🌳 Jerome Powell Will Maintain Rates For Prolonged Period; MicroStrategy Unveils Plans To Build Decentralized IDs Using Inscriptions

02 May 2024, Thursday

2:40 AM

🌳 Jerome Powell Will Maintain Rates For Prolonged Period; MicroStrategy Unveils Plans To Build Decentralized IDs Using Inscriptions

BTC

ETH

S&P Futures 500

$57,785.51

$2,949.25

$5,067.75

(-4.02%)

 (-1.72%)

(+0.18%)

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 Reserve signals that rates are set to remain; Yen’s continued surge sparks more government intervention speculations (More in Macro & TradFi)
  • MicroStrategy plans to build decentralized IDs; Tether announces record earnings (More in DeFi & CeFi)
  • Bitcoin ETF outflows signal market recalibration; Ethereum's growth highlights sustained investor confidence (More in On-Chain)
  • BTC sees heightened movements in IV while seeing an increase in C-P skew despite the price drop (More in Crypto Derivatives)
  • BTC tumbles, testing resistance; ETH dips, nearing key support levels (More in Crypto Technical Analysis)

Macro & TradFi

The Federal Reserve has indicated that U.S. interest rates will likely remain elevated for longer than anticipated, as it continues grappling with persistent inflation that has yet to make significant progress toward the 2% target. During the latest meeting, the Fed maintained rates at a 23-year high of between 5.25% and 5.5%, with Fed Chair Jerome Powell suggesting that rate cuts could be delayed until the latter half of the year, if at all. This decision reflects recent economic data showing an uptick in inflation and slower growth, heightening concerns as the U.S. approaches a presidential election. However, Powell remains optimistic, dismissing fears of 1970s-style stagflation, noting that economic growth is strong and inflation remains under control. The Fed also plans to scale back on quantitative tightening in June, a move that could support Treasury prices and align with market expectations of a potential rate cut by year-end.

The Japanese yen experienced a significant surge against the dollar, advancing over 3% in a single late New York trading session, prompting widespread speculation of a possible government intervention. This sudden movement came after the yen had hit a 34-year low, igniting discussions that Japanese authorities might be taking firm steps to support the currency amidst its recent decline. Despite the rapid appreciation, Japan's top currency official, Masato Kanda, remained non-committal on whether the government had intervened, aligning with Japan's typical approach of maintaining ambiguity regarding market interventions. 

Following the Fed Reserve’s decision, U.S. stocks closed mixed with the S&P 500 and Nasdaq ending the day lower, while the Dow Jones Industrial Average recorded a modest gain. The S&P 500 dropped 0.34%, and the Nasdaq fell 0.33%. In contrast, the Dow rose by 87.37 points or 0.23%. Amid these shifts, notable stock movements included Advanced Micro Devices falling 9% due to a weak sales forecast for AI chips, and Amazon rising 2.2% after reporting strong quarterly results boosted by AI-driven cloud computing growth. Additionally, Johnson & Johnson climbed 4.6% as it proceeded with a significant lawsuit settlement, while Starbucks plummeted 15.9% after cutting its sales forecast, marking its first drop in same-store sales in nearly three years.

CeFi & DeFi

  • MicroStrategy unveils plan to build decentralized IDs using Inscriptions
  • Tether announces record earnings for Q1
  • Solana-to-Bitcoin bridge aimed to launch in Q3 2024
  • Chainlink to join Rapid Addition to build blockchain adaptor for Institutions

At the annual MicroStrategy World conference in Las Vegas, co-founder Michael Saylor introduced the ‘MicroStrategy Orange Decentralized Identity protocol’, an open-source initiative aimed at anchoring digital identities on the Bitcoin blockchain. This move taps into the robust security features of Bitcoin, with the protocol allowing for the creation of decentralized identifiers (DIDs) that can be inscribed using a modified version of the Ordinals protocol. The Orange protocol enables the storage and management of DIDs, for organizations to issue these identifiers and integrate them into various applications, such as verifying emails, social media profiles, and even academic or medical records, thus enhancing security and trust through blockchain technology.

In other news, Tether Holdings reported a record net profit of $4.52B in Q1 2024, with $3.52B of this total derived from significant financial gains on its Bitcoin and gold investments, and the remaining $1B from operating profits linked to its holdings in U.S. Treasury securities. This period also marked a substantial increase in the company’s net equity, reaching $11.37B, up from $7.01B at the end of the previous year, reflecting the company's robust financial health. Additionally, Tether issued $12.5B worth of USDT, reinforcing its position as the world's largest stablecoin with a market cap exceeding $110B, according to CoinMarketCap data. The quarter closed with Tether enhancing its reserve assets to more than cover its liabilities by over $6.2B.

