🌳 WisdomTree files for the second BTC spot ETF after BlackRock; UK grapples with rising mortgage costs

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Our Daily View

What We Are Covering Today

• Jerome Powell's impending testimony affects U.S. markets, while UK grapples with rising mortgage costs (more in Macro & TradFi)
• WisdomTree files for the second BTC spot ETF after BlackRock; Paradigm releases the alpha version of its ETH client Reth (more in DeFi & CeFi)
• Whales holding 1K to 10K BTC in accumulation phase; BTC Binary CDD shows low long-term holder activity (more in On-Chain)
• Elevated interest and IV in options as traders embrace bullish Bitcoin ETF filings (more in Crypto Derivatives)
• BTC surges higher after breaking above range-quater and descending trendline; ETH tests descending trendline and quarterly open (more in Crypto Technical Analysis)

Macro & TradFi

U.S. equity markets experienced a slight downturn as investors exercised caution in anticipation of Fed Chair Jerome Powell's upcoming congressional testimony. The S&P 500 ended its most extended upward trend since Nov 2021 and encountered its initial consecutive losses in the past month. Concurrently, the 10-Year Treasury Yield receded to approximately 3.72%. Across the board, 10 out of the 11 sectors concluded the day with declines, with Materials and Energy sectors bearing the brunt of the losses. The upcoming congressional testimony from Powell will also provide crucial insights into the Fed's economic outlook, which could significantly influence market sentiment moving forward.

In the UK, Chancellor Jeremy Hunt has called for discussions with banks to address the escalating mortgage costs, described as a looming "mortgage bomb". He dismissed the possibility of providing fiscal support to households grappling with increasing mortgage expenses, arguing that further monetary injections would escalate inflation and interest rates. Hunt's strategy is to involve major lenders in exploring ways to help those struggling with their monthly payments. The rise in mortgage costs is expected to continue, with the Bank of England likely to increase interest rates due to persisting inflationary pressures. The response from the lenders to the Chancellor's call varies, with some being skeptical and others open to discussing ways to aid households. Despite the current situation, home repossessions and mortgage payment arrears remain below pre-pandemic levels.

On Tuesday, U.S. stock markets ended lower due to concerns over possible further interest rate hikes. The S&P 500 closed down by 0.47%, the Dow Jones decreased by 0.72%, and the tech-heavy Nasdaq Composite fell by 0.16%. U.S. housing starts surged unexpectedly by 21.7% month-over-month to a seasonally adjusted annualized rate of 1.631 million, suggesting robust domestic demand. This indicates a possible rise in interest rates which could slow down the weeks-long rally in US equities.

DeFi & CeFi

• WisdomTree files for a US spot Bitcoin ETF after BlackRock’s application
• Paradigm releases its first version of Ethereum archive node Reth
• Gemini announces APAC expansion plan with Singapore as its operations hub
• TokenInsight launches low-cost bulk transfer tool on 9 blockchains
• Binance announces to be working on Lightning Network integrations

WisdomTree has applied to the SEC for permission to launch a spot Bitcoin ETF in the US, following BlackRock's filing. The proposed WisdomTree Bitcoin Trust would be listed on the Cboe BZX Exchange under the ticker BTCW. The SEC has been cautious about approving Bitcoin ETFs due to concerns of fraud and manipulation in the spot market. However, BlackRock's recent filing has raised hopes for approval, given the company's size and reputation. Bitcoin's price has climbed around 13% in response, breaking the $28.5K level and marking a three-week high.

In other news, Paradigm has unveiled Reth v0.1.0-alpha, the initial version of its Ethereum client, which aims to enhance Ethereum's stability, client diversity, and accessibility for contributors. Reth is a modular and fast Ethereum archive node developed in Rust and licensed under Apache/MIT. According to Paradigm, it boasts impressive sync performance, taking only 50 hours to synchronize the chain from genesis to block 17.4M, with a database size of approximately 1.92TB. Notably, Reth also claims to outperform other node providers like Erigon, Geth, and Nethermind in terms of sync speed, success rate, and latency.

On-Chain

According to Santiment, BTC has been in the accumulation phase as whales holding 1,000 to 10,000 BTC have accumulated $3.5 billion since early April, showing an increased buying power. This accumulation has led to short-term price increases, with BTC's price rising more than 10% in the past week and 5% in the past 24 hours. Meanwhile, the supply of Bitcoin on exchanges has decreased while the number of unique BTC holders has also seen positive growth, suggesting optimism from the market.

According to on-chain data from Glassnode, the Bitcoin Binary Coin Days Destroyed (CDD) metric, which measures economic activity in cryptocurrencies and assigns importance to coins that have remained unspent for a longer time, has consistently remained low. The CDD metric calculates "coin days" by adding 1 for each day a coin unit remains unspent and resetting to 0 when it is spent, providing insights into the spending behavior of long-term holders. A modified version, Binary CDD, compares the current value to the long-term trend. The 7-day Simple Moving Average (SMA) of Bitcoin Binary CDD has consistently shown low values, indicating a lack of movement of older coins recently. Normally, higher CDD values indicate activity from long-term holders, but despite market volatility, these holders have not made significant transactions.

Crypto Derivatives

• Funding rates for BTC and ETH remain positive.
• The 30-day ATM IV for BTC surged to 48.35%, while for ETH it surged to 43.4%.
• The 30-day 25-delta skew (P-C) for BTC remains negatively skewed at -5.52%, favoring call options, whereas for ETH it decreased to 1.96%.

