🌳 IMF Calls for Structural Reforms in China; UN Reports Cryptocurrency Misuse in Asia

16 Jan 2024, Tuesday

3:07 AM

🌳 IMF Calls for Structural Reforms in China; UN Reports Cryptocurrency Misuse in Asia

BTC

ETH

S&P Futures 500

$42,585.89

$2,507.60

$4,800.00

(+0.87%)

 (+0.64%)

(-0.24%)

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


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 👇

You can also access our research articles on the Bloomberg Terminal with the command “NH TRH < GO >"!


Our Daily View

What We Are Covering Today

  • IMF head predicts a decline in China’s growth rate in 2024; Blackrock Vice  Chairman suggests that investors may be overly optimistic on US rate cuts (More in Macro & TradFi)
  • Cryptocurrencies fuel illicit economies in Asia; USDC surges in legitimate remittances (More in DeFi & CeFi)
  • Bitfinex thwarts XRP exploit attempt; Pendle Finance transfers $PENDLE amid price fluctuations (More in On-Chain)
  • ATM IV declines while the term structure largely moves back to the contango state (More in Crypto Derivatives)
  • BTC struggles to reclaim previous supports within the channel; ETH consolidating post pullback (More in Crypto Technical Analysis)

Macro & TradFi

The head of the International Monetary Fund (IMF), Kristalina Georgieva, has warned that China needs structural reforms to avoid a significant decline in growth rates. In the short term, she highlighted the need to address issues in China's property sector and manage high levels of local government debt. In the long term, Georgieva emphasized demographic changes and a "loss of confidence." Structural reforms to open up the economy, balance the growth model toward domestic consumption, and boost confidence are essential, according to Georgieva. The IMF raised its China growth forecast to 5.4% for 2023 but expects growth to slow to 4.6% in 2024.

Meanwhile, BlackRock Vice Chairman Philipp Hildebrand warned that investors' bets on U.S. interest-rate cuts could be excessive as inflation proves to be stickier than anticipated. He mentioned that the rapid slowdown in consumer-price growth is giving financial markets a false sense of security about underlying pressures. Money markets are currently betting on six quarter-point reductions at the Federal Reserve this year, with the first cut expected by May. Hildebrand cautioned that the outlook is likely mistaken, as stabilizing inflation to the 2% target won't be as easy as anticipated, and there might not be as much room for rate cuts as priced in.

During yesterday’s trading session, the Dow Jones Industrial Average declined by 0.3%, closing at 37,592.98. The Nasdaq Composite rose slightly by 0.02%, reaching 14,972.76, boosted by strong performances in large-cap technology stocks, particularly MercadoLibre, Inc., which surged 4.2%. The S&P 500 gained 0.1%, closing at 4,783.83, with seven out of 11 sectors in positive territory. Energy, real estate, and utilities sectors rose, while consumer discretionary declined. The CBOE Volatility Index (VIX) increased by 2.1% to 12.70. The market sentiment, influenced by signs of decreasing inflation, suggests expectations of potential interest rate cuts by the Federal Reserve in March. Citigroup Inc. (C) reported adjusted earnings that exceeded estimates, while Bank of America Corporation (BAC) surpassed earnings expectations but fell short on total revenues, resulting in a 1% rise for Citigroup and a 1.1% decline for Bank of America Corporation.

CeFi & DeFi

  • In the failed Bitfinex exploit attempt, billions in XRP were moved
  • UN implicates crypto in booming illicit economies of Southeast Asia
  • Circle highlights surge in USDC use for Asia remittances
  • Google Cloud joins Flare Network as a validator
  • Do Kwon appeals new Montenegro high court decision upholding extradition request
  • Protocol Village: Renzo raises $3.2M

The United Nations Office on Drugs and Crime has issued a report highlighting the misuse of cryptocurrencies like USDT and others in the expanding illicit economies of East and Southeast Asia, particularly in poorly regulated casinos and romance scams. Organized crime groups are exploiting advanced technologies such as large language model-based chatbots, deepfake technology, and automation, posing severe threats to individuals and the formal banking sector. The report underscores the strategic use of these cryptocurrencies in underregulated areas and special economic zones, often linked to autonomous armed groups. This development has fostered a niche travel industry around illegal casinos, where junket operators offer various underground financial services, further complicating law enforcement efforts against these sophisticated criminal networks. The report emphasizes the urgent need for enhanced awareness and policy reform to tackle the region's growing financial lawlessness.

In its latest report, Circle, the issuer of the USDC stablecoin, has highlighted a significant surge in the use of USDC for remittances across Asia, with over $130 billion flowing into the region in 2022. This trend underscores the expanding role of USDC beyond speculative trading, particularly in emerging markets with substantial diaspora populations, like the Philippines. The report also emphasizes USDC's contribution to bridging the $510 billion trade finance gap in these markets, often hindered by capital outflow restrictions. Notably, Circle's collaboration with Coins.ph and companies like Taipei-based XREX showcases USDC's growing utility in facilitating cross-border remittances and credit, highlighting its increasing relevance in global finance, with a notable decline in its use for speculative trading. This reflects a broader global trend, as evidenced by the significant adoption of stablecoins in regions like Latin America, pointing to the rising importance of digital currencies in the world’s economy.

