🌳Inflation in the US is projected to decline; Japan's major banks are leveraging public blockchains to expand the usage of yen-pegged stablecoins

10 Jul 2023, Monday

2:45 AM

🌳Inflation in the US is projected to decline; Japan's major banks are leveraging public blockchains to expand the usage of yen-pegged stablecoins

BTC

ETH

S&P Futures 500

$30,039.33

$1,843.89

$4,447.25

(-1.23%)

 (-3.14%)

(-0.68%)

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

GM Treehouser 🌳

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June 2023 Market Recap

Our Daily View

What We Are Covering Today

  • Sticky components delay inflation dropping below 2%; Yellen assures Beijing that US controls on investment will not adversely affect them (more in Macro & TradFi)
  • Japanese banks expand stablecoin integration with Cosmos; Lightning Labs empowers AI with Bitcoin (more in DeFi & CeFi)
  • BTC sharks and whales continue accumulation over last month; US entities regaining BTC supply dominance (more in On-Chain)
  • IV drops across different tenors; Put-Call skew moves back to to equilibrium (more in Crypto Derivatives)
  • BTC and ETH losing positive price momentum (more in Crypto Technical Analysis)

Macro & TradFi

As overall inflation in the US is expected to fall to about 3% in June, the lowest in two years, the challenge lies in bringing it further down to the Federal Reserve's 2% target. First, core consumer price inflation is projected to drop to around 5%, driven by a slowdown in rent growth and declining used-car prices. Second, housing, accounting for 40% of the core CPI, has seen a deceleration in price increases due to a slowdown in household formation and an increase in apartment supply. Last, used-car prices, which surged during the pandemic, are expected to decline as production of new cars rebounds.

US Treasury Secretary Janet Yellen assured Beijing during her four-day visit that US controls on investment into China would only target sensitive national security sectors. Yellen emphasized that the investment screening would be highly targeted and narrowly focused on specific sectors of national security concern. While expressing concerns over security, human rights, and coercive actions against American firms, Yellen also highlighted the importance of open and in-depth discussions between the US and China. The visit took place amid China's struggling economic recovery and tensions with the US, which have impacted foreign investment sentiment. Chinese state media described the talks as constructive, while the nationalist Global Times expressed optimism for improved relations.

In the US, markets closed lower due to concerns over potential interest rate hikes, with the Dow Jones Industrial Average falling by 0.55%, the S&P 500 losing 0.29%, and the Nasdaq Composite dropping 0.13%. Asia-Pacific markets mostly experienced gains ahead of key inflation reports, with the Nikkei 225 in Japan rising by 0.28%, the Topix gaining 0.13%, and Australia's S&P/ASX 200 climbed 0.52%.

DeFi & CeFi

  • Japan’s largest banks to bring japanese stablecoins to Cosmos
  • Lightning labs introduce Bitcoin Tools for AI, allowing Bitcoin payment between AI agents
  • Multichain may have lost complete control due to force majeure, not simple hacking
  • Nearly 2 Million wallets interacted with DApps daily in June despite regulatory challenges
  • Sega distances itself from Blockchain Games as COO claims Play-to-Earn games 'boring'
  • Gemini sues DCG and its founder Barry Silbert
  • Aave to convert 1,600 ETH in DAO treasury to $wstETH and $rETH

Japan's largest banks are expanding the use of Japanese yen-pegged stablecoins by integrating them with Cosmos and other public blockchains. Progmat, a stablecoin issuance platform project initiated by Mitsubishi UFJ Trust and Banking (MUFG), the country's largest bank, has garnered support from over 200 Japanese companies, including major banks like SMBC and Mizuho. MUFG's Progmat Coin will facilitate the issuance of bank-backed stablecoins on Ethereum, Polygon, Avalanche, and Cosmos, with plans to expand to more networks in the future. Collaborating with Promat, @tokifinance, an IBC-enabled cross-chain bridge, and @noble_xyz, a token issuance protocol, aim to introduce Japanese stablecoins to Cosmos. While the initial focus is on Cosmos IBC, the TOKI team envisions eventual cross-chain swapping with stablecoins on Ethereum and utilizing them for cross-chain lending. The launch of Japanese stablecoins on Noble is anticipated in spring 2024, while TOKI plans to debut its mainnet in Q4 of this year.

