🌳Potential Yield Curve Policy Tweaking From BOJ Sparks Worries Amongst Markets; US Regulatory Body Sees Further Advances To The Potential Crypto Bill

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter, where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

Also, in case you have missed it, check out our latest research piece 👇

Our Daily View

What We Are Covering Today

• Bank of Japan signals the potential of tweaking the yield curve control policy; Chinese Minister urges further support in the real estate market (more in Macro & TradFi)
• U.S. crypto legislation sees pivotal regulatory advances; PancakeSwap expands onto the zkSync Era blockchain (more in DeFi & CeFi)
• BTC Supply Last Active Age Bands reveal long-term accumulation; LINK transactions and wallets indicate heavy whale accumulation (more in On-Chain)
• BTC options skews subside after Blackrock's ETF filing excitement; skews shifts from positive to neutral amid put flows (more in Crypto Derivatives)
• BTC and ETH continue to trade in a macro range; PEPE sets up for another potential leg higher (more in Crypto Technical Analysis)

Macro & TradFi

The Japanese yen strengthened against major currencies after a report revealed that the Bank of Japan (BOJ) plans to discuss modifying its yield curve control policy during its meeting on Friday. The yen surged up to 2% against the euro and 1% against the dollar. The BOJ will reportedly consider allowing long-term interest rates to rise above its current 0.5% cap by "a certain degree." This potential policy tweak has sparked market speculation, and traders have increased protection against a possible surge in the yen. This BOJ's move to adjust or abandon its yield curve control policy could significantly impact both Japanese and global markets.

In other news, China's Minister of Housing and Urban-Rural Development, Ni Hong, has urged financial regulators and lenders to take more robust measures to revitalize the struggling property sector. In a meeting with property developers and builders, he called for homebuyers who had paid off previous mortgages to be considered as first-time purchasers, seeking to reduce down-payment requirements and mortgage rates for first-home buyers. This move comes as China's real estate crisis hampers economic recovery, prompting expectations for further government action to stimulate demand. Policymakers have been looking for ways to stabilize the property market, and easing homebuying restrictions in major cities is being considered. The government emphasizes support for home purchases to meet essential dwelling needs and stimulate economic recovery. However, concerns about potential risks associated with debt-laden local government financing vehicles and the impact on banks' earnings and capital positions are rising.

Worries about a potential policy tweak by the Bank of Japan (BOJ) negatively impacted the U.S. stock market. Investors fear that Japanese investors, who hold significant amounts of U.S. fixed income, may repatriate their investments, leading to a sell-off of U.S. Treasury securities. The Dow Jones Industrial Average ended its 13-day winning streak after the 10-year Treasury yield surged above 4%. Similarly, SPX and NASDAQ have declined by 0.64% and 0.55% respectively. In the future, market participants are closely monitoring the BOJ's meeting to see if there will be any adjustments to the yield curve control policy.

DeFi & CeFi

• Crypto bills pass congressional committee
• PancakeSwap now live on zkSync Era network
• Worldcoin rebuts reports of lackluster takeup
• Crypto Payment App hi Secures $30M from Animoca Brands
• U.S. House lawmakers fail to reach a bipartisan deal on stablecoins legislation
• OKX Wallet is now integrated with DeFi Land, a play-to-earn game

The House Financial Services Committee has greenlighted two pivotal bills to provide regulatory clarity for U.S. crypto firms. The Financial Innovation and Technology for the 21st Century Act, which details registration protocols with regulatory bodies, was approved by a 35-15 vote. Concurrently, the bipartisan Blockchain Regulatory Certainty Act seeks to remove barriers for blockchain developers and service providers. These developments mark a substantial step towards shaping the regulatory framework for the U.S. cryptocurrency market.

Decentralized exchange PancakeSwap has extended its operations onto the zkSync Era blockchain, aiming to enhance protocol revenues and broaden its user base. With transaction fees set at 0.01% of trade value for token swaps and liquidity provisioning, it also plans to introduce a Farm feature, enabling users to stake LP tokens to earn CAKE rewards. Initially launched on BNB Chain, PancakeSwap is now accessible on multiple platforms, including Ether, Polygon zkEVM, Aptos, and zkSync Era.

On-Chain

According to Glassnode data, Bitcoin's Supply Last Active Age Bands, representing different active age groups of BTC holdings, have all reached all-time highs, showing a common trend of HODLing among long-term investors. The one to five-year active age bands has witnessed a significant, simultaneous increase in long-term accumulation, indicating that investors are holding onto their BTC since last year's capitulation. Despite recent dips, the number of holders in profit still exceeds those facing losses, reinforcing the trend of holding BTC for the long term.

Chainlink whales have acquired approximately 11M LINK tokens worth $77M in the past month. Notably, transactions valued at $1M or more are rising this year, indicating heavy whale accumulation, according to Santiment data. Wallets holding 100,000 to 1,000,000 LINK are also accumulating rapidly, nearing a 7-month high, as seen from the graph. Overall, the market awaits to see if this accumulation can help LINK recover from its 2022 decline.

