Optimism Rolls Out Second Round Of Retroactive Public Good Funding; Recession Fears And Nuclear Threats By Russia Send Markets Into Disarray

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Recession bets stack up among fund managers (more in Macro & TradFi)
• Optimism announces its second round of Retroactive Public Good Funding; Hooked Protocol to airdrop tokens to NFT holders, up to 100 $HOOK per user (more in DeFi & CeFi)
• Whales and Sharks have accumulated 2.1% of total ETH supply in Dec (more in On-Chain)
• Bearish structures continue dominating options flows (more in Crypto Derivatives)
• BTC and ETH prices fell below intraday support levels (more in Crypto Technical Analysis)

Macro & TradFi

More recession fears are pushing stocks and long-end US Treasury bond yields lower, reigniting interests in duration and fund inflows into fixed income assets. US 10y bond yields have dipped for more than 80bps from the widely seen in mid-Nov, while 30y yields dropped almost 100bps, compared to less than 60bps for 2y yields. Asia stocks felt the heat of US recession fears as well - Chinese and HK stocks wiped out their 1.5-2% intraday rally on more loosening of COVID control measures, ending anywhere from 0.5-4% lower. On the geopolitics front, Russian president Putin warned that the threat of nuclear war is rising after recent Ukraine aerial assaults on a Russian airfield far from Ukrainian borders.

Stocks remained timid, with NASDAQ closing 0.36% lower, S&P 0.32% and DOW 0.28%. Bonds saw a rush into heaven assets as the 10-year Treasury yields dipped more than 10bps, now closing decisively below key technical level of 3.5%. Oil prices dipped further while the dollar index closed around flat.

DeFi & CeFi

• Perpetual Protocol adds $USDT as collateral
• Cross-chain bridge Hop protocol will deploy on zkSync 2.0
• DEX protocol Hashflow integrates with interoperability protocol Wormhole
• Hooked protocol announces airdrops to NFT holders
• Liquid staking protocol Stader to launch on Ethereum
• Decentralized oracle Band Protocol integrates with cross-chain lending protocol Chee Finance
• NFT fractionalization protocol Tessera goes live
• Gnosis Merge to complete around Dec 8, transiting from Proof-of-Authority to PoS
• NFT lending protocol BendDAO launches Ape staking
• Optimism announces $10 million OP distribution in second round of retroactive public good funding

In its second round of Retroactive Public Goods Funding, Optimism plans to distribute 10 million $OP tokens to fund public goods supporting the development of OP stack. The layer 2 protocol will also introduce the first iteration of the Citizen’s House, which helps govern the allocation of its public good funding. The voting rights will be conveyed through its voting badges that will see 90 new communities in this round while badge holders in its previous round will also receive the new voting badge. In addition, the Optimism’s Token House and Foundation will elect 10 and 21 badge holders respectively.

Hooked Protocol releases an airdrop announcement, stating that the airdrop event will be done in 6 batches for existing Hooked Party Pass NFT holders. Long-term community contributors, whitelisted participants and constant Hooked ecosystem members will also receive Hooked Party Pass Season 2 NFT, entitling them to receive $HOOK airdrop in the last 5 batches. The total number of NFT holders will be limited to 99,999 and the total number of tokens each user can receive is up to 100 $HOOK tokens for all 6 batches. More information is available here

On-Chain

Looking at on-chain data, whales and sharks have been accumulating ETH at current prices. Key holders (holding 100 to 1m ETH), who own two-thirds of total supply, have added another 2.1% or 561K ETH to their holdings collectively (@santimentfeed).

Crypto Derivatives

• Funding rate turns negative on BTC while remaining positive on ETH
• 30-day IV rose for both BTC and ETH to 53.52% and 73.32% respectively
• 30-day 25d put skew eased for BTC to -9.07 % while tightening for ETH to -11.35%

For futures, total liquidations yesterday amounted to $66.61M, with $59.93M of that being long liquidations.

On the options front, IV rose across the board for BTC and ETH as spot dipped slightly. For BTC, term structure remains in contango, and for ETH term structure remains in contango on the front end, and relatively flat on the medium to longer term of the curve. Put skew eased further on BTC while further tightening on ETH.

On the flow side, bearish structures such as the bear and bull put spreads continued dominating flows for BTC. Flows for ETH were mixed, with short risk reversals and bull call spreads dominating ETH flows. As noted by Blofin, traders are betting on a minimal rebound and fall in prices, and prefer to purchase structures like spreads that are more risk averse.

Lastly, the VIX continues climbing and is now trading at 22.67.

Crypto Technical Analysis

Yesterday, BTC broke below the $17K level to $16.7K. With a sharp candle downward on the H4, price lost support at $16,943 while RSI fell below 50. However, price momentum remains suppressed as the RSI has not moved into oversold territory.

Similarly for ETH price broke below its range support of $1,239 yesterday afternoon but without showing signs of a strong reversal based on RSI.

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Daily Readings

TradFi

• S&P, Nasdaq extend losing streaks amid rising recession worries

• Celsius bankruptcy judge orders return of some crypto assets to customers

• U.S. court weighs novel issue of crypto ownership in bankruptcy

• TSX falls for fourth day as oil prices hit 2022 low

• Bank of Canada increases rates by 50 bps, says hikes may be over

• Blackstone CEO says financially distressed investors driving REIT redemptions

• Stocks, bond yields dip as U.S. data muddies Fed rates outlook

• China's trade suffers worst slump in 2-1/2 yrs as COVID woes, feeble demand take toll

• UAE non-oil private sector growth slows amid global headwinds-PMI

• India's c.bank set to raise rates; outlook on growth, inflation in focus

• Markets are bracing for a 'Powell recession' that could be coming soon.

• China eases Covid restrictions on travel and production.

Crypto

• First Mover Asia: Here’s What Might Happen to Sino Global’s Liquid Value Fund During FTX’s Bankruptcy Protection Proceedings.

• Privacy-Focused Gnosis Chain to Undergo Its Own Proof-of-Stake ‘Merge’.

• Bitcoin’s High Correlation to Copper Does Not Bode Well for Short-Term Investors.

• Coinbase CEO Armstrong Confirms Street Expectations for a 50%-Plus Decline in Revenue in 2022.

• US Sen. Cynthia Lummis: Ether Is Now a Security; My Bill Might Have Stopped FTX.

• South Korea’s Central Bank Wants to Oversee Stablecoins.

• Genesis Client Letter Suggests No Imminent Solution to Withdrawal Freeze.

• Crypto Bank Signature Suffers Another Analyst Downgrade; Shares Fall.

• Crypto consumer protection, proof-of-reserves bills introduced into US Congress.

• Binance US eliminates trading fees for Ethereum.

• Zodia Custody launches service to protect users’ crypto from exchange insolvency.

• Ankr deploys $15M to make users whole as Helio stablecoin recovers after exploit.

• Mazars says users’ BTC reserves on Binance are fully collateralized.

• Institutional investors still eye crypto despite FTX collapse.

Yours sincerely,
Treehouse Research 🌳

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