SEC Serves Paxos A Wells Notice, Ordered By NYDFS To Stop Minting $BUSD; Kazuo Ueda’s Nomination For BOJ Top Job Sparks Volatility In JPY

14 Feb 2023, Tuesday

2:52 AM

SEC Serves Paxos A Wells Notice, Ordered By NYDFS To Stop Minting $BUSD; Kazuo Ueda’s Nomination For BOJ Top Job Sparks Volatility In JPY

BTC

ETH

S&P Futures 500

$21,750.50

$1,502.25

$4,145.50

(-0.37%)

 (-1.16%)

(+1.37%)

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

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Our Daily View

What We Are Covering Today

  • Bank of Japan is set to announce its top job and Kazuo Ueda's nomination has sparked expectations for a tighter monetary policy this year, triggering higher volatility in JPY (more in Macro & TradFi)
  • Paxos stops minting $BUSD amidst the potential lawsuit; Greyscale’s GBTC discount widens to near all time high (more in DeFi & CeFi)
  • BUSD depegged slightly as whales and sharks move their BUSD out of their wallets (more in On-Chain)
  • Front-end of the curve bid up for both BTC & ETH (more in Crypto Derivatives)
  • BTC and ETH consolidate in tight range ahead of CPI (more in Crypto Technical Analysis)

Macro & TradFi

US Secretary of State Antony Blinken is considering a face-to-face meeting with China's top diplomat Wang Yi at a security conference later this week, despite all the balloon fiasco since early February. The Bank of Japan is set to announce its top job and Kazuo Ueda's nomination has sparked expectations for a tighter monetary policy this year, triggering higher volatility in JPY against major currencies. Asian stocks are expected to rise, following a rally on Wall Street and Blinken’s China visit news. The US financial regulators are increasingly closing key doors to the crypto industry, which could push the industry to the fringes of finance. The world is still trying to revive local economies and lure employees back into offices after the pandemic. The US is using $439,000 missiles to shoot down UFOs. Treasury 10-year yields are down 17 basis points year-to-date, but bond traders are betting on further disinflation.

US markets bounced higher overnight; NASDAQ added 1.66%, SPX 1.23% and DOW 1.09%. US Treasury bonds rallied with 10-year yields trading 5bps tighter. Chinese stocks pre-empted the Wall Street rally yesterday as the large-cap China A50 stocks rallied 2% after falling 0.5% first, driven by both liquidity data and news that Blinken might still visit China despite balloon incidents. Futures of Chinese onshore and Hong Kong indices are indicating higher open.

US markets closed on a weak footing again last Friday; NASDAQ sold off 0.83% while SPX & DOW better held off. Bonds were down as well; 10-year treasury yields traded 8bps wider to close around 3.75%. Oil traded more than 2.5% higher.

DeFi & CeFi

  • EU banks may need to assign the highest risk weight to all crypto holding under the newly drafted law
  • Paxos stops minting $BUSD while Binance publicly states that it will continue to support the stablecoin in the near future
  • QuasarFi, a Cosmos based asset management protocol, launched on public testnet
  • Dsquared, an Arbitrum based DeFi option vault, have its public token sales on February 15th
  • GBTC discount continues to widen and is reaching all-time high

Following the regulatory security around cryptocurrencies in the US, the New York Department of Financial Services (NYDFS) is intending to sue Paxos over its flagship Binance branded stablecoin $BUSD and its potential to be recognized as an “unregistered security”. In addition, NYDFS has ordered Paxos to stop minting $BUSD until further notice while redemptions are being kept smooth. Despite the regulatory scrutiny, Binance has announced that BUSD will continue to be supported by the exchange in the foreseeable future but product offerings may change based on how the situation evolves (e.g. remove certain BUSD trading pairs from the exchange).

On the other hand, Greyscale’s GBTC shares continue to have larger discounts to its NAV since the report last week that the Digital Currency Group (DCG) started to sell its holdings at a steep discount. Currently trading at a 47% discount to the NAV, the spread is the widest since December and is soon approaching the record high of 49%. Sheraz Ahmed, Managing Partner at Storm Partners, has also commented that the Bitcoin price rally in the last month and the increased regulations have also contributed to the decoupling between GBTC and BTC prices.

On-Chain

For on-chain, BUSD's value slightly de-pegged from $1 as traders moved their stablecoins away. Large BTC holders have been moving their coins out of wallets with 1,000 to 10,000,000 BUSD, causing a drop in BUSD addresses. Binance's native token, BNB, is heavily shorted and experiencing negative sentiment, likely due to the BUSD lawsuit.

Elsewhere, outflow from exchanges continues for ETH as ETH supply on exchanges has fallen by 30% since the Merge. However, the ETH price remains rangebound during this period.

Crypto Derivatives

  • BTC and ETH funding rates remain positive
  • 30-day ATM IV rose to 47.03% and 62.41% for BTC and ETH respectively
  • 30-day 25d call skew fell to -2.53% and -4.66% for BTC and ETH respectively

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

27.37%

XRP

OKX

BYBIT

26.96%

SOL

OKX

BYBIT

7.39

ETH

dYdX

BYBIT

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 in the past 24H amounted to $109.62M, majority coming from longs at $83.71M.

On the options front, IV rose across the curve as term structure flattens for both BTC & ETH. Front-end of the curve is bid up ahead of CPI though IVs dropped lower in Feb. RV breaks its fall, rising slightly to 35.72 for BTC and 51.71 for ETH. Variance risk premium jumped to 14.73% for BTC and to 15.2% for ETH.

On the flow front, the volume comes mainly from long-dated options expiring on 29 September or BTC at a price of $60,000. On both the BTC & ETH side, the most popular strategy is the bull diagonal spread (Calls), with a notional of 88.49M & $55.19M over the past 24H, as traders look to capture the next leg up.

Lastly, the VIX held steady at 20.34.

Crypto Technical Analysis

Onto TA, BTC continues to trade between a tight range of $21.5K-$22K ahead of CPI. Daily and 4H RSI remain below the neutral level. The price levels to keep an eye out for when BTC breaks out of the $21.5K-$22K range are either the $20.7K support level for the bears or the $22.5K-$22.8K resistance zone for the bulls.

As for ETH, price fell lower, hitting the $1,450-$1,475 support zone before recovering to the $1,500 support level. The H4 RSI briefly dipped into the oversold territory before rising back up to 40 while daily RSI remains slightly bearish around 44. The next support level to be on the lookout for could be $1,350 if ETH manages to break through the $1,450-$1,475 support zone.

Daily Readings

TradFi

Crypto

Deal Flow

Yours sincerely,
Treehouse Research 🌳