Markets Dragged Down By Tech Lender SVB Troubles As VC Firms Advise PortCos To Pull Deposits

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Silicon Valley Bank sells assets at $2B loss to cover withdrawals (more in Macro & TradFi)
• Alameda Research sells its Sequoia Capital stake for $45M to Abu Dhabi's Al Nawwar Investments, Aptos partners with Wormhole to bridge NFTs across different chains while preserving metadata (more in DeFi & CeFi)
• On-chain activities shows Voyager is moving its assets to Binance and Coinbase prior to deal close (more in On-Chain)
• IVs spike across the curve as a flurry of bearish news flood the market (more in Crypto Derivatives)
• BTC and ETH can potentially see large price downsides if BTC fails to hold the psychological support level (more in Crypto Technical Analysis)

Macro & TradFi

Before the market opened, futures briefly rose due to higher than expected jobless claims, which some investors interpreted as a sign of the labor market cooling down. However, this optimism was quickly dashed by news of weakness in the financial sector. SVB Financial Group suffered a 60% drop in stock price after having to sell its assets at a loss of $2B due to a cover for large withdrawals. Prominent venture capitalists, including Peter Thiel's Founders Fund, have advised their portfolio companies to withdraw their money from Silicon Valley Bank while SVB CEO Greg Becker held a conference call to calm stakeholders. Major bank stocks, including JPMorgan, Charles Schwab, Bank of America, and Wells Fargo, all fell between 5.4% and 13%. At the end of the day, the Dow Jones Industrial Average fell by 1.66%, the Nasdaq by 2.05%, and the S&P 500 by 1.85%.

Additionally, major crypto bank Silvergate saw its share price plummet by 42% after announcing its plans to wind down operations and pursue voluntary liquidation. Credit Suisse has postponed the publication of its annual report following questioning by the SEC regarding some of its earlier financial statements.

The markets are now looking to the upcoming release of the US employment report and Japan's final monetary policy decision under Kuroda for guidance.

DeFi & CeFi

• Proven raises $15M for proof-of-solvency protocol using zero-knowledge proofs
• Alameda Research sells its Sequoia Capital stake for $45M to Abu Dhabi's Al Nawwar Investments
• Mt.Gox extends creditor deadline to April 6th for repayment method selection and registration of payee information
• CFTC chair declares stablecoins and Ether as commodities, differing from SEC's definition of crypto
• Aptos partners with Wormhole to bridge NFTs across different chains while preserving metadata
• Arthur Hayes proposes NakaDollar stablecoin using derivatives exchanges and inverse perpetual swaps
• Vertex launches beta testing of crypto trading protocol for institutional traders on Arbitrum
• Mirror introduces Subscribe to Mint to allow collectors to interact with creators by subscribing to their publication with email
• Binance CEO CZ confirms his exchange is not affected by Silvergate's voluntary liquidation
• Ethereum Foundation announces Shanghai + Capella upgrade activation on Goerli testnet on March 14th
• Hedera shuts down its operations after experiencing smart contract irregularities

According to court documents filed on Wednesday, Alameda Research has agreed to sell its stake in Sequoia Capital to Abu Dhabi sovereign wealth fund Al Nawwar Investments for $45 million. The sale is part of FTX's efforts to sell off its investments in early-stage crypto and tech ventures to repay creditors after filing for bankruptcy in November. The deal is subject to approval by Delaware bankruptcy judge John Dorsey and could close as early as March 31. FTX received interest from four parties but decided to go with Al Nawwar Investments due to their superior offer and ability to execute the sale quickly.

Aptos has partnered with Wormhole to create a new interoperability feature that allows for the transfer of non-fungible tokens (NFTs) between multiple supported chains, such as Ethereum, Solana, Binance Smart Chain, and many others. This feature, called Portal bridge, locks the NFT in a smart contract and mints an equivalent wrapped NFT in a corresponding collection on the destination chain. The wrapped NFTs behave like other NFTs on that chain, preserving the metadata and the same appearance as the original NFT. This new NFT bridge capability enables Aptos users to explore new use cases for their NFTs, unlocking exciting new possibilities.

Arthur Hayes, the former CEO and co-founder of BitMEX, has proposed a new stablecoin called NakaDollar ($NUSD) that will rely on derivatives exchanges listing liquid inverse perpetual swaps. This stablecoin is designed to create a synthetic USD equivalent without holding USD in the fiat banking system or using an existing stablecoin. According to the proposal, 1 $NUSD will be equal to $1 of Bitcoin plus a short 1 Bitcoin/USD inverse perpetual swap. This relationship allows for creating a USD equivalent without encumbering more crypto collateral than it creates in fiat value. Hayes excluded decentralized derivative exchanges as they are not as liquid as centralized ones. To create NakaDollar, an organization will be created that exists in the legacy legal system and as a crypto-native DAO, issuing its own governance token, $NAKA, which will be distributed in exchange for providing liquidity across the DeFi ecosystem.

On-Chain

While recent news reports have been focusing on the issues with Silvergate’s insolvency, Voyager, which filed for bankruptcy last year, has been moving its remaining assets. According to Etherscan, Voyager moved $33M worth of $ETH and $9M worth of $SHIB, along with many other tokens, to Coinbase and Binance. These transfers are rumored to be related to the recent restructuring plan (which has not officially gone through yet) that was approved by the US court to sell its assets to Binance US for $1.3B (@OnchainDataNerd).

On the other hand, the discussion rate of BTC vs all other altcoins has reached the highest point since July 2022. The majority of these discussions are around the possibility of BTC pulling below $20K as the market condition worsens. This serves as a fear indicator as altcoin prices drop faster in a bear market which puts the focus back on BTC as a mega-cap asset (@santiment).

