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Treehouse Daily12 Apr 2023

a16z Releases New State of Crypto Index Tool In 2023 Report; IMF Warns Of Potential Economic Fallout From US Bank Failures

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BTC

ETH

S&P Futures 500

$30,255.50

$1,889.00

$4,138.75

(+1.20%)

 (-1.51%)

(-0.02%)

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

GM Treehouser 🌳

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Our Daily View

What We Are Covering Today

  • IMF warns the economy that the financial system instability is not yet over (more in Macro & TradFi)
  • IOG launches Lace, Cardano's first native wallet with multiple asset transactions and direct ADA staking; a16z launches State of Crypto Index and 2023 State of Crypto Report (more in DeFi & CeFi)
  • Shanghai unlocking event may have a lower price impact than expected (more in On-Chain)
  • Near-term IV spikes ahead of CPI print; ETH option volume remains low in the face of upcoming Shanghai upgrade (more in Crypto Derivatives)
  • BTC shows sideway movement while the majority of altcoins saw large price corrections (more in Crypto Technical Analysis)

Macro & TradFi

According to the International Monetary Fund (IMF), the tighter bank lending following the failure of two midsize US banks will impact US economic growth this year and it’s too soon to declare victory over the financial system crisis. The IMF expects that US banks' lending capacity will decline by 1% this year, which will reduce lending by 0.44 percentage points on US GDP in 2023. As smaller regional banks account for over a third of total bank lending in the US, this retrenchment in credit provision is likely to have a material impact on economic growth and financial stability.

Meanwhile, according to a note sent to Ernst & Young (EY)’s 13,000 partners, EY has dropped its plan to split its auditing and consulting arms due to the U.S. arm’s decision not to move forward. The plan, which would have created two firms, was designed to reshape the accounting industry. EY spent over a year and more than $100m on the effort but the plan was upended by a small group of senior US executives. The failure of the project has left EY with a potential leadership vacuum, thousands of angry partners, a split between its US and overseas partnerships, and confused clients.

Lastly, major US markets were mostly flat in the last trading session. Specifically, S&P 500, DJIA and NASDAQ moved by -0.01%, +0.29%, and -0.44% respectively. On the treasury notes, 2-year and 10-year Treasury yields have gone slightly up, with the former currently at 4.041% and the latter at 3.429%.

DeFi & CeFi

  • a16z launches State of Crypto Index, tracking the health of crypto industry from technological perspective
  • El Salvador grants first digital asset license to Bitfinex
  • Bitcoin infrastructure Lightspark unveils Bitcoin’s Lightning Network platform for businesses
  • Metalpha launches Grayscale-based digital asset fund
  • Cardano development lab IOG releases Lace, the first native wallet for Cardano network
  • Shiba Inu’s metaverse to be partially open by end of the year, according to devs
  • Derivative DEX EMDX to launch V2 on Avalanche Subnet
  • LiquidityTech protocol launches $100M quantitative trading incubation fund
  • Layer 1 blockchain Sei raises $30M at $800M Valuation with participation from Multicoin Capital, Jump Capital, among others
  • Mobile game development studio Mayhem Studios raises $20M in Series A round led by Sequoia Capital

a16z has introduced the State of Crypto Index, an interactive tool designed to monitor the state of the cryptocurrency industry using technological, rather than financial, metrics. The index measures the weighted average monthly growth of 14 industry metrics, including the number of active developers, verified smart contracts, active addresses, and job search interest. In addition to the launch of the State of Crypto Index, a16z also released the 2023 State of Crypto Report, which highlights 7 key takeaways from the crypto industry in 2023. These include the growth in active users and engagement on blockchains, the rising activity in DeFi and NFTs, the steady number of active developers in the industry, the scaling of blockchains through promising new paths, the emergence of new technologies, the loss of the U.S.'s lead in Web3, and progress seen across key indicators when zooming out.

