🌳U.S. Treasury Boosts Bond Issuance; Volatility Shares, Grayscale, And Four Others Apply For Ethereum Futures ETF

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• U.S. Treasury boosts bond issuance; UK delays border food checks over inflation fears (more in Macro & TradFi)
• Volatility Shares, Grayscale, and four others apply for Ethereum futures ETF; Litecoin successfully underwent third ‘Halving’ (more in DeFi & CeFi)
• Substantial wBTC transactions decrease exchange supply; significant on-chain activity for altcoins (more in On-Chain)
• Options show steady IV despite Fitch's U.S. downgrade (more in Crypto Derivatives)
• BTC and ETH pare yesterday’s gains as they re-enter the previous week’s trading channel (more in Crypto Technical Analysis)

Macro & TradFi

The U.S. Treasury has increased its quarterly bond issuance to $103B to finance a growing budget deficit, a move made for the first time in over 2 years. This issuance, which encompasses 3-, 10-, and 30-year notes, represents a jump from the previous $96B and slightly exceeds forecasts. The announcement has consequently led to a selloff in Treasuries. Meanwhile, the private payroll data from ADP revealed that private employers added 324,000 jobs in July, significantly surpassing estimates of 190,000. This growth was largely propelled by a 201,000 increase in the leisure and hospitality sector, further reflecting the ongoing economic recovery.

UK ministers are preparing to announce another delay to post-Brexit border controls on animal and plant products imported from the EU, in response to concerns that added bureaucracy could exacerbate inflation. The new import regime was slated to commence in October but is now expected to be postponed into next year. This decision, driven by efforts to contain inflation, also aims to provide companies and port operators additional time to adapt to the new rules. The repeated postponements, while seen as sensible given the current economic climate, have generated frustrations and calls for a clear and concrete timetable for implementation.

The Dow Jones Industrial Average was down 0.98%, the S&P 500 down 1.38%, and the Nasdaq Composite was down 2.17%. Market attention is focused on the US Nonfarm Payrolls, scheduled to be released on Friday, August 4, at 12:30 PM UTC. Additionally, Advanced Micro Devices saw its share price fall by 7.02% despite robust results and significant customer interest in its forthcoming MI300 AI chip. Chinese technology companies JD.com and Baidu experienced declines following proposals by regulators to limit smartphone and internet usage for minors.

DeFi & CeFi

• Volatility Shares, Grayscale, and others apply for Ethereum futures ETFs
• Litecoin undergoes third 'Halving' as 12-year-old blockchain reaches milestone
• US DOJ considers lawsuit against Binance amid concerns of exchange run
• Decentralized exchange sBalancer now live on Avalanche blockchain
• OKX wallet launches Smart Account for gas fee payments with USDT and USDC
• Optimism testnet Faucet implements reputation system, World ID support planned

Several major asset managers, including Grayscale and VanEck, have filed new applications to launch Ether (ETH) futures exchange-traded funds (ETFs) for US customers. Grayscale's filing includes applications for a proposed Grayscale Global Bitcoin Composite ETF and a Grayscale Ethereum Futures ETF, with investments in front-month Ether futures traded on the Chicago Mercantile Exchange. Volatility Shares also plans to list an Ether futures ETF, investing in cash-settled contracts referencing ETH. At the same time, VanEck aims to invest in ETH futures contracts equal to 100% of the fund's total assets. ProShares outlined their Short Ether Strategy ETF to profit from the S&P CME Ether Futures index losses. These applications follow recent Bitcoin ETF applications by mainstream asset managers.

Litecoin, sometimes referred to as "digital silver" in comparison to Bitcoin's "digital gold," underwent its third halving in its 12-year history as its pace of new cryptocurrency issuance got cut in half. The halving, programmed into the blockchain's code every four years, reduced the block subsidy from 12.5 LTC to 6.25 LTC. Commemorative silver cards were also created to mark the event. While some analysts may not see Litecoin as technologically promising, its vintage status and staying power have kept it valuable, with a market cap of about $7B. Litecoin also helps secure Dogecoin through a “merged mining” arrangement, allowing Dogecoin to tap on Litecoin’s network security.

On-Chain

BTC has seen a modest positive influx on exchanges over the past month. As noted by @Santiment, two transactions of 2,000 Wrapped Bitcoin (wBTC) each have notably reduced the exchange supply at the end of July. wBTC is a tokenized version of Bitcoin on the Ethereum blockchain, designed to bring BTC's liquidity and functionality to Ethereum's dApps and smart contracts. Moreover, on-chain transaction volume has peaked, hitting its highest in over a month. This activity is underscored by whales transferring funds away from exchanges, indicating a heightened preference for self-custody of their assets, and possible participation in DeFi activities on the Ethereum network.

