Job Growth Booms While Unemployment Looms In Latest Jobs Report; Atomic Wallet Exploit Leads To Over $35M in Losses

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• US payrolls surge alongside joblessness, sending mixed signals in the labor market; Saudi Arabia voluntarily cuts output by an extra 1M barrel-a-day (more in Macro & TradFi)
• An exploit of Atomic Wallet leads to full losses from wallet users; Wall Street firms to create or fund crypto exchanges and custody solutions (more in DeFi & CeFi)
• Bitcoin mining difficulty hits all-time high; on-chain metrics indicate capitulation of single-cycle long-term holders (more in On-Chain)
• Widening spread between ETH and BTC, alongside notable shifts in BTC's open interest and options expiry (more in Crypto Derivatives)
• BTC consolidates within a narrow range; ETHBTC continues to show strong momentum (more in Crypto Technical Analysis)

Macro & TradFi

Last Friday, the U.S. labor market exhibited a complex mix of robust job growth and rising unemployment rates this spring, which could impact the Federal Reserve's decisions on interest rates. In May, U.S. employers created 339,000 jobs, significantly more than the anticipated 195,000, and revisions to previous months added an extra 100,000 jobs. According to the Labor Department, this amounts to a total of over 1.5 million jobs added in 2023. There were notable increases across professional and business services, government, and healthcare sectors. However, the unemployment rate unexpectedly climbed from a decades-low of 3.4% to 3.7%, the largest monthly leap since April 2020. These varied signals, coupled with potential threats such as a credit crisis and impending layoffs, could affect the Federal Reserve's strategy for interest rate changes in the forthcoming months.

On the following Sunday, Saudi Arabia announced an extra reduction of 1 million barrels of oil daily for July, reaching the lowest production level in years. The decision followed intense debates among OPEC+ members, with some, particularly African producers, strongly resisting the country. The wider cut forms part of an agreement between OPEC and its Russia-led allies to sustain current production targets until the end of 2024. Despite opposition from Russia and the United Arab Emirates, who have not agreed to further cuts, Saudi Arabia's Energy Minister committed to stabilizing the market, especially in light of weak economic data from China. These measures are projected to support crude oil prices, which have been impacted by a sluggish global economy.

Major stock indexes soared on Friday, following a promising jobs report that exceeded analysts' predictions, implying that hiring continues to be robust, even as other data suggests a slowdown in inflation. The Dow Jones Industrial Average leapt about 2.1% or over 700 points, marking its best session of the year, which offset recent losses and concluded the week positively. The S&P 500 rose 1.5%, while the tech-heavy Nasdaq Composite ascended by 1.1%, securing its sixth straight weekly gain and a new 52-week high. Two-year Treasury yields, which are more reactive to imminent central bank decisions, increased by five basis points, adding to Friday's 16 basis point rise. The yield on 10-year Treasuries advanced three basis points to 3.72%. Meanwhile, oil prices surged due to a supply cut by Saudi Arabia. West Texas Intermediate futures initially rocketed almost 5% in the session before scaling back gains to trade just under $73 per barrel, while the global benchmark Brent was trading around $77.

DeFi & CeFi

• Wall Street firms to take on Binance, Coinbase, other crypto-native exchanges
• Atomic Wallet gets exploited, leading to $35M crypto assets stolen from users
• Ethereum network faces increased strain as Celsius Network alters its ETH staking strategy
• Liquidity staking derivative coin Marinade (MNDE) sees notable surge
• Former Coinbase manager and sibling settle SEC insider trading charges
• Ledger's CEO advocates for their new key recovery service amid controversy
• Groundbreaking AI features position InQubeta (QUBE) to potentially surpass Cosmos (ATOM) and Near Protocol (NEAR) in market prominence

Atomic Wallet reportedly fell victim to an exploit, leading to users losing their entire crypto portfolios. The Atomic Wallet team has recognized the compromise reports and initiated investigations. Some users took to social media to express their losses, claiming their funds vanished from the digital wallet app. With a user base exceeding 5 million, Atomic Wallet had experienced similar incidents previously. Cryptoasset detective ZachBTX, renowned for tracing stolen funds and supporting hacked projects, has joined the investigation. The nature and methodology of the attack remain uncertain. This event adds to the growing tally of frequent crypto hacks.

