🌳Zhongzhi Enterprise Insolvency Exacerbates China's Financial Strain; Singapore Updates Crypto Regulatory Framework

24 Nov 2023, Friday

2:37 AM

🌳Zhongzhi Enterprise Insolvency Exacerbates China's Financial Strain; Singapore Updates Crypto Regulatory Framework

BTC

ETH

S&P Futures 500

$37,318.75

$2,065.75

$4,571.00

(-0.02%)

 (+0.56%)

(+0.13%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)


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Our Daily View

What We Are Covering Today

  • Zhongzhi insolvency exacerbates China's financial woes; UK consumer confidence sees surprising rebound (More in Macro & TradFi)
  • Singapore central bank rules to discourage speculation, ease investment qualifications; Binance Bitcoin reserves drop as retail flow moves to Coinbase (More in DeFi & CeFi)
  • Whale withdraws crypto from Binance; significant $BLUR activity post-airdrop indicates bullish trend (More in On-Chain)
  • BTC's volatility contracts; Short-term skew shifts suggest increased upside interest (More in Crypto Derivatives)
  • BTC exhibits consolidation in an ascending wedge; ETH tests resistance, trends upwards (More in Crypto Technical Analysis)

Macro & TradFi

Zhongzhi Enterprise Group, a prominent Chinese shadow bank, has declared insolvency with liabilities surpassing $64 billion, signaling a severe escalation in China's ongoing property sector crisis. The Beijing-based firm, with significant investments in real estate, revealed in a communication to investors that its liabilities range between 420 billion yuan ($58 billion) to 460 billion yuan ($64 billion), dwarfing its estimated assets of about 200 billion yuan ($27 billion). This development highlights the vulnerabilities in China's $3 trillion shadow banking sector, where firms like Zhongzhi operate with fewer regulations than commercial banks and are major financiers of real estate developers. The firm's difficulties began surfacing in July with missed payments by Zhongrong International Trust Co, a Zhongzhi-controlled entity. This situation reflects broader challenges in China's property sector and the shadow banking system, potentially impacting global markets and economic stability.

Elsewhere, UK consumer confidence experienced a notable rebound, as reported by market research firm GfK. This improvement, marked by a rise in GfK's headline consumer confidence index to -24 from October -30, exceeded expectations and represents the most significant monthly increase since early in the year. However, this level of confidence still falls short of pre-COVID-19 pandemic standards. This upswing in consumer sentiment reflects a complex economic landscape, where high personal taxes and elevated fuel and energy costs counter positive signs such as declining inflation and wage growth. In particular, the outlook on the economy and personal finances over the next year showed improvement, despite the UK grappling with stagnant economic growth and persistent inflation, which remains among the highest in major developed economies. The Bank of England's cautious stance on interest rates, maintaining them at 5.25% amidst ongoing inflationary pressures, underscores the precarious balance of economic recovery.

Yesterday, US markets remained closed due to the Thanksgiving holidays, leading to a dip in the Dollar. Meanwhile, Oil prices continued their downward trend, influenced by reports that OPEC+ will convene its postponed meeting virtually instead of in person. The Singapore Dollar (SGD) experienced an appreciation against the Dollar, driven by stronger-than-expected CPI data from Singapore. This data, highlighting a 3.3% year-over-year increase in core inflation for October — the first acceleration since January — has intensified anticipations of a more hawkish stance from the Monetary Authority of Singapore.

DeFi & CeFi

  • Singapore central bank rules to discourage speculation, ease investment qualifications
  • Binance Bitcoin reserves drop as retail flow moves to Coinbase
  • Bitcoin sender struck with $3.1M transaction fee
  • Ethereum Layer 2 blast polarizes crypto community
  • South Korea to pilot CBDC with 100K citizens in 2024
  • JPMorgan says GBTC could see outflows of $2.7B upon ETF conversion
  • Lido node operator InfStones agrees to rotate validator keys after vulnerability disclosure
  • Sam Bankman-Fried paid for haircut with fish

The Monetary Authority of Singapore (MAS) has responded to feedback on its proposed regulations for crypto service providers. MAS maintains restrictions such as discouraging financing, margin transactions, and trading incentives for retail customers. Crypto entities are advised not to accept locally issued credit card payments and to assess a customer's risk awareness before granting service access. However, MAS has incorporated industry feedback by easing some restrictions, such as allowing certain cryptocurrencies to be counted towards an individual's net worth in qualifying as an accredited investor. Exchanges can establish their criteria for token listings but must disclose conflicts of interest and set dispute resolution procedures. The phased implementation of rules starting from mid-2024 aims to provide a transitional period for compliance. MAS emphasizes these measures aim to mitigate potential consumer harm but notes the inherent speculative and risky nature of cryptocurrency trading, which may lead to losses regardless of regulatory safeguards.

In other news. CryptoQuant's on-chain data analysis shows Bitcoin (BTC) is shifting from Binance to Coinbase. Coinbase's reserves surged by approximately 12,000 BTC, while Binance saw a decrease of 5,000 BTC, mainly due to retail outflows. Concerns over recent legal implications against Binance are causing users to move funds to compliant or licensed exchanges like Coinbase for security. Despite decreasing exchange reserves of Bitcoin over the year, signaling bullish sentiment, dwindling trust in centralized exchanges post-FTX's collapse last year is leading investors to diversify holdings elsewhere. Additionally, a 1,000 BTC withdrawal from Coinbase was noted as a possible institutional over-the-counter trade, hinting at ETF approval anticipation.

