🌳U.S. Inflation Rose Modestly Hinting At Steady Interest Rates; Circle Counters Declining Market Share With Bolstered Reserves

11 Aug 2023, Friday

3:19 AM

🌳U.S. Inflation Rose Modestly Hinting At Steady Interest Rates; Circle Counters Declining Market Share With Bolstered Reserves

BTC

ETH

S&P Futures 500

$29,451.75

$1,852.50

$4,495.50

(-0.51%)

 (-0.19%)

(-0.10%)

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

GM Treehouser 🌳

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July 2023 Market Recap

Our Daily View

What We Are Covering Today

  • U.S. inflation hints at steady rates; EU takes measured stance on China investments (more in Macro & TradFi)
  • Circle boosts reserves amid competition; Binance invests in Curve post-exploit, expanding reach (more in DeFi & CeFi)
  • Aptos sees surge in APT price and developer activities after Microsoft partnership; Total Value Bridged grows after Base unveils (more in On-Chain)
  • BTC's ATM IV has dropped after the inflation data announcement while ETH's bullish sentiment drives upward skews in 7-day and 30-day C-P ratios (more in Crypto Derivatives)
  • Both BTC and ETH's direction is uncertain within a range, while ETH's path is contingent on the potential upper boundary breakout (more in Crypto Technical Analysis)

Macro & TradFi

In July, U.S. headline inflation experienced a slight increase, rising from June's figures but at a lesser rate than anticipated, solidifying arguments for the Federal Reserve to maintain current interest rates in their upcoming September meeting. The Bureau of Labor Statistics indicated that the CPI rose 0.2% month on month, with the yearly rate advancing to 3.2%. This subtle elevation does not indicate a substantial inflation acceleration but reflects base effects from July 2022's soft data. Simultaneously, core inflation, which eliminates the inconsistent food and energy components, was 4.7% annually, decelerating from June and representing the lowest since October 2021. Market responses to the released data lean heavily towards the Fed retaining interest rates, with key insights suggesting the central bank's pause in rate hikes for the near future.

While the U.S. recently imposed investment bans on China's high-tech sectors due to significant national security concerns, the European Union has chosen a more restrained approach. Despite President Joe Biden's encouragement for global allies to adopt similar stances, the EU plans to introduce its unique proposal by year-end. Notably, European economies, especially Germany and France, exhibit deeper ties with China compared to the U.S., influencing their hesitation to immediately echo the U.S. actions. This decision aligns with the EU's ongoing strategy of "de-risking" investments rather than outright bans, balancing economic ties with China and addressing security concerns around key technologies.

Yesterday, the Dow Jones Industrial Average was down by 0.03%, the S&P 500 was down by 0.03%, and the Nasdaq Composite dipped by 0.12%. The US Treasury sold $23bn in long-dated bonds at a high yield of 4.189 per cent, slightly above market levels ahead of the bid deadline. Meanwhile, Asian equities climbed. In particular, stocks sensitive to consumer spending rose after China announced it would resume outbound group travel to a list of 78 countries.

DeFi & CeFi

  • Circle preps $1B war chest for increased stablecoin competition
  • Binance invests $5M in Curve token as hacker partially returns funds
  • Coinbase Ventures invests in Rocket Pool, $RPL
  • Huobi addresses stUSDT fund concerns
  • Binance Labs backs CRV; supports BNB Chain integration
  • Xverse secures $5M funding, led by Jump Crypto
  • Unibot debuts "Unibot Cloud" security feature
  • Russia's digital ruble pilot set for 15th August

Circle has established a $1 billion cash reserve to counteract its decreasing market capitalization and to address emerging competition from entities like PayPal in the stablecoin domain, as stated by CEO Jeremy Allaire. Despite reporting a revenue of $779 million for the first half of 2023, Circle's market share in the stablecoin sector has reduced from $45 billion at the beginning of 2023 to $26 million by mid-year. Factors influencing this decline include Binance's decision to shift support from USDC to its own token and various market events. Concurrently, Circle has introduced a wallet-as-a-service API to bolster its Web3 initiatives.

