🌳U.S. Q2 GDP Revised Downwards Amid Inflation and Labor Dynamics; Bitcoin Mining Revenue Faces Stagnation

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• U.S. GDP growth adjusts, signaling mixed economic signals; China's property sector faces headwind (more in Macro & TradFi)
• Bitcoin mining revenue nears all-time low; Controversial digital euro law to be led by MiCA legislator (more in DeFi & CeFi)
• BTC whales were found to have front-ran the news around Greyscale and SEC (more in On-Chain)
• Short-dated ETH options surge in activity; BTC and ETH’s IV dips (more in Crypto Derivatives)
• BTC and ETH see price retracements from the rapid increase (more in Crypto Technical Analysis)

Macro & TradFi

The U.S. Q2 GDP growth was revised downwards to 2.1% from 2.4%, largely due to businesses reducing inventories. Despite this, robust consumer spending, underpinned by a tight labor market, points to sustained economic momentum, mitigating immediate recession fears. Concurrently, inflation pressures receded, with the government's inflation measure adjusting down to 1.7% from an initial 1.9%. While the Federal Reserve's previous rate hikes since March 2022 appear to have tempered growth, the resilient labor market indicates that the real efficacy of the monetary policy will manifest in labor dynamics. Additionally, the recent ADP report indicated private payrolls increased by 177,000 in August, undershooting the estimated 195,000 and marking a decline from July's 371,000. This backdrop, combined with a proactive Fed, suggests a balanced outlook with risks skewed towards the labor market's response to policy interventions.

Country Garden, China's premier private property developer, reported a staggering loss of $6.7B for H1 2023, a significant increase from its RMB 6.7B loss in H2 2022, and in stark contrast to the RMB 612M profit it enjoyed in H1 2022. This monumental setback comes amid a two-year liquidity crisis in the Chinese real estate sector, initiated by the China Evergrande default in 2021, and now potentially impacting the broader Chinese investment arena. Despite a 39% rise in H1 revenues to RMB 226B, Country Garden admitted to price reductions for timely property delivery, further underlined by its recent missed international bond coupon payments. With Beijing's regulatory easing on developers due to economic challenges, and the looming $38B debt payments faced by Chinese developers in the upcoming months, the health of giants like Country Garden is pivotal for understanding the trajectory and potential ripple effects in global markets.

U.S. equities extended gains for a fourth day, driven by data indicating a moderating U.S. economy, suggesting the Federal Reserve might soon halt rate hikes. The S&P 500 surpassed 4,500, reflecting a 0.39% rise, while the Nasdaq and DJIA climbed 0.56% and 0.11%, respectively. With domestic cues painting a clearer picture, investors now turn their focus to upcoming Chinese PMI data and U.S. Core PCE and Jobless Claims releases, emphasizing the market's vigilance to global economic shifts and the potential impact on investment trajectories.

DeFi & CeFi

• Bitcoin mining revenue nears all-time low
• Controversial digital euro law to be led by MiCA legislator Stefan Berger
• Sensitive data leaked in Kroll cybersecurity breach
• Robinhood wallet identified as 5th largest ETH holder
• Lybra Finance to launch V2 on Aug 31

Bitcoin mining revenue or “hash price” has dropped near its all-time low since the collapse of FTX last year. The current revenue is around $0.060 per terahash per second per day, which is comparable to that of last November when BTC’s price was $16,500. Conversely, the Bitcoin network’s hash rate, which measures the total computing power of miners, breached records at 414 exahashes per second (EH/s) on Aug 18, a 54% surge since the start of 2023 and an 80% increase over the past year, indicating increased network security. Analysts suggest that upward price adjustments are necessary to maintain mining profitability at high hash rates. Bloomberg reported 12 major publicly traded miners raised around $440M through stock sales in Q2 to support their operations. However, there are concerns that certain mining companies might be diluting shareholders at a faster rate than the increase in Bitcoin’s value, potentially impacting their financial health.

In other news, German lawmaker Stefan Berger, who participated in the passing of the EU’s Markets in Crypto Assets (MiCA) regulation, will lead the legislative efforts for a digital euro. Berger sees a digital euro as a means to increase the EU’s independence from non-EU countries and embrace the digital age. His role as rapporteur involves proposing amendments to draft laws related to the digital euro that other lawmakers can amend and vote on. Together with a body called the Council, comprising the European Parliament and other EU national governments, Berger will lead negotiations to iron out a unified version of the law. Importantly, the European Central Bank (ECB) has not formally decided on issuing a central bank digital currency (CBDC) but has invested resources in technical planning. Despite Berger’s pro-digital euro stance, other European Parliament members have expressed skepticism about the benefits of a digital euro, as far as calling it a “problem in search of a solution”.

On-Chain

According to an analysis by @santimentfeed, several whales, possibly insiders of the legal case, preemptively reacted to the news concerning Grayscale and the SEC. Specifically, whales holding between 10 to 10,000 BTC collectively amassed $388.3 million worth of BTC in the day preceding the news, resulting in a profit of over $23 million following the news.

