🌳The Biden Administration Restricts Chinese Tech Investments; Top Venture Firms Face A Lawsuit Over The FTX Fraud Case

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• U.S. restricts tech investments in China; UN seeks larger role in global taxation. (more in Macro & TradFi)
• Leading venture capital firms face lawsuit over FTX ties; Aptos partners with Microsoft on Web3. (more in DeFi & CeFi)
• Bitcoin sees profit-taking surge; Ethereum's top addresses consolidate significant holdings. (more in On-Chain)
• C-P skew for both BTC and ETH experiences substantial upticks, with ETH emerging from its month-long negative zone. (more in Crypto Derivatives)
• BTC successfully breaches previous resistance, while ETH maintains its position within a downward-sloping channel. (more in Crypto Technical Analysis)

Macro & TradFi

The Biden administration has announced a ban on specific U.S. investments in Chinese technology sectors, including quantum computing, advanced chips, and artificial intelligence, to prevent China's military from accessing American technology and capital. This directive, set to take effect next year, mandates companies to report investments in these Chinese sectors. Primarily, this policy impacts private equity, venture capital firms, and U.S. investors partnering with Chinese companies. President Biden highlighted the national security risks stemming from technological advancements in these sectors, pointing to the potential development of sophisticated weapons and threats to cryptographic codes used by intelligence agencies. This move is part of a broader series of actions aimed at limiting China's access to cutting-edge technology, a strategy described by national security adviser Jake Sullivan as the “small yard, high fence.” While Beijing views these actions as an impediment to its tech progression, U.S. officials emphasize their intention to safeguard American interests and maintain a commitment to open investment.

In other news, the United Nations Secretary-General, António Guterres, has advocated for a more prominent role for the UN in shaping global tax policies, potentially challenging the Paris-based Organisation for Economic Co-operation and Development, a long-standing leader in this domain. This development arises from concerns voiced by developing nations that the OECD's 2021 tax deal, primarily designed for its affluent member states, may disadvantage emerging economies. While the preliminary UN report supports these concerns, it also acknowledges the OECD's outreach efforts. The Secretary-General proposes three strategies to enhance the UN's influence, which member nations will discuss in the upcoming UN assembly session in September.

Yesterday, the Dow Jones Industrial Average was down by 0.54%, the S&P 500 was down by 0.70%, and the Nasdaq Composite dipped by 1.17%. Moody's recent downgrade of several midsized US lenders prompted a decline in US bank stocks, with the KBW Bank index dropping 1.7%. Nvidia, a semiconductor group, stood out with a 4.7% dip, positioning it as one of the S&P 500's most significant decliners. Meanwhile, traders anticipate the forthcoming US inflation data, scheduled for release on Thursday. Projections suggest a rise in consumer prices to 3.3% year on year for July, an increase from 3% in June.

DeFi & CeFi

• VC firms face class action amid allegations of abetting FTX fraud
• Aptos Labs partners with Microsoft
• Coinbase's Base mainnet officially opens to the general public
• The Fantom DEX SpiritSwap announced the end of its operations due to the Multichain incident
• US prosecutors to issue superseding indictment against Sam Bankman-Fried next week
• Bitstamp to halt U.S. trading of seven tokens identified as securities by SEC

Eighteen leading venture capital firms, including Temasek, Sequoia Capital, Sino Global, and Softbank, face a class action lawsuit filed in Miami due to their associations with the now-defunct cryptocurrency exchange, FTX. The lawsuit, filed on August 7th, alleges that these firms actively aided and abetted FTX in its fraudulent activities, leveraging their resources and influence to bolster FTX's growth into a multi-billion dollar entity. The suit further claims that FTX violated various securities laws and misappropriated customer funds, while firms like Temasek portrayed a misleading image of the exchange, suggesting thorough due diligence on their part.

Aptos Labs announced a partnership with Microsoft to advance Web3 capabilities, focusing on asset tokenization, payments, and Central Bank Digital Currencies. As part of this collaboration, Aptos Labs introduced the Aptos Assistant, a Web3 onboarding tool powered by Microsoft’s Azure OpenAI Service, designed to facilitate the transition from web2 to web3 for users and organizations. This partnership aims to make artificial intelligence and blockchain technology more accessible, merging two transformative technologies. Following the announcement, Aptos' APT token surged by over 17% despite the soon-to-be unlocked 2% of APT's circulating supply on August 11.

On-Chain

According to data from @Santiment, Bitcoin has witnessed a significant surge in profit-taking activities, with sellers outpacing buyers at a ratio of over 2:1. This level of profit realization is the most pronounced we've observed in over three weeks. Alongside this trend, BTC addresses have consistently demonstrated strength, with an average appreciation of more than 20% over the past year, underscoring the resilience and growth potential of the asset.

