🌳‘Magnificent Seven’, The Drivers Behind This Years Global Stock Market; Binance And CZ Renew Calls To Dismiss CFTC Lawsuit

25 Oct 2023, Wednesday

3:04 AM

BTC	ETH	S&P Futures 500
$34,018.21	$1,792.13	$4,264.75
(+1.48%)	(+0.83%)	(+0.38%)
Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter, where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

Also, in case you have missed it, check out our latest research piece 👇

Navigating the Landscape of zkEVM Projects: An Investor’s Guide

You can also access our research articles on the Bloomberg Terminal with the command “NH TRH < GO >"!

Our Daily View

What We Are Covering Today

The ‘Magnificent Seven’, the drivers behind this years global stock market; China’s Defense Minister, Li Shangfu, removed from his post (More in Macro & TradFi)
Binance challenges CFTC lawsuit; Paradigm's Ehrsam steps down from Managing Partner position amid strategic concerns (More in DeFi & CeFi)
NFT volume to rise amid broader crypto upswing; Ethereum's low on-exchange supply and peak transactions signal strong market confidence(More in On-Chain)
BTC IV subsides as option traders continues to taking profits while the C-P skews favors ETH over BTC (More in Crypto Derivatives)
BTC nears 'golden cross'; ETH surpasses pivotal moving averages, signaling bullish momentum (More in Crypto Technical Analysis)

Macro & TradFi

The Magnificent Seven, consisting of Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla, are the primary driving forces behind this year's global stock market gains. Their profound influence has significantly boosted the S&P 500 index, fueled by growing enthusiasm for the potential of artificial intelligence. Alphabet and Microsoft have also reported their earnings yesterday, with both topping analysts’ consensus in revenue and profit. However, Alphabet has seen a drop in stock price as the cloud revenue disappoints the market. It's worth noting that without the impact of these tech giants, the MSCI's All-Country World index would have shown a decline for the year. This dominance solidifies the United States' growing share in global market capitalization, currently representing 61% of the $60 trillion index.

In a series of high-profile reshuffles that have raised eyebrows among investors during China's delicate economic recovery, the nation's Defense Minister, Li Shangfu, has been removed from his post, as reported by CCTV. This unsettling change follows the earlier dismissal of former Foreign Minister, Qin Gang. The rapid ascendancy and subsequent descent of Li, who was elevated to his role in March, have sparked concerns about the stability at the upper echelons of China's government. Notably, Li, scrutinized for procurement issues in military equipment, had been absent from the public eye for two months. His removal might signal a thaw in Sino-American military relations, potentially reviving high-level discussions that had been paused for over a year due to sanctions on Li during the Trump administration.

U.S. equities increased during the last trading session, with the DJIA, NASDAQ Composite and S&P 500 gaining 0.62%, 0.93%, and 0.73% respectively. These moves follow 150 S&P 500 company reports which are slated for this week, with 23% so far reporting earnings and 78% posting earnings surpassing expectations. Meanwhile, the Nikkei 225 also increased 0.85% even despite escalating conflicts in the Middle East.

DeFi & CeFi

Binance and CZ renew calls to dismiss CFTC lawsuit.
Co-founder of Paradigm steps down as managing partner.
Ledger officially rolls out controversial 'Recover'.
dYdX releases open-source code before mainnet launch.
BlackRock's iShares Bitcoin ETF vanishes, then returns on DTCC.
FTX negotiates with three bidders to restart crypto exchange.

In a recent filing with the U.S. District Court for the Northern District of Illinois, Binance and its CEO, Changpeng “CZ” Zhao, have robustly challenged a lawsuit by the U.S. Commodity Futures Trading Commission (CFTC) that alleges the crypto exchange violated derivatives trading regulations. Binance's legal team contends that the CFTC is overstepping its jurisdictional bounds, asserting that if the court accepts the regulator's arguments, it would effectively position the CFTC as the global regulator of any cryptocurrency activity tied to a derivatives product. This is the second such attempt by Binance to have the lawsuit dismissed, emphasizing that the regulator's claims extend beyond its authorized reach.

Fred Ehrsam, co-founder of prominent crypto investment firm Paradigm, has transitioned from his role as managing partner to a general partner to allocate more time to exploring scientific fields he's passionate about, notably those intersecting with crypto and biology. Since co-founding crypto exchange Coinbase and later Paradigm with Matt Huang in 2018, Ehrsam has been a significant figure in the crypto sector. This shift in leadership might affect the strategic direction of Paradigm, one of the industry's influential investors, especially following recent events where the firm reported a $278 million loss from its investments in FTX, following allegations of the exchange misleading investors.

