Strong US Employment Data Drives Stock Market Rally and Gold Prices; Binance Halts BTC Withdrawals

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Our Daily View

What We Are Covering Today

• US employment rate exceeds expectations; S&P 500 rallies, and Gold nears record highs (more in Macro & TradFi)
• Gate.io lists $ORDI; Voyager Digital announces to wind down operation with a 36% recovery rate (more in DeFi & CeFi)
• Binance halts BTC withdrawals twice as pending transactions surge to 480K; BTC mean fee skyrockets amidst BRC-20 frenzy (more in On-Chain)
• Kink in ETH near-term IV; ETH put-call open ratio recovers to 0.39 (more in Crypto Derivatives)
• BTC and ETH 4-hourly charts displaying patterns of accumulation and uptrend respectively (more in Crypto Technical Analysis)

Macro & TradFi

Last Friday, the US employment rate came in at a robust 3.4%, beating the market consensus of 3.6%. The non-farm payrolls report also revealed the addition of 253,000 jobs in April, surpassing the expected 180,000. The strong job growth demonstrates the resilience of the US economy, even as the Federal Reserve hints at a pause in its interest rate hike cycle. The better-than-anticipated US jobs data spurred speculation that the Federal Reserve might need to increase interest rates to curb inflation.

Amidst the US banking crisis, gold prices have surged close to their all-time high. The ongoing crisis has prompted regional US bank PacWest to consider a potential sale of its assets, liabilities and operations for its survival, which in turn, drove gold futures trading on the Comex exchange to match the record high of $2,072 on Thursday. Spot gold prices also approached their all-time high of $2,072.49, as reported by Refinitiv, before retreating slightly to $2,008 on Friday.

US financial markets experienced notable movements on Friday, with the S&P 500 rising by 1.23%, the DJIA gaining 1.28%, and the Nasdaq Composite advancing by 1.32%. The two-year Treasury yield, which is closely tied to interest rate expectations, experienced a significant increase. It surged to session highs and finished the day up by 0.15 percentage points at 3.94%.

DeFi & CeFi

• Gate.io become the first CEX to list BRC-20 token
• 11 game developers are launching their project on Sui from May 15th
• Shell protocol announces tokenomics with 40M $Shell to be used for airdrop
• Voyager liquidating its assets after failing to sell to Binance or FTX, resulting a 36% recovery rate for its customers
• Ethereum foundation transferred 15K ETH to Kraken
• Binance lists FLOKI and PEPE in the Innovation Zone

Following the significant hype around BTC Ordinals and the new BRC-20 standard, which allows the Bitcoin network users to mint and send fungible tokens via the Ordinals protocol, a new narrative has emerged regarding BTC-related tokens as the network surged in transactions and gas fees. Gate.io as a result, announced that it will be the first centralized exchange to list the original $ORDI token created by the Twitter account @domo and started the BRC-20 narrative. This serves as the first indication that the BRC-20 standard is getting the attention of major players in the space.

Meanwhile, the bankrupted crypto lender Voyager Digital Ltd recently announced on Friday that the company has decided to liquidate all of its assets to wind down its entire operations. This decision comes after two failed attempts to sell its remaining assets to Binance US and FTX. According to the filing, Voyager customers will receive an initial recovery rate of 36% of their holdings, significantly lower than the initial estimate of 72% had the deal gone through. However, this rate may rise if Alameda Research is able to claw back the $446M from Voyager’s estate fails.

On-Chain

On the on-chain front, data reveals that Binance has experienced its largest-ever withdrawal. Specifically, over 162,000 BTC, valued at more than $4.6B, havebeen withdrawn from the exchange’s cold wallet. However, there is currently a lack of concrete evidence to support claims made by certain users suggesting that the outflow was merely a transfer to another hot wallet. On the same note, Binance temporarily halted all BTC withdrawals for the second time within a span of 24 hours, citing network congestion issues. This coincides with the mempool currently facing more than 480K unconfirmed transactions.

Meanwhile, the average fee on the BTC network (7-day MA) has surged to a 21-month high of $8.78, showing a significant increase of nearly 400% since late April. At the same time, the percentage of Bitcoin miner's revenue derived from transaction fees has matched the levels witnessed during the booming 2021 bull market, reaching 31.78%. Coinciding with the rise of memecoins, the crypto world has been captivated by the latest sensation, Bitcoin's BRC-20 token standard. This standard has facilitated the creation of over 14,000 distinct tokens, with a combined market cap of $547M as of the time of writing.