Meanwhile, prominent Wall Street firms, such as Standard Chartered, Nomura, and Charles Schwab, are reportedly making progress in the crypto sphere by creating or funding new cryptocurrency exchange and custody platforms. They're banking on fund managers maintaining an interest in crypto trading and preferring transactions with established entities over pure crypto-based exchanges like Binance. Legacy-backed crypto platforms pose potential competition to existing crypto exchanges, including Coinbase and Binance. These new platforms aim to increase transparency and mitigate risk by separating exchange functions from asset custody, aligning with BNY Mellon and Fidelity's existing practices. Nasdaq is also awaiting regulatory approval for a similar service.

Elsewhere, Brazil's central bank authorized payment provider status to Mercado Bitcoin, a prominent cryptocurrency exchange. This approval allows the exchange to roll out its fintech solution, MB Pay, which incorporates digital banking services utilizing crypto assets. These services include digital fixed-income investments, staking, and a soon-to-launch debit card offering a crypto off-ramp. This approval marks a crucial advance in the Brazilian crypto scene, signifying the further incorporation of cryptocurrency into conventional financial services. Nevertheless, regulatory obstacles remain, as exemplified by the recent order for Mercado Bitcoin to return over 2,182 BTC to investors due to alleged funds withheld by a former executive in a purported 2013 hack.

On-Chain

A report by crypto-services provider Matrixport indicates that Bitcoin (BTC) is experiencing selling pressure around the $28,000 price point, possibly due to miners selling off freshly mined bitcoins. The report proposes that shrinking profit margins in recent weeks are pushing miners to liquidate their stock. This contraction in profits is attributed to heightened competition and reduced profitability resulting from increased mining difficulty, which currently stands at an all-time high. Markus Thielen, Matrixport's head of research, stated that older mining machines manufactured before 2022 are likely unprofitable given the current cost and revenue expectations. Despite this, the report points out potential upside for miners, suggesting that a 10% or more rise in Bitcoin prices could substantially increase mining profitability.

According to a recent report by Glassnode, establishing a bear market floor typically aligns with single cycle long-term holders (6m-2y LTHs) exiting the market. One notable finding is that those who have incurred significant unrealized losses since the cycle's peak often capitulate at the lowest points. The report identifies three measurable behavioral patterns that serve as actionable signals: the LTH-MVRV ratio (the ratio of market value to realized value) falling below 1, indicating peak unrealized stress; the LTH-SOPR ratio dipping below 0.5, signifying average losses exceeding -50%; and the dominance of single cycle LTH volume surpassing 0.5 standard deviations from the mean, suggesting the participation of less experienced actors. The combination of these conditions indicates a significant market wash-out and signifies a learning and adaptation phase in the Bitcoin market cycle for single cycle Long-Term Holders (LTHs).

Crypto Derivatives

• BTC and ETH funding rates largely remain positive
• 30-day BTC ATM IV for BTC and ETH declined to 35.84% and 34.48% respectively
• Deribit Implied Volatility Index (DVOL) for BTC and ETH declined slightly to 41.37% and 41.51% respectively
• 30-day 25-delta ETH and BTC are skewed to the put side

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

The futures market saw liquidations worth $41.62M, with long positions accounting for 53.6% of this, amounting to $22.31M.

Implied volatility witnessed a rise across all durations compared to the previous day. The term structure for BTC retained its backwardation at the curve's front end. ETH displayed a slight increase in implied volatility across all durations except beyond 207 days, where it decreased by approximately 10%. The term structure presently remains in contango, with implied volatility having stayed relatively stable over the past few days due to concerns around the US debt ceiling and potential regulatory uncertainty, potentially driving the curve upwards. Comparing 7-day implied to realized volatility, the volatility risk premium for both BTC and ETH stayed in the high single digits.

In terms of skew, both BTC and ETH options maintained put skew. However, over the past four days, the spread between ETH and BTC expanded to 3.65, with put skew tightening on the front end for both. Currently, the 7-day 25-delta for BTC and ETH stands at -6.32% and -2.67%, respectively.

