zkEVMs Launching Left, Right And Center

29 Mar 2023, Wednesday

3:38 AM

zkEVMs Launching Left, Right And Center

BTC

ETH

S&P Futures 500

$27,292.75

$1,777.25

$4,106.00

(+1.28%)

 (+4.04%)

(+0.10%)

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

GM Treehouser 🌳

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February 2023 Market Recap

Our Daily View

What We Are Covering Today

  • New regulations are under consideration by the Biden administration to further constrain large banks in the wake of the SVB collapse (more in Macro & TradFi)
  • SBF faces additional bribery charge; ZeroSync brings ZKPs to Bitcoin; ConsenSys launches zkEVM public testnet (more in DeFi & CeFi)
  • XRP social dominance spikes following a 44% price surge in 2 weeks (more in On-Chain)
  • BTC term structure returns to contango; Huge clips of outright ETH calls expiring 28 Apr being bought (more in Crypto Derivatives)
  • Both BTC and ETH re-test the previous resistance zone with ETH experiencing a seemingly stronger bull run (more in Crypto Technical Analysis)

Macro & TradFi

Top officials from the Biden administration faced questioning from Congress yesterday about the recent collapse of Silicon Valley Bank and Signature Bank, and whether new laws and rules are needed in response. Michael Barr, Vice Chairman for Supervision at the Federal Reserve, stated that he anticipates strengthening capital and liquidity standards for firms with more than $100 million in assets, like Silicon Valley Bank. Barr pushed back on the idea that a 2019 law that eased regulations on banks with between $100 billion and $250 billion in assets was to blame for the failures. However, no official proposal has been made regarding this.

Meanwhile, Amazon is reportedly considering an acquisition of movie-theater chain AMC Entertainment Holdings, causing AMC's stock to jump by 12.8% on Tuesday. However, Wedbush analyst Alicia Reese thinks it is unlikely that Amazon will acquire AMC. The company does not need AMC’s massive scale to enter the theater business and would be better off buying a piece of the U.K.-based movie-theater chain Cineworld Group, which filed for bankruptcy protection last year. Reese also noted that AMC's massive debt burden and inflated valuation make it an unlikely acquisition target. However, Reese thinks its relationship with Imax would remain relatively safe if AMC were to be acquired.

Major equity indices closed slightly lower in the last trading session, with the SPX, DJIA, and NASDAQ down 0.16%, 0.12%, and 0.45% respectively. Treasury yields increased further, with the 2-year and 10-year Treasury yields currently sitting at 4.080% and 3.568%, respectively.

DeFi & CeFi

  • Sam Bankman-Fried hit with another bribery charge from US prosecutors
  • StarkWare’s zero-knowledge proofs to debut on Bitcoin blockchain
  • Circle to launch $USDC stablecoin on Cosmos-based asset issuance chain Noble
  • Consensys launches public testnet of Linea, fueling further competition in zkEVM vertical
  • 0VIX partners with Polygon to explore the potential of zkDeFi
  • OKX to apply for virtual asset service provider license for Hong Kong entity
  • Hong Kong Monetary Authority (HKMA) and Securities for Futures Commission (SFC) convene a meeting between crypto firms and banks
  • Crypto infrastructure Conduit raises $7M in seed round led by Paradigm

Sam Bankman-Fried (SBF), has been hit with an additional bribery charge. US prosecutors allege that he directed $40 million in cryptocurrencies to one or more Chinese government officials to influence them to unfreeze accounts owned by FTX's sister trading firm, Alameda Research. The accounts had been frozen as part of an investigation into a particular Alameda trading counterparty on two of China's largest cryptocurrency exchanges. The indictment also accuses SBF of spending months trying to access the funds before resorting to bribery. The newly filed charge is in addition to the 12 others he already faced, which include conspiracy, wire fraud, money laundering, and campaign finance violations.

Elsewhere, ZeroSync Association, a non-profit organization based in Switzerland, is bringing zero-knowledge proofs (ZKPs) to Bitcoin, allowing users to validate the network state without downloading the entire blockchain history or relying on third parties. The association is supported by various stakeholders, including Lightning Labs, and uses Cairo, a programming language developed by StarkWare. The association is developing a software development kit (SDK) to enable Bitcoin developers to generate custom validity proofs. The SDK includes ZeroSync's client, which can sync a full node much faster and without needing any code changes to the Bitcoin Core software. This technology can also compress the transaction history of validation protocols like Taro or enable exchanges to provide proof-of-reserves on Bitcoin.

