🌳U.S. Manufacturing Indicates Recovery; Ether ETFs Launch with Modest Initial Trading Volumes

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• U.S. manufacturing shows recovery signs; UK retail inflation hits a year's lowest rate (More in Macro & TradFi)
• Ether futures ETFs see low volume in first-day trading; Coinbase obtains payment license in Singapore (More in DeFi & CeFi)
• Prior to Bitcoin surging above $28K, four sizeable transactions between $187M and $346M were recorded; Spartan Group amidst DYDX activity, depositing 500K $DYDX back into Binance (More in On-Chain)
• Minimal changes across various indicators despite the launch of EFUT and BTC breaking the significant $28K threshold (More in Crypto Derivatives)
• BTC and ETH experience modest pullbacks, rejecting their respective resistance levels and cooling-off from over-bought RSI levels as the broader market settles (More in Crypto Technical Analysis)

Macro & TradFi

In September, the U.S. manufacturing sector exhibited signs of recovery, with the Institute for Supply Management (ISM) reporting the manufacturing PMI rising to 49.0 from 47.6 in August, marking its third consecutive month of improvement. Although this is still below the 50 threshold that indicates expansion, the upward trend suggests a positive trajectory for the sector. This optimism is further bolstered by a Commerce Department report highlighting robust construction spending in August, particularly in housing and factory construction. Despite concerns in some quarters about a potential recession, the data indicates continued economic resilience as we move into the last quarter of 2023.

In other news, UK retail inflation dropped to its lowest annual rate in a year at 6.2%, a decline from 6.9% in August, as reported by the British Retail Consortium. This decrease was driven by a significant easing in food price growth, which fell to a single-digit rate of 9.9% from its peak of 15.7% in April. Additionally, non-food inflation decreased, largely due to price cuts in back-to-school essentials. While this trend suggests a boost in consumer spending due to lower prices and record wage growth, ongoing challenges such as high interest rates, rising oil prices, and supply chain disruptions related to global events could threaten future price stability.

U.S. equities presented a mixed performance: while the government successfully averted a shutdown, the S&P 500 edged up by 0.01%, the NASDAQ climbed 0.83%, and the DJIA declined by 0.22%. U.S. Treasury yields soared to a 16-year peak, influenced by the Fed's hawkish stance. Tech stocks, with Alphabet gaining 2.53%, Meta up by 2.20%, and Nvidia rising by 2.95%, resisted the yield surge. Additionally, Coinbase appreciated by 0.31% on the back of its Singapore division securing a digital payment token service license. The market now anticipates the release of the JOLTs Job Openings data at 22:00 SGT.

DeFi & CeFi

• Ether futures ETFs see low volume in first-day trading
• Coinbase obtains payment license in Singapore
• Crypto liquidity provider GSR receives regulatory approval in Singapore
• Grayscale moves to convert its Ethereum trust to a spot Ethereum ETF
• Volatility Shares cancels Ethereum futures ETF launch
• Crypto investment firm Deus X Capital launches with $1B in assets

The first day of trading for futures-based ether exchange-traded funds (ETFs) saw lackluster volume across nine ETFs launched. The most popular, VanEck's Ethereum Strategy ETF, traded around 25,000 shares with a total dollar volume of $425,000, in contrast to the ProShares Bitcoin Strategy ETF's $1B in volume on its first day in October 2021. The crypto industry is still awaiting the SEC's decision on various spot bitcoin and ether ETF applications, with Grayscale Investments recently filing to convert its Grayscale Ethereum Trust to a spot ETF.

In other news, Coinbase has obtained a payment institution license from the Monetary Authority of Singapore, allowing it to provide digital payment token services to individuals and institutions in Singapore. This expansion comes as part of Coinbase's broader international growth strategy, focusing on countries with clear regulations in the crypto industry. Coinbase has quietly increased its presence in Singapore by establishing a tech hub and investing in Web3 startups. Singapore has also been actively supervising the crypto sector and issuing licenses to prominent firms, with one other such firm being the crypto market maker GSR.

On-Chain

According to data from @santimentfeed, amidst a backdrop of renewed market vigor with Bitcoin surging above $28K are four sizeable transactions executed just prior, each ranging between $187M and $346M in value. A further decrease in Bitcoin held on exchanges from 5.99% to 5.73% also acts as a positive indicator, with more holders on decentralized markets suggesting that investors are increasingly confident in Bitcoin’s short-to-mid term prospects and are strategically positioning themselves accordingly.

