US Charges Bizlato With Laundering Of $700M; Weak Retail Sales Figures Reignite Recession Fears

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Yield curve control remain unchanged after BOJ meeting; US stocks fell after retail sales post its biggest drop in 12 months (more in Macro & TradFi)
• Bizlato charge with laundering of $700M by DOJ; MakerDAO begins governance voting to limit exposure to Gemini (more in DeFi & CeFi)
• Several altcoins like SAND and MANA still undervalued based on their 1-year MVRV ratio (more in On-Chain)
• VRP broadly unchanged for BTC and ETH as RV continues to rise (more in Crypto Derivatives)
• BTC and ETH lost ground after attempting to reclaim key levels (more in Crypto Technical Analysis)

Macro & TradFi

USDJPY had a wild intraday swing after the BOJ policy meeting kept the yield curve control (YCC) program unchanged; JPY sold off over 3% and printed above 131.5 against the dollar at the intraday trough before bouncing back and wrapping the day around 1.5% weaker vs USD. Kuroda later stated that the central bank assesses its policy action’s impact promptly and its decision should not be interpreted overly. Otherwise, US retail sales data (-1.1% actual vs -0.4% consensus) showcased the tug of war between “bad news is good news” traders versus “bad news is bad news” cohort - stocks jumped higher initially on expectation of Fed being less hawkish before recession fears weighed down and pushed US markets to close lower.

Major US indices closed lower after initial gains following weak retail sales data; NASDAQ closed 1.4% lower, SPX 1.56% and DOW 1.8%. Treasury bonds rallied on recession fears; 10-year yields tightened almost 20bps. Brent and WTI oil sold off more than 2% before rallying more than 1% earlier in the day.

DeFi & CeFi

• Hong-Kong-based exchange, Bitzlato, charged with laundering of $700M of crypto
• MakerDAO begins the voting process for limiting exposure of DAI stablecoin to Gemini Dollar
• Coinbase halts operation in Japan
• National Australia Bank creates stablecoin AUDN and plans for transactions to begin mid-year
• Spain approves of Euro-linked token as part of sandbox initiative
• Deal Box launches $125M venture capital fund dedicated to blockchain and Web3

Bitzlato was charged with laundering $700M as the exchange operates as an unlicensed money exchange for those operating on Hydra Market. Hydra Market is an illegal online marketplace for narcotics, stolen financial information and fraudulent identification information. Owner of Bitzlato was a 40-year-old Russian that had since been arrested by the US authorities.

Gemini Dollar, GUSD, was one of the collaterals that could be used to mint DAI. With the concern around Gemini, MakerDAO has proposed two new governance changes to reduce its exposure. The two votes centered around the percentage fee charged for converting DAI back to its collateral asset, GUSD and the debt ceiling on GUSD. Currently, 75% of the votes are in favor of reducing the fee charged for conversion of DAI to GUSD while 73% of the votes are in favor of leaving the debt ceiling unchanged.

On-Chain

For on-chain, the news of DOJ taking action against Bitzlato had led to a mild -4.1% drop in BTC price as market participants fear more drastic action taken against the broader crypto market (@santiment). The crypto market has since mildly climbed higher from the initial FUD.

Meanwhile, some altcoins like $APE have seen their 1-year MVRV ratio jump back into positive territory while others like $SAND and $MANA still have their 1-year MVRV ratio well below 0, at -33% and -60% respectively.

Crypto Derivatives

• BTC and ETH funding rate remains positive
• 30-day ATM IV fell for both BTC & ETH to 59.6% and 70.0% respectively
• 30-day 25d call skew fell for both BTC & ETH to 1.07% and 0.66% respectively

For futures, total liquidations for the last 24hrs came in at $250.51M, with the majority coming from longs at $189.76M.

On the options front, IV largely fell across the curve as term structure flipped to contango for both BTC and ETH. Near-dated IV for BTC formed a bottom on 3 February while longer-dated IV remained stable for both BTC and ETH. RV continues to rise for both BTC at 67.20 and ETH at 76.62. Variance risk premium rallied to 8.67% for BTC and to 8.17% for ETH.

On the flow front, most of the volume comes from short-dated options expiring on 27 January. On the BTC side, the most popular strategy is the short straddle, as traders expect consolidation after BTC puked to $20.5K yesterday.

Lastly, the VIX rose to 20.34 as stocks whiplashed from US retail data.

Crypto Technical Analysis

BTC price whipsawed overnight as it attempted to break above $21.4K, However price action gave way and tumbled as low as $20.3K. The H4 RSI has fallen to the neutral level and prices are currently holding at $20.7K.

Similarly for ETH, prices attempted to reclaim 1.6K but fell reaching lows of $1,500. The H4 RSI is lower than BTC’s at 40. Currently, the $1.5K price may act as a psychological level of support. If price breaks below this point, however, the next short-term support looks to be $1,430.

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Daily Readings

TradFi

• Davos 2023: China recovery could be very quick -IMF's Gopinath

• Shell unit to acquire EV charging firm Volta for about $169 mln

• Fed's Harker says he is ready to downshift to 25-basis-point rate hikes

• Blackstone closes PE secondary funds at record $25 billion

• Fed's Bullard urges colleagues not to "stall" on remaining rate increases

• Treasury yields fall after U.S. data, stocks decline

• U.S. holiday sales miss estimates as inflation weighs on demand - NRF

• Markets fully price in quarter-point interest rate hike in February as inflation slows.

Crypto

• Yuga Labs' Sewer Pass NFT Collection Nets Over $6M in Sales in Just Hours.

• MakerDAO Favors Holding GUSD Stablecoin as Part of Reserve in Early Voting.

• Crypto Markets Analysis: Bitcoin’s Improving Health May Be Thanks to 'Dr. Copper'.

• Lido’s Total Value Locked Spiked 33% In Past Month, Becoming Largest DeFi Protocol by TVL, Says DeFiLlama.

• Rarible Expands NFT Marketplace Builder to Polygon-Based Collections.

• US Charges Crypto Exchange Bitzlato With Laundering $700M.

• Bitcoin Tumbles From Multi-Month High on DOJ Worry, Hawkish Fed.

• Digital Dollar Project urges US to take action on CBDC development.

• Media startup says it will buy back $10 million SBF stake: Report.

• Spain's central bank approves euro-linked token pilot as part of sandbox initiative: Report.

• Genesis is planning to file for bankruptcy: Report.

• National Australia Bank creates stablecoin called AUDN: AFR

Deal Flow

• Deal Box launches $125M blockchain and Web3 venture fund.

Yours sincerely,
Treehouse Research 🌳