Fed Undecided on March Rate Size; Silvergate To Wind Down After Losses Mount

09 Mar 2023, Thursday

3:21 AM

Fed Undecided on March Rate Size; Silvergate To Wind Down After Losses Mount

BTC

ETH

S&P Futures 500

$21,707.25

$1,534.75

$3,993.00

(-2.41%)

 (-2.12%)

(+0.08%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

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February 2023 Market Recap

Our Daily View

What We Are Covering Today

  • Powell soften hawkish tone on second day of testimony; US President Biden looks to increase taxes on wealthy individuals and corporations (more in Macro & TradFi)
  • Marathon Digital reduces debt and frees up bitcoin collateral, Crypto bank Silvergate announces voluntary liquidation (more in DeFi & CeFi)
  • BTC Miners' Netflow Volume (7d MA) has recently hit a 1-month high (more in On-Chain)
  • IVs fell across the curve as put skew continues to tighten (more in Crypto Derivatives)
  • ETH breaks through its support with BTC having the potential for another large price swing (more in Crypto Technical Analysis)

Macro & TradFi

US stocks traded sideways yesterday with DJIA down 0.18%, NASDAQ up 0.4% and SPX up 0.14%. On the second day of Fed Chair Powell’s testimony, he emphasized that “no decisions’ have been made regarding the faster rate hikes. This status quo considers other macroeconomic indicators as the jobs openings in Jan remain higher than expected at 10.8M and job openings per unemployed sitting at 1.9, which both indicate that the labor market remains tight. Powell emphasized that the employment report on Friday and inflation data next week would guide the upcoming rate decision.

Elsewhere, Chinese ships cut the 2 internet cables leading to Taiwan’s Matsu Island. The first cable was severed by a fishing vessel and the second by a cargo ship. Cables could be cut by ships, anchors or by fishing boat’s steel net. Lastly in the US, President Joe Biden is set to release his budget proposal, which includes new tax increases on billionaires, rich investors, and corporations. The plan calls for a minimum 25% tax on billionaires, almost doubling the capital gains tax rate to 39.6%, and raising income taxes on wealthy Americans and corporations.

DeFi & CeFi

  • Marathon Digital reduces debt and frees up bitcoin collateral
  • Airbit Club founders and lawyer plead guilty to $100M fraud scheme
  • Crypto bank Silvergate announces voluntary liquidation
  • Pension fund-backed Parataxis Capital launches new fund
  • Vertex protocol targets institutional clients for DEX trading
  • Celsius Network allocates $25M for withdrawals and burns $500M in WBTC
  • JPMorgan cuts ties with crypto exchange Gemini, but remains with Coinbase

Marathon Digital, one of the biggest Bitcoin miners, has announced that it has terminated its credit facilities with Silvergate Bank. The bank announced that it would liquidate its assets and wind down operations on Wednesday. Marathon confirmed that its debt has been reduced by $50 million after the completion of the term loan prepayment on March 8, and its credit facilities with Silvergate Bank were terminated, according to a statement. The move has also increased its unrestricted bitcoin holdings by 3,132 as the BTC collateral held by a third-party custodian has been returned to the miner. The reduction in leverage will immediately free up approximately $75 million in bitcoin that was being held as collateral for the term loan, according to Hugh Gallagher, Marathon's CFO.

Silvergate Bank, as one of the most well-known crypto-friendly banks, will voluntarily liquidate its assets and wind down operations, according to its holding company Silvergate Capital Corp. The bank faced inquiries from auditors and accounting firms, and the winding down process will repay all deposits in full, and resolve claims and preserve residual assets. The California Department of Financial Protection and Innovation is monitoring the situation, and the Federal Reserve and Federal Deposit Insurance Corp. have declined to comment. The bank has provided banking services to crypto companies since 2013 with nearly 500 crypto clients in 2018 and over 750 clients during its IPO in 2019. This marks the first major bank collapse since October 2020 and possibly the largest bank to fail since 2009.

On-Chain

Short-term holders of Bitcoin cashed out their profits as the profit ratio rose above 5%, resulting in a temporary decline in Bitcoin's price. In addition, some miners transferred their Bitcoin to exchanges in early March. Despite the recent correction in Bitcoin's price, on-chain data still suggests a cautiously optimistic outlook for four reasons. First, the spending of large Bitcoin holders or "whales" has remained relatively low compared to other price corrections since late 2022. Second, the holdings of Bitcoin whales have increased to their highest level since November 30, 2022. Third, the Inter-exchange Flow Pulse (IFP) indicates the early stages of a bull market, with momentum turning positive again. Lastly, the Bull/Bear Market Cycle Indicator remains in the bull territory, and the On-chain P&L Index momentum has entered more sustainable levels. Additionally, traders in the derivative markets hold positive sentiments and are willing to pay to open new long positions.(@Cryptoquant)

On the other hand, the BTC Miners' Netflow Volume (7d MA) has recently hit a 1-month high of 12.267 BTC, indicating a surge in the volume of Bitcoin being moved from miner wallets to exchanges. This is a significant increase from the previous 1-month high of 7.544 BTC observed on 23 February 2023, which may signal a shift in the behavior of miners in response to market conditions. The increase in netflow volume could be attributed to miners taking advantage of the recent price increase to sell their Bitcoin and realize profits. Alternatively, it could also indicate a bearish sentiment among miners, with them hedging their mining rewards by selling their Bitcoin on exchanges. This on-chain data may suggest that Bitcoin's price may experience some short-term volatility. (@glassnode).

Crypto Derivatives

  • BTC and ETH funding rates edged slightly higher
  • 30-day ATM IVs fell to 46.5% and 51.7% for BTC and ETH respectively
  • 30-day 25 delta put skew tightened further to -3.34% and -5.88% for BTC and ETH respectively

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

17.62%

SOL

DYDX

BYBIT

9.34%

ETH

DYDX

OKX

5.33%

LTC

OKX

BYBIT

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

For futures, total liquidations over the past 24 hours jumped to $110.28M, the majority coming from longs at $94.9M. Open interest for BTC fell by 0.88% while open interest on ETH futures rose by 2.05%.

On the options front, IV fell across the curve for BTC with only far-dated IVs on ETH rising slightly. Term structure remains relatively unchanged with IV on today’s expiry remaining elevated. BTC 25d skews are also firmly back to put premiums, especially for short-dated maturities. 7-day RV has reached 40.36 for BTC and 41.82 for ETH while variance risk premium narrows back to 3.95% and 5.25% on the two majors.

On the flow side, long put butterfly was the most popular strategy trading within BTC as while the most dominant strategy for ETH switched to long strangle.

Lastly, the VIX dropped to 19.10.

Crypto Technical Analysis

Onto TA, BTC price movements have confirmed a new lower high and hence formed a falling pennant pattern on the 4H chart. However, there has yet to be a clear breakout of the previous trendline of LLs. This could indicate a large swing in price in the near future as price trades towards the end of the pennant. Meanwhile, the current price level could serve as a strong support. RSI, on the other hand, has declined to the oversold territory at around 27.6 for the 4H timeframe. If price breaks the level, the next support zone can be observed at $20.6K to $20.7K.

As for ETH, price has broken through the rising channel’s lower bound and is approaching the next key support zone of $1.49-1.50K. However, if the 1.50K level fails to hold as well, ETH will possibly move to the $1.43K level which signifies another 5% drawdown. RSI, however, remains to be in the reasonable fair value range with it sitting at 41.7 and 36.3 respectively for 1D and 4H.

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Treehouse Research 🌳