Elsewhere, Cardano development lab IOG has launched Lace, its first native wallet for the Cardano network. Lace is a browser-based wallet similar to MetaMask, allowing users to access Cardano-based decentralized applications and send/receive Cardano digital assets like ADA, NFTs, and Cardano-native tokens. It also enables users to stake ADA directly from the wallet to contribute to the network's security and receive rewards. The wallet's "bundle transaction" feature allows users to send multiple assets to different addresses in a single transaction, saving costs. Lace is expected to add fiat-to-crypto on-ramps, a dapp store, in-wallet swaps, and staking enhancements in the future. By providing easy access to decentralized finance tools, wallets like Lace may increase user participation and boost the token ecosystem of the network.

On-Chain

@Glassnode has assessed the potential sell-side pressure that may result from the Shanghai Upgrade unlock event. About 321k ETH ($616M) is expected to become liquid in the first week, based on validators who have indicated their intention to withdraw their staked funds. To provide context for this number, the inflow of ETH to exchanges would double the weekly average, which is similar in scale to the market correction on March 23 when the price fell 8.7% following the Banking Crisis.

Depositers can indicate their intent to exit the staking pool by signing a voluntary exit message. Currently, there are 1,229 validators waiting to exit, and 214 slashed validators who will be forced out as soon as withdrawals are enabled. This represents a total of 45k ETH, worth approximately $86.4M.

The rewards accumulated by validators since the beacon chain's launch will be unlocked at once, and are estimated to be 1.137M ETH or $2.18B. However, only 44% of the validators have updated their withdrawal credentials and are eligible for automatic processing. These validators cumulatively hold 276k ETH, worth approximately $530M, which is expected to be withdrawn over the next two days following the Shanghai upgrade.

If you want to learn more about the conditions of ETH staking after the Shanghai upgrade, you can check out our outlook on Treehouse Academy.

Crypto Derivatives

  • BTC and ETH funding rates remain positive
  • 30-day ATM IVs for BTC and ETH decreased to 57.32% and 58.51% respectively
  • 30-day 25 delta call skew for BTC and ETH falls to 2.75% and 0.89%

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

30.48%

ETH

OKX

DYDX

14.95%

SOL

BYBIT

DYDX

14.21%

BNB

BINANCE

OKX

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 futures market experienced $130.86M in liquidations over the past 24 hours, with short liquidations accounting for the majority at $93.92M.

In the options market, the term structure remained flat while near-term IV spiked ahead of the CPI print. Open interest for put-call volume in ETH remained above 0.5 for the entire week, but trended lower. BTC call skew remained relatively unchanged, while ETH call skew sharply fell from 2.57% to 0.89%. With less than 24 hours until the Shanghai upgrade, sentiment seemed slightly bearish for ETH.

On the flow side, ETH option volume did not see a spike despite the upcoming Shanghai upgrade, while BTC sustained high volume of calls since yesterday. Notably, BTC traders of options have a slightly bullish-neutral stance for the end of April, but are very bullish for the end of May.

A notable trade for ETH was the purchase of 14.25K contracts for 2K call options expiring on April 14th, likely a speculative play on the Shanghai upgrade. For BTC, a 1.5K contract of a 26 May 30K/40K call spread was sold at a profit as near-term IV spiked.

Finally, the VIX rose to 19.1.

Crypto Technical Analysis

On the TA front, unlike many other altcoins which have already seen a large price correction, BTC has stayed elevated and mostly traded sideways since the previous pump. As price continues to hover around the $30K psychological resistance zone, clear directional movements from this level may act as a direct indication of the short-term momentum. Zooming into the 1H timeframe, price has largely traded sideways as well but a small rising wedge was observed which suggests an upcoming reversal to the downside. If it does, BTC is likely going to pull back to the $29.2K level which we have seen previous minor support at and acts in between the 50% and 61.8% Fibonacci retracement level. Lastly, RSI has continued to stay elevated at 82.2 and 60.4 respectively for 4H and 1H.

Turning to ETH, price has respected the $1.92K resistance and has since pulled back. If the downward momentum continues in the short term, ETH is likely to test the lower trendline at approximately $1.86K. If the trendline fails to hold, price will likely fall further to the $1.83K support zone which could effectively turn the momentum sideways to a horizontal parallel channel. RSI for ETH, on the other hand, has come down to the normal zone and is currently sitting at 52.7 for the 4H timeframe.

Access institutional-grade commentary on TradFi × Crypto markets

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Treehouse Research 🌳

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