Major DeFi Players Announce Partnerships In A Social Coordination Experiment; Market Turmoil as Rates Hike Bets Revived

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter (previously known as The Canopy Collective), where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

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

Our Daily View

What We Are Covering Today

• Stocks and bonds tanked while the dollar rallied across the board as markets unwind Fed loosening bets (more in Macro & TradFi)
• Multiple leading DeFi protocols announce bilateral partnership; StarkWare to open source STARK Prover (more in DeFi & CeFi)
• SAND sees large token deposits on Binance (more in On-Chain)
• ETH call skew continues to ease (more in Crypto Derivatives)
• BTC is approaching the support level at 22.6K, with ETH trading within the rising channel (more in Crypto Technical Analysis)

Macro & TradFi

Stocks and bonds tanked while the dollar rallied across the board as markets unwind Fed loosening bets. Atlanta Fed chief Bostic said the January NFP rejuvenates the possibility that the central bank needs to raise rates to a “higher peak” than previously anticipated. Meanwhile, a powerful earthquake that hit Turkey and Syria caused heavy casualties, and the local snowstorm isn’t helping the rescue mission.

US indices sold off further initially but recovered from intraday lows in yesterday’s trading; NASDAQ closed 0.8% lower after ~1.5% downside was seen earlier, while SPX closed 0.53% lower and DOW wrapped around flat. All three indices futures are in marginal green territory at Asia open. US Treasury bonds tumbled, with 10-year yields jumping more than 10bps wider and 30-year yields almost 20bps wider. Dollar gained across the board with JPY weakening another 1% after selling off 2% the earlier day against greenback.

DeFi & CeFi

• Multiple DeFi protocols announce partnership in a social coordination experiment
• Crypto exchanges pledge aid to Turkey’s earthquake victims
• Visa announces plans to process stablecoin settlement payments
• OpenSea implements “three-hour-hold” rule on some NFT transactions
• Binance invests in Korean cryptocurrency exchange GOPAX
• Membrane Finance launches first EU-regulated full-reserve stablecoin EUROe
• Platypus launches over-collaterialized $USP stablecoin
• Injective integrate Solana Assets to Cosmos ecosystem
• Avalanche-based DEX Trader Joe integrates with LayerZero
• StarkWare to open source STARK Prover
• Compound Labs CEO vote to deploy Uniswap V3 to BNB Chain with 5.76M $UNI

Several leading DeFi protocols such as Aave, Lido, Maker Sushiswap, dYdX, MakerDAO have announced bilateral collaboration efforts in “an experiment in social coordination”. The collaboration are as follows:

• Maker X Element Finance
• Lido X Bebop
• Aave X dYdX
• Sushiswap X Aura
• Dopex X Yearn
• Euler X Zerion
• Stake DAO X Opyn
• CoW Swap X Gearbox
• Pods X DegenScore

The announcements came after these protocols posted a “fist bump” emoticon on Twitter.

Additionally, StarkWare plans to open source STARK Prover, an engine that generates cryptographic proofs, under the Apache 2.0 license for increased accessibility, community collaboration, and other benefits. Once this is implemented, the Starknet stack will be fully open-sourced with Cario 1.0, Papyrus Full Node and StarkNet’s new Sequencer having been open-sourced.

Lastly, Visa is reportedly seeking to meet customers' need to convert cryptocurrencies to fiat. Visa wants to build “muscle memory” in the global settlement vertical and has been testing USDC settlement payments on Ethereum.

On-Chain

Bitcoin Sell-Side Risk Ratio compares overall realized profit and loss as a proportion of Realized Cap (a measure of network valuation). Compared to asset size, realized profit and loss are tiny. The bull market's euphoria and the FTX capitulation event dwarf spending events. This shows that most coins on the move were bought close to the spot price and are not locking in a hefty realized profit.