Crypto Derivatives

• Funding rates for BTC and ETH remain positive.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH rose to 39.73% and 37.99%, respectively.
• 30-day 25-delta skew (C-P) for BTC and ETH fell to 2.74% and -1.39% respectively.
• The futures market witnessed $46.93M worth of liquidations with longs representing 77.30% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

BTC's ATM IV has experienced a notable downturn. The 7-day ATM IV fell to 36.01 % from its earlier 40%, while the 30-day ATM IV fell to 34.78% from 35.82%. This volatility adjustment may be anticipating tonight's release of the Core PCE Price Index and Initial Jobless Claims data, underscoring the market's sensitivity to pivotal economic indicators.

BTC and ETH term structures predominantly reflect contango, with IVs declining across most tenors. Short-dated options, on the other hand, have largely maintained their level from yesterday. While a series of SEC ETF deadlines loom this weekend, the market seemingly isn't pricing in immediate approvals.

BTC's 30-day (C-P) skew has notably fallen to 2.74 from 5.45, while ETH has fallen to -1.39 from 1.26. This dynamic shift suggests a waning bullish sentiment for Bitcoin and a rising bearish outlook for Ethereum, potentially driven by diminishing optimism for crypto ETFs.

ETH options activity took center stage, especially in short-dated expiries, with significant purchases of calls ranging from Aug 31 to Sep 8 on Paradigm during late morning EST. This resurgence in short-dated ETH options, not observed for a considerable duration, could indicate strategic book repositioning or anticipation of near-term ETH volatility.

Lastly, @Paradigm detailed option flows yesterday revealed distinct strategies for BTC and ETH positions during the US trading hours. Key BTC trades included the acquisition of 1000x 29-Sep-23 Puts (tied) and the sale of 100x 29-Dec-23 28000 Straddles. Meanwhile, significant ETH trades encompassed the purchase of 6500x 15-Sep-23 1800 Calls, 5832x 31-Aug-23 1750 Calls, and 4564x 15-Sep-23 1900 Calls.

Crypto Technical Analysis

Moving on to technical analysis, in line with yesterday's assessment, BTC has retraced swiftly after encountering the resistance zone at $28.3K on the 4-hour chart. Correspondingly, the RSI has retreated to the normal zone, currently registering at 62.07. Additionally, BTC is presently encountering a minor support at the 50% Fibonacci retracement level, causing the pace of price decline to slow down. Furthermore, as the 100-SMA line descends alongside the ongoing price retracements, it is gradually approaching the upper threshold of the previous trading channel ranging between $25.8K - $26.6K which could potentially serve as robust support in the near future.

Shifting our attention to ETH, the analysis from yesterday remains accurate, as the 100-SMA line has provided modest support to ETH, leading to a deceleration in the decline during the retracement on the 4-hour chart. The nearest resistance zone persists approximately in the range of $1.86K to $1.88K, a range that has been observed from the end of last month to early this month which signifies a potential 10% upside from the current level.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• US Fed ramps up demands for corrective actions by regional banks - Bloomberg News

• Country Garden warns of default risks, 'deeply remorseful' for record loss

• UK business optimism at 18-month high on hopes for rate hike pause

• US insurers brace for Idalia claims, UBS estimates $9.36 bln cost in Florida

• Short U.S. housing correction likely over; tight supply to keep prices high: Reuters poll

• US economic growth trimmed on inventories; retains underlying momentum

• Wall Street ends higher as economic data fuels rate-pause bets

• US curbs AI chip exports from Nvidia to some Middle East countries

• U.S. retailers shut stores as Hurricane Idalia slams Florida, Georgia

• TSX ends modestly higher on US inflation relief

• Consumer spending in China bounced back in August, survey finds.

Crypto

• Genesis Lender Group Opposes ‘Wholly Insufficient’ DCG Deal.

• Controversial Digital Euro Plan to Be Led by Architect of Landmark MiCA Crypto Law.

• Crypto Bank Seba Wins In-Principle Approval to Operate in Hong Kong.

• EOS Network's Token Receives Trading Approval in Japan, EOS Surges Nearly 10%.

• Sensitive data leaked in Kroll cybersecurity breach — Report.

• Judge dismisses class-action suit against Uniswap over token scam losses.

• Coinbase stock surges after favorable federal ruling for Grayscale.

• South Korean parliament rejects motion to expel lawmaker over crypto scandal.

• Arkham Intelligence identifies Robinhood wallet as the 5th largest ETH holder

• Bitcoin Miner Revenue per TeraHash Slumpled to Nearly All Time Low Level

• Lybra Finance to Launch v2 on August 31

• Arbitrum Launches New Testnet on Sepolia

Note: As 1st September is a public holiday in Singapore due to the presidential election, Treehouse Daily will resume its regular publications on 4th September.

Yours sincerely,
Treehouse Research 🌳