On-Chain

In the midst of a cryptocurrency surge, it's not just heavyweights like BTC and ETH capturing attention. According to @nansen, the positive sentiment has rippled to the NFT market, reaching the highest volume since August, marking a 38% jump from the lowest week in September. This increase in activity underscores the broader crypto market’s momentum and may also hint at a revived interest in the NFT sector. As of October 23rd, the weekly close stands at a notable 47,368 ETH (equivalent to $85M).

Meanwhile, as Ethereum's price touches $1,850 for the first time since August 15th, a mere 8.41% of $ETH remains on exchanges, marking its lowest level since 2015. Furthermore, @santiment reported a significant 6,049 transactions, each valued over $100k, signify the highest single-day activity since April 2023. Concurrently, we see the price increasing in this period of rising transaction count. These indicators may showcase heightened confidence and an accumulation of ETH. This trend suggests investors might be holding their ETH may also be utilizing the token for staking and other decentralized applications.

Crypto Derivatives

Funding rates remained positive for BTC and ETH.
Deribit Implied Volatility Index (DVOL) for both BTC and ETH experienced a large increase before dropping back down, currently at 54.44% and 50.74%, respectively.
30-day 25-delta skew (C-P) rose significantly for BTC and ETH to 3.52% and 6.61%, respectively.
The futures market witnessed $285.84M worth of liquidations since Friday, with shorts representing 53.72% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR	Perp (USDT pair)	Long on	Short On
37.20%	BTC	Bybit	dYdX
29.25%	DOGE	Bybit	dYdX
17.93%	ETH	Bybit	dYdX
Source: @CexyArbBot Telegram Bot 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.

As the initial excitement following the DTCC listing subsides, BTC's implied volatility (IV) has decreased significantly, resulted from the topside selling pressures in the options market, according to @Paradigm's report. Presently, BTC's 7-day IV stands at 52.91%, while the 30-day IV is at 51.26%. These levels, however, remain above the historical averages observed before the news of Blackrock's ETF listing on DTCC.

The subdued short-term IVs have also led to a term structure in both BTC and ETH resembling an almost straight line, with minimal differences between near and far-dated contracts. Aside from short-term expiry contracts, the overall curve has also seen negligible changes in the past 24 hours.

The BTC 30-day and 7-day 25-delta (call-put) skews have started to decline, currently at 3.52% and 1.90% respectively. In contrast, ETH has witnessed an increase in skewness, reaching 6.61% and 6.01% for the 30-day and 7-day periods. This may suggests a potential shift in preferences towards the two major cryptocurrencies in the last 24 hours, likely influenced by the listing and delisting of Blackrock's BTC ETF on DTCC.

During yesterday’s US trading hours, @Paradigm reported that the majority of flows remained bullish, with many investors taking profits on the upside. Notable trades included the purchase of 12,500x 29-DEC-23 1900 ETH Calls, 11,648x 29-Dec-23 2200/2800 ETH Call Spreads, and a custom strategy involving -1 24-Nov-23 1650 ETH Puts and +1 29-Dec-23 2100 ETH Calls.

Crypto Technical Analysis

On the daily chart, BTC exhibits robust dynamics around the 34.1K mark, having surpassed the 3 Simple Moving Averages comprising of the 50-day, 100-day and 200-day averages — an indicator often employed for discerning short-term price trends. This advancement is compounded by the anticipation of an imminent 'golden cross', a bullish signal where the 50MA (50-day moving average) is on the verge of crossing above the 200MA (200-day moving average). Such a crossover often suggests a potential longer-term uptrend. Moreover, BTC has recently broken above its established ascending channel, pointing towards potential shifts in its future trajectory. If a pullback occurs from the current position, a significant support level is expected around the 31.8K zone, implying a possible retraction of about 6.71%. On the flip side, upward momentum might meet resistance near the 37.9K threshold. Augmenting this perspective, the RSI is pitched at 86.78, underscoring the current bullish momentum, but suggests that BTC may be overbought.

Moving on to ETH, the token also exhibits commendable performance, rising to $1.8K. This uptrend is underscored by its successful breach above three pivotal simple moving averages (SMAs): the 50, 100, and 200-day. Such a trend is typically emblematic of robust investor confidence in the near term. However, should Ethereum encounter a price pullback, critical support lies at the $1.62K territory, a drop of 10.24%. Conversely, should the bullish trend persist, resistance might manifest near the $1.95K range. The daily RSI positions itself at 73.53, which suggests that the asset has witnessed a significant buying interest recently, similarly warrants caution as potential price corrections might be on the horizon.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

Crypto

Deal Flow

Yours sincerely,
Treehouse Research 🌳

Share