Market Expects 25bps Hike From Fed; Wormhole To Be Uniswap’s Designated Bridge For BNB Deployment

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Market bakes in 25bps hike for tonight’s FOMC, Adani Enterprises saw its $2.5bn stock offering fully subscribed (more in Macro & TradFi)
• Uniswap DAO chooses Wormhole for V3 deployment on BNB Chain; COTI launches $DJED; dYdX releases ecosystem annual report (more in DeFi & CeFi)
• Whale transactions of $100K or more fuel dogecoin pump (more in On-Chain)
• Near-term IV spikes ahead of FOMC meeting (more in Crypto Derivatives)
• BTC and ETH hold their ground as more directional clues will likely come after tonight’s FOMC (more in Crypto Technical Analysis)

Macro & TradFi

Chinese PMI delivered an upside beat yesterday but couldn’t stop onshore and Hong Kong stocks from two-day losing streak as profit taking prevailed. India’s Adani Enterprises saw its $2.5bn stock offering fully subscribed after receiving support from Abu Dhabi royal family, kicking the ball back to short seller’s court. US wage data preferred by Fed chair Jerome Powell, Employment Cost Index, slowed to 1% last quarter from 1.2% and boosted market sentiment about the slowing down of Fed tightening beyond the next two meetings; the market has baked in 25bps hike for tonight’s FOMC and traders expect Powell to reiterate on his 5% terminal rates - which means Fed officials need to be more hawkish than that to deal a blow to optimism in the market.

US stocks and bonds both ended up. NASDAQ +1.09%, SPX +1.13% and DOW added 0.95%, wrapping up January’s comeback of more than 11% in NASDAQ and 6% in SPX. Treasury bonds gained late in the session pushing 10y yields back down to 3.5%. Oil rallied and gold reversed early losses to close higher as well.

DeFi & CeFi

• Uniswap DAO chooses Wormhole as the cross-chain bridge for V3 deployment on BNB Chain
• Pyth launches on Arbitrum
• COTI launches $DJED, a Cardano-based decentralized stablecoin, live on mainnet
• dYdX releases ecosystem annual report
• History tool goes live on Multichain
• Ethereum's first public withdrawals testnet Zhejiang to launch on February 1st
• Hong Kong Monetary Authority (HKMA) proposes to bring regulation on certain stablecoin activities
• Ribbon Finance announces to airdrop all fees earned over the last year on the $SOL vault to Friktion users who migrate to Ribbon before February 17th
• ZKX, a StarkNet-Based Derivatives Exchange, announces testnet launch on March 14th

Uniswap DAO has selected Wormhole as the cross-chain bridge provider for the anticipated Uniswap V3 deployment on BNB Chain. Wormhole received 62.31% of the vote among the four alternatives LayerZero, Celer, and deBridge. Uniswap DAO already passed the Temperature Check for Uniswap V3 deployment on BNB Chain. In the final BNB Chain deployment governance vote, Wormhole will be used as the bridge provider.

COTI launched $DJED, a Cardano-based decentralized stablecoin developed with Cardano's core developer Input Output, on mainnet. $DJED is backed by $ADA, and it uses $SHEN as its reserve token. Hosting a 400%–800% collateral ratio. The platform will prevent burning $SHEN and minting $DJED when the collateral ratio drops below 400%. Users can mint and burn $DJED but not $SHEN when the ratio exceeds 800%. $DJED has partnered with over 40 Cardano-based projects.

According to dYdX’s ecosystem annual report, in 2022, the dYdX circulating supply (including the community treasury) reached 194,449,829 $DYDX (19.4% of the total supply) and the community treasury's accrued balance was 39,343,417 $DYDX. Currently, the dYdX community has access to 2,492,731 $DYDX per epoch for DAO and community activities, liquidity mining, contributor grants, etc. In 2022, there were 33,900 active traders on the dYdX. The cumulative trading volume hits $466.3B, while the cumulative fee income reaches $137.8M.

