The Threat From Debt Default Looms As The Discussion Reaches No Results; Hong Kong SFC’s Regulations On Crypto Exchanges Will Take Effect From June 1st

24 May 2023, Wednesday

2:54 AM

The Threat From Debt Default Looms As The Discussion Reaches No Results; Hong Kong SFC’s Regulations On Crypto Exchanges Will Take Effect From June 1st



S&P Futures 500







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

  • US debt limit deadline looms with no progress; US economic data defies expectations, signals growth on the horizon (more in Macro & TradFi)
  • Ledger postpones Ledger Recover launch after backlash; Hong Kong to allow crypto exchanges to serve retail investors from June (more in DeFi & CeFi)
  • Bitcoin's low sell-side risk ratio and whales' increasing stablecoin holdings signal potential heightened market volatility and buying power (more in On-Chain)
  • Increased RV and IV for both ETH and BTC; high volume in OTM ETH calls expiring end-June (more in Crypto Derivatives)
  • ETH/BTC pair: Ethereum's strength signals potential upside (more in Crypto Technical Analysis)

Macro & TradFi

Debt ceiling talks between President Joe Biden's representatives and congressional Republicans have reached a stalemate as the deadline to raise the government's borrowing limit draws nearer. The parties remain divided on how to address the federal deficit, with Democrats advocating for increased taxes on wealthy individuals and businesses, while Republicans favor spending cuts. Despite holding discussions, no substantive progress has been made, and it remains uncertain when talks will resume.

Elsewhere, US new-home sales defied expectations, reaching their highest level since March 2022, while prices saw a decline. Data revealed a 4.1% increase in new single-family home purchases, with an annualized rate of 683,000, surpassing the median estimate of 665,000. In addition, US business activity experienced its strongest growth in over a year, driven by strong demand for services and an improved economic outlook. According to the S&P Global Flash May composite purchasing managers index, there was a 1.1-point increase to 54.5, marking the highest level since April of the previous year. Traders are eagerly anticipating the release of minutes from the recent FOMC meeting, scheduled for later on Wednesday, as they seek insights into whether the Fed will consider pausing interest rates at its upcoming June meeting.

Lastly, US stocks ended sharply lower on Tuesday while short-term yields shot up as investors' concerns grew over the lack of progress in US debt limit talks. The Dow Jones Industrial Average declined by 0.69%, the S&P 500 index slid by 1.12%, and the NASDAQ Composite index also declined by 1.26%. The two-year yield exhibited volatility, briefly surging to 4.40% during the US trading session before pulling back to 4.26% at the opening of Asian hours. In commodities, crude oil prices rose as U.S. oil and fuel supplies tightened, and short speculators were warned by the Saudi energy minister, raising the possibility of additional output cuts by OPEC+. This led to a 1.2% increase in WTI, reaching $73.79 per barrel. Meanwhile, gold futures remained relatively unchanged, adding 0.07% yesterday.

DeFi & CeFi

  • Ledger postpones the launch of Ledger Recover service
  • FTX CEO John Ray III’s billings reveal FTX 2.0 reboot plans
  • DEX WOO X responds to insolvency rumors with live balance sheet
  • Hong Kong to implement Virtual Assets Regulation in June
  • Zhu Su’s bankruptcy claims trading platform Open Exchange (OPNX) opens up to market
  • Bitcoin payments platform Strike announces integration of USDT
  • Solana integrates ChatGPT and raises AI grants fund to $10M
  • Coinbase Cloud’s MPC-based wallet solution launches on Ethereum

Ledger faced community backlash last week after announcing its new key-recovery service, Ledger Recover, criticizing the compromising of users’ wallet seed phrases. Ledger Recover is an opt-in service that allows users to store three encrypted shards of their seed phrases with three custodians, thus requiring a know-your-customer (KYC) verification. It aims to solve the problem of lost or forgotten seed phrases, but this recovery service will be at the expense of private keys leaving the Ledger hardware. Criticisms also included the fact that Ledger Recover’s code was not open-source. In response, Ledger has decided to delay the release of this new service, stating in a letter that it will only go live once it has completed accelerating its open-sourcing roadmap. This will include code for core components of the Ledger OS and Ledger Recover.

Meanwhile, Hong Kong continues to lay the foundations for crypto activity in the region. From 1 June, the Guidelines for Virtual Asset Trading Platform Operators will take effect, and the Hong Kong Securities and Futures Commission (SFC) will allow crypto trading platform operators to apply for licenses to serve retail investors. According to the SFC’s announcement, they received 152 submissions during the consultation period. However, crypto platforms will have to adhere to strict measures and regulations before approval. Failure to adhere to SFC standards will lead to a mandated orderly closure of operations in Hong Kong. The guidelines emphasize safe asset custody, segregation of client assets, and cybersecurity standards, among other considerations.


