Risk Assets Boosted By Inflation Data; HSBC and Deutsche Among Others Are Still Willing To Serve Crypto Firms

15 Mar 2023, Wednesday

2:58 AM

Risk Assets Boosted By Inflation Data; HSBC and Deutsche Among Others Are Still Willing To Serve Crypto Firms

BTC

ETH

S&P Futures 500

$24,759.50

$1,705.50

$3,917.00

(+2.01%)

 (+1.76%)

(+1.25%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

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February 2023 Market Recap

Our Daily View

What We Are Covering Today

  • US market reacts positively to the February CPI figures that are in line with expectations (more in Macro & TradFi)
  • Shanghai upgrade finalized on Goerli; some major banks remain open to crypto companies (more in DeFi & CeFi)
  • Bitcoin surges 22%, making 2.7M coins profitable, whales increase $1M+ transactions to a 4-month high (more in On-Chain)
  • BTC skew flips to call premium (more in Crypto Derivatives)
  • Technical shows potential fakeout in BTC and ETH (more in Crypto Technical Analysis)

Macro & TradFi

As per the February report from the US Bureau of Labor Statistics, inflation in February rose in line with expectations, with the consumer price index increasing by 0.4%, and the year-on-year rate reaching 6%, according to the Labor Department. Excluding food and energy prices, core CPI rose 0.5% in February and 5.5% annually. The inflation report is likely to keep the Federal Reserve on track for another interest rate hike next week, with markets expecting a 0.25 percentage point increase to its benchmark federal funds rate. The report showed that housing costs are a key driver of inflation figures, accounting for more than 60% of the total CPI increase.

Meanwhile, continuing with the fall of SVB, creditors of Silicon Valley Bank's parent company, SVB Financial Group, have formed an investor group in anticipation of a potential bankruptcy filing, hoping to profit from a sale of the collapsed firm's nonbank units. The investor group is being advised by PJT Partners and includes Centerbridge Partners, Davidson Kempner Capital Management, and Pimco, among others. The group wants SVB Financial to file for bankruptcy and then auction off its nonbank businesses through a court-supervised sale process. The parent company owns assets, including SVB Capital, SVB Securities, and SVB Private, that could have significant value. The bondholder group could profit if SVB Financial's assets fetch a high enough valuation in any such auction.

Lastly, largely driven by the within-expectation CPI figures, all major indices closed higher yesterday with DJIA, SPX, and NASDAQ gaining 1.06%, 1.65%, and 2.14% respectively. On the other hand, the yield on the 2-year treasury note has risen to 4.30% while 10-year treasury yield stayed relatively flat at 3.685%.

DeFi & CeFi

  • Shanghai upgrade is completed on Ethereum Goerli testnet, devs to meet on Thurs to finalize a date for mainnet upgrade
  • Unstoppable Domains announces the launch of .polygon domains
  • DCG claims that some major banks like HSBC, Deutsche among others are still willing to work with crypto companies
  • New York Department of Financial Services states that possession of Signature Bank had nothing to do with crypto
  • Cybersecurity firm Halborn identifies critical vulnerabilities in Dogecoin, Litecoin and Zcash blockchains
  • Filecoin Virtual Machine set to launch today
  • Meta to discontinue its NFT pursuits
  • Crypto platform Anchorage Digital to lay off 20% of its staff, according to Bloomberg

Firstly, the Shanghai upgrade for Ethereum was triggered on the Goerli testnet on March 14th, but it was only finalized 15 epochs later due to low network participation caused by some validators not upgrading on time. However, Ethereum core developer Tim Beiko expects the mainnet upgrade to have a smoother transition. A meeting will be held on Thursday to confirm the date for the mainnet upgrade after the successful testing on Goerli.