On-Chain

An analysis by @_Checkmatey_ suggests a pivotal moment for Bitcoin ETFs, marked by a substantial exodus of over half a billion dollars in a single day. Leading this unprecedented movement, the FBTC and ARKB ETFs experienced their most substantial outflows ever, shedding $116 million and $98 million respectively. This development aligns with historical Bitcoin cycles where, following the halving, BTC entered a period of "chop-solidation" — a phase of sideways movement. In the past two cycles, this six-month consolidation was succeeded by a 6-12 month parabolic advance. The recent ETF outflows may suggest an impending period of market recalibration, preceding a potential significant upswing in investor activity and market value.

Meanwhile, Santiment highlights a significant milestone for Ethereum, documenting the most substantial two-day network growth since October 2022, with 266.6K new wallets created on April 28th and 29th. This robust expansion alongside a dip in ETH’s price indicates sustained interest and confidence in the Ethereum network. Investors appear to be capitalizing on this market dip as an entry point, reflecting a strategic response to purchase ETH at perceived lower prices. This activity suggests that despite the price fluctuations, the foundational growth and adoption of the Ethereum network continue to attract investment.

Crypto Derivatives

  • Funding rates remained positive for BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 60.91% and 72.76%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH dropped significantly to -3.77% and -11.29%, respectively.
  • The futures market witnessed $350.01M in liquidations, with longs representing 69.33%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

25.70%

SOL

OKX

dYdX

22.66%

AVAX

OKX

dYdX

22.29%

SOL

Bybit

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.


BTC's 30-day ATM implied volatility (IV) has remained relatively stable. However, the 7-day IV has witnessed significant movement in the last two days, surging to 69.38 before retracting to 57.91. This indicates the heightened volatilities in the options market were short-lived in reaction to the swift downturns experienced by the underlying token as the ATM IV has quickly moved back to the normal ranges.

Conversely, BTC's term structure has generally shifted downward in the last 24 hours, particularly in longer-tenured contracts. This suggests that long-term expectations for BTC price towards the year-end have stabilized, likely influenced by additional clarifications from the Fed regarding interest rate decisions in the latter half of the year. On the other hand, while displaying lower IVs towards the further end of the curve, ETH's term structure has witnessed an increase in IVs on the 30 and 60-day contracts. This uptick could be attributed to speculations surrounding the approval timeline of the ETH ETF.

Despite the recent downturns experienced by the crypto market in the last two days, BTC has not exhibited significant variations in its C-P skews. BTC has shown an increase in the 7-day skew despite a decline in the underlying price. This suggests that option traders may perceive the recent downturn as temporary and do not anticipate a change in the directional view of the token in the near future.

Lastly, @Paradigm reported a variety of trading activities on May 1st as BTC dropped to a level last seen in February. Notable BTC trades include the purchase of 408x  +1.00 31-May-24  61K Call/-2.00 31-May-24  69K Call custom BTC structure and the sale of 400x  +1.00 31-May-24  57K Call/-2.00 31-May-24  51K Call custom BTC structure. On the ETH side, we have seen the purchase of 7250x 2-May-24 3.2K/3.4K Call Spread and the sale of 4500x 31-May-24 2.4K Put.

Crypto Technical Analysis

Moving on to Technical Analysis, BTC’s price has seen a notable decline in price over the past day, with Bitcoin currently trading around $57.6K. This level marks a significant breakdown from previous support levels. Given this recent tumble, BTC might attempt to rebound to test the former support level at $59K, which could now act as resistance. The Relative Strength Index (RSI) is hovering around 34, indicating that the asset is nearing oversold conditions, which could further influence short-term price movements. The next significant support below the current price can be found near $52K, indicating a potential further decline of about 8.3% should the current level fail to hold.

On the other hand, ETH is on a clear downward trajectory following a breakdown from an ascending channel pattern, indicating a shift in market sentiment from bullish to bearish. Ethereum is currently positioned at approximately $2.89K after experiencing a significant drop. This recent decline suggests a retest of the crucial $3K level, which previously acted as support and may now serve as resistance. This potential retest signifies a recovery attempt of around 3.8% from the current price levels. The RSI is near 36, suggesting that the asset is approaching oversold conditions, which might prompt a corrective rally if buying pressure resumes. Should Ethereum fail to reclaim the $3K level, the next key support is established around $2.6K, marking a potential further decline of approximately 9.2%.

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