No FTX Bailout As Binance Walks Away; FTX Faces $8Bn Shortfall; Disney Fell by 13% After Reporting Earnings and Revenue Miss

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• US stocks dipped as uncertainty looms over a political gridlock (more in Macro & TradFi)
• Binance decide against acquiring FTX after due diligence (more in DeFi & CeFi)
• ETH mean gas prices are at a 3-month high; Spot and Futures exchange inflows increase despite the recent events (more in On-Chain)
• IV jumps to levels not seen since prior blow-ups; Heavy put buying dominates the tape (more in Crypto Derivatives)
• BTC price plummets to 2020 prices; ETH falls to levels last seen during May’s Terra collapse (more in Crypto Technical Analysis)

Macro & TradFi

GM! US stocks slumped, ending a three-day winning streak, as the midterms elections remained tight. The republicans are still expected to win the House by a narrow majority while the Senate race remains too close to call. The fall of DJIA was led by Disney, which fell over 13% as streaming costs dragged on the company's earnings. Meanwhile, META was an outlier yesterday, rallying over 5% as it announced plans to cut more than 11,000 jobs. Investors also remain wary of the CPI results coming out later today, with the consensus being 7.9%.

US stocks closed red, with the S&P 500 down 2.08%, the Nasdaq down 2.37%, and the DJIA down 1.95%. The 10Y yield decreased to 4.09%. Meanwhile, WTI crude decreased 3.39% to $85.67 a barrel.

DeFi & CeFi

• Binance passed on FTX bailout after due diligence
• FTX would need to file for bankruptcy without cash injection, faces up to $8B shortfall
• Binance tops up its emergency insurance fund to $1B
• In the past 24h, nine exchanges have issued statements to publish their Merkle tree reserve certificates
• Amber Group clear all its outstanding loans on Clearpool
• Lionel Messi take a stake in NFT Fantasy Football Game, Sorare
• OpenSea to maintain its royalties fee structure on existing collections

In the latest turn of events, Binance has officially announced its decision to not pursue the potential acquisition of FTX.com after due diligence revealed misappropriation of client funds and alleged US agency investigation. According to Bloomberg reports, Sam Bankman-Fried is still trying to raise capital in the form of debt, equity or a combination of both. If he fails to secure a deal, FTX will likely file for bankruptcy. Temasek, Singapore’s state investor, was one that has engaged with FTX. The exchange has since suspended its withdrawal, with Genesis, Wintermute, Multicoin and Amber Group among others affected by the suspension.

On-Chain

BTC's Market Value to Realized Value Ratio (MVRV) just reached a 4-month low of 0.872. The previous low of 0.876 was observed on 7 September 2022.

On the other hand, ETH's Mean Gas Price (7d MA) just reached a 3-month high of 28.134 GWEI. Even after the FTT crisis, the trend of futures and spot exchange inflows has still increased.

Crypto Derivatives

• Funding rate remains negative on BTC, ETH, and all other crypto-assets
• 30-day IV rose for both BTC and ETH to 90.27% and 124.24%, respectively
• 30-day 25d put skew tightened for BTC and ETH to -27.68 % and -22.03%, respectively

For futures, total liquidations came in at $565M, with the majority coming from long liquidations at $400M. With the exception of FTX, funding rates remain highly negative across all exchanges as traders seek to long on the now-defunct exchange while going short on other exchanges to potentially hedge out their exposure should a final resolution to save stuck assets come through.

On the options front, IV fluctuated as rumors about FTX and Alameda's solvency circulated. IV initially crashed on the Binance deal but quickly spiked after a potential fallout as reported by CoinDesk. Now that the deal has fallen through, IV has risen another notch, spurring contagion fears. However, these periods of heightened volatility are often brief and volatility will eventually crater lower.

On the flow side, it is clear that downside and long vol bets have dominated the tape over the last 24 hours. Long strangles and bear put spreads were popular structures among outright put buyers on shorter-dated expiries. However, we do observe some call buying on longer-dated expiries, suggesting that people are hoping for better days ahead.

Finally, the VIX index increased by a percentage point as the ongoing crypto carnage sent shockwaves through the equity markets, on top of the upcoming CPI print and midterm election uncertainty.

Crypto Technical Analysis

BTC is currently at $15,877, falling by 14.0% in a day to price levels that have not been seen since 2020. On the daily, BTC broke past 2 key levels of support and is currently in unchartered territory. On the H4, BTC has not respected any levels of support and has continued its freefall. The next level of support is at $12,257, which is notably the 2020 price level.

ETH has also plummeted, with the price currently at $1,099.7 after dropping by 17.5%. On the daily, price has not respected the level of support at $1,251.3, and has broken out to the downside. ETH is now back inside the range of $1,244 to $1,053, which were price levels that were reached during the Terra collapse earlier this year. On the H1, price tested the top of the range at $1,248 before rejecting off this level and taking a plunge towards the bottom of the range. The next support level to watch would be $1,040.7.

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Daily Readings

TradFi

• Biden says ‘we’re not anywhere near a recession’ right now

• Occidental’s project to capture CO2 takes a hit from inflation

• Tesla stock hits 2-year low after Musk sells $4 bln worth of shares

• U.S. securities regulator says crypto events underscore industry risks

• Meta cuts 11,000 jobs as it sinks more money into the metaverse

• Disney sees biggest one-day loss in over two decades as streaming costs mount

• China’s Oct new yuan loans seen sliding as demand weakens

• China’s factory gate prices suffer first drop since Dec 2020 as COVID curbs take toll

Crypto

• Market Wrap: Bitcoin, Other Cryptos Continue to Plummet.

• Tron Network USDD Stablecoin Wobbles from Dollar Peg Amid Latest Crypto Crisis.

• Crypto Stocks Continue Drop as Binance Walks Away from FTX Deal.

• FTX Faces US Justice Department Probe: Report.

• DeFi Exchange Platform dYdX Places Solana in ‘Close Only’ Mode.

• Solana Blockchain Hit by FTX Tremors as Nearly $800M SOL Tokens Set to Be Unstaked.

• Crypto.com Halts Solana USDC and USDT Deposits, Withdrawals.

• Binance-FTX Deal Will Bring Regulatory ‘Scrutiny’ on Crypto Exchanges: Blockchain Association’s Kristin Smith.

• Crypto Bank Silvergate’s Stock Defended By Analysts Amidst FTX Concerns.

• Bitcoin Hits 2-Year Low Below $16K After Binance Backs Out of FTX Deal.

• Crypto Financial Firm Galaxy Digital Reveals $76.8M FTX Exposure as CEO Novogratz Hunkers Down.

• Crypto Fund Alameda’s Ethereum Wallet Holdings Slumped 50% Since October.

• OKX, Kucoin say proof of reserves will be ready in a month.

• Orthogonal Credit alleged key weaknesses in Alameda’s due diligence early in 2022.

• Breaking: FTX’s Binance rescue deal falls apart in less than 48 hours.

• Alameda Research and FTX Ventures websites go dark.

Deal Flow

• Thoma Bravo leads $70 million round into crypto compliance firm TRM Labs.

Yours sincerely,
Treehouse Research 🌳

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