Lightning Labs has launched tools that enable AI applications, including OpenAI's GPT series, to leverage the Lightning Network for Bitcoin transactions. This integration empowers AI platforms to bypass traditional payment methods like credit cards and benefit from fast, cost-effective Bitcoin transactions. It expands the scope of AI use cases and enhances accessibility to AI software. Notably, Language Models like ChatGPT can now facilitate API access charging, enabling software agents to pay for API usage and unlocking opportunities for innovative applications and monetization. Lightning Labs anticipates a broader range of use cases beyond chat interfaces, particularly in enterprise and SaaS applications.

On-Chain

Bitcoin sharks and whales have accumulated over 71,000 BTC in the past three weeks, according to @santiment. Despite the lackluster price action and sideways trading, addresses holding between 10 and 10,000 BTC added this significant amount. This accumulation, equivalent to $2.15 billion, indicates high confidence among these large Bitcoin holders. Overall, the trend suggests that the sharks and whales are undeterred by the current price levels, showing continued bullish sentiment in the market.

The supply of Bitcoin (BTC) held by US entities has increased, suggesting a significant change in BTC supply dominance following a surge in ETF filings, according to @glassnode. Previously, Asia had a strong presence in the BTC market with US supply dominance having fallen by 11% since mid-2022 as regulatory actions and uncertainty in the US led some entities to move their operations offshore. However, even with Asia's receptive approach to the crypto ecosystem, for the foreseeable future, it seems that the trend will reverse course, with Asia's crypto holdings falling relative to the US.

Crypto Derivatives

  • Funding rates remains negative for BTC and positive for ETH
  • Deribit Implied Volatility Index (DVOL) is 43.73% and 42.95% for BTC and ETH respectively
  • 30-day 25-delta skew (C-P) for BTC and ETH is at 0.47% and -1.04% respectively
  • The futures market witnessed $102M worth of liquidations, with short positions representing 60.4% of the total.

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

41.06%

BNB

Bybit

Binance

32.73%

SOL

OKX

dYdX

10.49%

ETH

dYdX

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

The 7-day ATM IV initially experienced a slight drop but quickly recovered to the same level recorded on Friday. Overall, the ATM IV for BTC remains elevated and has remained relatively flat since the beginning of the month, reflecting the market's current calmness.


Both BTC and ETH continue to exhibit a contango term structure, although there has been a decrease in Mark IV across all tenors due to lower trading activities over the weekend. The near-dated IV (0 to 1 day to expiration) has been impacted the most, with a significant drop of up to 10%.

Analyzing the BTC Constant Maturity Skew (P-C) at 25 Delta, the 7-day skew has risen to 0.08%, returning to positive territory, while the 30-day skew has also increased to -0.54%. This indicates that traders are adopting a more neutral view of the market as Put and Call options reach an equilibrium. Investors are debating whether BTC will break its long-standing resistance or retrace back to lower levels.

According to @Paradigm, the most notably traded structures since Friday involved the sale of BTC 25 Aug 23 35000 / 29 Dec 23 55000 Call Calendar 175x (350 BTC) @ -0.0005 BTC, the sale of BTC 25 Aug 23 35000 / 29 Dec 23 55000 Call Calendar 100x (200 BTC) @ -0.0003 BTC, and the purchase of BTC 29 Dec 23 22000/45000 Risk Reversal (Call) 100x (200 BTC) @ 0.0124 BTC. This shows that largely institutional investors’ interests remain concentrated on BTC with the recent news, and are looking to hedge their exposures over an extended period (end of August/end of year).

Crypto Technical Analysis

Analysing the 4-hour chart for BTC, we observe a horizontal structure with resistance at $31K and support at $30K. Presently, BTC is trading in the lower portion of this range. The RSI is currently signaling negative momentum and has not yet reached oversold conditions. This suggests a potential decline in BTC towards the lower support level at $29.3K.

ETH is on a noticeable downward trend since Friday on the daily chart, steering towards the support level at $1.8K. A symmetrical triangle pattern appears to be forming on the higher time frame. This technical pattern doesn't offer clear directional bias currently, but an ensuing breakout can be expected soon.

After being rejected at the horizontal resistance of 0.063, ETHBTC has retraced to the 0.06 level and found support at the lower trendline of the descending wedge pattern. The RSI currently stands at 37.18 and is recovering from oversold conditions. This suggests that ETH may regain some strength against BTC in the short term.



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