🌳US Jobless Claims Decrease, Highlighting Labor Resilience; Base and Optimism Forge Governance and Revenue-Sharing Partnership

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• U.S. jobless claims beat forecasts, signaling robust labor; UK consumer confidence shows resilience (more in Macro & TradFi)
• Base, Optimism unveil governance and revenue-sharing framework; Mastercard and Binance terminate crypto card program (more in DeFi & CeFi)
• $ETH whale activity rebounds; Sell-offs from Wintermute, $PEPE multi-sig, and early adopters present immediate $PEPE price uncertainty (more in On-Chain)
• BTC and ETH funding rates remain negative; $1.9B open interest for BTC options (more in Crypto Derivatives)
• BTC shows bearish indicators on weekly charts; ETH's head-and-shoulders pattern emerges (more in Crypto Technical Analysis)

Macro & TradFi

Last week, initial jobless claims decreased unexpectedly by 12,000 to 237,000, surpassing economists' forecast of 250,000. While data distortions may arise from factors like the Independence Day holiday and varying automaker plant idlings, the undercurrents suggest a still-robust demand for labor. The Federal Reserve's recent "Beige Book" highlights ongoing worker shortages in several sectors and an evolving hiring approach becoming more targeted. However, it's crucial to note that, while job growth in June was the lowest in over two years, current claim levels—when contextualized against the labor market size—remain well below the 280,000 benchmark, signaling no substantial deceleration in job growth. Despite economic headwinds and policy shifts, the labor market's fundamentals remain largely intact, suggesting sustained resilience in U.S. employment dynamics.

Elsewhere, UK consumer confidence in August outperformed expectations, bolstered by decelerating energy prices, swift wage growth, and a moderation in inflation to 6.8%. The GfK Consumer Confidence Index advanced five points to -25, nearly offsetting July's dip and reverting to early last year's levels. This uptick, punctuated by significant wage hikes outpacing prices and recent reductions in mortgage and energy rates, hints at the potential alleviation of the recent cost of living crisis. However, looming concerns of potential unemployment surges, declining property values, and anticipated interest rate hikes by the Bank of England might temper this optimism. In essence, current figures suggest resilience in consumer sentiment, vital for underpinning economic growth.

U.S. equities faced headwinds yesterday, with a tech surge anchored by Nvidia losing steam and pushing broader indices like the DJIA, S&P 500, and Nasdaq Composite down by 1.08%, 1.35%, and 2.19%, respectively. Amidst rising Treasury yields, investors dissected comments from Fed officials, anticipating Chair Powell's imminent Jackson Hole address for insights into future rate actions. The recent remarks from Fed officials, especially Boston Fed President Susan Collins, hint that the Federal Open Market Committee’s further adjustments to interest rates aren't off the table.

DeFi & CeFi

• Base, Optimism unveil shared governance and revenue-sharing framework
• Mastercard and Binance terminate crypto card program
• PancakeSwap V3 goes live on Linea mainnet
• ARK Invest, 21Shares apply for Ethereum futures ETF
• Balancer says $2.8M still at risk after vulnerability warning

Base and Optimism network developers have announced a revenue-sharing and governance-sharing agreement. This entails Base paying the greater of either 2.5% of its revenue or 15% of profits to the Optimism Collective, in exchange for receiving voting tokens for protocol governance capped at 9% of the total votable supply. Base's smart contracts can also only be upgraded via a two-of-two multisignature wallet, requiring consent from both Base and the Optimism network's team. Coinbase has pledged neutrality and released a list of "principles of neutrality" to prevent Base from centralization, in which it promises not to control user crypto, alter transaction orders for self-gain, or misuse non-public Base data. Base aims to become more decentralized, focusing on enhancing client scalability and developing Pessimism, a network-monitoring tool. Withdrawals from Base will be processed without censorship, upholding users’ “freedom to exit”. As more chains use the OP Stack and join Optimism’s “Superchain”, governance will transition to a “security council” with representatives from each chain in the ecosystem. Base itself will eventually hand its upgrade keys over to this “security council”.

In other news, Mastercard and Binance will terminate their crypto card programs in Argentina, Brazil, Colombia, and Bahrain from September 22. Binance is currently facing legal and regulatory challenges, including a US lawsuit alleging deceptive operations. The joint project would have produced cards that enabled users to make payments in traditional currencies using cryptocurrency holdings on Binance. Reasons for ending the Binance program and the decision-making process were not disclosed by Mastercard, and Binance's customer support confirmed that the Binance card will no longer be available in Latin America and the Middle East. However, Mastercard's head of crypto and blockchain mentioned that the company was still on the lookout for crypto firm partnerships, and that potential card programs go "through due diligence". The termination of Binance's partnership will not affect Mastercard's other crypto partnerships, such as the one with Gemini.

On-Chain

According to @santimentfeed, on-chain data reveals compelling shifts as there has been a resurgence in holder activity for ETH, underlining heightened whale interest. Specifically, the number of wallets holding between 10 and 10K ETH has now rebounded to 355K, including surges in transactions worth greater than $100K. This activity suggests that, amidst the market downturn, prominent investors are not only accumulating but strategically reallocating their holdings.

Recent on-chain data from @lookonchain highlights notable activity in the $PEPE market. Within a span of just an hour, both Pepe multi-sig wallet and Wintermute Trading moved a significant 17.3T $PEPE, valued at approximately $18M, to exchanges. Shortly thereafter, an early $PEPE adopter offloaded 1.88T of their holdings, fetching 1,010 $ETH or around $1.68M on a DEX. Such pronounced sell-offs suggest bearish sentiment in the immediate term.