According to Twitter user @_Checkmatey_, the sell-side risk ratio for BTC, a key indicator of market risk appetite, is nearing historic lows. This suggests that BTC holders are currently reluctant to sell regardless of profit or loss.  Historically, this has been a precursor to large-scale price movements in the crypto market. Such a pattern often surfaces when selling pressure is exhausted from both profitable and unprofitable positions looking to hodl for a longer time horizon.

Despite consistent BTC holdings among sharks and whales, a notable shift is evident in their holdings of stablecoins. This implies an increasing buying power for future market activity. Specifically, investors with holdings in the $100K-$10M range have significantly increased their stake in stablecoins. Current data shows that 37% of USDC, 6% of BUSD, and 39% of DAI are held by these market participants. The uptick in stablecoin accumulation among large investors indicates the potential for a sizable influx of capital into the market in the near term.

Crypto Derivatives

  • BTC and ETH funding rates remain positive
  • 30-day BTC ATM IV slightly rose to 45.18% while ETH ATM IV rose to 45.65%
  • Deribit Implied Volatility Index (DVOL) is 50.07% and 50.62% for BTC and ETH respectively
  • 30-day 25-delta skew for ETH and BTC is positive at 0.78% and -1.55% 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













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

The futures market saw $50.53M in liquidation yesterday with 68.9% coming from shorts at $34.82M.

Looking at the BTC ATM IV term structure, the entire curve is in contango but has shifted up compared to yesterday: at the front end, there has been a 2-3% move upwards in volatility while at the back of the curve, there has only been a small increase of about 0.5%. Similarly, for the ETH, except for slight backwardation between the end-June and end-July contracts, the curve is in contango and has shifted up about 2-3% at the front and about 1% at the back. Moving onto 7-day implied volatility vs realized volatility, the level of volatility risk premium remains similar to yesterday as both IV and RV have increased slightly, possibly attributed to the small, yet sharp rally in BTC and ETH last night.

The 7-day 25-delta skew in BTC continues to rise in a stair step formation and was recently at 2.61% call premium, however, the current level is closer to 0.78%, indicating a slight call premium, but it is more neutral in terms of directional bias. During the rally in ETH last night, the 7-day skew rose from -3.08% (put premium) to 0.11% (almost neutral) and currently stands back at -1.51% (put premium). The relative difference in skew between ETH and BTC and the recent pronounced increase in ETH realized volatility continues to indicate that investors are keen on hedging more downside risk in ETH than BTC.

Over the last 24 hours, most ETH call volume entered contracts expiring 29 Sep. Looking more closely at the open interest of the strike prices for that expiry, the majority of call contracts are at the $1900 strike price, which is slightly out-of-money at this time, while max pain is at $1800. For puts, most of the volume entered contracts expiring in 2 days (26 May) and open interest in strikes was distributed quite evenly from $1200 to $1800.

Since yesterday, the top traded strategies for BTC have been long risk reversals (bullish but uncertain about volatility), bear diagonal spreads, and short straddles (expecting a contraction in volatility). For ETH, the top traded strategies have been bear call spreads, call calendars (bearish in the short-term but slightly bullish in the long-term) and short straddles. Some noteworthy trades recorded by @tradeparadigm were 7,500 $2100 outright calls expiring 30 Jun and 8,500 $2000 outright calls expiring 30 Jun for ETH. For BTC and the same expiry, there were 750 $31K and 500 $30K outright calls bought.

Lastly, the VIX rose slightly to 18.53.

Crypto Technical Analysis

Following up on our analysis from yesterday, ETH has displayed notable strength against BTC by breaking above the critical resistance level of 0.068 on the daily chart. This breakout confirms the bullish momentum and suggests that ETH may lead the way towards an upward trajectory for altcoin markets. Additionally, the 0.068 resistance has now turned into a support level, which should be closely observed for further trading decisions in the altcoin market. Caution should be exercised, as market participants may seek the safety of BTC in the event of any weakness in altcoins.

Shifting our attention to BTC, it has maintained its position above the crucial $26.6K support level, demonstrating a relatively stable performance in the past days as it continues to consolidate sideways within the range of $26.6K and $27.3K amid the weakness in the traditional markets. Traders remain cautious and are waiting for a clear bullish signal to enter a position on BTC. It is crucial to closely monitor the $26.6K support level, as a breach could trigger a swift downward move, potentially leading to a decline towards the $25K level. This scenario is further supported by the relatively low trading volume observed beneath the current support level.

Lastly, a bullish impulse candle has emerged on the 4-hourly chart for ETH, reflecting a significant 2.37% upward movement within the four-hour timeframe. This price action indicates a strong positive momentum for ETH and has resulted in a series of higher highs and higher lows. Traders should closely monitor this development, as it suggests a potential continuation of the upward trajectory, with the next resistance level identified at $1.98K. It is worth noting that downside supports can be observed at $1.8K and $1.73K, providing key reference points for potential price retracements.

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