🌳 US And China Prioritize AI Safety Dialogue; Ripple And Tether Spark Regulatory Discussions

14 May 2024, Tuesday

2:41 AM

🌳 US And China Prioritize AI Safety Dialogue; Ripple And Tether Spark Regulatory Discussions

BTC

ETH

S&P Futures 500

$62,796.66

$2,945.91

$5,243.50

(+2.13%)

 (+0.52%)

(-0.02%)

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

  • US-China discuss AI risks; Yellen seeks moderate response to US tariffs (More in Macro & TradFi)
  • Ripple and Tether CEO argue over the regulatory compliance of USDT; ZachXBT unveils a potential exploit to Bahrain-based exchange Rain (More in DeFi & CeFi)
  • Bitcoin on-chain activity is at the lowest point in a decade; Ethereum shows growth in DeFi and Staking sectors (More in On-Chain)
  • Bitcoin market expects future volatility; overall sentiment remains cautiously optimistic (More in Crypto Derivatives)
  • BTC looks to test $64K and $65K resistance levels; ETH consolidating  above $2.9K support (More in Crypto Technical Analysis)

Macro & TradFi

US and Chinese officials are set to convene in Geneva for their inaugural dialogue on artificial intelligence risks, following agreements made by Presidents Joe Biden and Xi Jinping at a San Francisco summit. This dialogue aims to mitigate the risk of misjudgments and unintended conflicts as AI technologies advance. The US delegation, led by Tarun Chhabra and Seth Center, will discuss norms and principles of AI safety and express concerns over Chinese AI developments perceived as security threats. This meeting, focusing on managing risks rather than promoting technical cooperation, underscores the necessity of balancing innovation opportunities with security concerns. This engagement is part of broader efforts to stabilize relations, which include reopening military communication channels and addressing transnational challenges like fentanyl trafficking.

In other news, Treasury Secretary Janet Yellen expressed hope that China will not retaliate significantly in response to new U.S. measures designed to protect investments in critical industries such as electric vehicles, batteries, and solar cells. While specific details of the impending tariffs remain unconfirmed, Yellen emphasized that any U.S. actions would be targeted and not broad-based. This approach reflects the Biden administration's strategy to safeguard American technological advances against unfair competition, particularly from China, which is perceived to not adhere to equitable trade practices. Yellen's comments underscore the administration's dual focus on protecting domestic investments and managing inflation, which remains a top priority amid ongoing economic challenges.

Yesterday, US equities presented a mixed performance, with the Dow Jones Industrial Average ending its eight-day winning streak, decreasing by 0.21%, while the S&P 500 slightly dropped by 0.02%. In contrast, the Nasdaq 100 saw a rise of 0.21%. This divergence in market movements came as investors adjusted their positions in anticipation of upcoming inflation data. Notably, Intel's shares surged by 2.21% following news of its potential $11 billion deal with Apollo Global Management to establish a factory in Ireland. The focus now shifts to the U.S. Consumer Price Index (CPI) data due on Wednesday, which is likely to influence market sentiment further, alongside the Producer Price Index (PPI) set for release today. Both sets of data are crucial for assessing the inflation trajectory, which remains a pivotal concern for traders.

CeFi & DeFi

  • Tether and Ripple CEO clashed over USDT
  • Middle East exchange Rain has reportedly been exploited for $14.8 million
  • WBTC hacker returns $71 million worth of stolen funds
  • Antonio Juliano steps down as CEO of dYdX
  • US kicks Chinese crypto miner MineOne Partners off land near Air Force Base
  • Philippines begins sandbox testing for Peso-backed stablecoin

Ripple CEO Brad Garlinghouse suggested in a podcast that the United States government is targeting stablecoin issuer Tether, potentially causing unpredictable effects on the crypto markets. Garlinghouse expressed certainty that another crypto-related black swan event, akin to the FTX executives' fraud revelation, is imminent. Following the statement, Tether CEO Paolo Ardoino has responded sharply to the comments about Tether, accusing Garlinghouse of spreading FUD (Fear, Uncertainty, Doubt) regarding USDT, Tether's largest stablecoin offering. Ardoino highlighted Tether's efforts to maintain regulatory compliance and combat criminal activities, emphasizing its collaboration with law enforcement agencies globally. He criticized Garlinghouse as an "uninformed CEO" and questioned Ripple's plans to launch a stablecoin while under investigation by the U.S. Securities and Exchange Commission (SEC). He also expressed disappointment with mainstream crypto media for promoting negative narratives about Tether and reiterated Tether's commitment to cooperating directly with regulators while emphasizing Tether's role in ensuring a safe global financial ecosystem with a track record of stability, liquidity, custodianship, and compliance.

