Swiss Regulators Will Support Troubled Credit Suisse If Necessary; OpenAI Announces New and More Capable AI Technology, GPT-4

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.

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

Our Daily View

What We Are Covering Today

• Swiss regulator provides liquidity facility to the troubled Credit Suisse; OpenAI releases GPT-4 (more in Macro & TradFi)
• Lido V2 upgrade scheduled in mid-May; European Data Act bill sparks controversy over “kill switch” provision in smart contracts (more in DeFi & CeFi)
• Miners and exchanges continue to see net outflow of BTC (more in On-Chain)
• Variance risk premium goes more negative as RV continues to climb (more in Crypto Derivatives)
• BTC and ETH prices fail to bounce back from the previous resistance level (more in Crypto Technical Analysis)

Macro & TradFi

Swiss regulators have announced that they would provide liquidity to the group if necessary in response to recent troubles at Credit Suisse. Before the regulator's announcement, Credit Suisse's shares had slid 24% to a new low, and prices on its bonds had fallen to distressed levels, indicating that investors were pricing in the possibility of default. This comes after the Chairman of Saudi National Bank, Credit Suisse’s largest shareholder, refused to devote more capital to the bank. The Swiss National Bank and Finma have said that Credit Suisse “meets the higher capital and liquidity requirements applicable to systemically important banks.” Credit Suisse's selloff had quickly spread to the broader European banking sector, sparking a furious and destabilizing rush toward the safety of government bonds.

Meanwhile, investors are increasingly betting that the US Federal Reserve will cut interest rates due to mounting concerns about bank stability. Bond traders are pricing in a drop of over 100 basis points in the central bank's policy rate by the end of the year, and government debt yields have plunged as investors seek havens. The expected peak for the Fed policy rate has fallen to under 4.70%, and there is less than a one-in-two chance of a single quarter-point hike at next week's policy meeting.

On the other hand, OpenAI has also announced a new version of its artificial intelligence technology, called GPT-4, which is more capable than its predecessor GPT-3.5, offering better reliability, creativity, and handling of nuanced instructions. Among the new features that the new model will offer is the ability to understand images. GPT-4 also has a "better memory" and can process up to 25,000 words, and it passes a simulated bar exam with a score around the top 10% of test takers.

Lastly, major indices closed slightly lower yesterday with DJIA and SPX ending the trading session with -0.87% and -0.70% drop respectively. The NASDAQ saw a slight uptick of 0.05%. Treasury yield has also ended higher with 2-year and 10-year treasury note sitting at 3.982% and 3.498% respectively.

DeFi & CeFi

• Uniswap V3 goes live on BNB Chain
• AI-related crypto tokens rally following GPT-4 release
• MEV rewards on Ethereum hits all-time high during SVB collapse and USDC depeg
• Euler Finance to offer $1M bounty on its exploiter
• Cathie Wood’s Ark Invest raises $16.3M for new private crypto fund
• DeFi fund MEV Capital to provide IL hedging for Uniswap liquidity providers
• Lido v2 upgrade to go live on Ethereum mainnet in mid-May
• Metamask announces new features to enhance user privacy and control
• Cosmos Hub undergoes Lambda upgrade, introduces first iteration of replicated security to safeguard Cosmos ecosystem
• European new Data Act requires smarts contracts to be alterable and includes “kill switch” function
• Stablecoin issuer CNHC raises $10M in Series A+ funding round led by KuCoin Ventures
• Crypto wallet infrastructure Capsule closes new funding round co-led by a16z and Geometry
• Starknet launches decentralized governance with new protocol upgrade as its first vote

Lido has announced that its V2 upgrade will be launched on the Goerli testnet on March 20, with a mainnet upgrade expected in mid-May after a four-week test period. The Lido community approved the upgrade with a 100% approval rate, and the V2 smart contracts are undergoing seven audits, with two completed and five in progress.

Next, the European Parliament has approved the Data Act, which aims to promote innovation by removing barriers to access industrial data, but its provisions on smart contracts have caused concern among experts, particularly the "kill switch" function that allows for the safe termination or interruption of the contract.

Lastly, following the release of GPT-4 from OpenAI, several AI projects, such as The Graph, SingularityNET, Render Token, Fetch.ai, and Oasis Network, have seen their tokens skyrocket in value after the news. Elon Musk has also seemingly changed his focus from meme coins to the AI hype, posting two tweets on the subject.

On-Chain

The Yearly Absorption Rates for Bitcoin miners show a net distributive force, where the balance declines by 1.05 to 1.1 BTC for every 1.0 BTC mined, indicating a gradual expenditure of the accumulated balance among miners over time. Of note is the 2020-22 cycle when miners absorbed slightly more Bitcoin than was mined, which is linked to the emergence of publicly traded mining companies with access to capital markets (@glassnode).

Since the peak of the 2018 bull market mania, the exchange yearly absorption rate has trended lower and the 2020 Covid-19 sell-off marks an inflection point where there has been a structural change in the regime of net exchange outflow. This outflow of BTC from exchanges could be seen as liquidity being removed and could add to price volatility (@glassnode).

