🌳John Williams Foresees A Sustained Restrictive U.S. Monetary Approach; PayPal Introduces Its New Stablecoin, PYUSD

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Our Daily View

What We Are Covering Today

• Federal Reserve Bank of New York President discusses restrictive monetary stance; Tesla CFO Kirkhorn resigns (more in Macro & TradFi)
• PayPal launches PYUSD stablecoin; Huobi faces declining TVL amid transparency concerns (more in DeFi & CeFi)
• USDC exchange levels dip; Chainlink's development and large holder activity surge (more in On-Chain)
• BTC and ETH shows a divergence in the changes in term structure in the last 24 hours; Top flows were reported to be focused on BTC downsides (more in Crypto Derivatives)
• BTC and ETH bounce off from their respective support zones (more in Crypto Technical Analysis)

Macro & TradFi

Federal Reserve Bank of New York President, John Williams, anticipates maintaining a restrictive US monetary stance for the foreseeable future. In a recent interview, he highlighted that while current monetary policy aligns with requirements, any adjustments would be data-driven. Following the Fed's July rate increase, which marked the highest rate in 22 years, Williams labeled the necessity of additional rate hikes as "an open question." With potential signs of decreasing inflation, he suggested the possibility of interest rate cuts by 2024 or 2025. Williams' long-term perspective envisions inflation aligning with the central bank's 2% target, calling for a return to a "more normal" policy setting in the coming years.

Zach Kirkhorn, Tesla's Chief Financial Officer and a key figure closely associated with Elon Musk, has unexpectedly resigned amid efforts to control costs at the electric vehicle giant. Vaibhav Taneja, the company's Chief Accounting Officer since 2019, will succeed Kirkhorn. This executive transition breaks a period of unusual stability within Tesla's higher echelons. During Kirkhorn's tenure as CFO over the past four years, Tesla witnessed significant financial growth, with its annual free cash flow escalating from near break-even to over $7bn. Notably, the company's share value has multiplied tenfold since 2019, with over 1.3 million vehicles delivered in 2022. Despite these achievements, the company had not hinted at Kirkhorn's impending departure in recent communications.

Yesterday, the Dow Jones Industrial Average was up by 1.16%, the S&P 500 rose by 0.90%, and the Nasdaq Composite rose by 0.61%. Long-dated Treasuries fell again, pushing 30Y yields to around 4.2%. Berkshire Hathaway gained by 3.43% after posting its highest-ever quarterly operating profit, driven by the strong performance of its insurance business. After hours, Paramount rallied by 4.47% after reporting surprise Q2 profit and strong subscriber growth.

DeFi & CeFi

• PayPal Launches a Stablecoin, PYUSD
• Huobi insolvency rumors denied as USDT reserves decline on all exchanges
• Curve founder announces plan for a Forex market
• Tether releases Bitcoin mining software
• Perp DEX protocol D8X Closes $1.5M in Pre-Seed Round Led by Polygon Ventures
• Singapore pledges $112M to foster fintech and web3 innovation

PayPal Holdings Inc. has introduced a stablecoin named PayPal USD (PYUSD), marking a significant move by a major financial entity into the digital token space. Issued by Paxos Trust Co., PYUSD is pegged to the US dollar and is backed by US dollar deposits, short-term Treasuries, and similar cash equivalents. The stablecoin aims to facilitate instant and cost-effective transfers without the need for a central intermediary. Although stablecoins have been in existence for nearly a decade, their primary use has been for trading digital assets between exchanges, with limited penetration into consumer payments. PayPal's introduction of PYUSD seeks to expand the adoption of stablecoins in the broader payment ecosystem.

Elsewhere, crypto exchange Huobi has experienced a decline in its TVL, dropping from $3B to $2.4B in July. While there have been unconfirmed reports of Huobi executives being detained by Chinese authorities, these claims have been refuted by Justin Sun, a global advisor to Huobi. Data from Glassnode indicates a broader market trend of declining USDT reserves across major exchanges, with Binance being a notable exception. Adam Cochran of Cinneamhain Ventures has voiced concerns about Huobi's solvency, alleging discrepancies in USDT and USDC tokens within the platform and suggesting a lack of transparency. Huobi representatives have countered these claims, emphasizing the platform's operational stability and urging caution against unfounded rumors.

On-Chain

According to @santiment, the total number of USDC in exchanges has reached a yearly low. In contrast, USDT has risen from January to June but has remained flat since. Historically, movements of USDT and USDC to exchanges have been precursors to cryptocurrency market surges. Notable instances include the influxes of USDC to exchanges in December and February that were followed by market rallies in the subsequent months.

