Major Crypto Market Makers Rumored To Leave the US Market; Real Estate Sector Faces Immense Challenges Amidst The Banking Crisis

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Our Daily View

What We Are Covering Today

• Market indicators reveal emerging challenges in the US commercial real estate industry amid an unstable banking sector (more in Macro & TradFi)
• Jane Street and Jump Trading leave the US market; Binance.US sees a $650 BTC premium compare to other CEXs (more in DeFi & CeFi)
• Number of UTXOs on BTC explodes higher while the median volume per transaction plummets to historical lows (more in On-Chain)
• ETH skew continues to trend towards put premium; Traders take advantage of low ETH vol to buy long-term calls (more in Crypto Derivatives)
• BTC and ETH trading range tightens and prepares for a breakout (more in Crypto Technical Analysis)

Macro & TradFi

US stocks retreated on Tuesday as investors braced for a crucial inflation report. Trading activity was subdued as market participants anticipated updates on CPI and the debt ceiling. The S&P 500 finished the day 0.5% lower, while the tech-centric Nasdaq Composite declined by 0.6%. These movements precede Wednesday morning's release of US consumer price data, projected to show a steady annual CPI increase of 5% in April, matching the previous month's figure, as per Bloomberg-survey economists. Consumer inflation has consistently receded since last summer, and a 5% reading would signify the first stagnation of headline figures since then. This data will critically influence the Federal Reserve's decision-making at its upcoming monetary policy meeting. Investors remain divided on whether the Fed will hike interest rates again.

Meanwhile, investment banks are increasingly bullish on the sterling as it hovers near a one-year high against the dollar and a five-month peak against the euro. This optimism is fueled by the resilient performance of the UK economy, outpacing earlier predictions. On Tuesday, the pound was trading at $1.2618, tantalizingly close to its Monday high of $1.2688 - its strongest since April 2022. The euro was trading at £0.8698, marking sterling's most robust level since mid-December. Analysts predict that the right conditions are set for the pound's continued recovery, bolstered by robust GDP, manufacturing, and jobs data this year, a dip in natural gas prices, and broad dollar weakness.

Lastly, fund managers are sounding the alarm over burgeoning issues in the $5.6tn US commercial real estate sector, potentially causing further distress to lenders already battered by the recent banking crises. The commercial property market is grappling with the strain of increasing interest rates, declining prices, and a post-pandemic decrease in office space demand. The situation has worsened following the collapse of Silicon Valley Bank, Signature Bank, and First Republic earlier this year, raising concerns about other regional banks that dominate the commercial real estate loan market.

DeFi & CeFi

• Goldman Sachs, Microsoft, and other giants join forces to launch the new blockchain called Canton Network
• NFT project Pudgy Penguins raises $9M in seed round led by 1kx
• Bitcoin trades at a $650 premium on Binance.US
• Binance NFT marketplace announces support for Bitcoin NFTs
• Bitcoin developers discussing whether to reject non-standard Taproot transactions from full nodes
• Terraform Labs moves 1.8M $CVX to a new wallet
• Lido V2 votes on May 12th which would enable stETH withdrawals
• Jane Street and Jump Trading retreating from crypto trading in the US

Bloomberg has reported that two major market makers in the cryptocurrency industry are reducing their involvement in US crypto trading due to the regulatory crackdown on the sector, according to a person familiar with the matter. Although both firms are still active in the crypto space, Jane Street is scaling back its global crypto expansion plans, while Jump Crypto, the digital assets trading unit of Jump Trading, is pulling back from US markets but plans to expand internationally. However, the rumor has yet to be confirmed as both Jane Street and Jump Trading declined to comment on the matter.

According to Adam Cochran, partner of Cinneamhain Ventures, on Twitter, the regulatory pressure in the US is also forcing Binance to leave the US market. At 9:26 AM UTC, BTC was trading at a $650 premium on Binance.US compared to other major exchanges. This was suspected to be a result of the CFTC lawsuit and the consequent rotation of BUSD to BTC to USDT, which drove the order book imbalance of buy and sell orders.

On-Chain

In terms of on-chain, the number of Unspent Transaction Outputs (UTXOs) has been increasing due to significant new activities generating new UTXOs. However, beneath this rising trend, an interesting observation emerges regarding the transaction volume as pointed out by Glassnode. The median transaction volume has fallen off the cliff, reaching historic lows. Despite the overall increase in the number of transactions, the median volume suggests that these transactions involve only small amounts of BTC being transferred. Specifically, the BRC-20 inscriptions, which are commonly found in these transactions, typically carry very few satoshis (approximately 10,000, filling the block with numerous transactions with small payloads).

Furthermore, despite the increasing number of UTXOs, there has been a decline in the creation of new addresses. Within BRC-20 activities, it seems that users are repeatedly utilizing the same addresses. According to data from Glassnode, approximately 60-70% of transactions are linked to these identical addresses. This situation deviates from the norm in BTC, where new addresses are typically generated for each transaction to enhance security and privacy, unlike in Ethereum and various other blockchains.