On-Chain

Large Ethereum holders have shown weaker hands lately as holders of 32 and 100 coins have reached 1-month lows.

Elsewhere, Dogecoin’s recent upswing has been due to multiple large whale transactions of more than $100K in value yesterday according to @santimentfeed.

Crypto Derivatives

• BTC and ETH funding rates remain positive
• 7-day ATM IV increased to 63.0% and 66.8% for BTC and ETH respectively
• 30-day 25d call skew rose for BTC to 1.11% & fell for ETH to -2.63%

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

For futures, total liquidations in the past 24H amounted to $60.37M, majority coming from shorts at $36.30M.

On the options front, near-dated IV spiked heavily ahead of the upcoming FOMC meeting this Wednesday. Term structure remains in backwardation, however, ETH’s term structure seems to indicate a return to contango as its longer-dated IV increases. The variance risk premium for BTC and ETH rose to 16.7% and 10.9% respectively as near-dated IV jumped. Volume of put-call ratio is at 0.66 for BTC and 0.69 for ETH.

On the flow front, most of the volume comes from options expiring on 3 Feb and 24 Feb. Traders that bought the near-dated options might be looking to speculate on the upcoming FOMC meeting. The most popular trading strategy is the reverse call calendar.

Lastly, the VIX fell by 2.85% to 19.37.

Crypto Technical Analysis

For TA, BTC rebounded off the $22.8K and advanced 1.3% to $23.1K overnight. The resistance-turned-support level was able to hold its ground against the bears as FOMC draws closer. On the H4, price has consolidated between the 20 and 50 EMA lines as more directional clues will likely come after the Fed meeting. If bearish news were to arise, the 100 EMA line would likely be the next support level to be tested. Falling below it could likely send it to the next major support at $21K.

As for ETH, it saw an increase of 1.21% overnight to $1.58K as price has found its footing on the 20-d EMA. Daily RSI has been edging lower since mid-Jan and is now approaching the neutral level. Should price break below the 20-d EMA, the next level of support to watch will be it 50-d EMA. If tonight's FOMC is a positive one, ETH could likely restest the $1.67K resistance level before making a run toward the $1.8K zone.

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Daily Readings

TradFi

• Traders see inflation falling this year - JPMorgan survey

• Biden to ask McCarthy to show Republican budget in White House meeting

• GM to help Lithium Americas develop Nevada's Thacker Pass mine

• Exxon smashes Western oil majors' profits with $56 billion in 2022

• Bond investors brace for recession as Fed expected to slow pace of tightening

• Oil prices settle steady on higher U.S. demand, weaker dollar

• India sees GDP growth slowing on global weakness

• UK grocery price inflation surges to record 16.7% - Kantar

• Japan Dec factory output inches down, retail sales beat forecasts

Crypto

• ImmutableX to Launch All-In-One Passport System to Onboard New Gamers Into Web3.

• Ethereum Developers to Launch New Testnet ‘Zhejiang’ for Simulating ETH Withdrawals.

• Social Token Project Rally Shuts Ethereum Sidechain, Stranding Users’ Crypto Assets.

• Wormhole Wins Vote to Be Uniswap’s Designated Bridge to BNB Chain.

• Strike Expands Lightning Network-Powered Remittances to Philippines.

• Celsius Used New Customer Funds to Pay for Withdrawals: Independent Examiner.

• Stablecoins Seem Unattractive as the Gap Between 3pool's APY and Treasury Yields Widens.

• Court permits Core Scientific to borrow $70M to replace existing loan.

• Bitcoin miner Greenidge cuts NYDIG debt from $72M to $17M.

Deal Flow

• DeFi Liquidity Protocol Squid Raises $3.5M Round Led by North Island Ventures.

• Blockchain provider SIMBA Chain awarded $30M by US Air Force STRATFI program.

• Cronos Labs to accept second cohort for $100M-backed Web3 accelerator program.

Yours sincerely,
Treehouse Research 🌳