🌳 Federal Reserve Plans Rate Cuts Amid Job Growth Surge; Changpeng Zhao's Sentencing Postponed to April 30

13 Feb 2024, Tuesday

2:38 AM

🌳 Federal Reserve Plans Rate Cuts Amid Job Growth Surge; Changpeng Zhao's Sentencing Postponed to April 30

BTC

ETH

S&P Futures 500

$50,148.30

$2,670.06

$5,033.00

(+3.14%)

 (+6.15%)

(-0.20%)

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

  • Fed plans rate cuts amid job growth; China faces cautious consumer spending (More in Macro & TradFi)
  • CZ asks for postponement of sentencing; Franklin templeton enters race for ETH ETF (More in DeFi & CeFi)
  • Bitcoin's stable valuation suggests low correction risk; Ethereum co-founder diversifies assets (More in On-Chain)
  • BTC skew shows short-term bullish sentiment (More in Crypto Derivatives)
  • BTC and ETH see gains, facing key resistances; overbought conditions suggest caution (More in Crypto Technical Analysis)

Macro & TradFi

Despite an unexpected surge in job growth in January, the Federal Reserve plans to proceed with rate cuts, driven by a robust $7 trillion economic boost from immigration and a decrease in job vacancies, which suggest the labor market's impact on inflation may be subdued. Officials are convinced that the labor market's strength will not necessitate inflationary pressures, underpinned by an influx of foreign workers that helps temper wage growth. This approach is informed by recent payroll data and a strategic outlook that prioritizes controlling inflation without significantly affecting employment levels. The Congressional Budget Office has highlighted the positive economic impact of immigration, forecasting a substantial increase in the workforce and output, which is expected to enhance government revenues by $1 trillion over the next decade. The Fed's stance is supported by cooling labor demand and wage growth moderation indicators, reinforcing their readiness to lower interest rates later this year to sustain economic growth while managing inflation effectively. This policy trajectory underscores a nuanced understanding of the interplay between labor supply, economic output, and inflation, positioning the Fed to navigate economic challenges with a balanced approach.

In other news, with consumer prices falling at the fastest annual rate in 15 years in January, Chinese consumers are increasingly cautious with their spending, signaling deeper concerns about the economic outlook of the world's second-largest economy. This cautious consumer behavior persists even though businesses across various sectors, from cosmetics to cars, are offering significant discounts to stimulate demand. The property market's ongoing pressures further dampen consumer confidence, traditionally a cornerstone of economic optimism in China. Analysts suggest this trend could represent a structural change in consumer behavior, highlighting the challenges policymakers face in revitalizing consumer demand to support economic growth. Despite a nominal increase in retail sales and a recovery in auto sales driven by price reductions, the broader trend of consumer downgrading, preferring cheaper alternatives across various spending categories, suggests a complex path ahead for China's consumer-driven economic recovery.

US stocks closed below record highs yesterday, with mixed performances across major indices—S&P 500 decreased by 0.09%, Dow Jones increased by 0.33%, and Nasdaq fell by 0.30%—as the market anticipated the consumer price index report for January, expected to be released later today at 21:30 SGT. Economists forecast a decline in headline inflation to 2.9% from December's 3.4%. Notably, Walt Disney's shares surged 11.49% following its earnings beat and optimistic profit outlook for the year, attributed to cost management and robust theme park revenues. Meanwhile, Arm's stock dramatically increased by 47.89%, buoyed by raised annual forward guidance propelled by AI industry growth.

CeFi & DeFi

  • Binance founder CZ asks for postponement of sentencing
  • Franklin Templeton joins spot ETH ETF race
  • FTX to Sell Custody Unit for $500K After Paying $10M Just Months Before Collapse
  • Ethereum Validator Entry Queue Signals Renewed Interest in Staking
  • Solana's Second Phone Crosses 100,000 Presales, Securing $45M for Development

The legal proceedings involving Changpeng Zhao, the founder of Binance, have encountered a delay, as the federal court in Seattle has pushed back his sentencing to April 30. He is facing a charge for failing to establish an adequate anti-money laundering program at the world's largest cryptocurrency exchange. The reason for postponing the sentencing, originally set for February 23, was not disclosed in the court's latest notice. Zhao, who is a Canadian citizen residing in the United Arab Emirates, is currently on a release bond of $175 million in the U.S. This judicial extension comes after Zhao's November 21 guilty plea, which was part of a deal that included his resignation as CEO of Binance and a $50 million fine. In conjunction with Zhao's plea, Binance consented to pay fines and restitution amounting to $4.3 billion for its plea to charges including conspiracy to conduct an unlicensed money-transmitting business. The severity of the allegations is underscored by comments from Treasury Secretary Janet Yellen, who cited the platform's facilitation of transactions tied to various illicit activities. With federal sentencing guidelines suggesting up to 18 months in prison, there is speculation that prosecutors may seek a stiffer penalty for Zhao.