Several banks, including Santander, HSBC, Deutsche Bank, BankProv, Bridge Bank, Mercury, Multis, and Series Financial, are still open to working with crypto firms, according to messages exchanged by staff at Digital Currency Group (DCG). The crypto conglomerate is seeking new banking partners for its portfolio companies following the collapse of Silicon Valley Bank, Silvergate, and Signature Bank. However, banks may restrict some services, such as brokerage and money market services, and limit the ability to wire money to third parties. DCG also reached out to international banks, including Revolut, United Overseas Bank, and Bank Leumi, as well as BlackRock, JPMorgan, and Bank of America.

Lastly, Filecoin is set to launch its Filecoin Virtual Machine (FVM) upgrade, which introduces smart contracts and decentralized applications to its network. The upgrade brings user programmability to Filecoin, enabling developers to design decentralized applications, which will allow for more use cases such as perpetual storage and financial services for miners. The token, FIL, has rallied about 45% since the FVM upgrade was first announced last month.

On-Chain

The latest increase in Bitcoin's value, which has risen by 22%, has led to over 2.7 million coins becoming profitable. This suggests that approximately one-fifth of the adjusted circulating supply was obtained in the price range of $20,000 to $26,000. The upswing in the cryptocurrency's worth has brought substantial gains to investors who acquired their coins within this specific price bracket (@glassnode).

Bitcoin is experiencing a remarkable rebound, soaring past the $26.5k mark in response to positive Federal Reserve news regarding potential cuts in US interest rates. This bullish environment has encouraged whales to make an increased number of transactions involving over $1 million in Bitcoin. This level of high-value trading activity has not been seen in the last four months and comes as Bitcoin breaks through price highs that have been sustained for nine months (@santimentfeed).

Crypto Derivatives

  • BTC and ETH funding rates remain positive; ETH funding rate increases to 0.0296% on Binance
  • 30-day ATM IVs decreased to 59.94% and 61.33% for BTC and ETH respectively
  • 30-day 25 delta put skew eased to -1.03% and -3.32% for BTC and ETH respectively as BTC returns to put premium

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

31.05%

BTC

DYDX

OKX

19.40%

SOL

BINANCE

DYDX

18.09%

ETH

BYBIT

DYDX

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

For futures, total liquidations over the past 24 hours amount to $302.34M with the majority coming from shorts at $178.48M.

On the options front, term structure remains in backwardation as near-term IV decreased significantly. Skew flipped back into put premium for BTC for both 7-day and 30-day as the market as price began to retrace after hitting a peak of $26.5K. Variance risk premium turns negative for both BTC and ETH, sitting at -9.85% and -11.55% respectively as IV fell after the CPI print which came mostly in line with expectation while RV continues to climb. 7-day RV for BTC is 80.94% and ETH is 79.18%.

On the flow side, the main theme was profit-taking after the CPI print rally. For BTC, 1025 contracts of 28 Apr 26K calls were sold for profit while ETH saw the main profit-taking occur with the 10K contracts of 28 Apr 1.6K/2K call spreads. The most popular strategies are short risk reversal and bull diagonal call spread on BTC.

Lastly, the VIX fell to 23.73 as the market recovers from the recent banking turmoil.

Crypto Technical Analysis

Onto TA, BTC continued with the strong bullish momentum yesterday with price increased by another 2.24%. In the 4H timeframe, price has broken the $25K key resistance zone briefly before coming back from getting rejected at the upper bound trendline. RSI, on the other hand, stays elevated at 64.5 and 67.6 respectively for 1D and 4H. As BTC continues to test the $25K level, the next zone of resistance would be seen in the range of $31.15K and $31.60K, indicating a potential 25% upside. However, if a reversal is to happen, price is likely to drop to the $20.90K support zone first before testing the $18.7K - $19.0K support zone.

As for ETH, the analysis is largely the same as BTC with the potential fakeout. However, price has not fallen below the previous resistance zone. Instead, ETH stayed above it and rebounded from the previous resistance which sits directly at the 23.6% level of the Fibonacci retracement. RSI has fallen slightly back to the normal zone and is currently sitting at 62.1 and 66.1 respectively for 1D and 4H. If the bullish rally continues, the next resistance could be observed at $1.76K - $1.77K at the daily level where support could be seen at $1.42K - $1.44K.

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