🌳 Iran Conflict With Israel Escalates; Coinbase Challenges SEC Over Legal Interpretations

15 Apr 2024, Monday

2:53 AM

🌳 Iran Conflict With Israel Escalates; Coinbase Challenges SEC Over Legal Interpretations

BTC

ETH

S&P Futures 500

$65,524.77

$3,115.17

$5,179.50

(-6.75%)

 (-11.53%)

(-1.26%)

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

  • Iran conflict with Israel escalates; US consumer sentiment and inflation concerns rise (More in Macro & TradFi)
  • Coinbase request review over SEC’s lawsuit; Uniswap raises fees for most transactions (More in DeFi & CeFi)
  • Whales provide a continued injection of capital into ETH and BTC markets during the recent market decline (More in On-Chain)
  • Bitcoin IV rises amid tensions; Paradigm highlights defensive crypto trades (More in Crypto Derivatives)
  • BTC and ETH declined to rebound from support levels of $62.7K and $3K respectively (More in Crypto Technical Analysis)

Macro & TradFi

Iran's decision to launch a large-scale drone and missile attack on Israel significantly escalated the ongoing conflict between the two nations, which had been marked by decades of hostility and indirect confrontations. This unprecedented assault follows a suspected Israeli strike on Iran's consular building in Damascus, which killed senior commanders of the Revolutionary Guards, signaling a major escalation in their shadow war. Tehran's action sends a clear message of its willingness to confront Israel and potentially engage the U.S. directly, challenging hopes of de-escalating regional tensions. As both countries continue to assert military deterrence, this latest development pushes the Middle East closer to a possible full-blown regional conflict, with Iran risking further escalation to reassert its influence and deterrence capabilities through its network of regional proxies. The response from Israel's government, particularly how Prime Minister Benjamin Netanyahu's far-right administration chooses to respond, will be critical in determining the next phase of this escalating cycle of violence.

Meanwhile, in April, U.S. consumer sentiment slightly declined to 77.9 from March's 79.4, as indicated by the University of Michigan's preliminary survey data. Simultaneously, inflation expectations for both the short and long term rose, with one-year outlooks increasing from 2.9% to 3.1%, and five-year predictions moving up to 3.0% from 2.8%. This uptick in inflation expectations occurs amid a backdrop of ongoing concerns over services inflation, which remains a significant issue for consumers. Economists had anticipated a higher sentiment index of 79.0, reflecting a cautious consumer stance likely influenced by the upcoming elections, which are perceived as potentially pivotal for economic directions.

Last Friday, U.S. equities experienced a downturn due to rising inflation concerns and geopolitical tensions, with the S&P 500 dropping by 1.46%, the Nasdaq Composite by 1.66%, and the Dow Jones Industrial Average by 1.24%. In contrast, the Russell 2000 index managed a 0.7% gain. Bank stocks, particularly JPMorgan, faced significant losses, dropping 6.47% as a forecast of lower net interest income overshadowed better-than-expected earnings, exacerbated by increasing interest costs and a shift in depositor preferences towards higher-yielding options. Internationally, the People’s Bank of China is anticipated to maintain its one-year medium-term lending facility rate at 2.5% to stabilize the yuan. Looking ahead, investors are keenly awaiting the U.S. retail sales data set for release tonight and key economic indicators from China, including property prices, GDP, and industrial production due early next week.

CeFi & DeFi

  • Coinbase appeals for judicial review for SEC’s lawsuit
  • Uniswap Labs raises interface swap fees
  • Binance Labs shifts focus to BTC DeFi 
  • TON teams up with HashKey to drive on-ramp in Telegram
  • Ether.FI signs $500M restaking deal with RedStone
  • Supposed Avail airdrop criteria leaked

Coinbase has sought an interlocutory appeal to challenge a fundamental legal question in the SEC’s lawsuit, arguing the necessity of post-sale contractual obligations for an investment contract. This appeal, prompted by a denial of a motion to dismiss, is a strategic effort to clarify legal interpretations that may pivot the course of the lawsuit, which charges Coinbase for operating as an unregistered securities exchange. The outcome could significantly impact not only Coinbase but the broader crypto industry, as it seeks to resolve regulatory ambiguities hindering the sector's growth and innovation.

