🌳 U.S. Trade Deficit Narrows Due to Import Decline; SEC Social Media Breach Impacts Bitcoin Market

10 Jan 2024, Wednesday

3:01 AM

🌳 U.S. Trade Deficit Narrows Due to Import Decline; SEC Social Media Breach Impacts Bitcoin Market

BTC

ETH

S&P Futures 500

$45,842.64

$2,393.38

$4,792.25

(-1.75%)

 (+3.69%)

(-0.10%)

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

  • U.S. trade deficit narrows; U.S.-China military talks signal diplomatic progress (More in Macro & TradFi)
  • SEC’s social media account was hacked, Gary Gensler confirms; DeFi identification should be the focus for policymakers (More in DeFi & CeFi)
  • An unknown institution has seen an inflow of $239M USDT over the past few days from the Tether Treasury; Regular LINK trader moves $2.78M of LINK to Binance (More in On-Chain)
  • BTC's IV term structure shows market anticipation; call-put skews reflect regulatory uncertainty (More in Crypto Derivatives)
  • BTC experienced a fake out above the resistance following the SEC Twitter hack coinciding with an unexpected surged ETH during the same period (More in Crypto Technical Analysis)

Macro & TradFi

The U.S. trade deficit narrowed unexpectedly to $63.2 billion, contrary to economists' predictions of an increase to $65.0 billion. This reduction from October's revised figure of $64.5 billion was primarily due to a significant decline in imports, which outweighed the drop in exports. The Commerce Department highlighted a 1.9% decrease in import values, falling to $316.9 billion, with notable reductions in consumer goods like pharmaceuticals, cell phones, and other household items, as well as in capital goods and industrial supplies. Concurrently, export values decreased by 1.9% to $253.7 billion, with substantial declines in industrial supplies and materials, including non-monetary gold and crude oil, and a decrease in consumer goods and automotive exports. 

Elsewhere, US and Chinese military officials conducted their first formal discussions since 2021, following an agreement between President Joe Biden and President Xi Jinping. The Pentagon emphasized the criticality of these "Defence Policy Coordination Talks" to maintain open military-to-military communication and mitigate the risk of escalating competition into conflict. This meeting, led by Deputy Assistant Secretary of Defense Michael Chase and Major General Song Yanchao, addressed concerns such as China's actions in the South China Sea and the upcoming presidential elections in Taiwan. These talks represent a concerted effort to stabilize US-China relations, particularly in light of past tensions over US surveillance flights and China's military maneuvers. The resumption of these talks shows the importance of diplomatic engagement in reducing misunderstandings between the two nations. 

Yesterday's trading session in the US saw mixed results among major equity indices as investors cautiously anticipated upcoming inflation data and evaluated the Federal Reserve's potential rate cuts in 2024. The Nasdaq experienced a slight uptick, gaining 0.17%, while the S&P 500 dropped modestly by 0.15%. The Dow Jones Industrial Average saw a more pronounced decline, falling by 0.42%. Notable movements in individual stocks included Boeing, which fell by 1.41% despite reporting its largest-ever sales for the 737 Max in 2023. Unity Software faced a significant downturn, plummeting by 7.95%, following the announcement of cutting about a quarter of its workforce as part of a larger restructuring plan. Investors are now keenly focusing on the US Consumer Price Index data, scheduled for release tomorrow at 21:30 SGT. Additionally, market participants are also awaiting inflation data from China, due on Friday, 12 January at 09:30 am.

DeFi & CeFi

  • SEC confirms that their social media account was hacked
  • CFTC recommends that DeFi identity should be a priority for policymakers
  • BitGo wins in-principle approval as Major Payments Institution in Singapore
  • Bitcoin decouples from Nasdaq amidst all the ETFs speculation
  • Grayscale stands its ground despite the ETF fee war
  • A blockchain-powered tool “Verify” able to weed out deep fakes

The U.S. Securities and Exchange Commission (SEC) has reported that its social media account was compromised, leading to the dissemination of false information about the approval of spot Bitcoin exchange-traded funds (ETFs). This unauthorized announcement, quickly retracted by SEC Chair Gary Gensler 15 minutes later, had momentarily influenced the cryptocurrency market with BTC prices experiencing a brief surge. In a following tweet, Gary Gensler has once again confirmed that the ETFs have not been approved. This incident temporarily affected Bitcoin prices while exposing vulnerabilities in the SEC's digital security protocols, and may have eroded public confidence in the credibility of information disseminated by the SEC. 

Following the release of its report, the U.S. Commodity Futures Trading Commission (CFTC) is advocating for a focus on identifying individuals in the decentralized finance (DeFi) sector, amid concerns about anonymity leading to potential financial crimes like money laundering and terrorism financing. The CFTC highlights the need for implementing robust digital identity, Know Your Customer, and Anti-Money Laundering protocols in the DeFi space. This initiative, supported by recent legal actions against entities in the DeFi field and parallel efforts by the Financial Crimes Enforcement Network (FinCEN), aims to enhance transparency, accountability, and consumer protection in the rapidly evolving DeFi ecosystem.

