🌳US Government On Brink Of Shutdown Amidst Budget Uncertainty; Crypto Exchange HTX Hacked For $8M

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• US government on brink of shutdown amidst budget uncertainty; Evergrande crisis deepens as subsidiary fails to repay 4 billion yuan onshore bond (more in Macro & TradFi)
• Crypto exchange HTX hacked for $8M; Mixin Network hacked for $200M (more in DeFi & CeFi)
• MicroStrategy acquires 5,445 $BTC, valued at $147.3M; Vitalik.eth deposits 400 $ETH to Coinbase (more in On-Chain)
• Options market shows unexpected stability; BTC term structure unchanged; cryptocurrencies indicate bearish sentiment (more in Crypto Derivatives)
• BTC and ETH find support after plunge on Monday; ETHBTC attempts to break above resistance after setting yearly lows (Crypto Technical Analysis)

Macro & TradFi

Amid growing political tensions, the US government is on the brink of a shutdown as lawmakers remain deeply divided over the budget, primarily due to opposition from the right wing of the Republican party. With a looming deadline of next weekend, there is a pressing need for a spending plan that can be approved by both chambers of Congress, which currently exhibit a fragile balance of power. The potential shutdown threatens to furlough millions of federal workers, pausing all but essential operations, and could further dent the already fragile US economic confidence amidst recession fears. This budgetary impasse is intensified by internal Republican conflicts over tax and spending decisions, as well as international aid to Ukraine. While the White House underscores that funding the government is Congress's responsibility, they are concurrently preparing for a probable shutdown, emphasizing the need for lawmakers to prioritize national interests over partisan politics.

The China Evergrande Group crisis intensified as the company's Hengda Real Estate Group subsidiary failed to repay a 4 billion yuan ($547M) onshore bond. Amidst restructuring setbacks, Evergrande is teetering on the edge of one of China's largest restructurings, jeopardizing its $30B offshore debt plan. This led to a 25% plunge in Evergrande’s shares, while reports surfaced about the detention of former company executives, Xia Haijun and Pan Darong. As the company struggles with a staggering 2.39 trillion yuan liability, worries about China's deepening property crisis have caused Chinese property stocks' valuation to drop by $55B this year. This ongoing turmoil not only highlights the vulnerability of Chinese real estate giants but also raises global concerns over Chinese assets.

U.S. equities saw a slight up-swing as the S&P 500, NASDAQ Composite, and DJIA rose by 0.40%, 0.45%, and 0.13%, respectively. Warning of a US government shutdown did little to shift market sentiment, but concerns may intensify as October 1 nears. Shares in Asia declined, with the Japanese Nikkei and Hong Kong Hang Seng dropping 0.70% and 0.72%, respectively. Attention in Asia is focused on the fresh signs of turmoil as Evergrande missed a debt repayment.

DeFi & CeFi

• HTX hacked for $8M
• Mixin Network hacked for $200M
• MicroStrategy bought 5,445 BTC since August
• ECB’s Lagarde says digital euro at least 2 years away
• Celsius creditors vote in favor of reorganization plan
• Coinbase successfully registers with Spain’s central bank
• Hong Kong to disclose all crypto license applicants after JPEX probe

HTX, formerly known as Huobi, experienced a hack resulting in a loss of 500 Ether (ETH), valued at around $8M. Justin Sun, Tron's founder and HTX advisor, stated that the incident occurred on Sunday and was identified immediately. HTX has covered the losses, assuring users that their funds are safe and the stolen sum is relatively small compared to the exchange’s assets. The hacker targeted the exchange's hot wallet, which received approximately $500M in deposits from Binance since its creation in March. HTX is offering the hacker a $400K bug bounty to return the stolen funds and is open to hiring them as a security white hat advisor.

In other news, Mixin Network, a Layer-2 protocol designed to facilitate cheaper and more efficient cross-chain transfers, has reported a hack resulting in the loss of approximately $200M. In July, Mixin Network’s top 100 assets amounted to just over $1.1B. The breach was executed on the database of Mixin Network's cloud service provider. On Twitter, community members have been chastising Mixin Network's reliance on a centralized database, which creates a single point of failure. The platform's founder is expected to address the situation in a live stream within the day.

On-Chain

According to @santimentfeed, MicroStrategy has acquired 5,445 $BTC valued at approximately $147.3M. Remarkably, this level of social media attention and discourse has reached heights that MicroStrategy only last saw on April 5th, a mere six days before Bitcoin's significant leap past the $30K mark. These movements underline MicroStrategy's continued bullish stance on cryptocurrency, particularly Bitcoin.