In other news, Chainlink's development activity, as observed on GitHub, has seen a notable uptick this summer, positioning it among the top five most actively developed assets. Furthermore, large holders with a holding range of 100K-10M LINK have amassed their highest coin count since December 2022, indicating a positive sentiment towards the token and potentially strong demand for its oracle product.

Crypto Derivatives

• BTC and ETH funding rates remain positive.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH remain unchanged at 36.09% and 34.17%, respectively.
• 30-day 25-delta skew (C-P) for BTC and ETH rose to 1.00% and -1.83%, respectively.
• The futures market witnessed $93.91M worth of liquidations in the last 24 hours with longs representing 69.97% of the total.

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

BTC has experienced an increase in ATM IV over the past 24 hours. The 7-day and 30-day IVs rose to 29.6% and 32.37%, respectively, which aligns with BTC's upward movement from the $28.8K support zone yesterday.

Both BTC and ETH's term structures remain in contango. For BTC, IVs have increased across the curve, particularly in near-dated options. Conversely, ETH's term structure has moved in the opposite direction in the last 24 hours. IVs have fallen across the curve, except for a slight increase in the 3-day expiry options, possibly due to market anticipation of the inflation reporting on Thursday.

The 7-day and 30-day (C-P) skews for BTC have remained relatively unchanged since yesterday, hovering near the neutrality zone as BTC continues to move within its consolidation range.

According to @tradeparadigm, the majority of BTC option flow focused on the downside yesterday. The top trades included the purchase of 600x 27-Oct-23 27000 Put, 340x 25-Aug-23 28000 Put, and 340x 18-Aug-23 28500 Put, as traders aim to secure short-term profits and hedge against potential downside risks.

Crypto Technical Analysis

Moving on to technical analysis, BTC has shown strong adherence to the $28.8K support level, leading to a noticeable bounce toward the upside. If the current bullish momentum persists, we can anticipate a potential test of the upper trendline created by the local lower highs, which is situated at approximately $29.5K. On the contrary, failure to maintain support at $28.8K upon re-testing could align with the earlier analysis, indicating a potential decline towards the lower trendline formed by the higher lows on the daily timeframe, ultimately establishing support around the $28K mark.

Akin to BTC, ETH has followed a similar price trajectory. Upon examining the 4-hour chart, we observe a nearly precise bounce from the channel's lower boundary. Despite this movement, ETH continues to trade within the middle range of the channels, with no definitive market direction discernible at the moment.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• US dollar gains as Fed comments on more rate hikes lend support

• Analysis: Yuan loses core support as firms leave China

• Lucid sticks to production goal, has enough cash for electric SUV next year

• Musk's Neuralink raises $280 mln in funding led by Thiel's Founders Fund

• Public debt expected to fall in most Pacific countries -World Bank

• Judge puts US, New York predatory lending lawsuit against Credit Acceptance on hold

• Airlines seek extension to cuts in minimum flight requirements at New York-area airports

• Amazon.com set to meet with US FTC ahead of potential antitrust lawsuit -source

• Options bets on earnings-fueled volatility in US stocks paying off

• Under pressure Altice owner Drahi says Portugal corruption probe a 'shock'

• Tesla names insider Taneja CFO as Kirkhorn steps down

• Asia markets largely rise ahead of China trade data.

Crypto

• PayPal Launched New Stablecoin PayPal USD, Issued by Paxos

• Solana-Based Cypher Protocol Experiences Exploit, Freezes Smart Contract.

• Worldcoin Nairobi Warehouse Raided by Kenyan Police: Reports.

• Curve Recoups 73% of Hacked Funds, Bolstering CRV Sentiment.

• Steadefi has been exploited with $1.1M currently at risk.

• Breaking: ‘All funds are at risk' — Steadefi exploited in ongoing attack.

• Hong Kong securities regulator warns of ‘criminal’ activity by unlicensed exchanges.

• Singapore commits $112M to support fintech solutions like Web3.

• Binance sold USDC for another stablecoin — Coinbase CEO.

• Tether Releases Bitcoin Mining Software

• PancakeSwap Introduces Private RPC in Collaboration with bloXroute Labs

• Curve Founder Michael Egorov Reveals Plan for a Forex Market on Curve

Deal Flow

• Binance's VC Arm Dominated Funding Rounds Last Week Even as Regulators Scrutinized the Crypto Exchange.

• Perp DEX Protocol D8X Closes $1.5 Million in Pre-Seed Round Led by Polygon Ventures

Yours sincerely,
Treehouse Research 🌳