Elsewhere, numerous transactions valued at $10M or more have emerged across various networks today. Amid the volatility in altcoins and a continued reduction in market capitalization, close attention should be paid to the significant movements by prominent investors (or "whales") in specific assets, including AAVE, APE, COMP, IMX, LDO, and MDT. The activity in these particular tokens may provide insights into broader market sentiment and strategic positioning within the current volatile environment.

Crypto Derivatives

• BTC and ETH funding rates continue to stay positive.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH fell slightly to 36.79% and 36.27%, respectively.
• 30-day 25-delta skew (C-P) for BTC and ETH rose to 1.58% and -2.06%, respectively.
• The futures market witnessed $84.73M worth of liquidations yesterday with longs representing 66.17% of the total.

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

After briefly touching $30K, BTC pulled back to the $29.2K range, erasing its gains from the earlier APAC session. The implied volatility (IV) for all BTC tenors remained largely stable.

The term structure persists in a contango state, evident from its consistent upward gradient. Amidst turbulence in the DeFi sector, IVs across all tenors experienced a slight decline.

The 30-day (C-P) skews for BTC and ETH shifted to a more positive stance yesterday. However, the ETH skew has remained predominantly negative across the board. In contrast to the US stock market, the crypto market showed an indifference to the news, largely unswayed by news of Fitch's downgrade of the U.S. long-term rating and the re-emergence of risk-off sentiment.

As detailed by @tradeparadigm, BTC saw increased activity in its front-month options during the European session, notably with the purchase of 400 contracts each of the 27-Oct-23 $38K and $36K Calls. Conversely, ETH experienced selling in its back-end months and a surge in gamma buying in spreads and outrights, especially on Deribit. Significant ETH trades included a selling of vega with 34,949 Sep/Dec $2.2K Call Calendar contracts (-$81k vega) and 30,000x Oct $2.1K Call contracts (-$87k vega), along with the sale of 5,000x 29-Mar-24 $2K Calls and the purchase of 4,500x 25-Aug-23 $2K Calls.

Crypto Technical Analysis

After yesterday's breakout, BTC displayed an upward trajectory, momentarily crossing the $30K threshold. However, encountering resistance, it swiftly retreated below its 100-period moving average, repositioning within the trading channel set the previous week. Presently, BTC navigates tentatively within the channel's midpoint. If bearish tendencies persist, we could witness BTC nearing the channel's lower boundary at $28.8K.

In a similar vein, ETH demonstrated bullish momentum, only to face resistance at the 100-period moving average on the 4H chart, subsequently declining in tandem with BTC's percentage drop. Yet, the $1.82K mark has effectively served as a support level. Should ETH's retracement continue, it might revisit the $1.82K level, with the critical $1.8K support level in its sights.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• US Ramps Up Debt Issuance, Adding Fuel to Selloff in Treasuries

• Dollar to remain steadfast in coming months, say FX strategists: Reuters poll

• US says probe into Southwest Airlines December meltdown ongoing

• Major global firms warn of slow China sales as post-pandemic surge fades

• Double-digit growth in real wages, retail sales as Russia's unemployment hits record low

• Small businesses boost US private payrolls in July

• UK public inflation expectations fall in July, Citi/YouGov survey shows

• Bank of England caught between inflation fight and recession risk

• Exclusive: Chinese cities tighten property firms' access to escrow funds

• Foreign buyers are bailing on the U.S. housing market. Here's why.

Crypto

• Direxion Files Application for Bitcoin and Ethereum Futures ETF

• Optimism Testnet Faucet Utilizes Reputation System, Plans to Support World ID

• Bitcoin Sees Little Boost From Fitch Downgrade, Slumps on Binance Contagion.

• Binance Could Face U.S. Fraud Charges, but Prosecutors Worry About Risk of Bank Run: Semafor.

• Litecoin Undergoes Third 'Halving,' in Milestone for 12-Year-Old Blockchain.

• Ethereum Juggernaut MetaMask’s Origin Story Challenged in New Lawsuit.

• CRV Gets Plunge Protection on Binance as Market Makers Add Bid-Side Liquidity.

• DeFi Protocol Abracadabra Wants to Charge 200% Interest on Curve Founder’s $18M Loan.

• Google Cloud Is Running a Validator on Celo Network.

• Race for Ether Futures ETFs Kicks Off With 6 Firms Filing SEC Applications.

• ETF analyst raises spot Bitcoin ETF approval chances in the US to 65%.

Yours sincerely,
Treehouse Research 🌳