🌳U.S. Mortgage Rates Reach Two-Decade High; Tornado Cash Developers Face Money Laundering Charges.

24 Aug 2023, Thursday

3:13 AM

🌳U.S. Mortgage Rates Reach Two-Decade High; Tornado Cash Developers Face Money Laundering Charges.

BTC

ETH

S&P Futures 500

$26,519.33

$1,682.28

$4,470.00

(+1.83%)

 (+3.02%)

(+1.46%)

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

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What We Are Covering Today

  • U.S. mortgage rates soar, impacting housing; UK's economic activity declines amid borrowing costs (more in Macro & TradFi)
  • Tornado Cash developers charged with money laundering; 3 Pendle pools impacted by Balancer’s emergency measures (more in DeFi & CeFi)
  • On-chain metrics show buoyant BTC sentiment as whales accumulate and short-term holders go into profits (more in On-Chain)
  • BTC C-P skew shifts back to the neutral zone while ETH term structure remains in backwardation (more in Crypto Derivatives)
  • BTC faces resistance at $26.6K; ETH's constricted Bollinger Band suggests upcoming volatility (more in Crypto Technical Analysis)

Macro & TradFi

U.S. mortgage rates surged to 7.31%, the highest since late 2000, causing home-purchase applications to plummet to levels unseen since 1995. This uptick, influenced by rising U.S. Treasuries and anticipation of sustained interest rates due to a resilient economy, combined with persistent high home prices, strains the housing market which had previously demonstrated growth potential. As homeowners hesitate to embrace higher rates, the focus shifts to new constructions, suggesting a potential pivot in housing market dynamics and challenging affordability for prospective buyers. Additionally, the U.S. PMI Composite Flash reading for August unexpectedly declined to 50.4 from July's 52.0, indicating the weakest output growth since February. Both manufacturing, which recorded a contraction with a PMI of 47.0, and services, which posted a PMI of 51.0, contributed to this downturn. S&P Global attributes the decrease to contractions in new orders across sectors and rising costs stemming from fuel, wages, and raw materials.

Elsewhere, the UK's economic activity unexpectedly declined in August, with the PMI reading dropping to 47.9 from July's 50.8, signaling the first contraction since January due to higher borrowing costs. The softening PMI, which gauges economic health, triggered a market reaction, causing a dip in sterling and prompting investors to recalibrate interest rate expectations. While recent data showcased a robust economy, the latest PMI figures, indicating declining service sector activity and accelerating manufacturing downturn, suggest potential headwinds. The Bank of England may rethink further interest rate hikes, foreseeing a possible mild recession.

Yesterday, US equities experienced their most significant surge since June amidst a buildup by Nvidia's optimistic revenue forecast, which saw its shares soar by 6.58% due to heightened demand for its AI-centric GPU chips. Following this, the DJIA rose 0.54%, and more pronounced jumps were observed in the S&P 500 and Nasdaq Composite, rising by 1.11% and 1.60%, respectively. As investors anticipate a potential Fed pause in its rate-hiking journey to stave off a looming recession, Treasury yields, including the pivotal 10-year note, retreated from recent highs — Yields on the benchmark 10-year US note fell 130 basis points to 4.2% after reaching a 16-year high earlier this week.

DeFi & CeFi

  • Tornado Cash developers charged with assisting hackers in money laundering
  • $DAI stablecoin surpasses $5 billion market cap
  • 3 Pendle pools impacted by Balancer emergency measures
  • Binance Labs invested in Pendle Finance

Developers of Tornado Cash, Roman Semenov and Roman Storm, have been charged with money laundering and sanctions violations for facilitating over $1 billion in money laundering, a significant portion of which was for North Korea's Lazarus Group. This is despite the fact that the Lazarus Group was already previously sanctioned by the US Treasury Department’s Office of Foreign Asset Control (OFAC) as blocked property. Storm has been arrested, while Semenov and 8 of his Ethereum addresses have been sanctioned by OFAC. US prosecutors explained that the duo were aware of Tornado Cash engaging in illegal activity, but proceeded with efforts to seem law-abiding while continuing to violate sanctions. However, the decentralized nature of Tornado Cash makes it challenging to completely shut down as similar services can be created using its open-source code.

In other news, DeFi yield protocol Pendle Finance, which recently received an investment from Binance Labs, tweeted that some of its liquidity pools were affected by Balancer’s emergency measures. Specifically, these pools are ETHx-bbaWETH, swETH-bbaWETH and swETH-bbaWETH [Old]. Funds within the affected pools are secure, but swaps in the underlying Balancer pools have been disabled, meaning fees and yields will no longer accumulate. Pendle encouraged its users to follow Balancer’s suggestion to withdraw their funds as base LP assets to ensure their safety.