Crypto Derivatives

• BTC and ETH funding rates remain positive
• 30-day ATM IV remain relatively unchanged with BTC and ETH at 48.27% and 49.12%
• 30-day 25-delta skew fell to 1.67% for BTC and flips to put premium for ETH at -0.38%

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

The futures market saw $351.60M in liquidation over the past 72 hours with the majority coming from longs at $192.39M.

Term structure for both majors remains in contango. For ETH, there is a slight kink in the near-term IV as IV recovers from the post-FOMC IV crunch. The variance risk premium remains positive at 5.45% and 5.63% for BTC and ETH respectively. The put-call open ratio fell from 0.48 to 0.45 for BTC after the end-of-week options expired. On the other hand for ETH, the ratio fell to 0.36 after the options expired before recovering to 0.39 over the weekends.

On the flow side, large capital was focused on BTC contracts at the end of September. Upon closer examination, the large volume of BTC 29 Sept 30K/40K seemed to be part of a bull call spread strategy.

Some noteworthy trades on Friday include the 449 BTC contracts of 12 May 28K/31K strangle being sold and another 350 BTC contracts of 19 May 28K/31K strangle being sold (@tradeparadigm).

Lastly, as a result of the positive sentiment in the equities market, VIX has plummeted to 17.19%.

Crypto Technical Analysis

On the 4-hour timeframe, BTC is showing a significant accumulation/distribution area between $27.1K and $29.9K that has been forming since mid-April. This indicates strong buying or selling pressure at these levels, and the chart is displaying a symmetrical triangle pattern. The BTC price range is currently coiling up into a narrow range of $28.6K to $29.8K, suggesting that a major breakout of this price range may occur by the end of the week.

Based on the higher lows acting as the supporting trendline, a potential long position may be considered at the $28.5K level. However, if the price falls below $28.0K, it would invalidate this uptrend and a stop could be seen just below $27.7K. In this scenario, the price may fall back to retest the $27.2K level at the bottom of the accumulation area at $27.1K. This presents an upside target of 5.64% and a downside of 2.31%, with a risk/reward ratio of 2.45.

As for ETH, the 4-hour chart shows a clear uptrend has been observed since the bottom at $1.37K, as indicated by the higher lows at $1.68K, $1.76K, $1.78K, and $1.80K. Currently, ETH has been trading within the accumulation/distribution area between $1.84K to $1.95K, with price spikes above $1.95K unable to hold up and falling back to the same area. However, if the price falls below $1.8K, the uptrend would be invalidated as the local high becomes the peak, potentially indicating the start of a reversal pattern.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• Gold set for weekly gain on bets of Fed pause

• Albemarle open to renegotiating Chile lithium contract early

• Oil heads for third straight weekly loss as economic worries persist

• Exclusive: UBS weighs options for sale of Credit Suisse's Swiss unit

• Air France-KLM in talks with Apollo for $550 mln cash injection

• Ecuador frees cash for Galapagos conservation with $1.6 bln bond repurchase

• Apple iPhone sales inch up, bolstering results amid shaky economy

• Lyft shares tumble as cheaper rides to hurt second-quarter margin

• Fed data shows failed bank First Republic was key central bank borrower

• Shares rise, dollar weakens on bank sector fears

Crypto

• Israel Has Seized 190 Binance Accounts With Alleged Terrorist Ties Since 2021: Reuters.

• First Mover Asia: CBDCs Are the Hottest Issue in Florida Politics; Bitcoin Falls Slightly.

• 3% Tax on Crypto Transfers Part of Kenya's Proposed Budget: Bloomberg.

• Bitcoin Holds Near $29K as Investors Weigh Rate Increases, Banking Contagion.

• Wrapping Up Consensus 2023.

• Bitcoin’s Frenzy of Activity Pushes Average Transaction Fee Over $7, Nearly 2-Year High.

• Decentralized Exchange SushiSwap Rolls Out V3 Liquidity Pool on 13 Chains.

• Block’s Q1 Bitcoin Revenue Rises 18% From Q4, Gains 25% From a Year Ago.

• Coinbase Shares Rise as Q1 Revenue Grows 23% to $773M From Q4.

• SEC has 10 days to respond to Coinbase complaint: Legal exec.

Yours sincerely,
Treehouse Research 🌳