Crypto Derivatives

• BTC and ETH funding rates remain positive
• 30-day ATM IV increased to 48.90% and 50.79% for BTC and ETH respectively
• 30-day 25-delta BTC call skew increased to 0.15% while ETH put skew tightens to -2.69%

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

The futures market saw $50.84M in liquidation over the past 24 hours with the equal amount from longs and shorts.

Term structure for both majors has a kink in the near-term IV, likely as a result of speculation around the upcoming CPI print. On the ETH side, the term structure is flattening out as the near to mid-term IV has been rising. BTC mid-term skew (30 to 90 days) has stabilized around neutral, 0%, whereas the long-term (180 days) sat at 2.03%. As for ETH, all its skews continue to trend towards put premium with the 30-day ATM IV sitting at -2.69%.

On the flow side, BTC volume came primarily from the end-of-May calls while ETH volume came from the far-dated June and July end-of-month calls. The volume from ETH far-dated calls might be a result of traders taking advantage of far-term IV being the cheapest it has been in over 1 year.

Traders seemed to be bullish on BTC near-term as seen by the relatively large call volume for contracts expiring this week. As for ETH, more bearish sentiments can be observed in the near-term with more put volume on the 11 and 15 May contracts.

Some noteworthy trades include the buying of 600 BTC contracts for 19 May 25K puts, 12.5K ETH contracts for 28 Jul 2.3K calls and 7.5K ETH contracts for 28 Jul 2.4K being bought (@tradeparadigm).

Lastly, VIX rose slightly and closed at 17.71.

Crypto Technical Analysis

BTC has been consolidating sideways within a tight range of $27.1k and $29.9k over several weeks, with key support level of $27.1k established. The latest 24-hour period saw prices consolidating between an even narrower range of $27.1k and $27.7k, indicating a positive short-term outlook as prices bounce off the key support level. However, caution should be taken as low trading volume between $27.1k and $25k could lead to a rapid drop if the support level is breached. A bullish position on BTC seemed to be more favorable at this point since there are few overhead resistances until $29.9k.

The 4-hour ETH chart shows a narrow range between $1.83k and $1.86k over the last 24 hours. The recent weeks have been characterized by a sideways trend between $1.80k and $1.95k. Key support level of $1.80k has remained strong, while key resistance at $1.95k has shown a lot of sell-side pressure with all wicks above it being quickly rejected, leading to prices going back into the consolidation range.

On the daily timeframe, the uptrend is clear from the higher lows formed. ETH is trading close to the 50 EMA and will likely bounce off above it. Should the support at $1.8k fail to hold, there is potential to add to positions at the $1.73k level, as it potentially returns to the multi-month breakout area.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• China's shrinking imports, slower exports growth darken economic outlook

• T-bills hit by US debt ceiling worries, stocks slip ahead of CPI

• Nikola to pause production, cut costs after quarterly loss

• Airbnb forecasts fewer bookings, lower prices in Q2; shares slump

• Biden, McCarthy divided over debt ceiling but talks continue

• US approves temporary nuclear waste storage in New Mexico

• Lackluster results, production target cuts deepen EV start-up gloom

• LinkedIn cuts over 700 jobs, phases out China app as demand wavers

• Goldman Sachs to pay $215 mln to end gender bias lawsuit

• Column: Investors dumped oil, curtailing OPEC⁺ driven rally

• ECB may need to raise rates for longer than anticipated: Kazimir

• BOJ's Ueda says yield control will end when price goal achievement foreseen

• Japan's spending downturn, wages decline heighten pressure on economy

• Fed's John Williams says rates could be increased if inflation doesn't come down.

Crypto

• Previewing Congress's Joint Crypto Regulation Hearing.

• SEC Blasted on Custody Proposal by JPMorgan, Crypto Firms and a Fellow Agency.

• Market Makers Jane Street, Jump Retreating From U.S. Crypto Trading: Bloomberg.

• Bitcoin, Ether Slide for 4th Consecutive Day, While Altcoin Trading Volume Spikes.

• Aragon Cancels Planned Community Control of $200M Treasury Amid Battle With Activist Investors.

• Coinbase Works to Fix Wallet Support for Ethereum Staking Withdrawals Stuck in Limbo.

• DeFi Broker Prime Protocol Introduces Bridgeless Cross-Chain Token Transfers.

• Xapo Bank to Enable Tether Deposits, Withdrawals.

• Crypto Security Firm Dfns Adds Biometric Support to Wallet Development Toolkit.

• DCG Looks to Refinance Outstanding Genesis Obligations, Raise Growth Capital.

• Grayscale expands ETF business, puts forward 3 new crypto funds.

• OKX just sent $60M in USDT, MASK token to Alameda Research.

• PayPal’s crypto holdings increased by 56% in Q1 2023 to nearly $1B.

• Bitcoin priced on Binance​.US crypto exchange at $700 premium.

• Microsoft, Goldman Sachs, others partner in new blockchain network.

• Bitcoin fee spike spurs shift to Lightning Network — Binance and Coinbase line up.

• A16z says SEC custody tweak would ban investment advisers managing $128 trillion from exchanges like Coinbase

Deal Flow

• Crypto Media Outlet Blockworks Raises $12M at $135M Valuation.

• NFT Project Pudgy Penguins Raises $9M.

Yours sincerely,
Treehouse Research 🌳