Crypto Derivatives

• BTC and ETH funding rates fell below zero, negative on most exchanges
• 30-day ATM IVs rose to 50.2% and 56.23% for BTC and ETH respectively
• 30-day 25 delta put skew tightened further to -5.73% and -7.89% for BTC and ETH respectively

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

For futures, total liquidations over the past 24 hours spiked to $273.67M, the majority coming from longs at $248.86M. Open interest for BTC and ETH nosedived, falling by 9.53% and 10.42% respectively.

On the options front, IVs jumped across the board as BTC falls to $20K. Term structure has flipped to a steep backwardation. Skews have also fallen across all tenors, with ETH 7-day 25d skew falling below -11% as traders bid up for near-term protection. 7-day RV has climbed back to its 3-March highs, sitting at 46.49% and 49.88% for BTC and ETH respectively. Variance risk premium widens to 5.32% for BTC and 7.53% for ETH.

On the flow side, downside trades such as BTC Mar and Apr put spreads and ETH Mar puts dominated the tape. According to @tradeparadigm, sizeable ETH 1.9K Sep maturity calls were sold by a large overwriter, likely part of a calendar roll strategy done early this week.

Lastly, the VIX rose sharply to 22.63, close to its Feb high.

Crypto Technical Analysis

Onto TA, the market has seen a significant downturn following the news regarding SVB and Silvergate. For BTC, price has not only broken through the pennant but also the two support levels at $21.6K and $20.7K. On a 4H timeframe, RSI has gone deep into the oversold territory at 11.4. Looking at the near-term future, $20K serves as a highly important psychological support level. If that fails to hold, the next strong support can be observed at the daily level in the range of $18.8K - 19.0K, which represents another 6% drawdown from the current level.

As for ETH, the narrative is largely the same as BTC with the significant drawdown that it has experienced overnight. However, the price has not fully broken the $1.43K - $1.45K support zone that was previously observed. However, if BTC fails to hold the $20K psychological support, it will like bring ETH price down to the next support zone at $1.27K - 1.28K, indicating a potential drawdown of another 10%.

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Daily Readings

TradFi

• U.S. household wealth rebounded to $147.7 trillion in 4th quarter

• Factbox: Biden budget targets U.S. fossil fuel subsidies

• LATAM Airlines posts $2.5 bln profit after emerging from bankruptcy

• Silicon Valley Bank scrambles to reassure clients after 60% stock wipe-out

• Biden's $6.8 trillion budget challenges Republicans, raises taxes on rich

• Morning Bid: Bye Kuroda - BOJ takes center stage as banks get battered

• Wall St falls on bank stocks tumble, jobs report jitters

• Gap sees weak sales as inflation-hit consumers rein in spending on apparel

• Wall Street ends sharply lower, Treasury yields dip ahead of jobs report

• Crypto stocks slide after Silvergate decides to shut down

• Bank of Canada says it needs more evidence that rates are high enough

• Australia's 'Big Four' banks to hike home loan rates to match RBA move

• China consumer inflation slowest in a year, leaves room for more stimulus

• Japan's economy barely grew in Q4, weak consumption raises policy challenge

• Powell changed everything this week on market's view of interest rates.

• GM offers buyouts to 'majority' of U.S. salaried workers.

Crypto

• Huobi’s HT Token Suddenly Falls 93%, Then Rebounds Just as Quickly.

• Crypto Traders Suffer Over $300M of Losses in Liquidations Amid Market Crash.

• U.S. Treasury Department Proposes 30% Excise Tax on Crypto Mining Firms.

• Voyager Continues Liquidating Crypto Assets for Circle’s USDC Stablecoin.

• New York Attorney General Alleges Ether Is a Security in KuCoin Lawsuit.

• Federal Reserve Setting Up New Squad of Crypto Specialists.

• Three Arrows Founders' Bankruptcy Exchange to Offer Claims as Portfolio Margin.

• Aave Advances Plan to Nix Borrowing, Lending of Binance’s BUSD Stablecoin.

• US REPO task force names crypto as target in efforts involving $58B in sanctioned assets.

• SWIFT moves to next phase of CBDC testing after positive results.

• Web3 platform partners with self-custody wallet to broaden crypto adoption in Africa.

• Biden includes crypto tax changes in 2024 budget request

• Aptos and Wormhole Team up to Bridge NFTs Across Multiple Chains

• A New Stablecoin "NakaDollar" Proposed Based on Bitcoin Inverse Perpetual Swap

• [New Order Book DEX Vertex Launch Beta Version on Arbitrum](https://twitter.com/vertex_protocol/status/1633525522117562369Deal Flow)

Deal Flow

• Bitcoin Miner Hut 8 Talks Operational Issues and U.S. Bitcoin Corp. Merger in Earnings Call.

• Gwyneth Paltrow backs web3 art platform Wild in seed round led by Matrix Partners

• Coinbase Ventures, Brevan Howard among early backers of compliant DEX Mauve

• Framework Ventures leads $15.8 million round into 'proof of solvency' startup

• Gyroscope unveils $4.5 million in funding as it prepares to launch 'unique' stablecoin

• Stablecoin issuer ECSA secures $3 million in funding

• Polychain Capital leads web3 dev tool provider Cubist's $7 million raise

• Former Jane Street, PIMCO traders raise $15M for ZK proof-of-solvency protocol.

• CryptoPunk NFT bid funded with 527,000 once worthless testnet ether tokens

• Alameda Research Sells Sequoia Capital Stake to Abu Dhabi Sovereign Wealth Fund for $45 Million

Yours sincerely,
Treehouse Research 🌳