exchanges. This trend indicates growing investor confidence in self-custody as users move their Bitcoin off exchanges for long-term holding or security reasons. Despite BTC's price drop below $30K, the market remains relatively calm, with no signs of panic selling or FUD dominating sentiment. CoinShares also reported an outflow of $6.5M of digital asset investment products after four consecutive weeks of significant inflows totaling $742M invested.

Bitcoin's sluggish trend and recent price plunge have raised concerns about the upcoming rally as whale activity indicates significant bearish signals. Whale balances on exchanges have been declining for the past few months, suggesting a shift in sentiment. Glassnode data shows a steep drop in whale volume on exchanges, with a net balance decrease of 255K BTC since May 30, including the most significant 30-day net position decrease in the history of nearly 148K BTC. Whales are transferring BTC from exchanges, with 82% going to Binance and 6.8% to Coinbase. Similar patterns to past market collapse raise alarms about the current bearish influence on the upcoming BTC price rally.

Crypto Derivatives

• Funding rates remain positive for both BTC and ETH
• Deribit Implied Volatility Index (DVOL) rose to 38.07% for BTC, while ETH fell to 36.16%
• 30-day 25-delta skew (C-P) for BTC rose to and ETH is at 1.83% and -0.78% respectively
• The futures market witnessed $55.52M worth of liquidations on Wednesday with shorts representing 56.9% of the total

Top 3 CEX USDT perp funding rate arbitrage based on the last 24-hour lookback:

Following the Fed's expected 25bps rate hike announcement yesterday, the ATM IV for BTC in 7-day contracts collapsed. Meanwhile, 30-day contracts remained relatively stable. Despite this, the overall IV figure has continued its downtrend over the past month, as BTC's price stabilized around the $30K level for an extended period.

The term structure remains in contango, with IV dipping for shorter tenors following major rate hike announcements and key earnings releases. Short-expiration IVs cooled down, while IVs further out the curve remained relatively unchanged. Bitcoin's IV remains higher than ETH by up to 2.7% throughout the curve.

Option skews for BTC remained relatively flat, with both the 7 and 30-day skews remaining in preference for calls. Meanwhile, the ETH skew became less negative after the Fed rate decision and is approaching the neutral level. Ethereum's persistently negative skew across durations underscores its perceived elevated risk, especially as BTC and ETH prices verge of breaking down at their horizontal support levels.

@paradigm reported decent volumes around FOMC despite another day of low IV trading in the mid to longer tenors from 30 days out to Dec expiry. A notable highlight was a large buyer of BTC Sep bullish risk reversals, indicating optimism about BTC's price movement. Additionally, there was significant interest in ETH monthly ATM calls, suggesting a bullish sentiment on ETH's short-term performance. Top traded structures for BTC included 1025x 29-Sep-23 $26K/$35K Bull Risk Reversal bought, and 500x 29-Mar-24 $45K/28-Jun-24 $50K Call Calendar bought. For ETH, top traded structures were 5500x 25-Aug-23 $1.9K Call bought and 2500x 25-Aug-23 $1.9K/ 29-Sep-23 $1.9K Call Calendar sold.

Crypto Technical Analysis

Moving on to technical analysis, BTC surged after the FOMC and attempted to retest the $29.6K level. However, it could not find a clean acceptance above this level and back into the trading range of $29.6K to $31.8K range on lower time frames. In our discussion on Tuesday, we highlighted the possibility of BTC revisiting the crucial $29.6K level, which serves as the lower boundary of the trading range. As expected, BTC has now deviated below the $29.6K resistance level, indicating a potential downward trend toward revisiting both the $29K level and the April open if its current bearish momentum persists.

Similarly, ETH popped higher post-FOMC but couldn't surpass the upper boundary of its descending channel on the hourly chart. If the current downward trend continues, we anticipate ETH to trade closer to the lower part of this channel. On the daily chart, there is an evident attempt by ETH to reach the range quarters of the larger time-frame trading range. ETH must maintain this range quarter level of $1.78K; otherwise, prices could trade towards the range mid-level of $1.47K in the weeks to come in a full-blown bearish scenario.

Following up on our previous day’s discussion on DOGE, the memecoin is currently on a downward trajectory after failing to push higher towards its $0.08900 resistance level. This pullback could either signify that DOGE is preparing for another leg higher towards $0.08900 or may potentially seek to revisit the descending trendline seen on the daily chart.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Fed recap: Details from the July hike and Powell's market-moving comments.

• US willing to take 'targeted' actions against China for national security, Treasury official says

• Big Tech under pressure as Microsoft results put AI costs in spotlight

• JPMorgan to buy almost $2 bln of mortgages in the PacWest deal - source

• Mattel expects Barbie bounceback to spark toy sales

• European banks flag bad loan risks as global economy falters

• Key U.S. credit metrics that will inform the Fed's policy moves

• Visa discloses further demands from US Justice Dept. over antitrust probe

• Facebook parent Meta sees advertising jump, tops Wall Street targets

• Exclusive: Biden taps ex-Maryland Governor O'Malley to run Social Security agency

Crypto

• House Financial Services Committee Votes in Favor of Crypto, Blockchain Bills.

• Paradigm Moves $3.5M in MakerDAO's MKR Tokens Following Peer a16z's Maneuver.

• Once a Pioneer, Cosmos Blockchain Project Faces 'Existential' Crisis.

• Italy’s Central Bank Taps Polygon, Fireblocks DeFi Project to Help Institutions Dabble With Tokenized Assets.

• Crypto Lender Credix Brings Additional Private Credit Pool on Solana With 11% Yield.

• Judge warns Sam Bankman-Fried to ‘take it seriously’ as prosecutors push to revoke bail: Report.

• Binance withdraws crypto license application in Germany

• OP Chain Public Goods Network Goes Live

• Optimism Announced the Law of Chains to Provide Guiding Principle for Superchain

Deal Flow

• Arthur Hayes’ Maelstrom backs Aethir in funding round at $150 million valuation

Yours sincerely,
Treehouse Research 🌳