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Our Daily View
What We Are Covering Today
- President Xi Jinping sees ‘progress’ in US-China relationship, the UK experiences a shift as mortgage rates surpass 6% (more in Macro & TradFi)
- HKMA to release MVP of cross-border CBDC bridge by early next year; Aave rejects proposal to feeze $CRV assets (more in DeFi & CeFi)
- Binance’s large transfer has positive impact on BTC network; illiquid supply reached a new all-time high at 15.2M BTC (more in On-Chain)
- Elevated term structure for crypto options and bullish sentiment sparked by BlackRock's Bitcoin ETF filing (more in Crypto Derivatives)
- BTC attempts to break above key resistance and descending trendline, ETH returns to narrow trading range (more in Crypto Technical Analysis)
Macro & TradFi
President Xi Jinping made a statement about the US and China making progress in stabilizing bilateral relations is a clear indication that both countries are exploring ways to transform their tumultuous relationship into a responsible and stable one. This shared commitment signals a potential easing of tensions, which could significantly impact the "future and destiny of mankind", as suggested by Xi. Despite enduring disagreements and unresolved issues; including the possibility of President Xi snubbing Blinken and an ongoing FBI investigation into the balloon incident, there are positive signs of a potential thaw.
Elsewhere, the UK witnessed a significant milestone in the mortgage market as the cost of a two-year fixed-rate mortgage surpassed 6% for the first time since 2008, exerting added pressure on homeowners and the government. Additionally, two-year gilt yields rose 0.14 percentage points, surpassing the 5% mark, their highest level since 2008, indicating that mortgage rates may escalate even further. This development comes in anticipation of a projected rise in interest rates by the Bank of England. However, despite the mounting economic strain, Prime Minister Rishi Sunak dismissed the possibility of extending additional support to struggling households, emphasizing his plan to curb inflation as the primary method of keeping costs and interest rates under control.
On Monday, U.S. markets remained closed due to the Juneteenth federal holiday, but European stocks saw notable activity. The Stoxx 600 suffered its largest one-day fall this month, decreasing by 1.1%. Similarly, France's Cac 40 and the FTSE 100 also declined by 1% and 0.7%, respectively. The Stoxx 600 Basic Resources index fell 2.1% amidst concerns over the delay in China's economic rebound from its zero-Covid policy. Furthermore, Goldman Sachs has reduced its GDP growth prediction for China in 2023 from 6% to 5.4%, citing challenges such as a weak property market and diminished investor confidence.
DeFi & CeFi
- Ethereum developers propose to raise validator limit to 2,048 from 32 ETH
- Binance announces opBNB a L2 solution for BNB chain
- UBS confirms the BOCI Digital Structured Notes to be issued on Ethereum chain
- HKMA said the cross-border CBDC “mBridge” to enter MVP in early next year
- Aave community rejects proposal to freeze CRV on Aave V2
Hong Kong Monetary Authority (HKMA) CEO, Eddie Yue, recently discussed the progress of the cross-border network for central bank digital currencies, mBridge. He stated that the network is expected to enter the "minimum viable product (MVP)" stage in early 2024, with talks underway for additional central banks to join. The main challenges lie in coordinating regulatory requirements, platform governance, and ensuring liquidity. Yue highlighted the importance of harmonizing regulations to facilitate faster cross-border remittance and proposed solutions for liquidity support. The goal of mBridge is to enhance trade settlement efficiency and affordability, and it currently has 15 observer members, with more expected to join.
Elsewhere, the Aave community recently voted against the proposal put forward by Gauntlet, a DeFi infrastructure company, to freeze CRV and to set CRV LTV to zero on Aave V2. This means that Curve founder Michael Egorov's CRV collateral on Aave V2 will remain unfrozen. Gauntlet had expressed concerns about concentration risk and recommended freezing the collateral, but instead suggested migrating the CRV collateral to Aave V3, which offers more suitable risk parameters for the CRV market. Egorov had borrowed $71M stablecoins against a significant portion of the circulating supply of CRV on Aave V2.
Binance disclosed a significant transfer from its cold wallet to a new address involving 15,000 BTC. However, another transaction involving $3.47B in Bitcoin was soon spotted, marking the second largest individual move of the year. The larger transfer caused a surge in transaction volume and decreased the BTC supply on exchanges to 5.74%. The transfer coincided with a spike in realized losses, suggesting the coins were moved at a lower price. Despite the undisclosed nature of the larger transfer, Bitcoin's price responded positively, rising 1.6% since the transfer and highlighting the potential for increased market activity.
