Genesis Seeks $1B Loan, Jump Trading Rebuff Winding Down Rumors; Hawkish Comments From Fed Officials and Employment Data Leave Investors Cautious

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter (previously known as The Canopy Collective), where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

In case you have missed it, check out our latest insights piece 👇

Our Daily View

What We Are Covering Today

• Hawkish Fed rhetoric and labor market strength reignite fears of continually restrictive monetary policy (more in Macro & TradFi)
• Genesis seeks $1B emergency loan (more in DeFi & CeFi)
• Long term BTC holder unrealized losses reach near 2018 lows (more in On-Chain)
• IV falls while put skew eased; SOL options market fades into obscurity (more in Crypto Derivatives)
• BTC attempts to reclaim $17K, ETH trails sideways as weekend rolls in (more in Crypto Technical Analysis)

Macro & TradFi

GM! Yesterday, initial jobless claims figures came in below expectations, further fuelling fears that the Fed might not slow down its hiking campaign. Fed officials also mirrored this hawkish rhetoric suggesting that rate hikes needed to continue to be restrictive to combat inflation. Markets are now pricing in terminal rates of around 5-5.25%, in line with St. Louis Fed President James Bullard statement. Elsewhere, data released revealed that Japan's core consumer inflation rocketed to a 40-year high in October, up 3.6% YoY. This comes as Japan's Yen has continued to show weakness, causing import costs to be high and cost-push inflation to occur.

US indices sank which saw the Nasdaq fell by 0.35% and the S&P 500 dropped by 0.3%, while the DJIA remained flat. The 10Y treasury yield rose sharply by 8 bps to 3.77%. Elsewhere, WTI Crude rose by 0.7% to $82.18 a barrel.

DeFi & CeFi

• Paxos clarifies that they are not affected by the FTX debacle
• Lentra, a SaaS lending solution powered by blockchain, raises $60M in series B round
• Genesis seeks $1B in loans by Monday
• Jump Crypto clarifies that they will continue operations
• Nexo previously attempted to acquire BlockFi in an $850M deal back in July
• FTX’s new CEO, John Ray, reveals complete failure of corporate controls in new bankruptcy documents

Genesis attempted to borrow $1B from investors due to a liquidity crunch before halting redemptions for Genesis Global Capital. So far, they have not been able to raise what they need. In a confidential fundraising document that was leaked, it was stated that there is an ongoing run on deposits driven mainly by retail and partners of Genesis such as Gemini Earn and institutional clients testing liquidity.

Jump Crypto debunked social media speculation that it will shut down due to the huge losses incurred in Luna and the Solana ecosystem. They clarified in a tweet that they remain well-capitalized and liquid and are still actively trading and investing. They even ended off by saying that projects who are looking to get funded can approach them.

John Ray, the new CEO of FTX, made claims in new bankruptcy documents stating that the corporate controls of FTX were worse than anything he has ever seen. There were many issues highlighted in the documents. To start off, FTX US did not file the crypto assets deposited by customers as liabilities, hence it is not clear how much FTX US owes to its customers. FTX also exempted Alameda from its auto-liquidation protocol, allowing bad debt to accumulate. Private keys to customer deposits were also held in a vulnerable manner, akin to being logged onto a Google Sheet. There were also several communication issues, such as SBF sending auto-delete work messages and even encouraging employees to do the same.

On-Chain

Looking at on-chain, long-term BTC holders’ MVRV ratio is at extreme lows similar to that in 2018. MVRV, which measures the market value to realized cap shows when price is trading below a “fair value”. Long-term holders are seeing a -33% in unrealized losses close to 2018 bottoms when holders saw a -36% loss (@glassnode).

Crypto Derivatives

• Funding rate remains negative on BTC and ETH
• 30-day IV rose for both BTC and ETH to 67.39% and 85.55%, respectively
• 30-day 25d put skew eased for both BTC and ETH to -14.58% and -20.78%, respectively

For futures, total liquidations came in at $47M, with the majority coming from long liquidations at $25M.

On the options front, IV has continued to fall lower, while put skew has decreased as no major crypto headlines came out on Thursday. The 30-day IV spread ratio between ETH and BTC is currently at 1.26. The front-end of the IV term structure normalized in contango. However, there is still an IV kink on the 31 Mar expiry leading into backwardation, which suggests that demand for optionality appears to be primarily driven by medium-dated tenors.

SOL IV, on the other hand, continues to plunge. The SOL options market has been quietly withering off as volume has plummeted. This follows several options exchanges halting trading and removing the addition of new expiries on SOL options, as well as the possibility of reduced market making activities on the pair, causing supply and demand to dry up.

On the flow side, large topside trades dominated the tape on ETH, as large clips of medium to longer dated calls, such as the 30 Dec and 31 Mar expiries, were both bought on ETH. Meanwhile, BTC flows came in mixed.

Crypto Technical Analysis

Looking at TA, BTC has been attempting to break out of the $17K level. RSI on the H1 suggests that buyers are gaining momentum in the short run however with the weekend coming, volume is likely to subside. This morning, BTC attempted to break out of 17K again, but has since been rejected, while the RSI has stopped short just below overbought conditions.

Looking at ETH, price continues to trail sideways between the $1,174 and $1,286 level. While price has seen lower lows over the past 3 days, RSI continues to trail sideways suggesting a slowdown in bearish momentum. Barring any major news, ETH is likely to trail between these two price levels into the weekend.

Monitor and Defend Your DeFi Portfolio!

The most comprehensive DeFi portfolio management tool ever

Own Your DeFi Game

Daily Readings

TradFi

• New wave of resignations hits Twitter after Musk ultimatum

• Japan sees core inflation at highest in 40 years as Asia-Pacific stocks rise

• Dow futures fall slightly as investors assess the prospect of higher interest rates

• Amazon CEO Andy Jassy says layoffs will continue into next year

• Dollar on track for weekly gain as Fed pushes back on pivot

• Fed to lift rates by 50 basis points, but peak policy rate may be higher

• Fed’s Kashkari: not stopping rate hikes until inflation peaks

• US Mortgage Rates Post Biggest Drop Since 1981, Falling to 6.61%

• Fed’s Bullard: Even ‘dovish’ policy assumptions require more rate hikes

Crypto

• Bahamas Securities Regulator Says It Ordered FTX Crypto Transferred to Government Wallets

• Sam Bankman-Fried Switches Legal Counsel as Investigations Into FTX Collapse Mount: Report

• Market Wrap: Crypto Respond Sideways to FTX and related crises

• Sui Network, a New Blockchain From Ex-Meta Employees, Launches Its Testnet

• FTX Ventures Was a Disorganized Mess With Missing Financials, Bankruptcy Documents Say

• US Senators Warren, Durbin Probe FTX Collapse

• FTX Affiliate Alameda Research Loaned $4.1B to Related Parties – Including $1B to Sam Bankman-Fried

• Confusion Abounds As Binance and OKX Suspend Support for USDC, USDT on Solana, Then Backpedal

Yours sincerely,
Treehouse Research 🌳

Completed this issue?

or

© 2022 Treehouse. All rights reserved.