🌳U.S. Economy Grows Robustly; Valkyrie Pioneers Dual Cryptocurrency Futures Exposure in ETF

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• U.S. economy grows despite challenges; German inflation drops amid ECB rate concerns (more in Macro & TradFi)
• Valkyrie gets approval to combine Bitcoin and Ether ETFs; US SEC delays spot Bitcoin ETFs for BlackRock, Invesco, and Bitwise (more in DeFi & CeFi)
• LINK whale is potentially taking profit as price pumps throughout the months; Institutional investors exhibit different views on LDO (more in On-Chain)
• Implied volatilities for BTC rise; ETH's DVOL surpasses BTC, signaling higher expected volatility (more in Crypto Derivatives)
• BTC and ETH broke their respective resistances as the bulls dominated the market with the commencement of the US trading session (Crypto Technical Analysis)

Macro & TradFi

The U.S. economy exhibited robust growth in Q2, with a 2.1% annualized GDP increase, and is on track for a potential 4.9% growth rate in Q3. However, concerns arise from a potential government shutdown due to congressional disputes and the ongoing auto workers' strike, which may impact motor vehicle production and disrupt supply chains. Despite these challenges, the labor market remains resilient, evidenced by a mere 204,000 new unemployment claims, slightly below expectations, and an unemployment rate of 3.8% in August. This strength in the labor market, combined with unresolved inflation concerns, could prompt the Federal Reserve to consider another rate hike in the near term.

On the other hand, German inflation declined to a two-year low, with the harmonized index of consumer prices dropping from 6.4% in August to 4.3% in September, outperforming the anticipated 4.5%. This decline, combined with Spain's lower-than-expected inflation, suggests the European Central Bank might maintain the eurozone's benchmark interest rate at 4%. Despite this, rising oil prices and significant wage growth in Germany raise concerns about sustained inflation surpassing the ECB's 2% target, potentially necessitating prolonged elevated interest rates.

U.S. equity markets advanced, with the S&P 500 increasing by 0.59%, the NASDAQ Composite by 0.84%, and the DJIA by 0.35%. In Europe, the Stoxx Europe 600 index climbed 0.4%, ending its five-day decline. As yields pulled back from their recent highs, tech stocks such as Meta and Advanced Micro Devices saw gains of 2.09% and 4.78%, respectively. On the downside, Accenture's stock declined by 4.33% after the company reported mixed earnings and provided a below-expectation revenue forecast. Market participants are now keenly awaiting the release of the Fed's Core PCE Price Index data, scheduled for 20:30 SGT today.

DeFi & CeFi

• Valkyrie gets approval to combine Bitcoin and Ether futures ETFs
• US SEC delays spot Bitcoin ETFs for BlackRock, Invesco, and Bitwise
• Ripple cancels plan to buy Fortress Trust
• Coinbase receives approval to list perpetual futures trading to users outside the US
• Ethereum developers appear successful in 2nd attempt at Holesky testnet launch
• Buenos Aires releases blockchain digital identity solution powered by zkSync’s ZK proofs

Asset manager Valkyrie has started purchasing Ether futures contracts, making it the first US ETF to offer exposure to both Ether and Bitcoin futures contracts in a single investment vehicle. The Valkyrie Bitcoin Strategy ETF (BTF) has begun adding these Ether futures contracts to its portfolio, after receiving approval to convert its existing Bitcoin futures ETF into a two-for-one investment vehicle. The fund's new strategy, which combines BTC and ETH futures contracts into one ETF, will officially take effect on Oct 3, and the fund's name will be changed to Valkyrie Bitcoin and Ether Strategy ETF, with the ticker remaining as BTF.

Separately, following the recent delayed review of Bitcoin exchange-traded fund (ETF) applications for Ark, 21Shares, and Global X, the U.S. Securities and Exchange Commission (SEC) has delayed its decision on several spot Bitcoin ETF proposals, including those from BlackRock, Invesco, Bitwise, and Valkyrie. The decision comes two weeks earlier than the previously determined deadline of Oct 16-19, and ahead of the anticipated government shutdown on Oct 1, which is expected to disrupt federal agencies, including the SEC. Bloomberg ETF analyst James Seyffart predicted that applications from Fidelity, VanEck, and WisdomTree will also be delayed. The third set of deadlines for these firms is set for around mid-January, which could possibly be delayed as well. The SEC’s final decision is expected by mid-March.

On-Chain

@lookonchain recently observed a significant event as a whale withdrew $2.35M worth of LINK tokens from Aave just a few hours ago. This particular whale initially entered his LINK position in July, acquiring tokens at an average cost of approximately $7.6 per token. Considering the substantial gains LINK has experienced this month, with a 25.8% increase in the last 30 days, it is highly likely that this whale is looking to take profits on these gains. Consequently, $LINK holders should exercise caution due to the potential selling pressures emerging across various exchanges.