Bitcoin holders are in a phase of quiet accumulation according to Glassnode Insights, with around 42.2K BTC per month being absorbed by the price-insensitive class. Illiquid wallets reached a new all-time high of 15.2M BTC, while exchange balances are at their lowest since January 2018 at 2.3M BTC. This gradual accumulation has been ongoing for over two years and is expected to continue for another 6 to 12 months. Entities with balances under 100 BTC have significantly increased their holdings, absorbing 254% of the mined supply in the past month. Despite regulatory challenges, this suggests there is underlying demand in the market.
- Funding rates for BTC and ETH remain positive.
- The 30-day ATM IV for BTC remains flat at 40.69%, while for ETH it reaches 39.99%.
- The 30-day 25-delta skew (P-C) for BTC remains negatively skewed at -1.29%, favoring call options, whereas for ETH it increases to 14.45%.
Top 3 CEX USDT perp funding rate arbitrage based on last 24-hour lookback:
Net Annualized APR
Perp (USDT pair)
Source: @CexyArbBot Telegram
1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, DOGE vs USDT perps
2) CEX observed include Binance, Bybit, OKX & DYDX
@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo
In the past 24 hours, the total liquidations amounted to $49.61M, with approximately equal volumes of long and short positions being liquidated.
Based on the term structure for crypto options, there has been a marginal increase in market interest, particularly with longer-dated options, leading to an elevation of the entire term structure. This trend is particularly prominent for BTC. The rise in IV can be attributed to the news surrounding the potential U.S. Bitcoin ETF filing by BlackRock, which has ignited a bullish sentiment among traders. Overall, this development indicates a positive shift in market sentiment. The realized volatility (RV) for near-term expirations is notably higher. This increase in volatility can be attributed to the recent price spike in BTC, which has led to heightened market volatility. Near-term options are more sensitive to immediate market events, introducing a greater level of uncertainty and expectations for volatility.
Observing the comparison between Deribit's 7-day IV and realized volatility (RV), the IV for ETH continues to underestimate the RV. This suggests that the volatility risk premium (VRP) for ETH may be relatively cheap. Traders might be mispricing the volatility of ETH and neglecting downside hedging strategies.
The skew of BTC options (P-C), represented by the difference between the prices of put and call options, remains negative, indicating a preference for call options among traders. This negative skew implies that traders are willing to pay higher prices for calls, signaling a bullish outlook on BTC and an anticipation of further positive price movements in the coming week. Conversely, the positive sentiment observed for BTC does not extend to ETH, as the skew for ETH options remains positive.
Examining the VRP, it is notable that traders are willing to pay higher premiums in order to participate in potential upside movements in BTC. On the other hand, the VRP for ETH has been negative, and the IV continues to underestimate the RV over the past week.
Within the options market, there has been significant focus on 30 June Call Spreads across various strikes. These structures have been rapidly traded through Paradigm order books through Request for Quote (RFQ). Traders are positioning themselves for upside potential and taking into account the upcoming 30 June expiry. The top traded structures reported by @paradigm include the 1,956x 30 Jun 23 $33K/$36K BTC Call Spread and the 799x 30 Jun 23 $33K/$35K BTC Call Spread, both for BTC. Furthermore, there has been a notable outright buyer of ETH upside with a purchase of 6,000x 28-Jul-23 1900 Call.
Lastly, the VIX increased to 14.19%.
Crypto Technical Analysis
Shifting our attention to technical analysis, we observe that on the daily chart of BTC, it is currently testing the resistance level of 27K, which corresponds to its range-quarter. Simultaneously, BTC is attempting to surpass the descending trendline that has been in place since mid-April. During that time, BTC was unable to surpass the upper boundary of the range, resulting in a pattern of lower highs and lower lows. In order for a bullish scenario to materialize, BTC must successfully breach both the range-quarter and the descending trendline. However, if BTC fails to do so and experiences rejection at these critical levels, it could revisit the range-mids of 22K.
On the flip side, when examining the daily chart of ETH, we observe that it has displayed strong resilience above the 1.72K level, acting as a reliable support level. This support was established after ETH managed to recover above it following a significant drop below it last week. Should ETH sustain its short-term upward recovery, the next potential obstacle to watch for would be the quarterly open level of 1.82K. Additionally, on the 4-hourly chart, we can see that ETH deviated back into the narrower range it has been trading within since the initial downward movement on June 10, 2023. It is highly probable that ETH will continue to remain within this tight range, and any noteworthy volatility will result in ETH breaking out of this range, subsequently determining its future trajectory.
Access institutional-grade commentary on TradFi × Crypto markets
By Treehouse Research
Treehouse Research 🌳