[Updated] BlockFi Is the Next Domino to Fall After FTX Debacle; Lower-Than-Expected PPI Data Provides Encouraging Inflationary Signs

16 Nov 2022, Wednesday

3:29 AM

[Updated] BlockFi Is the Next Domino to Fall After FTX Debacle; Lower-Than-Expected PPI Data Provides Encouraging Inflationary Signs



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

GM Treehouser 🌳

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What We Are Covering Today

  • US PPI data leave investors optimistic about inflationary pressure; Stray Russian missiles hit Polish village killing 2 (more in Macro & TradFi)
  • BlockFi, which previously suspended withdrawals, could potentially file for bankruptcy in the wake of FTX’s implosion; SBF cryptic tweets states that FTX US can repay client funds (more in DeFi & CeFi)
  • On-chain data suggest month-high hodling activity amidst market turmoil (On-Chain)
  • IV continues to fall while put skew eased further; SOL IV remains highly elevated as concerns shift over to its survivability (more in Crypto Derivatives)
  • BTC and ETH inch higher but faces resistance across their H4 timeframes likely signaling a bearish continuation (more in Crypto Technical Analysis)

Macro & TradFi [Updated]

GM! Yesterday, oil markets rose after news that oil supply to Hungary would be temporarily suspended due to a fall in pressure in the Druzhba pipeline. Elsewhere, a Polish village near the border of Ukraine was hit by stray Russian missiles that killed 2 people. G20 countries are convening in an emergency meeting to discuss the events. In the US, producer price index increased less than expected in October, 0.2% actual vs a 0.4% consensus.

Looking at US equities, the Dow closed higher by 0.2%, the Nasdaq was up 1.45% and the S&P500 notched up 0.8%. Markets reacted positively to the lower-than-expected PPI data pointing to a possible turn in inflation. 10Y yields continue to trail lower this week while the DXY has also lost some ground.

DeFi & CeFi [Updated]

  • Crypto.com claims that they only had $10M of exposure in FTX
  • VC firm, Paradigm, marks FTX investment down to 0, stating that it was only a small portion of its portfolio
  • SBF continues cryptic tweet thread, stating that FTX US has enough money to pay back customers
  • BlockFi considers filing for bankruptcy
  • Cristiano Ronaldo partners up with Binance to release NFT collection
  • Leading banks such as Citigroup and Wells Fargo kick off a 12-week pilot program for digital liabilities with the New York Fed
  • Liquid exchange, previously acquired by FTX, suspends withdrawals
  • Oxygen Protocol states that they are seeking legal advice and are considering all options to protect the MAPS and Oxygen ecosystem
  • OKX announces $100M fund for distressed projects

According to WSJ, BlockFi appears to weigh in on the possibility of a bankruptcy filing due to their “significant exposure” to now-defunct crypto exchange FTX. The lender, which has previously denied rumors that the majority of their client assets were held on FTX, has acknowledged that there were some deposits left on the exchange and had an undrawn line of credit from FTX.

On Twitter, SBF continues to post cryptic tweets which started out as alphabets and single words. Some have speculated that SBF was trying to bypass the detection of tweet count bots by tweeting in unorthodox time frames such that he could delete his older tweets simultaneously. SBF's newest tweets stated that Alameda had more assets than liabilities, including illiquid assets. He also confirms that Alameda had a margin position on FTX International and that FTX US can repay all customers. He ends off by stating that he will commit to making customers whole and be transparent.

On-Chain [Updated]

Looking at on-chain data, signs of hodling increase as number of spent outputs with lifespan of 1d-1w have reached 3-month lows suggesting bag holding amidst the chaos that has ensued the past 2 weeks.

Elsewhere, the number of addresses holding more than 10K Ether jumped to a 1-month high suggesting more accumulation by big wallets.

Crypto Derivatives

  • Funding rate remains negative on BTC and ETH
  • 30-day IV fell for both BTC and ETH to 73.58% and 90.44%, respectively
  • 30-day 25d put skew eased for BTC and ETH to -16.11% and -17.93%, respectively

For futures, total liquidations came in at $69M, the lowest we have seen in the past few days since the FTX debacle.

On the options front, IV continues to fall specifically on near-dated tenors while put skew eased significantly. Short-dated IV is still currently underperforming RV. The term structure remains in backwardation, however, is less steep as compared to the day before as near-dated options with elevated IV expires, pushing the front-end of the IV curve lower. While it seems like the dust has settled on both BTC and ETH, fear is still lopsided in SOL. SOL IV remains highly elevated with the 30-day trading at 235% as markets are now more concerned over the knock-on effects on the blockchain’s survivability due to its close relations with FTX and Alameda.

On the flow side, sentiments were largely mixed as outright call buying and put buying are seen on both BTC and ETH. Traders are still piling onto short-volatility to capitalize on the aftermath of the crisis. One interesting trade that has been seen in the past 24 hours is synthetic shorts, where traders are using options as a way to replicate the linear payoff of a short underlying.

Crypto Technical Analysis

BTC is currently at $16,890 and has moved higher by 1.70%. Price has shown strong bullish momentum off its 16k support area as BTC trades within a range. Although price still trades below the 50-period EMA on the H4, it is likely to test its previous high at 17.5k with further confirmations on the H1 where bullish structure has been established with a new higher low formed.

ETH is trading at $1,252 and has inched higher by 0.78%. Price continues to hover above its 1.25k support region created since July, having broken below it 1 week prior. Similarly, new higher lows have been observed on its H1 chart. However, there is a resistance present at $1,280, A break above would allow price to test its $1,335 highs since 11 Nov, otherwise, a rejection of this area would likely cause a bearish continuation in price.

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