🌳Zelenskiy Replaces Defense Minister Reznikov, An Act Against Corruption; Former SEC Chairman Says Spot Bitcoin ETF Is “Inevitable”

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

• Zelenskiy replaces Defense Minister Reznikov, an act against corruption; U.S unemployment rate unexpectedly rose to 3.8% in August (more in Macro & TradFi)
• Former SEC chairman says spot Bitcoin ETF is “inevitable”; Ethereum liquid staking protocols impose self-limiting rule on market share (more in DeFi & CeFi)
• Vitalk liquidates long-term $MKR position; Pronounced uptick in $XRP on-chain transaction volume and circulation (more in On-Chain)
• BTC term structure remains to be in contango while its C-P skew experiences another sharp decline over the weekend (more in Crypto Derivatives)
• BTC tests key resistance; ETH faces potential 'death cross' (more in Crypto Technical Analysis)

Macro & TradFi

Ukrainian President Volodymyr Zelenskiy is set to replace Defense Minister Oleksii Reznikov, who had been appointed just prior to Russia's full-scale invasion in 2022. Amid allegations of graft in military procurement, Reznikov's ouster is perceived as Zelenskiy's proactive measure against potential corruption threats that could undermine the Ukrainian military's efforts against Russia. To steer the Defense Ministry in a fresh direction, Rustem Umerov, noted for his anti-corruption endeavors, has been nominated. While US President Joe Biden remains abreast of the developments, domestic opposition grows against his proposed $13 billion additional support for Ukraine, on top of an already committed $77 billion. However, the White House underscores Ukraine's "notable progress" in their recent counter-offensives.

In other news, as reported on Friday, the U.S. witnessed an unexpected rise in the unemployment rate in August, reaching 3.8%. Despite this, nonfarm payrolls surpassed expectations, recording an increase of 187,000. The labor force showed signs of significant activity, with its participation rate touching a notable 62.8%, the highest since before the Covid pandemic's declaration. While sectors such as health care and leisure thrived, transportation and warehousing faced setbacks, particularly influenced by the Yellow trucking bankruptcy. Although markets predict no rate hike in the Fed's upcoming September meeting, a potential hike in late October remains on the table. Concurrently, the economy demonstrates resilience with steady growth, but a softening labor market and inflation concerns loom, with job openings decreasing to 8.83 million in July, and inflation metrics showcasing cooling tendencies.

In anticipation of Labor Day, U.S. equities traded thinly, with the S&P 500 and DJIA marking a 0.18% and 0.33% increase respectively, while the Nasdaq Composite saw a 0.022% decrease. In Australia, the S&P/ASX 200 started the week up 0.37%. Investors are now looking to key data later in the week, as the Reserve Bank of Australia plans to release its rate decision on Tuesday. Japan’s Nikkei 225 and South Korea’s Kospi also edged up by 0.12% and 0.21%, respectively, as international markets speculate about the end of the Federal Reserve raising U.S. interest rates following last week's job opening data for July.

DeFi & CeFi

• Former SEC chairman says spot Bitcoin ETF is “inevitable”
• Ethereum liquid staking protocols impose self-limiting rule on market share
• MakerDAO co-founder proposes fork of Solana codebase for native chain
• Hashkey Capital to launch first secondary market crypto fund
• Whale Alert sparks speculation as XRP transfers surge

Former chairman of the U.S. Securities and Exchange Commission (SEC) Jay Clayton stated his belief that a spot Bitcoin exchange-traded fund (ETF) will eventually be approved in the United States. He reasoned that Bitcoin is not a security and that there exists clear demand from retail and institutional investors for such a product. Several firms, including BlackRock, Fidelity, and Invesco have proposed spot Bitcoin ETFs, and the SEC is expected to make a decision on these applications in mid-October or later. JPMorgan also believes that the approval of a spot Bitcoin ETF is more likely following Grayscale’s legal victory against the SEC.

Shifting our focus, several Ethereum liquid staking providers, including Rocket Pool, StakeWise, Stader Labs, Diva Staking, and Puffer Finance, have committed to or are working towards a self-limit rule that prevents them from owning more than 22% of the Ethereum staking market. The self-limit addresses concerns of centralization in Ethereum staking, where a large concentration of power within a few validators can pose risks to network security and decentralization. By setting the self-limit at less than 22%, at least four significant entities would have to collaborate to reach the 66% threshold to achieve consensus on the state of Ethereum. Lido Finance, the largest Ethereum liquid staking provider, controversially voted against self-limiting and currently holds a dominant 32.4% of all staked Ether, raising concerns about its influence in the ecosystem. The Ethereum community itself has mixed reactions to the self-limit proposal, with some seeing it as a necessary step to maintain network decentralization, while others view it as a competitive move by smaller providers.

On-Chain

According to on-chain data from @lookonchain, after maintaining a dormant position for nearly two years, Vitalik Buterin liquidated his entire remaining holdings of 500 $MKR in exchange for 353 $ETH ($580,000). Such a move underscores potential shifts in strategic asset allocation by one of the industry’s key figures but might also hint at broader market sentiment or forthcoming initiatives. As with any major transaction by influential industry players, investors should be attuned to the potential implications and ripple effects in the market.

