Memecoins Pump Higher, Along With Gas Prices; a16z Unveils New Optimism-Based Rollup Client

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• UK reports higher-than-expected inflation in March, signaling more rate hikes (more in Macro & TradFi)
• a16z announces new rollup client Magi; Memecoins rocket as gas fees spike on Ethereum blockchain (more in DeFi & CeFi)
• Peak FOMO approaches as altcoins ascend to the top-10 gas burners list on Ethereum (more in On-Chain)
• ETH skew and risk premium turn negative; Traders chase downside (more in Crypto Derivatives)
• Both BTC and ETH broke its local support, forming new trends for short-term price movement (more in Crypto Technical Analysis)

Macro & TradFi

According to the newest data, UK inflation rate remained high at 10.1% in March, exceeding economists' expectations of a drop to 9.8%. The core inflation rate, which excludes volatile items such as energy and food, remained unchanged at 6.2%. Food prices rose by 19.1% over the 12 months through March, the highest increase since 1977. The UK's high inflation rate was mainly driven by energy prices, which rose by 40.5%. To combat this inflation, the Bank of England has signaled that it may vote for another increase in interest rates in the next meeting in May. Money market traders have priced an interest rate of over 5% as the peak rate from BOE current cycle. The swap market also indicates two consecutive 25 bps increase in May and June.

Meanwhile, Freshippo, the Alibaba-owned grocery chain known for its fresh seafood and high-tech automated picking system, is reportedly preparing for an initial public offering (IPO) in Hong Kong with the help of banks including China International Capital Corp. and Morgan Stanley. As such, Freshippo is among the first of several Alibaba units in the pipeline to be listed after the Chinese tech giant made an announcement to split up its $250 billion business last month. The IPO could happen next year and the size and valuation of the offering are still under consideration. The IPO plan could help Freshippo turn profitable in the current fiscal year, according to Bloomberg Intelligence analysts.

Lastly, the major US indices remained flat yesterday with S&P 500, DJIA, and NASDAQ closed at -0.01%, -0.24%, and +0.03%, respectively. 2-year and 10-year Treasury yields have gone further up, with the former currently at 4.263% and the latter at 3.600%.

DeFi & CeFi

• a16z to launch Magi, an Optimism Stack rollup client
• Investors pile into new wave of memecoins, similar to 2021 pump
• Crypto options exchange Deribit to add zero-fee spot trading
• Web 3 identity platform Space ID to add support for Sei network
• Sui announces its mainnet and token launch on 3 May
• Coinbase obtain license in Bermuda, plans to launch an offshore derivatives exchange by next week
• DeFi credit protocol Maple Finance launches US Treasury bill pool for cash management
• Distributed stablecoin project HOPE launches on Ethereum mainnet
• Fetch.ai to offer a suite of trading tools for DEXs
• An unknown exploit drained crypto veterans' wallets worth over $10M in past five months
• Sushiswap recovers $600K in stolen funds, pays $200K in bounty

Recently, memecoins such as $PEPE and $WOJAK, have been gaining in popularity and value, with $PEPE reaching a market capitalization of $86M in just five days. According to @lookonchain, an individual has successfully turned a small investment of $251 into a massive profit of approximately $1.14 million. Some crypto enthusiasts see memecoins as a fun and accessible way to engage with the industry, while others criticize their questionable utility and the idea that the crypto industry is purely gambling. Memecoins have also caused gas fees on the Ethereum blockchain to spike with users paying up to $30 to trade on DEXs. According to @SeaLaunch, an Ethereum MEV bot named jaredfromsubway.eth has been using a significant amount of gas to trade obscure memecoins like PEPE and WOJAK. The bot has spent over $1 million in gas in the past 24 hours, accounting for almost 8% of total gas spending. While memecoins have caught the attention of investors and traders, it remains to be seen whether their success will positively impact the crypto industry in the long term.

Venture capital firm Andreessen Horowitz (a16z) has announced its plans to launch Magi, a rollup client for the OP Stack development stack that powers Optimism. Magi, which is written in Rust, aims to offer an alternative to the existing rollup client, op-node, which is written in Go and maintained by OP Labs. The aim is to improve client diversity and attract more developers. Magi will act as the consensus client, supporting any OP Stack chains, and will feed new blocks to the execution client to advance the chain. While Magi can already sync to both the Optimism and Base testnets, it is still in development and months away from being production-ready.

On-Chain

According to @santiment, the price of ETH has fallen below $2,000, but there are indications that this drop may be short-lived. Dormant assets on the Ethereum network are on the move, which could be a sign of significant price shifts in a positive direction. When assets move from old addresses to new ones, it typically increases on-chain activity and the rate of token movement between addresses. There has been a recent spike in dormant asset circulation (shown in yellow), which has historically coincided with price bottoms. Today's spike is the fifth-highest level in the past six months, increasing the likelihood of history repeating itself.

In addition, the mean dollar invested age (shown in red) has been decreasing over the past week. This suggests that the average age of investments in addresses has decreased, which historically favors a bullish setup.

Santiment also noticed an interesting shift in the top 10 gas burners on the Ethereum network. Usually, the top gas burners include ETH, WETH, and stablecoins. However, the list has now shifted to recently deployed altcoins, such as TROLL, APED, and BOBO. Investors are looking to invest in the next PEPE, which gained over 1,000 times in price since its launch on Saturday. This change in the top 10 gas burners has resulted in exceptionally high average fees on the Ethereum network. These indicators suggest that the Fear of Missing Out (FOMO) is reaching its peak among market participants, and investors should be cautiously bullish ahead of a local top.