On-Chain

@Spotonchain recently highlighted a notable development in the cryptocurrency market, where a prominent whale, wallet 0x94c, executed significant withdrawals from Binance. In 18 days, the investor withdrew a diverse array of 9 tokens - ILV, MKR, ETH, 1INCH, UNI, GAL, ARB, ENS, and LQTY, totaling an estimated expenditure of $16.1M. The recent transactions included withdrawing 701K GAL and 691K ARB, valued at about $918K and $720K, respectively. Despite partial redeposits of MKR and ENS back to Binance, totaling $758K, the whale retains a significant value of $17.2M across these assets. Impressively, their estimated profit is $1.9M, a 14% increase. Investors can interpret this pattern of large withdrawals from the exchange as a signal that the whale might be shifting to a long-term holding strategy.

On the other hand, @lookonchain has reported a significant surge in $BLUR activity following the Season 2 airdrop, with 19 addresses buying a total of 51.3M BLUR, valued at $21M, reflecting strong market interest. Mandala Capital’s withdrawal and staking of 1.98M BLUR (worth about $1M) from OKX 8 hours ago, coupled with Sigil Fund’s deposit of 3.1M BLUR (valued at $1.54M) into OKX for staking 6 hours ago, underscore a bullish sentiment towards $BLUR. These actions, especially after the airdrop, suggest a growing trend towards staking in the Blur ecosystem and indicate a strategic shift by investors towards long-term investment.

Crypto Derivatives

  • Funding rates remained positive for BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH fell to 53.49% and 53.82%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH fell to 5.87% and 3.90%, respectively.
  • The futures market witnessed $60.33M liquidations since Friday, with shorts representing 52.96% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

20.78%

ETH

dYdX

OKX

18.64%

SOL

OKX

dYdX

8.07%

BTC

Bybit

dYdX

Source: @CexyArbBot Telegram Bot

Notes:

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, and DOGE vs. USDT perps. 

2) CEXs observed include Binance, Bybit, OKX & dYdX.

3) Lookback period is 24 hours.


In the last 24 hours, both BTC's 7-day and 30-day implied volatilities have dipped to 45.48% and 50.31%, respectively, indicating a contraction in expected price variability. This decrease suggests that traders might anticipate a period of relative calm, possibly caused by the lack of BTC-related events in the near term.

Meanwhile, BTC's term structure has continued to be in contango. IV has generally remained unchanged as well, dipping toward the front end of the curve.

In the past 24 hours, the market has observed a substantial alteration in the 25-delta call-put skew. Notably, the 7-day skew has increased, from 6.19% to 6.61%. However, the 30-day skew has decreased, settling at 5.87%. This divergence between the 7-day and 30-day 25-delta call-put skew indicates a change in market sentiment in the short term versus the medium term. The increase in the 7-day skew suggests that traders are showing more concern for upside risk in the very short term.

Yesterday, during @Paradigm's Asia / Europe Session Hours, highlighted option flows this week, emphasizing downside coverage with strategic put purchases and structured positions. Key BTC trades encompassed the procurement of 275x 1-Dec-23 35/39k Custom Put-Call structures and the sale of 225x 1-Dec-23 36.5k Puts. Noteworthy ETH transactions included a substantial purchase of 30,000x 29-Mar-24 2800/3000 Call Calendars and 7500x 1-Dec-23 2300 Calls.

Crypto Technical Analysis

Observing the 4-hour chart for BTC, the price is currently oscillating around the $37.4K mark, exhibiting a consolidation pattern within an ascending wedge. The price action is constrained by upper resistance, creating a series of lower highs, a sign that bulls may be losing momentum. If the upper boundary of the channel, which coincides with the resistance level at approximately $38K, is decisively breached, we could anticipate an upward move toward the next significant resistance near $40K, marking a potential increase of roughly 7% from the current level. Conversely, should the price break below the channel's lower support, the next substantial support is around $32.2K, implying a drop of approximately 13.6%. The RSI is currently hovering around 57, with a neutral trend. This suggests that traders might be waiting for a catalyst or a technical breakout/breakdown to define the direction of the next significant move.

On the 4-hour timeframe, ETH is presenting a price that is steadfast near the $2.07K region. The price action has been making higher lows, which is indicative of an ascending trend line that acts as support. Currently, ETH is challenging a resistance level near $2.14K, with the price having tested this threshold multiple times. A definitive breach of this resistance could potentially lead to an approach towards the $2.2K level, marking an approximate increase of 3.5% from the current price. Should the price reverse and breach the ascending support line, the next level of substantial support is situated around $1.9K, reflecting a potential decline of about 8.1%. The RSI reads slightly above 60, suggesting a mild bullish momentum without venturing into overbought territory. The RSI's moderate ascent is in tandem with the price, supporting the current uptrend. However, the multiple tests of resistance without a clear breakout may indicate a need for a significant volume or sentiment change to fuel the next directional move.

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