The majority of BTC call volume was channeled into contracts set to expire on June 30. A closer examination of the open interest for that day reveals most call contracts were transacted at the $35K strike price, closely trailed by the $30K strike price. For put options, most open interest is concentrated at the $24K strike price. For the same contracts expiring on June 30, the maximum pain point for BTC options appears to be at the $24,000 strike price. According to @tradeparadigm, the volumes came from 300x 29-Dec-23 30,000 Call spread sold and 250x 16-Jun-23 27500 Call spread sold, and 100x 30-Jun-23 2300 Call calendar bought for BTC structure.

Other noteworthy BTC trades by notional amount included the Bull Diagonal Spread, Short Strangle, and Long Strangle.

Lastly, the VIX dipped to 14.6.

Crypto Technical Analysis

Moving onto technical analysis, BTC's daily chart shows the cryptocurrency lingering around the $27K mark with no significant movements over the weekend. It continues to consolidate in a symmetrical triangle, where a rapid fall below the $26.8K mark may signal a downward trend, while a surge above the $28K level could imply an uptrend initiation. The $26.55K level currently serves as minor support as the price touched this point last Friday and also maintained above this level during March's latter half.

Looking at ETH, akin to BTC, it also showed no significant shifts over the weekend, with the price persistently consolidating on the daily chart. Beneath the current level, a mildly ascending trendline had previously functioned as support. ETH remains above the declining trendline, indicating sustained bullish momentum. Near the current price, the $1850 level has served as resistance this March, last August, and last June, while the $2000 level has also behaved like a pivot point/resistance this May, last August, and last May. Given that the MACD is above the zero line, an uptrend in ETH can be anticipated in the near-term.

Lastly, the ETHBTC ratio has shown an upward trend over the past month. However, drawing a trendline from the weekly chart, there is overhead resistance at 0.07, which is quite near to the present level. If the ratio succeeds in breaking the upper trendline, coupled with positive factors on the ETH chart, we can anticipate ETH's relative outperformance compared to BTC.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• China's services activity picks up in May on improved demand- Caixin PMI

• Russia fully enforces its oil output cuts, Novak says

• UBS considers delaying results after Credit Suisse rescue, Financial Times

• Airbus seeing more predictable industrial rhythm after delays

• Morning Bid: Teed up for a bullish start to the week

• Asian shares extend global rally; oil prices jump on Saudi cuts

• McCarthy lauds U.S. debt ceiling deal, House conservatives divided

• Goldman Sachs sees Turkish lira slip to 28.00 versus dollar in 12 months

• OPEC+ sticks to 2023 oil production targets as Saudi Arabia announces further voluntary cuts.

• Saudi energy minister defends voluntary oil cuts as precautionary.

• Oil prices pop 2.5% after Saudi Arabia pledges more voluntary production cuts.

• US employers boost hiring in May, but labor market losing steam

• Fed rate-hike pause still likely despite strong data

Crypto

• First Mover Asia: Why Did Bitcoin's Price Hold Above $27K Over the Weekend? Two Analysts Expect Continued Resilience.

• Crypto Lender Celsius’ $800M Ether Staking Shake-Up Stretches Ethereum Validator Queue to 44 Days

• Credit Suisse, Deutsche Bank-Backed Taurus Deploys on Polygon Blockchain

• Uniswap Community Votes Down Protocol Fees for Liquidity Providers

• Ripple case: Pro-XRP lawyer tips outright SEC victory at ‘less than 3%’.

• Gate.io threatens legal action against rumor-mongers.

• Atomic Wallet hack losses top $35M, on-chain sleuth reports.

• Elliptic integrates ChatGPT to bolster crypto risk detection.

• Net Bitcoin ATMs record an increase after 4 months of global downtrend.

• Microsoft pens AI cloud computing deal with former Ethereum miner CoreWeave: CNBC.

• MUFG to facilitate Japanese bank-backed stablecoins via Progmat Coin platform.

• US lawmakers aim for crypto regulatory clarity with proposed bill putting the screws to SEC.

• Silvergate agrees with Fed deadline for wind-down plan of crypto-friendly bank

• Skale Network introduces Ethereum ZK-Rollup Levitation Protocol

• TON Foundation proposes burning 50% of network fees

• Hong Kong's VSFG Asset Management Plans to List Its Bitcoin Spot Fund As an ETF

Deal Flow

• COMBO Launches $80 Million Ecosystem Fund