Crypto Derivatives

• BTC and ETH funding rates remain positive
• 30-day ATM IV rose to 53.54% for BTC while falling to 55.85% for ETH
• 30-day 25 delta call skew for BTC falls to 0.52% while ETH flips to put premium at -0.47%

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

The futures market experienced $287.07M in liquidations over the past 24 hours, with longs accounting for majority at $262.52M. Most of the longs were liquidated at 4PM SGT as BTC fell -2.66% and ETH fell -3.82% on the 30 min chart.

In the options market, the term structure for both BTC and ETH remains in contango, relatively unchanged. BTC 30-day call skew flips to put skew momentarily during the market sell-off before recovering back to call premium, sitting currently at 0.52%. As for ETH, its 30-day skew is currently in put premium, sitting at -0.47%. 7-day RV for ETH continues to rise and currently sits at 53.2% while its 7-day IV sits slightly below at 52.08%. Variance risk premium for ETH turns negative as a result, sitting at -1.12%.

On the flow side, ETH option volume picked up as traders piled into puts as the market sell-off sent the put-call volume ratio from 0.41 to 1.07, put-call open interest ratio similarly increased from 0.45 to 0.48. ETH volume in the near-term is still dominated by calls while the mid-term (30 Jun) is strongly dominated by puts. As for BTC, despite the crash, sentiment remained neutral-bullish as calls dominate across the expiries.

During the European/Asia trading hours, traders were chasing the downside. Some noteworthy trades include the 450 BTC contracts of 30 Jun 25K/30K bull risk reversal being sold and the buying of 10K ETH contracts of 30 Jun 1.9K/1.5K put ratio (1-to-2 ratio) (@tradeparadigm).

Finally, the VIX continues its descent and hits 16.46.

Crypto Technical Analysis

On the TA front, the massive dump of BTC yesterday afternoon wiped out more than a week’s price gains in less than an hour. As a result, BTC consecutively broke through the trendline and the 29.8K support zone. BTC formed a small parallel channel on the 1H timeframe, which is expected to determine short-term price action. If the price breaks through the lower bound of this channel, it is likely to test the lower support at $27.8K. RSI has fallen significantly and is currently sitting at 35.4 at the 4H timeframe, indicating oversold conditions.

On the other hand, ETH has seen a greater magnitude of price movement than BTC, with a dip of 4.5% in less than an hour. The price has broken through the parallel channel and the 2K support zone, but the lower trendline formed by the local higher lows continues to be respected. The price bounced off at the $1.93K level, and it is likely to retest the $2K zone, which acts as both strong daily resistance and a key psychological resistance zone. Short-term price movement will depend on whether ETH sees a retracement to the downside or breaks through the $2K level to see further upside testing the local high. RSI has dropped even more than BTC and is currently at 31.7 for the 4H timeframe, indicating oversold conditions.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• Oil exports from Russia's western ports hit 4-yr high in April

• Zambia's official creditors expected to sign debt relief MOU in May - sources

• Fed's Williams: Inflation still 'too high,' Fed will act to lower it

• U.S. banking regulator warns 'open banking' could impact deposit outflows

• U.S. Treasury's tax deadline day take totals $129.8 bln -statement

• Republican McCarthy unveils plan to lift US debt ceiling, cut spending

• Bed Bath & Beyond prepares for bankruptcy filing -WSJ

• Storm clouds gather over highly indebted companies, Moody's says

• Canadian housing starts slow as BoC rate hikes weigh

• Australian competition watchdog blocks Qantas' acquisition of Alliance Aviation

• Western Alliance stock surges as results allay deposit fears

• Morgan Stanley, Deutsche and others raise UK rate-hike forecasts

• UK records western Europe's highest inflation as March fall disappoints

• Core euro zone inflation edges up in March, keeping ECB on alert

• China says drafting plans to boost recovery, expansion of consumption

• Elon Musk threatens to sue Microsoft over using Twitter data for its A.I..

• Israel’s Netanyahu says damage to investor confidence ‘a momentary problem’ as protests persist.

Crypto

• Trezor Model T Gets Bitcoin Privacy Upgrade With New CoinJoin Feature.

• Crypto Lender Maple Finance Opens U.S. Treasury Bill Pool for Cash Management.

• Russia Plans to Mine Crypto for Cross-Border Deals, Says Central Bank.

• Valuations and M&A Show Things Aren’t So Bad for Crypto.

• EU Lawmakers Skeptical on Digital Euro Plans.

• Microsoft Working With Space and Time to Add Real-Time Blockchain Data for Azure Cloud.

• Democrats Blast Draft Stablecoin Bill in First 2023 Hearing on Issue.

• Bitcoin Miner Mawson to Sell Texas Sites for $8.5M to Singapore Fund Manager.

• Prosecutors Seek 7-Year Prison Sentence for Reggie Fowler in Crypto Shadow Bank Case.

• Crypto Wealth Manager Onramp Taps CoinDesk Indices to Create Customized Portfolios.

• EU’s Crypto Licensing Regime Set for Approval as Lawmakers Signal Support.

• Hard-Wallet Maker Ledger, Crypto Custodian Etana Target Institutions With Regulated Custody.

• Crypto Protocol Fetch.ai Offering AI Trading Tools for Decentralized Exchanges.

• Hong Kong Court Declares Crypto as Property in Case Involving Defunct Gatecoin.

• Coinbase gets Bermuda license, offshore exchange could launch next week: Report.

• Subgraph hosted service launches as The Graph prepares for decentralization.

• Coinbase’s Base network gets OpenZeppelin security integration.

• A trading bot is making sandwiches amid memecoin craze, spending millions on gas

• Distributed Stablecoin Project HOPE Launches on Ethereum Mainnet

Deal Flow

• Yoz Labs Raises $3.5M to Build Web3 Notification System.

Yours sincerely,
Treehouse Research 🌳