Lastly, zkEVMs public launches are popping up one by one with ConsenSys the next to join the party after zkSync and Polygon. The Ethereum software company has named its zero-knowledge Ethereum Virtual Machine (zkEVM) solution Linea and launched its public testnet. Linea private testnet was launched in January and has processed over 1.5M transactions since then. Linea has native integration with MetaMask and is available as a default testnet option on the extension.

On-Chain

Stargate Finance is experiencing a notable surge in on-chain activity on Arbitrum. The exact reason for this spike is uncertain, although it may be related to ongoing voting within Stargate DAO. Despite the lack of a precise explanation for this increase, users engaging in such significant on-chain activity suggests a high level of commitment and anticipation among Stargate Finance stakeholders. This heightened activity may also lead to increased promotion and publicity for Stargate Finance (@Santiment).

XRP Network has experienced a surge in social dominance, reaching its highest level in the past year, following a recent price increase above $0.49. This marks the first time XRP has reached this price point since November 6, 2021. The increased social recognition of XRP suggests that higher trading volumes and mainstream interest may lead to more volatile price swings. Due to this surge in price, there has been a significant amount of trader profit-taking, which has reached its highest ratio compared to loss-taking since August 2021 (@Santiment).

Crypto Derivatives

  • BTC funding rate returns to positive while ETH funding rate further increases
  • 30-day ATM IVs decrease to 56.35% and 60.81% for BTC and ETH respectively
  • 30-day 25 delta call skew for BTC increased to 1.05% while ETH put skew is close to flipping to call premium at -0.01%

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

17.92%

XRP

OKX

BINANCE

14.66%

BNB

BYBIT

BINANCE

10.83%

LTC

BINANCE

BYBIT

Source: @CexyArbBot Telegram

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

2) CEX observed include Binance, Bybit, OKX & DYDX

@CexyArbBot allows you to customize CEX, 100+ pairs & lookback periods combo

The total liquidations for futures in the last 24 hours amounted to $143.84M, with longs contributing $116.81M.

In the options market, BTC IV across the curve decreased, with the near-term falling significantly, leading to a flatter contango term structure. Meanwhile, the Ethereum term structure remained flat and unchanged. The variance risk premium remained negative at -3.48% for BTC and -0.4% for ETH. ETH put skew was close to flipping to call premium, currently sitting at -0.01%, while BTC remained in call premium. The put-call open interest ratio was 0.54 for BTC and 0.36 for ETH.

On the flow side, most of BTC volume came from the 31 Mar contracts while majority of ETH volume came from further dated options expiring 28 Apr. Notably, there was significantly more call volume than put on 28 Apr for ETH, potentially related to the announcement of the Shapella (Shanghai + Capella) upgrade going live on the mainnet on 12 April. The upgrade would have mechanisms to prevent a flood of ETH disrupting the market.

The noteworthy trades came mostly from ETH bullish calls with 10K contracts of 28 Apr 2.2K call option being bought and 3.75K contracts of 28 Apr 2K call option bought (@tradeparadigm).

Finally, the VIX continues its descent and now sits at 19.97.

Crypto Technical Analysis

On the TA front, BTC has attempted to break the upper trendline after a drop caused by the Binance lawsuit. However, there is no clear sign of a breakout yet with price continuing to look for directional clues on its next movement. It is unclear if the recent price hike is a true reversal or just a pullback before falling lower. If BTC successfully reverses and breaks through the current level, it may face slight resistance at $27.99K before moving into the stronger resistance zone at $28.43K. However, if the bearish momentum continues, the support level remains at $26.33K at the 1H timeframe before moving into the stronger 4H support zone at $24.27K.

Meanwhile, ETH follows a similar price trajectory as BTC but with a more bullish swing as it broke out of the $1.77K resistance zone last night. Since then, the price has pulled back slightly before rebounding upwards where the swing is more distinct in the hourly timeframe. If the price continues to respect the broadening pattern, we may see the price slowly approach the upper bound at $1.88K, indicating a potential 5.2% upside. The RSI has also slowly risen and currently sits at 56.1.

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