Elsewhere, Ethereum's top 10 addresses have been actively consolidating their holdings. Over the past five years, these addresses have increased their ownership from 11.2% to 34.6% of the total ETH supply, accumulating an additional 27.86M ETH valued at approximately $51.6B, showing the convictions of the Ethereum whales despite the bear market conditions.

Crypto Derivatives

• BTC and ETH funding rates remain positive.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH remain unchanged at 38.63% and 34.41%, respectively.
• 30-day 25-delta skew (C-P) for BTC rose to 3.87% while that of ETH flipped positive at 0.31%.
• The futures market witnessed $54.06M worth of liquidations in the last 24 hours with longs representing 60.36% of the total.

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

In the last two days, BTC's ATM IV has exhibited a swift and pronounced increase. Notably, the 7-day and 30-day IVs have surged to 33.19% and 34.98% respectively. This surge can be attributed to heightened market volatility, as investors engage in speculative activities in light of impending inflation data set to be released on Thursday.

The term structures for both BTC and ETH persist in a contango state. Although there have seen negligible changes in the curves for both cryptocurrencies in the past 24 hours, there has been a marginal downtick in IVs associated with near-dated ETH options.

The 7-day and 30-day (C-P) skews for both BTC and ETH, on the other hand, have demonstrated significant upward movement within the past 48 hours. Particularly noteworthy is ETH's distinct departure from its longstanding trend of negative C-P skew over the past month. This shift signifies a transformation in investor sentiment, with a newfound preference for calls over puts, aligning with a bullish outlook.

Trading flows according to @tradeparadigm confirm this phenomenon as traders are bidding for the upside volatilities in both BTC and ETH. Among the prominent trades, yesterday's highlights encompass the purchases of 1000x BTC 27-Oct-23 34000 Call (delta neutral), 700x BTC 29-Dec-23 38000 Call (delta neutral), and 4500x ETH 27-Oct-23 2300 Call. These transactions underscore burgeoning interest and optimistic sentiment for the latter half of the year.

Crypto Technical Analysis

Regarding technical analysis, BTC has adhered to the earlier assessment on the 4-hour chart, successfully breaching the upper trendline formed by the local lower highs in an upward movement. The RSI surged into overbought territory, reaching 73.4, subsequently prompting a price retracement towards the former trendline. This trendline, now functioning as a support level, also coincides with the 50% Fibonacci retracement zone. Assuming the bullish momentum sustains, the forthcoming resistance is anticipated within the range of $30.7K to $30.8K. These levels underwent testing on five occasions during the first half of July, presenting a potential upside of 3.6%.

Conversely, focusing on ETH, it has remained within the confines of the previously identified channel, lacking a definitive breakout signal despite following BTC's upward trajectory. The current price hovers in the vicinity of the upper boundary of the channel, approximately ranging between $1.85K and $1.86K. In the event of a divergence from BTC and a subsequent downward move, the immediate support continues to be the lower boundary of the channel, situated at around $1.79K. However, should it break free from the channel's constraints, the next notable resistance level emerges at approximately $1.92K, offering a potential gain of 3.6% from the current price.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• China's real estate market roiled by default fears again, as Country Garden spooks investors.

• China's uneven recovery may deepen demand worries for U.S. luxury goods makers

• Oil prices fall as China woes offset boost from high US fuel demand

• US SEC seeks to appeal Ripple Labs crypto decision

• Biden orders ban on certain U.S. tech investments in China

• Congresswoman Waters 'deeply concerned' about PayPal's stablecoin launch

• Rising bond yields emerge as pressure point for US stock rally

• London-listed IWG considers move to US exchange - CEO

• US reports big interest in $52 billion semiconductor chips funding

Crypto

• SEC Will Appeal XRP Ruling in Case Against Ripple, Regulator Says.

• Fireblocks Discloses ‘Zero Day’ Vulnerabilities Impacting Leading MPC Wallets.

• As Curve Averts DeFi Death Spiral, Fiasco Exposes Serious Risks.

• Coinbase Officially Launches Base Blockchain in Milestone for a Public Company.

• Russia to Test Digital Ruble With Banks, Clients.

• Maple Finance's Tokenized Treasuries Available to U.S. Investors After Securities Exemption.

• Aave’s Earning Farm protocol targeted by reentrancy attack — PeckShield.

• Another Fantom project winds down citing Multichain exposure.

• Fantom is exploring adding optimistic rollups to connect to Ethereum

• Aptos Labs Collaborates with Microsoft to Develop AI Blockchain Solutions

• Crypto Exchange Bitstamp to Suspend Trading for 7 Tokens in the US, Including $SOL, $MATIC, and $NEAR

• Temasek, Sequoia Capital, Softbank and 15 VCs Being Sued for "Assisting and Abetting" FTX

Deal Flow

• Web3 Security Startup Cube3.Ai Raised $8.2 Million, Led By Blockchange Ventures

• Bitdeer, B. Riley Financial enter into agreement for $150M share purchase.

Yours sincerely,
Treehouse Research 🌳