Uniswap Labs has increased the swap fee on its platform from 0.15% to 0.25% for most transactions. This change, effective from April 10 as per blockchain records, impacts trades executed through Uniswap Labs' interface on the Ethereum mainnet and all supported Layer 2 networks, with exceptions for certain stablecoin transactions and ETH to WETH wraps. This fee adjustment comes after a Wells Notice from the SEC, signaling potential legal action against the company. Hayden Adams of Uniswap has reiterated their core role in protocol development and interface provision, while also acknowledging the contributions of others in the ecosystem who have developed alternative access points to the Uniswap protocol.

On-Chain

A Lookonchain analysis showed that a BTC whale withdrew 598 BTC, worth $37.78M, from a Binance hot wallet to a personal wallet address after the market experienced a decline over the weekend. Since the decline in the price of BTC from its peak on March 14th, this whale investor has executed a withdrawal of 10,158 BTC valued at approximately $680.83M from Binance, with the average price per BTC at the time of withdrawal being $67,026. This shows a continuous demand for BTC assets even as the overall market suffers from wider macroeconomic implications.

Elsewhere, another Lookonchain analysis on ETH indicated that a whale caught the recent market bottom with his purchase of 23,790 ETH valued at 70M, at $2,942. Cumulatively, he purchased 85,931 ETH from Binance and decentralized exchanges over the past week, with an average purchase price of $3,241. Currently, this whale still holds $136M in stablecoins. Despite the decline in the ETH market, there is still capital inflow to provide a strong support for ETH and this whale may be waiting for the appropriate moment to inject his capital into the market. Traders should be vigilant for any upcoming catalyst for the ETH domain such as the possibility of an ETH ETF.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH rebounded to 71.8% and 76.58%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH decreased to -1.98% and -5.22% respectively.
  • The futures market witnessed $250.08M in liquidations, with shorts representing 51.36%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

28.43%

BNB

OKX

Bybit

26.56%

AVAX

OKX

Bybit

21.90%

AVAX

OKX

dYdX

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 7-day and 30-day implied volatility (IV) for Bitcoin have shown upward trends, registering at 75.62% and 71.02%, respectively. This increase signifies that traders expect heightened market volatility, influenced by escalating geopolitical tensions in the Middle East and rising inflation expectations.

The term structure for BTC exhibits a backwardation with implied volatility over short to mid-term tenures spiking up to 85%, then gradually leveling off into longer-term maturities. This suggests that market participants anticipate higher volatility in the near term, and are hedging their delta exposures by buying short-dated options in anticipation of heightened volatility.

The BTC 25-delta skew chart shows a significant decline with the 7-day and 30-day IV entering negative territory, at -2.3 and -5.59 respectively, indicating a bearish sentiment among traders for the short to mid-term, likely influenced by recent geopolitical developments. 

Last week, @Paradigm's spotlight on option flows this week showcased defensive strategies with notable put buying and structured positions in the crypto derivatives market. Within the BTC sphere, the acquisition of 400x 31-May-24 66K Puts stands out, as does the sale of 300x 26-Apr-24 80K Calls, along with the purchase of 300x 28-Jun-24 95K Calls. For ETH, significant moves were observed with the purchase of custom structures that involved 12750x 26-Apr-24 3600 Puts, paired with the sale of the same number of 28-Jun-24 2500/3000 Calls, and 10250x 28-Jun-24 3500 Puts coupled with 2400/2900 Calls.

Crypto Technical Analysis

Moving on to Technical Analysis, on the 4-hour BTC chart, BTC price experienced a significant decline of 8.1% and bounced off the support area in the range of $63.5K to $61.9K. BTC is currently positioned at $65.2K, while the key resistance level is at $70.2K, representing an upside of 7.6%. Should buyers gather momentum and the price successfully break above this level, the next significant resistance lies at $73.5K. Conversely, if bearish momentum takes over, we may see a retest of the support area mentioned above. The RSI level of BTC rebounded from oversold territory, currently at 40.63 and approaching the neutral zone. Traders should be vigilant of upcoming catalysts such as continued capital inflow from BTC ETF and BTC halving which may move the market. 

On the 4-hour ETH chart, the price of ETH underwent a similar movement to the BTC price, declining 11.4% over the weekend to rebound from the support level of $3K and currently situated at $3.1K. The key level of resistance is present at $3.6K, a 16.1% upside, while the nearest key support level to watch is $3K. Should the price of ETH decline further to break past this support, the next level of support is in the range of $2.7K, representing past resistance levels from January to February. The RSI level of ETH rebounded from oversold territory, currently at 40.97 and approaching the neutral zone.

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