US-China Relationship Worsens Over Taiwan; Coinbase’s Layer 2 Experiences Technical Difficulties During Testnet Launch

24 Feb 2023, Friday

3:16 AM

US-China Relationship Worsens Over Taiwan; Coinbase’s Layer 2 Experiences Technical Difficulties During Testnet Launch

BTC

ETH

S&P Futures 500

$23,970.25

$1,651.75

$4,018.25

(-0.68%)

 (+0.81%)

(+0.20%)

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

GM Treehouser 🌳

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January 2023 Market Recap

Our Daily View

What We Are Covering Today

  • US sends more troops to Taiwan; Biden appoints former Mastercard CEO to be the president of the World Bank (more in Macro & TradFi)
  • Galaxy Digital acquires GK8 for $44M; CoinBase new layer-2 launches on testnet with technical glitches (more in DeFi & CeFi)
  • BTC whale addresses are slightly rising; BUSD addresses reached 3 month low (more in On-Chain)
  • Straddle sellers add pressure to IV as it crashes below RV (more in Crypto Derivatives)
  • BTC and ETH fail to rebound to key zones (more in Crypto Technical Analysis)

Macro & TradFi

The US China relationship intensifies as a US defense official states that the number of American troops in Taiwan is being increased to 100-200 troops, a significant increase from the previous number of around 30, to support the island's democracy. At the same time, US Secretary of State Anthony Blinken accused China of supplying Russia with non-lethal equipment that can be used for both military and civilian purposes. He expressed his hope that China would understand that providing military support to Russia's invasion would harm Beijing's international standing.

On the other hand, Ajay Banga, the former CEO of Mastercard, has been nominated by President Joe Biden to serve as president of the World Bank. As the largest shareholder in the World Bank, the US typically selects the leader of the institution. If chosen, Banga would succeed David Malpass, an appointee of former President Donald Trump who announced last week that he would step down from the role on June 30. The Biden administration has sought to focus the World Bank’s work more directly on addressing climate change, a topic on which Malpass faced criticism for his comments.

Lastly, the US markets have ended the four-day losing streak with DJIA, SPX, and NASDAQ gaining 0.53%, 0.33%, and 0.72% respectively. However, the major indices are still likely to end the week in the red. Meanwhile, US Treasury yields have pulled back from the 3-month highs as investors are starting to price in stronger economic data such as the decline in jobless claims. Meanwhile, 2Y Treasury yields went down yesterday to 4.687% and 10Y rates to 3.898%.

DeFi & CeFi

  • Galaxy Digital acquires institutional crypto custody firm for $44M
  • CoinBase’s new layer 2 blockchain, Base, off to a bad launch
  • Web3 game Worldwide Webb raises $10 million from Pantera Capital
  • DWF Labs invests $25M in privacy tech startup Beldex
  • Israeli startup Chain Reaction raised $70M to develop blockchain chips
  • Messari reduces workforce by 15%
  • Conflux integrates with Alchemy Pay to allow buying crypto with fiat
  • Binance US’s bid for voyager was rejected by SEC
  • Collab.Land to airdrop token to over 2M wallets on Optimism

Galaxy Digital acquires GK8 for $44M, a company that has created its own proprietary cryptocurrency custody platform with the goal of providing secure asset management for institutional users. Additional features include access to trading, DeFi, tokenization, NFT and automated transactions with a multi-party computation vault. These technologies will be used by Galaxy Digital for its upcoming prime brokerage, Galaxy One. Galaxy Digital has doubled down on its investment into cryptocurrency as it was just last December when it acquired Argo Blockchain’s mining operations for $65M.

On Thursday, Base, a brand-new layer 2 from Coinbase, launched on testnet. Unfortunately, many people had complaints about the technical issues they had utilizing it. Due to inaccurate calculations of the required amount of gas, almost every transaction carried out on Base had to be reverted. Another criticism came when the Base team removed their original pledge of donating 20% of their revenue and replaced it with a “portion of sequencer revenue”.

On-Chain

Tracking BTC whale addresses, the 100-1,000 BTC addresses are staying flat in this $23-25K trading range. 10-100 BTC addresses, on the other hand, have seen a slight increase in recent weeks. If the 10-1,000 BTC addresses start to rise as it has been during the price rally in the last 3 month, it could indicate another potential wave of surges in BTC price.

The number of active on-chain addresses that hold $BUSD has dropped significantly and reached a 3-month low on a 7D moving average scale.

Crypto Derivatives

  • BTC and ETH funding rates rose slightly
  • 30-day ATM IV fell to 51.35% and 56.57% for BTC and ETH respectively
  • 30-day 25d call skew decreased to 1.00% for BTC while put skew tightened to -3.44% for ETH

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

15.21%

SOL

OKX

DYDX

11.86%

BNB

OKX

BYBIT

7.75%

LTC

OKX

DYDX

Source: @CexyArbBot Telegram

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, DOGE vs USDT perps 

2) CEX observed include Binance, Bybit, OKX & DYDX

@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo

For futures, total liquidations over the past 24 hours amounted to $96.91M, the majority coming from longs at $58.55M.

On the options front, near-dated IV fell for BTC while falling across the curve for ETH. Term structure remains in contango for BTC and ETH though there is a kink on year-end for ETH. 7-day RV continues to fall, reaching 48 and 53 for BTC and ETH respectively. BTC’s negative carry remains while ETH’s variance risk premium widened to 4.7%.

On the flow side, for BTC options expiring today, open interests for calls and puts are at 45.8K and at 30.3K contracts, worth about $1.1B and $330M respectively. Taking a closer look at the strike prices for the BTC call options expiring today, we see that there are 2.7K contracts ITM with a strike price of $23K and 4.6K contracts ATM with a strike price of $24K. Popular strike price ranges from $24K to $28K, if BTC is to see a rally, there could be a cascading effect where option writers have to hedge their positions by buying more BTC.

Lastly, the VIX fell slightly to 21.14.

Crypto Technical Analysis

Onto TA, BTC continued its free fall yesterday after failing to break past the $25K mark. It fell under the $23.9K level briefly but bounced back up with the RSI gaining momentum, rising from 35 to 47. On the H4, the 100 & 200 MA can be expected to cross later today. The next level to look out for is the $24.8K to $25.2K resistance zone if momentum continues to rise.

As for ETH, price broke below the rising channel, reaching a low of $1.59K. 4H RSI bounced off right above the underbought range, jumping to 43, still below the neutral mark. The next level to follow is the $1.66K - $1.69K resistance zone provided price breaks back into the trend channel.

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