Crypto Derivatives

• Funding rates remain positive for both BTC and ETH
• Deribit Implied Volatility Index (DVOL) for BTC and ETH fell to 36.32% and 35.60%, respectively
• 30-day 25-delta skew (C-P) for BTC rose to and ETH is at 1.83% and -0.78% respectively
• The futures market witnessed $39.9M worth of liquidations on Thursday with longs representing 67.17% of the total

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

The 7-day and 30-day ATM IV for BTC declined yesterday, despite crypto and the US markets closing lower. The overall IV has continued its downtrend over the past month, as BTC's price remained stagnant around the $30K level for an extended period.

The term structure remains in contango, showing a smooth and consistent increase in IV as we move further out the curve. Short-expiration IVs have cooled down, while tenors further out the curve remain relatively unchanged. The IV spread between BTC and ETH has narrowed.

Throughout the first half of the month, there was considerable market excitement following Blackrock's announcement of the spot BTC ETF filings, resulting in highly positive options skews for BTC. However, the heightened enthusiasm has subsided notably since then. The 7-day and 30-day skews, previously favored calls, have declined significantly and are now reverting to neutral. This shift can be partly attributed to increased Put flows, indicating that investors have grown more cautious and are opting for puts to protect against potential downside risks.

As reported by @paradigm, there was late-session downside activity with the purchase of 500x 28-Jul-23 $28.75K Put at 15 delta. A notable trade involved the sale of 235x 25-Aug-23 $27K Put for BTC. On the other hand, bullish Risk Reversal buying for Sep continued for ETH. Other significant trades included the sale of 10,250x 27-Oct-23 $2.2K / 29-Dec-23 $2.5K Call Calendar and purchasing 3,816x 25-Aug-23 $1.7K Put.

Crypto Technical Analysis

After reading the weekly BTC chart, we noticed that BTC is confined within a larger trading range for the past year. Although it briefly peaked at $31.8K, it failed to surpass the critical $32K mark. As a result, BTC will probably maintain its course toward the middle of the established range, around $24K - $25K. Alternatively, a more optimistic outlook suggests that BTC might experience a retreat towards the range quarters at $28K in the upcoming weeks, potentially setting the stage for a stronger upward movement in the future.

Similarly, ETH is currently hovering around $1.85K, the macro range quarter. Bulls likely need ETH to find acceptance above this $1.85K level to set the stage for the next surge toward its range high of $2.1K. However, suppose ETH struggles to find sufficient support at this quarter level and deviates below it. In that case, there is a high probability that it could descend towards its range mid around $1.57K.

To cap off the week, we observe that PEPE has been trading rangebound for the past few weeks since the blow-off top in May this year. Presently, PEPE's price is confined within an ascending triangle pattern. If PEPE continues to trend upwards and approaches the upper boundary of the ascending triangle in the upcoming weeks, bulls must break above these levels. Doing so could trigger another substantial upward movement similar to April and May.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Yen Jumps on Report That BOJ Will Discuss Tweaking Yield Curve Control

• Top China Housing Official Urges Fresh Real Estate Rescue Effort

• Cadbury-maker Mondelez raises annual forecasts boosted by strong demand

• Foreign bank lending to Australian offices hits record as local banks retreat

• US economy defies recession fears with strong second-quarter performance

• Subway tuna lawsuit has been dismissed

• Bill Hwang seeks to subpoena 10 banks, shift blame for Archegos collapse

• American Airlines pilots reach deal to match gains at rival United

• Meta's Reels revenue narrows in on TikTok, boosted by AI

• Northrop Grumman lifts annual forecasts, passes on fighter jet competition

• Alarmed by AI's potential, U.S. Senate to summon experts

• US oilfield service providers expect rig count recovery later this year on high prices

• Half of Americans polled see China as the biggest threat to the U.S., survey shows.

Crypto

• Grayscale Urges Equal Treatment for All Spot Bitcoin ETF's in Letter to SEC.

• Tokenization News Roundup: Avalanche Invests $50M in RWA.

• Crypto Bill Advances Out of House Agriculture Committee.

• White House Derailed Negotiation on U.S. House Stablecoin Bill: McHenry.

• Palm Foundation to Scale Its Native Network to Support NFT Minting and Trading.

• Amazon Expands Web3 Reach With Cloud Tools That Help Blockchain Developers.

• PancakeSwap Expands to zkSync Era Network.

• ‘Pro-crypto bill' passes out of US House Agriculture Committee.

• Ethereum Dencun Upgrade Could Come in November, Says KOL

• THORChain Launches Streaming Swap, Allowing Split Large Transactions into Sub-Swaps

• US Prosecutors Seek to Put SBF in Jail Before His Trial

Deal Flow

• Animoca to invest $30 million in crypto app hi

Yours sincerely,
Treehouse Research 🌳