SAND has seen large token deposits on Binance in the last few days, as noticed by @Lookonchain. However, SAND has been in a stagnation mode, rapidly decreasing network activity for weeks now. The holders are in big profits which could result in accelerated dumping (@santimentfeed).

Crypto Derivatives

• BTC and ETH funding rates remain positive
• 30-day ATM IV fell to 50.7% and 64.4% for BTC and ETH respectively
• 30-day 25d call skew rose to -1.0% for BTC and fell to -4.7% for ETH

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

For futures, total liquidations in the past 24H amounted to $71.5M, majority coming from longs at $45.6M.

On the options front, there is a kink in the near-term for both BTC and ETH. Term structure remains in contango for BTC while ETH’s term structure continues to show signs of reverting back to contango as the near-term IV falls. For ETH, it appears that the downside put is catching a bid as fear of the downside is returning and the call skew continues to ease.

On the flow front, the bulk of the 24H volume comes from near-dated options expiring 10 Feb, 73K contracts with a notional value of $117M were traded. It was noted by (@tradeparadigm) that 18K contracts of 10-Feb-23 1.7K call options were bought. The top strategy for ETH is the long risk reversal.

Lastly, the VIX spiked 6% to 19.43.

Crypto Technical Analysis

Onto TA, BTC is trending sideways as it tests the $22.6K support zone. On the daily timeframe, RSI has fallen further to 60, from its high at 89 three weeks ago. If the price bounces back from the support level, we could see BTC retesting the resistance zone of $24.0K-$24.5K. However, if the support fails to hold, we could see a thin support level at around 20.7K and 20.9K respectively for the 4H and daily timeframe.

As for ETH, it continues to be traded within the rising parallel channel at both the 4H and 1D timeframe with RSI sitting at 45.2. However, the recent drop in price has caused the short-term 14-day moving average to go below the 30-day moving average. If the trend continues, a retest of the support level at 1.54-1.55K is possible. On the other hand, if the bullish momentum returns, we may see price being traded toward the upper bound of the channel at approximately 1.71K.

Track. Monitor. Discover. Swap. All with Harvest.

The all-in-one DeFi portfolio management platform for the productive investor.

Try Harvest Now!

Daily Readings

TradFi

• China reopening is wild card for Canada sticking economic soft landing, analysts say

• Russia's Jan budget deficit widens as energy revenues slump

• Adani Group still eligible for CEMBI, JACI, JESG indexes - JP Morgan

• Britain presses on with proposals for a digital pound

• 'Call of Duty' steers Activision sales in tough quarter for game makers

• Biden will insist that raising debt limit is not 'bargaining chip' -White House

• Bed Bath & Beyond moves to raise $1 bln to avoid bankruptcy

• Wall St ends down as investors await Fed's next steps

• Google announces Bard A.I. in response to ChatGPT.

• Microsoft likely to reveal ChatGPT-related service at event on Tuesday.

• Asia-Pacific markets rise ahead of Australia's rate decision; Wall Street extends losses.

Crypto

• Indexing Protocol The Graph’s GRT Token Soars Back Past $1B Market Cap.

• Bitcoin Holds Steady Near $23K as Investors Weigh Their Next Steps.

• DCG Creditor Pact Revealed With Plan to Sell Genesis Trading Unit as Part of Bankruptcy.

• Blockchain Analytics Firm Elementus Triples in Valuation Despite Crypto Winter.

• Decentralized Lending Protocol Clearpool to Start Institutional Borrowing Platform.

• Crypto Exchange Binance to Suspend US Dollar Bank Transfers This Week.

• Digital Bank Revolut to Offer Crypto Staking: Report.

• Global Crypto Industry Pledges Aid to Turkey Following Deadly Earthquakes.

• DeFi Lender Alchemix Approves ALCX Token Buyback Plan.

• StarkWare Partnering With Chainlink for StarkNet Growth.

• Community votes to deploy Uniswap v3 on Boba Network.

Yours sincerely,
Treehouse Research 🌳