According to @lookonchain, vitalik.eth (@VitalikButerin) has made a significant deposit of 400 $ETH, equivalent to $632K, to Coinbase in the last 24 hours. This transaction raises potential implications for market sentiment and underscores the dynamic actions of influential players within the space.

Crypto Derivatives

• Funding rate flipped to negative for BTC but remains positive for ETH
• Deribit Implied Volatility Index (DVOL) for BTC fell to 39.32% while it retreated on ETH to 35.78%
• 30-day 25-delta skew (C-P) on both BTC and ETH plunged to -1.11% and -4.12%, respectively
• The futures market witnessed $31.51M worth of liquidations in the last 24 hours, with shorts representing 63.37% of the total

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

In the options market, 7-day and 30-day implied volatilities (IV) on BTC have remained subdued since rising on the 20th of September. This is unexpected given the possible US government shutdown on Oct 1.

Meanwhile, the term structure of BTC remains in contango without any significant changes.

Elsewhere, the 30-day 25 delta (C-P) skew on BTC decreased to -1.11. Similarly, the 30-day skew on ETH has dropped further to -4.12%, indicating a near-term bearish sentiment for both major cryptocurrencies.

Lastly, @Paradigm spotlighted varied trading behaviors in the current market scenario. Prominent BTC activities include the acquisition of 1350x 27-Oct-23 $32K / 24-Nov-23 $33K call calendar options and the purchase of 1200x 29-Sep-23 $24K / 13-Oct-23 $24.5K put calendar options. On the ETH spectrum, notable trades consist of the procurement of 8000x 29-Dec-23 $1.8K (tied) call options and the acquisition of 3000x 29-Sep-23 $1.5K / 13-Oct-23 $1.45K put calendar options.

Crypto Technical Analysis

Turning our attention to technical analysis, BTC discovered support at the $26K mark after its decline on Monday, coincidentally aligning with the monthly opening price for September. Examining the daily chart, BTC is currently trading in a narrow range, fluctuating between $26K and $26.58K. These two levels have served as pivotal points for support and resistance. To witness a substantial upward breakout, BTC bulls must successfully establish themselves above the $26K threshold and refrain from dipping below it. Failing to do so could potentially lead to a decline towards the $25K mark.

In a similar vein, ETH found substantial support around $1.58K after being rejected off its September opening price of $1.64K. The price movement in the upcoming days is expected to remain confined within this tight range without any significant catalyst unless ETH deviates below the $1.58K support level. Such a move would trigger a retest of its lowest point for the quarter, at $1.54K, suggesting a stronger downward bearish trend.

Meanwhile, the ETHBTC pair has fallen tremendously since the start of September, underscoring BTC's dominance over ETH amid this bearish market phase. Currently, ETHBTC is striving to establish itself above the 0.065 threshold after establishing a new yearly low at 0.05940 last Friday. If successful, there is a chance that ETHBTC could potentially aim for a retest of the September opening level at 0.06354.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Evergrande debt setback, Oceanwide blow rattle China property stocks

• Hedge funds boost bearish bets on US equities amid market jitters

• UK workers take most sick leave in over 10 years, employers say

• US senators pressure Treasury to get more aggressive on climate crisis risks

• Wall Street posts gains as investors eye rate outlook

• Biden, US officials warn of hunger for millions in a government shutdown

• Schwab slashes fees on more fixed income ETFs

• DWS to pay $25 mln to end US probe into greenwashing, other issues

• Judge dismisses suit against New York Fed over COVID-19 firings

• Toronto market snaps losing streak as energy rallies

• Merck Covid drug linked to virus mutations that can spread between people, new study says.

• Asia markets largely fall despite Wall Street rally.

Crypto

• Crypto Exchange HTX Lost $8M of Ether Due to a Hack, Justin Sun Says.

• Optimism Slumps Most Among Crypto Majors Ahead of $30M Token Unlock.

• Coinbase Successfully Registers With Spain's Central Bank.

• MicroStrategy Bought 5,445 Bitcoin for $150M Since August.

• Hong Kong to Disclose All Crypto License Applicants After JPEX Probe.

• Arbitrum Treasury Richer by $59M as Users Miss Claims Deadline.

• Mixin Network Losses Nearly $200M in Hack.

• Counterfeit Aptos Token Deposited on Upbit Leads to APT Withdrawals Being Temporarily Suspended.

• Digital Euro at Least 2 Years Away, ECB’s Lagarde Says.

• Crypto exchange Binance reopens exchange services in Belgium.

• Celsius creditors vote in favor of reorganization plan.

• mBridge CBDC project preparing for new members, launch of minimum viable product.

Yours sincerely,
Treehouse Research 🌳