On-Chain

According to @santimentfeed, an on-chain momentum was observed that BTC whales (wallets holding 10-10K BTC) have collectively added 11,629 BTC in the last 6 days, worth $308M of assets. This influx caused significant buying pressure, briefly lifting BTC to a high of $26.8K on Wednesday.

According to analysis by @cryptoquant_com, the STH-SOPR metric can be used as a tool to evaluate the profitability of Bitcoin transactions among short-term holders. STH-SOPR value offers insights into the average profitability of Bitcoins being transacted by short-term investors. When the value is above 1, it suggests that Bitcoins are being sold at a profit. Notably, the recent 6% increase in Bitcoin's price has propelled the STH-SOPR above the crucial threshold of 1. This development carries significant implications, indicating that on average, short-term holders are now selling their Bitcoins at a profit, reflecting renewed market confidence among short-term holders who are now more inclined to capitalize on gains. Additionally, the sustained value above 1 suggests the potential for further price stabilization, aligning with previous instances where such trends have led to continued price appreciation in the coming days.

Crypto Derivatives

  • Funding rates hover around 0, with BTC and ETH having mixed sentiments as some exchanges show positive rates, others negative.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 42.62% and 40.35%, respectively.
  • 30-day 25-delta skew (C-P) rose to -0.47% and -3.55% respectively for BTC and ETH.
  • The futures market witnessed $93.85M worth of liquidations since Friday with shorts representing 74.5% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

19.93%

DOGE

dYdX

Bybit

17.13%

BNB

Bybit

Binance

14.27%

SOL

Bybit

dYdX

Source: @CexyArbBot Telegram Bot

Notes:

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, and DOGE vs. USDT perps. 

2) CEXs observed include Binance, Bybit, OKX & dYdX.

3) Lookback period is 24 hours.

Bitcoin's ATM IV has surged in the past 24 hours, with the 7-day and 30-day ATM IVs now at 38.83% and 37.54% respectively, mirroring elevated price volatilities in the BTC market.

The BTC term structure remains in contango, showing increased IVs across tenors. Near-dated options, especially 2-day expiry contracts, display a noteworthy IV rise of around 5%. Conversely, ETH exhibits a more pronounced backwardation state. Interestingly, contracts expiring between 15-65 days have experienced a significant IV decrease, indicating market certainty in short to medium-term ETH trends, though anticipating notable short-term volatility.

Meanwhile, yesterday's BTC pullback notably impacted the 7-day and 30-day (C-P) skews, settling at 0.14 and -0.15, respectively. These figures swiftly shifted towards call-put neutrality, suggesting changing market sentiments as bulls and bears contest near-term dominance.

Lastly, @Paradigm reported option flows during the Asia/Europe trading hours yesterday showed significant interest in short-term volatility hedgings for BTC through trades such as the purchase of 325x 25-Aug-23 25000 Put. ETH, on the other hand, saw call buyings across the curve, some notable trades include the purchase of 4500x 29-Dec-23 1500/1900 Bull Risk Reversal, 4350x 27-Oct-23 1900 Call, and 3750x 29-Mar-24 2000 Call.

Crypto Technical Analysis

In today's technical analysis, BTC posted a 2% gain earlier today, only to encounter resistance at the $26.6K mark and subsequently retracting to $26.4K. The asset's price movement remains tethered between the $26.5K-$26.8K resistance zone and a defining $26K support. Notably, the 50MA, currently on a downward trajectory, further reinforced this resistance, suggesting a potential bearish sentiment. The day's activity nudged the RSI to 52.98, landing it in neutral territory.

Analyzing ETH on the weekly timeframe reveals its Bollinger bandwidth is approaching its narrowest point since 2021. Historically, such constricted Bollinger bandwidths precede significant volatility in ETH, as seen from the tight channel following the parabolic move in 2021. Moreover, ETH's breach of the lower Bollinger band indicates that this anticipated volatility might skew bearish.

Moving on to the 4-hour chart, ETH tested but did not surpass the upper boundary of its current channel, hinting at the $1.74K level as the next formidable resistance. Should momentum reverse, this remains the threshold to monitor. The 4-hour RSI, positioned at 50.44, remains neutral, suggesting that the market hasn't fully committed to a particular direction.

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