Crypto Derivatives

• BTC and ETH funding rates remain positive; funding rate for ETH returns to 0.01%
• 30-day ATM IVs remain relatively constant at 60.78% and 59.43% for BTC and ETH respectively
• 30-day 25 delta put skew tightened to -2.73% for ETH while BTC flips to call skew at 0.08%

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

For futures, total liquidations over the past 24 hours amount to $214.25M with the majority coming from longs at $149.37M.

On the options front, term structure remains in backwardation but shows signs of flattening as the near-term IV continues to fall while mid to long-term IV remains flat. In terms of skew, BTC mid to long-term maturities all flipped to call premium. Variance risk premium turns more negative and currently sits at -15.62% for BTC and -16.7% for ETH as 7-day RV continues to climb and even exceeds 85% for BTC. BTC put-call open interest ratio continues to climb from 0.50 to 0.55 this week and might be a sign of traders looking to hedge their BTC exposure.

On the flow side, there seemed to be an institution that seemed very bullish on BTC by buying 3K contracts of 26 May 32K/38K bull call spread (@tradeparadigm). Across the expiries, only the 17 March option expiring at the end of this week has a higher open interest in puts than calls and is also reflected in today’s volume. Looking at volume by strike price, far OTM calls at 32K strike price is the most popular while for puts, traders seemed to be using it as a hedge with a closer strike price of 22K.

Lastly, the VIX rose to 26.14 as Credit Suisse reignites fear of a banking crisis.

Crypto Technical Analysis

Onto TA, the narrative for BTC price movement has stayed the same. After being rejected at the upper trend line, price has failed to bounce back but rather continues to be traded lower. RSI has also dipped further to 60.0 and 60.6 respectively for 4H and 1D. If the price continues to move lower, the next support zone can be observed at the $23.65K level before moving into the stronger daily support at $20.85K. However, if a reversal was to happen, BTC will retest the $25K resistance which also serves as an important psychological threshold.

As for ETH, price has also fallen below the prior resistance zone. However, price has not fallen below the previous resistance zone and the 23.6% level of the Fibonacci retracement. Instead, we have seen a slight bounce back at the 38.2% level of the Fibonacci retracement. RSI has fallen slightly and is currently sitting at 53.5 and 55.6 respectively for 4H and 1D. If the bullish rally continues, the next resistance could be observed at $1.68K before going into the $1.77K at the daily level. However, if the bears continue to take control, the next support zone could be seen at $1.54K - $1.56K.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• U.S. banks' CDS prices surge as contagion concern widens

• Bank of England in emergency talks as Credit Suisse crisis deepens - Telegraph

• ECB rate hike plans clouded by financial turmoil

• Nasdaq tells Yandex, other Russian firms of plan to delist stocks

• JPMorgan cranks up equities "underweight" after market rout

• Wall Street down as Credit Suisse sparks fresh bank selloff

• Swiss central bank throws financial lifeline to Credit Suisse after shares pummelled

• Oil slumps nearly 5% to lowest in more than a year as banking fears mount

• UK abolishes tax threshold on pension allowance to encourage people to work longer

• U.S. producer prices unexpectedly fall in February

• UK economy forecast to contract by 0.2% in 2023

• India's February exports rise despite global weakness

• BOJ debated feasibility of tweaking yield control in January, minutes show

Crypto

• Art Trading Platform LiveArt Announces NFT Membership Card Linked to Exclusive Drops.

• U.S. Federal Reserve’s Real-Time Payments System Coming In July.

• Salesforce Taps Into NFTs Through Suite of New Web3 Products.

• Starknet DAO Heads Toward First Governance Vote.

• SEC Chairman Gensler Suggests Again That Proof-of-Stake Tokens Are Securities: Report.

• Chinese Businessman With Ties to Steve Bannon Arrested, Charged With Fraud, Including $500M Crypto Scam.

• Brian Brooks: U.S. Government Using Crisis to Choke Off Crypto Access to Banks.

• Helium's HNT Crypto Token Slides to 2-Month Low After Binance.US Delisting Announcement.

• Ribbon Finance’s Native Token RBN Surges 19% Amid Options Platform Release.

• Uniswap Version 3 Goes Live on BNB Chain.

• What Is Cross River Bank, USDC Stablecoin Issuer Circle’s New Partner?.

• UK to Add Crypto Declaration in Tax Forms.

• OpenAI co-founder’s 'World ID' project launches, along with SDK waitlist.

• Europol seizes $46M from crypto mixer after $2.88B allegedly laundered.

• Fidelity Crypto quietly went live, giving millions of retail customers access to bitcoin, ether

• DeFi Lending Protocol Sturdy Finance's $STRDY Airdrop Available to Claim

Deal Flow

• Ark raises $16.3 million for new crypto fund amid buying spree

• Stablecoin issuer CNHC raises $10 million in funding led by KuCoin Ventures

• Cathie Wood’s Ark Raises $16.3M for New Private Crypto Fund.

• DeFi Exchange mStable Mulls Over Acquisition, Merger Offers.

Yours sincerely,
Treehouse Research 🌳