On-Chain

Data from Etherscan suggests that an unknown whale/institution is depositing large amounts of funds into the market periodically. Notably, it has received $239M USDT over the past few days from the Tether Treasury and has sent the funds to exchanges like Kraken, OKX, and Coinbase. In a longer timeframe, it has deposited a sum of approximately $2.88B USDT over 3 months. This could be a positive outlook as we see the crypto ecosystem receiving institutional attention in recent months which may climb further as we prepare for bullish narratives that likely follow the potential BTC ETF approval.

Meanwhile, a regular LINK trader, identified by the wallet address 0x929, has deposited the remaining 200,000 LINK ($2.78M) to their Binance address today. The whale accumulated 1.386M LINK from Binance at an average price of $10.12 (total estimated cost: $14.03M) between April 12, 2023 and January 9, 2024; and has deposited 1.186M LINK ($13.04M) to Binance at $10.99 on average. This indicates potentially large profit taking activities. As such, LINK holders should monitor the market with extra caution as it may suggest extensive selling pressure through centralized exchanges.


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH fell to 63.19% and 68.97%, respectively.
  • The futures market witnessed $214.85M liquidations, with longs representing 61.41%.
  • The 30-day 25-delta skew (C-P) for BTC fell to -2.57%, while that of ETH decreased to -2.08%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

29.21%

AVAX

OKX

dYdX

28.12%

BNB

Binance

OKX

​​20.86%

BTC

Binance

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.


The 7-day Implied Volatility (IV) for Bitcoin has shown a modest decrease, settling at 77.70%, signaling a growing sentiment of market confidence in the imminent approval of a new financial instrument. Correspondingly, the 30-day IV has followed suit, receding to 60.89%. This trend is attributed to a growing certainty among investors that an ETF approval is on the horizon.

The IV term structure for BTC and ETH continues to show significant backwardation, with elevated levels of short-term IV. A sharp shift in the term structure is evident in options expiring within a day, reflecting market anticipation of an imminent SEC decision regarding the ETF. In contrast, the flatter term structure in options with longer durations suggests a consistent long-term outlook for BTC, aligning with the trend toward price stabilization.

The BTC 25-delta 30-day and 7-day call-put skews have exhibited stability, with both metrics orbiting the neutral zero mark. The 30-day skew has fallen to -2.57%, whereas the 7-day skew has declined significantly to -4.64%. This negative skew is likely influenced by recent reports of SEC Chairman Gary Gensler's account being compromised, which has added uncertainty to the regulatory environment, particularly the prospects for the approval of a spot Bitcoin ETF.

In @Paradigm’s highlighted option flows for the US Session Hours, there is emphasized downside coverage with strategic put purchases and structured positions. Key BTC trades included the purchase of 1000x 26-Jan-24 54/60k Custom Calls, and the sale of 200x 12-Jan-24 46500 Call Calendar. Prominent ETH options activity featured the purchase of 2875x Inverse 26-Jan-24 2450/23-Feb-24 3300 Call Calendar, and 2625x 26-Jan-24 2450/2800 Call Spread.

Crypto Technical Analysis

In technical analysis, the false information disseminated through the hacked SEC Twitter account resulted in a fake-out on the Bitcoin 4-hour chart. The price swiftly broke above the previously identified upper boundary of the channel but retraced back within the channel range after being rejected at the $48.0K resistance. RSI exhibited a similar movement, briefly entering the overbought region before returning to neutral levels. Consequently, the analysis from yesterday remains valid, with the channel's upper boundary serving as the immediate resistance zone at approximately $46.5K. Meanwhile, the lower boundary of the channel remains a crucial immediate support level, situated at around $43.0K. It's essential to note that potential near-term volatilities in the BTC market are likely to be influenced by fundamental changes related to the potential ETF approval rather than technical indicators. Therefore, these immediate support and resistance zones could be quickly breached in response to finalized ETF decisions.

In contrast, ETH experienced an unexpected spike following the BTC sell-off triggered by the fake news. This surge can be interpreted as a flight to safety, with investors seeking refuge amidst uncertainties and potential adverse decisions by the SEC regarding spot BTC ETFs. The rapid increase in price yesterday faced resistance at the channel's upper boundary at $2.4K and is currently hovering close to the previously identified lower trendline formed by local higher lows, now acting as a support-turned-resistance. Conversely, a retracement is highly plausible if the ETF is approved, as investors may shift their ETH positions to BTC, potentially causing ETH to swiftly move towards the support at the channel's lower boundary, approximately at $2.15K.

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