On another front, @spotonchain has reported divergent behaviors among institutional investors concerning Lido's LDO token. Over the past 24 hours, Brevan Howard Digital deposited an additional 250K LDO tokens into Coinbase, marking a cumulative deposit of 3M LDO tokens for the month, which suggests significant potential selling pressure. In contrast, Amber Group has reportedly acquired another 1.175M LDO tokens from Binance, bringing their total purchases to 3.27M since August 18. These contrasting movements could be attributed to varying opinions on recent developments within the Lido ecosystem, particularly concerning efforts to limit Lido's dominance in liquid staking and enhance decentralization within the sector.

Crypto Derivatives

• Funding rates flipped to negative for both BTC and ETH
• Deribit Implied Volatility Index (DVOL) for BTC and ETH retreated to 38.65% and 38.82%, respectively
• 30-day 25-delta skew (C-P) on both BTC and ETH jumped to 1.97% and -0.30%, respectively
• The futures market witnessed $73.62M worth of liquidations in the last 24 hours, with shorts representing 75.71% of the total

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

In the options market, the 7-day implied volatilities (IV) for BTC rose from 27.44% to 28.95%. Similarly, the 30-day IV has risen from 29.89% to 32.84%. This increase in IV could be due to the spike in spot prices, which rose in light of the positive news from the US GDP forecast.

Notably, the DVOL index for ETH has overtaken the DVOL for BTC, a rare occurrence, suggesting that the options market currently perceives ETH to be more volatile than BTC in the next 30 days.

Furthermore, the term structures for both BTC and ETH consistently portray contango, with no marked deviations. A marginal elevation is observable at the curve's forefront, likely stemming from the market's anticipation of the Core PCE Price Index data today, which stands to impact interest rate trajectories.

Elsewhere, the 30-day 25 delta (C-P) skew on BTC rose to 1.97% from -1.12% whereas that of ETH rose slightly to -0.3% from -2.23%, indicating an increasingly bullish sentiment for both major cryptocurrencies.

During the Asia/Europe session, @Paradigm underscored varied trading behaviors in the current market setting. For BTC, key transactions featured the sale of 500x 27-Oct-23 $29K/$32K 1x3 call spread options and the acquisition of 450x 24-Nov-23 $31K call options. In the ETH domain, pivotal trades involved the procurement of 18750x 24-Nov-23 $2K call options and the purchase of 9030x 24-Nov-23 $1.9K call options.

Crypto Technical Analysis

Turning to technical analysis, BTC made a significant move as the US trading session kicked off, registering a gain of over 2% within just a few hours. The RSI has also seen a notable increase, approaching the overbought zone at 65.54. Consequently, the price has broken through the resistance marked by the upper trendline formed by recent local lower highs, as well as the 50-day and 100-day SMAs. If this bullish trend continues, BTC is likely to test the resistance level at $28.9K, which previously served as a support level from late July to early August. However, there is a possibility of a minor retracement for BTC, possibly in the form of a momentary pullback to the trendline or encountering slight resistance in the range of $27.5K to $27.7K before moving toward the new resistance. Conversely, if bears regain control, the previous support around the $25.5K level could hold.

Shifting focus to ETH, a similar pattern has emerged, marked by a breakthrough above the previously identified trendline and SMA levels. Looking ahead, the immediate next resistance level is approximately $1.74K, corresponding to the local high observed at the end of August. It is also possible that ETH retraces to the trendline before experiencing further upward movement. On the downside, in the event of a bearish reversal, the immediate support for ETH is situated at $1.54K, aligning with the local low.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• IMF sees signs China stabilizing, says reforms can boost medium-term growth

• Fed's Barkin says more data needed before making next monetary policy call

• U.S. pending home sales fall more than expected in August

• UK households shoulder 3,500 pound tax hit - IFS

• World Bank proposes ways to boost lending by over $100 bln

• Shutdown odds grow as Senate, House advance separate spending plans

• Global stock index rises as oil, 10-year yield and dollar pull back

• Traders wary of volatility as JP Morgan fund's big options trade looms

• Wall St ends higher as investors digest economic data ahead of inflation report

• US GDP growth unrevised at 2.1% in second quarter as economy shows resilience

• TSX rebounds from 3-month low as bond yields ease

Crypto

• Valkyrie Gets Approval to Start Buying ETH Futures For its Existing Bitcoin ETF.

• Ripple Cancels Plan to Buy Fortress Trust.

• Major TradFi Player VanEck Readies Ethereum Futures ETF.

• FTX Bankruptcy Claims Soar in Value in Over-the-Counter Markets as Estate Recovers $7.3B.

• Coinbase Receives Regulatory Approval to List Perpetual Futures Trading to Users Outside US.

• Ethereum Developers Appear Successful in Second Attempt at Holesky Test Network Launch.

• Buenos Aires Releases Blockchain Digital Identity Solution Powered by zkSync's ZK Proofs.

• Central Banks Successfully Test Cross Border Trading of Wholesale CBDC Using DeFi.

• CZ Denies He Owns CommEX, Binance Russia's New Owner.

• SEC delays spot Bitcoin ETF decision for BlackRock, Invesco and Bitwise.

• Argentina to Roll Out Digital Identity for Citizens Built on zkSync Era

• Bitcoin Face High Selling Pressure From Miners

Deal Flow

• Oracle Project Supra Closes Over $24 Million in Funding with Coinbase Ventures Involved

Yours sincerely,
Treehouse Research 🌳