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

In the past 24 hours, total liquidations reached $120.28M, with shorts comprising the majority at 75.2% of the liquidated positions.

Based on the term structure, there has been a significant surge in market interest for crypto options, resulting in an elevation of the term structure across all tenors. This heightened interest can be attributed to the news surrounding major institutions increasingly making moves to enter the crypto space. The IV for near-term expirations are notably higher, driven by recent price spikes in BTC and ETH. Trading interest remain focused on BTC, with ETH lagging behind; the IV for ETH is trading approximately 8% lower than that of BTC across most tenors, as reported by @paradigm.

The skew of BTC and ETH options (P-C), which measures the price difference between put and call options, has experienced a significant decline. This negative skew indicates that traders are willing to pay higher premiums for call options, anticipating further positive price movements for both majors in the upcoming week. According to @paradigm, BTC's 25-day skew normalized for at-the-money (ATM) options is at its most extreme levels year-to-date. Encouragingly, the positive sentiment observed for BTC has extended to ETH, as the skew for ETH options has converged to an equal interest in both calls and puts.

Examining the volatility risk premium (VRP), it is noteworthy that traders are paying higher premiums to participate in potential upside movements in BTC. Additionally, the VRP for ETH is flipping positive, indicating increased demand for ETH options. Among the notable trade structures, BTC witnessed substantial activity in outright calls and call spreads across various tenors from Jun to Dec 2023. Prominent trades include the purchase of 1,125x 29 Dec 23 $40K calls and 1,075x 30 Jun 23 $27K calls. As for ETH, significant trading activity was observed in overwriters covering short-dated call exposures, given the relatively lower volatility levels. Notable trades included the purchase of 10,000x 28 Jul 23 $1.9K calls, 5,000x 29 Sep 23 $1.9K calls, and 2,600x 30 Jun 23 $1.9K calls.

Lastly, the VIX fell to 13.88%.

Crypto Technical Analysis

In terms of technical analysis, BTC has been ripping higher without experiencing any significant pullbacks since successfully breaking above the descending trendline and the range quarter on the daily chart. On a broader scale, the weekly chart reveals a critical level of 28.8K that BTC currently resides at. Notably, this level was responsible for the downward movement leading to the yearly lows in 2022. Conversely, in the current year, 28.8K acted as a pivotal resistance that BTC surpassed, resulting in a rally above 30K. If BTC manages to surpass this key level, it has the potential to retest its yearly highs of 31K.

On the daily chart, ETH has surged above the 1.8K mark and is currently retesting the quarterly open at 1.82K, a significant level that has held as a key support and resistance for the past few months. Additionally, ETH is currently challenging the upper boundary of a descending trendline. If ETH successfully breaks through these two thresholds and maintains a position above them, it could pave the way for further bullish momentum in the token's price. Jumping onto the 4-hourly chart, we observe that ETH has finally broken out of the narrow trading range after it had deviated back into. Similar to the previous scenario, ETH must secure acceptance above this range before it can ascend to higher levels.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Read Past Issues

Daily Readings

TradFi

• China cuts lending benchmarks to revive slowing demand

• Wall Street ends lower, pausing rally as Powell testimony looms

• Brazil watchdog offers plea deals to Americanas employees in fraud probe

• Colombia will export fossil fuels for a long time, finance minister says

• IMF sees Zambia agreement with official creditors 'within a few days'

• Fed's Barr says Fed exploring how to speed up bank oversight process

• Abu Dhabi-based ADQ's talks to take Lazard private fall apart, Financial Times reports

• HSBC cuts China's GDP forecast to 5.3% on weak property, business outlook

• Bank Indonesia to hold key rate at 5.75% for rest of year: Reuters poll

• Australia's central bank hiked rates for fear inflation was becoming entrenched

• Elon Musk scheduled to meet Indian Prime Minister Modi on Tuesday.

• As growth stalls for the U.S. and China, Blinken talked up economic ties in high-stakes Beijing trip.

Crypto

• GBTC trading volume spikes 400% after BlackRock files for bitcoin ETF

• Polygon Proposes POS Chain To Become ZK Compatible.

• EU Commission’s Digital Euro Bill Back on Track for June 28, Lead Official Says.

• Deutsche Bank Applies for Digital Asset License in Germany as TradFi Pushes Further Into Crypto.

• Crypto Exchange Gemini to Expand Asia-Pacific Operations to Capture 'Next Wave' of Growth.

• Australian Payment Provider Cuscal Imposes New Restrictions on Crypto; Industry Body Criticizes Move.

• Atomic Wallet Hackers Use THORChain to Conceal Stolen $35M Funds.

• Bitcoin Holds Steady as China Rate Cut Fails to Encourage Risk Taking.

• Alibaba's Crypto Friendly Joseph Tsai Set to Become Chairman.

• Lack of bipartisan support on crypto regulation could make US ‘less attractive’ to firms: Moody’s.

• BIS releases unified-ledger proposal for cross-border, tokenized asset transactions.

• Stablecoin protocol Reserve invests $20M in Convex, Curve and Stake DAO.

Deal Flow

• EDX Markets, a Crypto Exchange Backed by Fidelity and Paradigm, Announces Launch and New Funding Round

• Galaxy Finance Secured $30 million in Series B Funding, Led by BlackPine, QCP Capital and Tally Capital

Yours sincerely,
Treehouse Research 🌳