Franklin Templeton, a heavyweight in the asset management arena with $1.5 trillion under management, has thrown its hat into the ring for the creation of a spot Ether ETF in the United States. On February 12, the firm filed an S-1 with the SEC, aiming to launch the "Franklin Ethereum ETF" on the Chicago Board Options Exchange. This move marks another significant step for a Wall Street firm towards embracing the burgeoning field of cryptocurrency-based financial products. In a novel approach, Franklin Templeton also revealed plans to incorporate staking mechanisms within its Ether ETF, allowing shareholders to potentially earn additional income. This strategy mirrors ARK 21Shares' recent updated filing and signifies a growing trend of integrating traditional financial structures with the innovative features of the crypto economy. As Franklin Templeton enters the race, it joins the ranks of other prominent firms such as BlackRock, VanEck, and Fidelity, awaiting the SEC's approval on their respective spot Ether ETF applications, with key decision dates spanning from May to August 2024.

On-Chain

The current Bitcoin valuation of $48K does not suggest imminent correction risks, with unrealized profit margins remaining low at 13%, as highlighted in the green circle of CryptoQuant's analysis by Julio Moreno. This is a significant shift from the situation a month ago, at the time of the ETF launch, when profit margins were approximately 30%, marked in red, indicating a higher risk of price correction. This analysis implies that while the price level is the same, the underlying market dynamics and investor sentiment have altered, thereby reducing the immediate threat of a market downturn.

Spotonchain has reported that Jeffrey Wilcke, co-founder of Ethereum, transferred 4,300 ETH, valued at approximately $10.7 million, to the Kraken exchange approximately 14 hours ago, when the price was $2,482 per ETH. This transaction follows a previous deposit of 22,000 ETH at $1,870 each in June 2023, which preceded a market downturn. Currently, Wilcke's holdings amount to 146,000 ETH, equivalent to $362 million. This recent transfer may indicate a strategic asset diversification by Wilcke.

Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH increased slightly to 54.20% and 56.77%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH remain positive, rising to 4.98% and 5.92% respectively.
  • The futures market witnessed $197.91M liquidations, with shorts representing 67.9%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

26.15%

BTC

Binance

dYdX

23.02%

ETH

Bybit

OKX

21.44%

ETH

Binance

OKX

Source: @CexyArbBot Telegram Bot

Notes:

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, and DOGE vs. USDT perps. 

2) CEXs observed include Binance, Bybit, OKX & dYdX.

3) Lookback period is 24 hours.


The BTC ATM Implied Volatility (IV) displays a synchronized increase across the 7 and 30-day maturities, suggesting an alignment in market sentiment towards expected mid-term volatility. This collective uptrend, with IV levels inching higher, indicates that traders may be bracing for upcoming events or market shifts. The current trend implies a market consensus forming on near-term BTC price volatility, yet with a cautious eye on longer-term conditions that could impact this equilibrium.

The Bitcoin (BTC) Term-Structure chart presents a contango configuration, with IVs across the curve experiencing significant increases. This trend is likely attributed to the market's uncertainty regarding the upcoming Federal Reserve interest rate decision and CPI data. This indicates that traders are anticipating potential volatility in Bitcoin prices, reflecting broader market apprehensions about the impact of monetary policy decisions on asset valuations.

BTC’s 25-delta skew across various maturities suggests a nuanced market sentiment. The 7-day skew is tracking closely with the 30-day skew, indicating that traders' expectations for near-term price action are aligned with their medium-term bullish views. 

Lastly, during @Paradigm’s highlighted option flows during the US Session Hours yesterday, there was an emphasis on upside coverage with strategic call purchases and structured positions. Key BTC trades encompassed the procurement of 275x 29-Mar-24 54/70k Call Calendar, and a significant position of 225x 23-Feb-24 48/1-Mar-24 50k Call Calendar. Concurrently, noteworthy ETH strategies included the purchase of a 6000x 1-Mar-24 2800 Call and a 4250x (Inverse) 29-Mar-24 2900/26-Apr-24 3800 Call Calendar.

Crypto Technical Analysis

On the 4-hour chart for BTC, the price has ascended over the Lunar New Year weekend, now trading at approximately $50K. Notably, there is a discernible ascending trend line supporting the recent upward trajectory, indicating sustained buying interest. However, the market is approaching a strong resistance level near the $52K mark, which was previously established as a significant barrier back in March 2022. A breach above this resistance could potentially signal further bullish momentum, with the next notable resistance poised at a higher psychological round figure. Conversely, should the price fail to surpass the $52K resistance, we may see a retest of the support turned resistance at $45K, a downside of 8.74%. The Relative Strength Index (RSI) is hovering around 74.69, which suggests that the market is in overbought territory. This could lead to a consolidation or a pullback in the near term, as traders might consider taking profits from the recent price surge. The RSI's trend will be closely watched for any signs of reversal that could confirm a potential retreat from current levels.

Moving on, ETH is exhibiting a significant appreciation as it approaches the resistance level at $2.66K. The price action suggests a consistent upward momentum, which has culminated in ETH's challenge of this resistance level. The market's reaction to this price point could be pivotal, as a conclusive breakout above this level may open the path toward the next resistance, which could be determined by the previous highs or psychological round figures. On the downside, should Ethereum face rejection at this juncture, the focus would shift to the support level at $2.5K, which could correspond to the 100-day moving average, representing a downside of 5.53%. Currently, the RSI is above 80, indicating strong buying pressure; however, it also signals that the market is in overbought territory. This condition often precedes a potential consolidation or retracement as the market digests recent gains. Investors and traders will be monitoring the RSI closely for any signs of divergence that might signal a weakening of the current trend.

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