Binance Labs, the investment division of cryptocurrency exchange Binance, has allocated $5 million to Curve (CRV), the token of the decentralized stablecoin trading platform. This investment follows a July 30 exploit where Curve lost $73.5 million due to a vulnerability. The hacker later returned approximately 73% of the stolen assets, prompting Curve to offer a $1.85 million bounty for information on the hacker's identity. Binance's investment is tied to Curve's commitment to deploy on the BNB Smart Chain, further expanding its presence beyond its original Ethereum base.

On-Chain

In an analysis by @Santiment, following the announcement of Aptos' partnership with Microsoft to develop AI tools for blockchain integrations, Aptos’ Price and development activity has notably decoupled. While initial reactions displayed a significant fear of missing out among investors, sentiment has since stabilized. Nevertheless, the increasing trading volume and heightened development activity suggest a potential upcoming surge for Aptos.

According to Dune user @cs-research, post the 9th August unveiling of Base, there has been a noticeable uptick in user traction towards the Base Chain, underscored by the Total Value Bridged to the chain. The ecosystem has experienced heightened interest from multiple cryptocurrency projects. The widespread access granted to the broader community this past Wednesday, particularly concerning the BALD memecoin incident, might correlate with the surge observed on 29th July.

Crypto Derivatives

  • BTC and ETH funding rates remain positive.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remain unchanged at 36.06% and 33.43%, respectively.
  • 30-day 25-delta skew (C-P) for BTC took a slight decrease to 3.49% while that of ETH rose to 0.60%.
  • The futures market witnessed $25.67M worth of liquidations in the last 24 hours with longs representing 62.41% of the total.

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

19.72%

BNB

Bybit

Binance

16.48%

SOL

Binance

dYdX

9.48%

BTC

OKX

dYdX

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

In the past 24 hours, BTC's ATM IV has continued its decline, as the market is quite down from the inflation data announcement. Currently, the 7-day IV stands at 27.53%, gradually nearing the monthly low.

Both BTC and ETH term structures persist in a contango state. Looking back over a 1-day period, the term structure shows minimal shifts towards later expiries. However, the front end of the curve exhibits a noticeable drop in IVs, possibly influenced by the inflation announcement.

Conversely, the 7-day and 30-day (C-P) skews for both BTC and ETH maintain their upward trajectory. Particularly in ETH, investor sentiment remains bullish due to the preference for calls over puts.

According to @laevitas, the top traded BTC instruments in the last 24 hours include $16.17M notional of 27OCT23-25000-P, $8.82M of 27OCT23-35000-C, and $7.36M of 27OCT23-32000-C. This trend aligns with data reported from @paradigm, where a substantial volume of trades is concentrated on risk reversal strategies, reflecting traders' efforts to hedge their exposures against extreme price movements leading into the end of Q3.

Crypto Technical Analysis

Onto technical analysis, the trendline delineated by the successive local lower highs remains upheld, presently undergoing its second test on the 4-hour chart. Furthermore, both the RSI and Bollinger Band indicators indicate that the price is presently trading within the midsection of its range. This suggests a prevailing sense of uncertainty concerning the imminent trajectory of BTC in the near term. Consequently, the previous analysis remains valid, positing that the forthcoming resistance is projected within the range of $30.7K to $30.8K in the event of an upward rebound from the trendline. Conversely, if the trendline fails to retain its significance, the ensuing support zone is identified at the local lows, approximately at $28.8K.

A similar narrative holds for ETH. A distinct breakout signal endorsing a surge above the channel's upper bound has yet to materialize. The RSI and Bollinger Band indicators similarly reflect a comparable level of uncertainty, mirroring that observed in BTC. Consequently, should the price retract from its present level, the support level remains situated around $1.79K, aligning with the lower boundary of the channel. Nevertheless, in the event of a decisive breach of the channel's confines, the subsequent prominent resistance level comes into play at approximately $1.92K.

Access institutional-grade commentary on TradFi × Crypto markets

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Treehouse Research 🌳