In other news, Bahrain-based crypto exchange Rain has reportedly been exploited for $14.8 million, according to blockchain analyst ZachXBT. The stolen funds, consisting of 137.9 BTC and 1,881 ETH, were transferred to wallets and have remained inactive since the incident on April 29. ZachXBT noted suspicious outflows from Rain's BTC, ETH, SOL, and XRP wallets, with funds swiftly moved to instant exchanges and converted into BTC and ETH. Rain's "pro" trading platform has experienced intermittent downtime since May 5. Despite obtaining a license to operate in the UAE in 2023, Rain has yet to respond to CoinDesk's request for comment. This incident adds to the growing trend of crypto-related hacks and exploits, which resulted in losses of $2 billion last year and an additional $333 million in the first quarter of this year.

On-Chain

Santiment’s on-chain data shows a significant decrease in on-chain activity for Bitcoin. Transaction volume on the network has reached its lowest point in a decade, while the number of daily active addresses has dropped to the lowest level since January 2019. Additionally, transactions over $100K, often attributed to whale activities, have decreased to their lowest since December 2018. This reduction in on-chain activity may not necessarily predict further price declines but rather highlights a period of market fear and indecision among traders.

In another analysis, Glassnode’s on-chain data reveals a robust recovery and expansion within its ecosystem, evidenced by the significant resurgence in Total Value Locked (TVL) in DeFi, which has been increasing. Concurrently, the total value and number of ETH staked have surged, particularly since the transition to Proof-of-Stake, highlighting increased participation and investment in securing the network. Additionally, the rise in weekly active addresses since early 2023 reflects a growing user base, further showcasing Ethereum's strengthening position as a central hub for DeFi and staking activities.

Crypto Derivatives

  • Funding rates remained positive for BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 55.97% and 63.64%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC dipped to -0.21% while ETH tumbled to -2.69%.
  • The futures market witnessed $201.03M in liquidations, with longs representing 59.96%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

20.45%

DOGE

OKX

dYdX

16.51%

AVAX

OKX

dYdX

16.03%

DOGE

Bybit

dYdX

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 ATM (at-the-money) implied volatilities experienced mixed outcomes, as the 7-day IV dropped to 50.06%, while the 30-day IV slightly increased to 53.30%. This suggests that traders anticipate increased market volatility over the next 30 days. Consequently, the decrease in shorter-term volatilities indicates more affordable options for traders, presenting an opportunity for cost-effective hedging or speculative strategies in the near term.

The persistent contango in Bitcoin's term structure highlights that market participants anticipate future volatility to surpass present levels. However, a general decline in implied volatilities (IVs) across the curve indicates a market consensus toward potential Bitcoin price stabilization. Additionally, the noticeable dip in short-dated tenors, particularly those up to 3 days, can be attributed to a substantial volume of options exercised as Bitcoin's price climbed past $62K.

Bitcoin's 7-day and 30-day skews have experienced significant declines, dropping to -1.36% and -0.02% respectively. This trend likely stems from speculative activity among option investors, compounded by an absence of imminent Bitcoin-related catalysts. The negative skews indicate a prevailing investor sentiment that anticipates lower volatility or fewer extreme price movements in the near term, suggesting a cautious but not pessimistic outlook on Bitcoin’s price stability.

Lastly, @Paradigm highlighted option flows yesterday emphasizing strategic put purchases. For BTC, significant movements included 200x 31-May-24 57k/55k Put Spreads. In the ETH market, traders aggressively opted for downside protection, exemplified by a 2450x 31-May-24 2700/2500 Put Spread and a substantial 1500x 31-May-24 2800/2600 Put Spread, aiming to manage potential declines effectively.

Crypto Technical Analysis

Moving on to Technical  Analysis, the BTC 4-hour chart shows BTC trading around $63K, with the same significant support at approximately $60K and resistance near $64K and $65K. The RSI at 61.46 suggests a mild bullish trend. Currently, the market sentiment leans slightly positive, as BTC is closer to testing its upper resistance than threatening the support level.

Currently, ETH is trading around $2.9K, consolidating just above the $2.8K support level on the 4-hour chart. Its positioning within the upper Bollinger Band indicates a potential increase in buying pressure, although the market remains neutral, with the RSI at 50.39. A sustained move above the $3.1K resistance could signify a bullish breakout, potentially pushing prices towards $3.2K, while a failure to break this level might result in a retest of the support or further decline.

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