On the other hand, recent on-chain data from @santimentfeed spotlights a pronounced uptick in $XRP activity. $XRP is not only recording a milestone with its on-chain transaction volume, which peaked at 4.8B $XRP, but it is also observing heightened circulation, clocking in at 2.03B $XRP. Notably, this represents the most significant transaction volume since February 1st and the largest movement of unique tokens since May 31st. Such robust on-chain metrics suggest a growing and renewed interest in XRP, potentially signaling positive market sentiments or strategic initiatives on the horizon.

Crypto Derivatives

• Funding rates remain positive for BTC while ETH funding rate flipped to negative.
• Deribit Implied Volatility Index (DVOL) for BTC and ETH rose to 37.72% and 38.21%, respectively.
• 30-day 25-delta skew (C-P) dropped significantly for BTC and ETH over the weekend, currently at -2.48% and -3.87% respectively.
• The futures market witnessed $158.24M worth of liquidations with longs representing 66.47% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Over the weekend, BTC's ATM IV has experienced a notable increase after a significant price decline on Friday. The 7-day ATM IV rose from a Friday low of 27.16% to 33.15%, while the 30-day ATM IV climbed to 33.94%. This rise is likely a result of heightened market volatility driven by anticipation of the US payroll report on Friday.

The term structures for BTC and ETH remain in contango, with IVs showing slight upticks across various tenors. Specifically, short-dated options have experienced a slightly greater increase in IV, although the overall change in the curve is minimal.

Although BTC's 30-day (C-P) skew has remained relatively stable, the 7-day skew has continued to decline from its Friday drop. After decreasing from a peak of 5.77 to -4.34 on Friday, the 7-day skew has further decreased to -6.72 over the weekend. This significant shift indicates an ongoing bearish sentiment for Bitcoin, as investors are willing to pay a premium for instruments designed for capital preservation.

Lastly, @Laevitas reported that the weekend's predominant flows have been concentrated on near-dated options, aiming to profit from a potential price reversal in BTC. The instruments with the highest flows are the 4-Sep-23 26000 BTC Calls and the 8-Sep-23 27000 BTC Calls.

Crypto Technical Analysis

Last week, BTC recently faced a notable resistance at $28.3K from the Bull Market Support Band (20-week SMA and 21-week EMA) and has since retracted, now navigating within the range between its support and resistance, spanning from 24.8K to 25.9K. Notably, BTC showcased minimal volatility over the weekend, with its price movement being largely confined between 25.9K and 25.8K. A breakdown from its current support could see the price of BTC fall to the next support at 21K, which presents a 20% downside. The RSI is potentially in oversold territory, registering at 37.17.

ETH currently gravitates around the $1.63K mark. A resistance zone spanning $1.72K to $1.81K looms, reaching this resistance band could yield an upside of 5.8%. On the flip side, if Ethereum falters beneath its prevailing support, it could be navigating the depths toward the $1.46K support, marking a stark 10% retreat. At this juncture, Ethereum is also testing its immediate support band from $1.6K to $1.63K, which could falter. Amplifying the cautionary tone is the 'death cross', characterized by the 50-day SMA's descent beneath the 200-day SMA. Historical precedence from January 2022 illustrates bearish aftermath of this cross, where Ethereum dwindled by 32.37% in a span of half a year after the cross. The RSI's current position at 35.35 hints at potential oversold conditions.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

• Asia markets mixed in early trading; Australia and China data closely watched this week.

• Zelenskiy Says He’s Removing Ukraine Defense Chief in Revamp

• Nigeria mulls G20 bloc membership, president to attend summit in India

• Major Gulf bourses fall amid China gloom

• BHP says Brazilian court approves Samarco debt reorganisation plan

• Asia looks to extend rally on China, US rate hopes

• Sweden to pause inflation-linked hike in state taxes in budget

• A China fund from Fidelity is beating the crowd. How it plans to keep doing it.

Crypto

• Spot bitcoin ETF approval is 'inevitable,' says former SEC chairman

• Whale Alert sparks speculation as XRP transfers surge.

• MakerDAO co-founder proposes fork of Solana codebase for native chain.

• Ripple legal team opposes SEC appeal over XRP decision.

• FTX wallet activity sparks token dump fears as bankruptcy hearing approaches

• Ethcon Korea 2023 Winners Officially Announced

• US SEC Delays Decisions on All Spot Bitcoin ETF Applications

• Big Banks Could Use Swift and Chainlink to Transfer Tokens Across Blockchains

• Ethereum Liquid Staking Protocols Impose Self-Limiting Rule on Market Share

• Akash Network Introduces Supercloud to Offer Decentralized GPU Resources

• Hashkey Capital to Launch First Secondary Crypto Market Fund

Deal Flow

• Web3 Social Protocol Tako Protocol Closes $2 Million Pre-Seed Funding Round

Yours sincerely,
Treehouse Research 🌳