On-Chain

Elsewhere, an attempt to exploit Bitfinex using the XRP Ledger's partial payment feature was thwarted. The exploit involved moving an amount of XRP nearly equating to half of its $31 billion market capitalization, causing alarm among market observers. However, the actual transfer involved only a few cents worth of XRP and failed due to insufficient liquidity from the sender. This exploit aimed to deceive Bitfinex into acknowledging the transfer as legitimate, potentially facilitating a hack. Bitfinex's systems, however, correctly identified the transfers as a "partial payment," a feature of the XRP Ledger that allows payments to succeed with a reduced amount. This safeguard highlights the importance of handling the 'delivered_amount' data field accurately to prevent such attacks. The XRP Ledger documents caution that assuming the ‘Amount’ field in a payment represents the total amount delivered can lead to vulnerabilities, allowing malicious actors to exploit such assumptions for financial gain.

Meanwhile, according to SpotOnChain's analysis, Pendle Finance's Ecosystem Fund recently transferred 1.3 million $PENDLE, valued at approximately $2.19 million, to Binance. This transaction follows an earlier unlock event on October 8, 2023, where the wallet received 23 million $PENDLE, equivalent to $15.6 million. To date, the wallet has deposited a total of 3.5 million $PENDLE, worth around $4.23 million, to Binance. Notably, the $PENDLE price has shown a tendency to experience a slight decline following these deposit events. Such actions are common in cryptocurrency projects for various reasons, including raising funds for operational expenses, rebalancing their portfolio, or converting to stablecoins for risk management. However, without explicit confirmation from the Pendle Finance team, the exact intent behind these transactions remains unknown.


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped slightly to 55.60% and 61.65%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC stayed flat at -1.95%, while that of ETH dropped to -1.57%.
  • The futures market witnessed $90.02M liquidations, with longs representing 52.03%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

21.26%

BNB

Binance

Bybit

16.11%

ETH

OKX

dYdX

10.43%

SOL

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.


In the last 24 hours, BTC’s ATM IV has experienced a slight decline following the selling pressure at the end of last week. The 7-day IV dropped from 58.85 to 53.77, aligning with the 30-day IV, currently at 52.58. This implies that traders' expectations have converged for the week and the month ahead, possibly due to the lack of further catalysts shortly after the ETF approval.

The term structure has shown a similar trend, predominantly returning to a contango state as short-term IVs declined. However, a slight backwardation persists for contracts expiring in 3 to 17 days, possibly reflecting the anticipated short-term volatilities as the price oscillates, with large institutions expressing varying opinions on the surge of BTC in the TradFi world.

The BTC 25-delta call-put skews have experienced a slight rise as prices pulled back from the selling pressure at the end of last week. Specifically, the BTC 30-day skew increased from -2.94% to -1.95%, while the 7-day skew, on the other hand, saw a more pronounced rise, moving from -6.89% to -5.52%. Although still in bearish territory, this suggests that the market sentiment towards BTC in the near term is improving, potentially driven by the macro outlook of potential rate cuts and speculation on increased institutional capital inflows to the ETFs.

During yesterday’s Asia/Europe Trading Session, the options market remained relatively quiet, as reported by @Paradigm, likely influenced by the US holiday. However, despite the reduced activity, option flows continued to exhibit a bullish bias. For BTC, notable transactions included the purchase of 300x 23-Feb-24 52K Calls and 170x 27-Sep-24 60K Calls. Meanwhile, leading ETH strategies involved selling 2500x 23-Feb-24 2.1K/3.2K Bear Risk Reversal and 1500x 19-Jan-24 2.5K/2.65K Strangle.

Crypto Technical Analysis

Onto technical analysis, the 4-hour BTC chart indicates a continued consolidation within a defined range after breaking below the ascending channel. The price is currently hovering around $42.6K at the point of writing, struggling to reclaim previous support levels within the channel. This lateral movement is confined by the established support near the $40K psychological threshold and resistance around $46K, where the earlier breakdown took place. RSI has also risen slightly compared to yesterday's 29.89, currently at 42.67, moving away from the oversold territory. This suggests that selling pressure is easing, but not yet indicative of a strong reversal momentum.

Moving on, ETH is trading around $2,510, a slight increase from the $2,480 support level yesterday. The price is experiencing consolidation after the pullback from the local highs near $2,700. This consolidation suggests that the market is in a state of indecision after the recent rally. The immediate support lies at the $2,400 level, formed by the local highs before the price surge last week. On the other hand, resistance is observed near the $2,700 to $2,800 range, which coincides with the recent peak and could present a hurdle for bullish movements. RSI is currently at 50.59, which is an improvement from the previously noted 40 level and indicates a neutral momentum in the market.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

Crypto

Deal Flow

Yours sincerely,
Treehouse Research 🌳