Crypto Derivatives

• Funding rates for BTC and ETH remain negative.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 41.63% and 41.30%, respectively.
• 30-day 25-delta skew (C-P) for BTC rose to 0.40% while ETH tumbled to -4.19%.
• The futures market witnessed $52.90M worth of liquidations with longs representing 83.0% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Bitcoin's ATM IV has maintained level in the past 24 hours, with the 7-day and 30-day ATM IVs now at 36.55% and 36.90% correspondingly, mirroring muted price volatilities for BTC following the spike on 17 August.

The BTC term structure remains in contango, maintaining IVs across tenors. Notably, the contango appears more uniform throughout the curve, suggesting a broader market consensus on the future price trajectory of BTC.

Similarly, ETH has shifted to contango. The contracts expiring from 35 days onwards have notably increased over all tenors, indicating market certainty in short to medium-term ETH trends, though anticipating notable short-term volatility. This could potentially be due to the Weekly US jobless claims falling unexpectedly, demonstrating strong labor market resilience, which may signal further rate hikes.

Meanwhile, BTC’s 7-day and 30-day (C-P) skews settled at 1.05 and 0.40, respectively. These figures are close to call-put neutrality, suggesting changing market sentiments as bulls and bears contest near-term dominance.

Open interest for Bitcoin options set to expire on Aug. 25 currently stands at $1.9 billion, although expectations are for a lower final value, especially with some traders projecting Bitcoin to breach the $29,000 mark. A surprising 12% price correction from Aug. 14 to Aug. 19 has caught bullish investors off-balance, as showcased in Deribit's data. The observed 0.56 put-to-call ratio highlights a significant disparity between the $1.2 billion call open interest and the $685 million in put options. However, if Bitcoin hovers around $26,500 by 8:00 am UTC on Aug. 25, calls worth only $35 million will be actionable.

Lastly, @Paradigm reported option flows during the Asia/Europe trading hours yesterday showed significant activity in BTC options. Key trades included the buying of 495x 27-Oct-23 23000/20000 Put Spreads, the selling of 275x 1-Sep-23 25500 Puts, and the purchase of 200x 25-Aug-23 25500 Puts. Additionally, there was interest in the 200x 8-Sep-23 28000/31000 Call Spread, indicating varied hedging strategies among traders.

Crypto Technical Analysis

Examining BTC on a weekly chart, it is evident that BTC has breached its ascending channel pattern, a move traditionally indicative of bearish sentiment post a prolonged rally. This bearish view gains further traction as BTC has also slid below critical benchmarks - the 200MA and the Bull Market Support Band (20-week SMA, 21-week EMA). With the weekly RSI positioned at 45.98, the market remains in a neutral state. Collectively, these developments suggest that BTC may be entering a bearish phase.

On the daily chart, BTC's performance remains constrained within the $26.5K-$26.8K band. BTC Daily Candles is currently positioned significantly below its 50, 100, and 200-day SMAs (Simple Moving Averages). The day's trading activity has driven the RSI to a relatively low 25.57, reinforcing that BTC may be oversold on a daily level.

Upon examining ETH on the weekly timeframe, Ether has now formed a head-and-shoulders price pattern, and has breached its bull market support band. Historically, this pattern has often heralded a bearish phase for ETH as seen from the crash in April 2022, where there was also a breach of the bull market support band. The technical formation suggests a potential downward trajectory for ETH in the coming periods.

On ETH's daily chart, it has retreated to the 1.66K mark, a notable support level reinforced by rebounds on the 18th and 22nd of August. While this level has consistently held, its current test could be pivotal as a breach may precipitate a decline to 1.47K. The daily RSI at 30.36 signifies that ETH is still oversold, and traders should remain vigilant to emerging directional cues.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• China's Xi pledges to support Africa's industrialisation at BRICS

• HSBC expands venture debt offering to early-stage startups in US

• US department stores see higher credit delinquencies amid strained spending

• US jobless claims fall, core capital goods orders grow incrementally

• Google vows more transparency on ads as new EU rules kick in

• Nvidia bets $25 bln that AI boom is far from over

• Nordstrom warns of feeble second half as consumers spend cautiously

• Bank of Korea stands pat as inflation eases, growth risks heighten

• Australia economy to slow, govt spending to rise as population ages-report

• Container ships are waiting at Asian ports as retailers struggle to shift excess stock.

• Asia markets fall ahead of Powell's Friday Jackson Hole speech.

Crypto

• Base, Optimism unveil shared governance and revenue-sharing framework.

• Mastercard, Binance to end crypto card partnership

• Weird PEPE Transfers Spook Crypto Investors and Prompt Meme Coin's 15% Plunge.

• Colombian Peso Stablecoin Goes Live on Polygon, Aiming for $10B Remittances Market.

• PancakeSwap Version 3 Goes Live on Ethereum Layer 2 Linea Mainnet.

• FTX Taps Galaxy to Sell, Stake and Hedge Its Crypto Billions.

• SBI-Owned B2C2 Eyes European Expansion With Acquisition of Rival Trading Firm Woorton.

• ARK Invest, 21Shares join queue to offer Ethereum futures ETF.

• Balancer says $2.8M still at risk after vulnerability warning.

• Pendle Finance Use MakerDAO's sDAI and Flux's fUSDC for its new RWA Product

• FTX to Hire Galaxy to Start Selling, Staking, and Hedging its Crypto Holdings

• Unknown Team May Launch Lending Protocol Based on friend.tech Keys

Deal Flow

• Web3 Engagement Platform Raleon Closes $3.8M Funding Round with Alliance DAO Involved

• Vessel Capital secures $55M to invest in Web3 infrastructure: Report.

Yours sincerely,
Treehouse Research 🌳