According to recent on-chain data from @lookonchain, a noteworthy series of transactions has been observed involving Spartan Group and $DYDX. After withdrawing 1.24M $DYDX ($2.25M in value) from Binance between January 13 and June 13, conducted at an average token price of $2.04, Spartan has now deposited 500K $DYDX, valued at approximately $1.04M, back into their Binance accounts. Currently, the Group's holdings stand at 737.62K $DYDX, equivalent to $1.53M, a moderate profit of $54.5K. This movement of assets back onto centralized exchanges may suggest potential selling pressure on the token, as Spartan Group may take profit on their positions.

Crypto Derivatives

• Funding rates remained positive for both BTC and ETH
• Deribit Implied Volatility Index (DVOL) for BTC rose to 38.00% while that of ETH stayed flat at 36.11%
• 30-day 25-delta skew (C-P) on both BTC and ETH dropped slightly to 0.69% and -0.22%, respectively
• The futures market witnessed $103.2M worth of liquidations yesterday, with longs representing 85.45% of the total

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

In conjunction with the price surge, BTC initially witnessed a notable spike in implied volatilities (IVs), peaking at 35.84% for ATM 30-day options. However, as the price subsided to more typical levels, IVs retraced, aligning with the patterns observed throughout the month.

Both BTC and ETH term structures consistently demonstrate a contango state, with a slight uptick in IVs along the curve, reflecting traders' expectations of slightly elevated volatilities in the near future.

Interestingly, despite BTC's breakthrough of the significant 28K level, the 7-day and 30-day 25-delta (C-P) skew for both BTC and ETH remain within the neutrality zone. Specifically, the 30-day C-P skew has decreased from 0.79% to 0.49% for BTC, and from 0.12% to -0.35% for ETH.

As reported by @Paradigm, option flows during yesterday's US trading session primarily focused on purchasing end-of-year upside positions, possibly influenced by the successful launch of VanEck's EFUT ETF. Notable trades included the acquisition of 575x 24-Nov-23 32000 BTC Call, 8000x 29-Dec-23 1400/2000 ETH Bull Risk Reversal, and the sale of 333x 24-Nov-23 28000 BTC Straddle.

Crypto Technical Analysis

Moving on to technical analysis, BTC was rejected at the $28.9K resistance level, falling 1.3% in the last 24 hours. The RSI has also seen a notable drop from overbought regions yesterday into a more neutral zone at 55.70. With this pull-back, the previously identified support at 27.5M has momentarily held, which may indicate a continued bullish sentiment if we can observe a further positive price reversal action from this level.

Much like BTC, ETH has also experienced a significant pull-back in the last 24 hours, dropping 3.4%. This was marked by a rejection of resistance levels at $1.74K, which brought ETH close to the 50 SMA line, acting as a slight support. RSI is now sitting at 46.82, reflecting a relatively neutral zone as price pulls back to the previous trading range. In a bearish case, the immediate support for ETH still sits at $1.54K, aligning with the local low.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• US manufacturing sector nears recovery; construction spending solid

• TSX tumbles to lowest in a year on recession fears, commodity prices

• S&P 500 ends near flat; utilities drop, focus on rate outlook

• Fed policymakers see rates staying high for 'some time'

• Global stock index dips while bond yields, dollar climb

• Fed's Powell: Economy still working through the impact of the pandemic

• Dollar climbs to near 150 vs yen after U.S. shutdown avoided

• STOXX 600 sinks to six-month low on higher bond yields

• ByteDance's valuation slumps to $223.5 bln in stock buyback - The Information

Crypto

• Ether Futures ETFs See Low Volume in First-Day Trading.

• Chainlink Unveils ‘Data Streams’ to Reduce Latency, Expands Decentralized Computing.

• Grayscale Moves to Convert Its Ethereum Trust to a Spot ETH ETF.

• Crypto Investment Firm Deus X Capital Launches With $1B in Assets.

• Coinbase Obtains Payment License in Singapore.

• Class-action suit filed against Binance for alleged harm to FTX before its collapse.

• Investors drop class-action lawsuit against Terraform Labs and Do Kwon.

• Volatility Shares cancels ETH futures ETF launch, ‘didn’t see the opportunity at this point in time’.

• Crypto liquidity provider GSR receives regulatory approval in Singapore.

• Parliamentary committee calls for shutdown of Worldcoin in Kenya.

• Tether treasury receives two $50M USDT lump sums from Bitfinex.

• VanEck Ethereum Strategy ETF set for CBOE listing.

Yours sincerely,
Treehouse Research 🌳