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Treehouse Daily1 Feb 2024

🌳 Fed Kept The Interest Rate Unchanged; FTX Rules Out The Launch Of FTX 2.0 and Aims To Repay Its Customers In Full

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BTC

ETH

S&P Futures 500

$42,412.20

$2,280.02

$4,879.50

(-1.25%)

 (-2.63%)

(-1.09%)

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

  • Fed held the interest rate steady; Meta, TikTok, and X were accused in a Senate hearing regarding child protection from sexual exploitation (More in Macro & TradFi)
  • FTX focuses on repaying creditors, not restarting; Ripple's Larsen suffers major hack (More in DeFi & CeFi)
  • Pendle investors deposit $10.97M to Binance; XRP account hacked, $112.5M stolen (More in On-Chain)
  • Skews remain positive, recent trades reveal a bullish tilt (More in Crypto Derivatives)
  • BTC and ETH decline; support levels and SMA indicators signal bearish market momentum (More in Crypto Technical Analysis)

Macro & TradFi

The Federal Reserve kept interest rates steady for the fourth consecutive meeting but indicated a willingness to consider rate cuts in the future. Fed Chair Jerome Powell, however, tempered expectations by stating that a rate cut in March is unlikely. The central bank's Federal Open Market Committee noted in a statement that it does not expect to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%. Powell emphasized the need for more data confirming the downward trend in inflation. The decision to leave rates unchanged was unanimous, and the Fed reiterated its intention to continue reducing its balance sheet by up to $95 billion per month. The central bank is preparing to start in-depth talks about the balance sheet at its March meeting. The Fed's decision reflects its cautious approach amid uncertainties about the economic outlook and the need to balance inflation concerns.

Elsewhere, in a Senate hearing, tech executives from Meta (Facebook), TikTok, and X faced accusations from lawmakers, including Sen. Thom Tillis (R-N.C.), that they are failing to protect children from sexual exploitation on their social media platforms. The hearing, held by the Senate Judiciary Committee, featured tense and emotional exchanges, with parents of children targeted by online predators present in the committee room. While lawmakers expressed frustration and threatened regulation, the hearing did not immediately signal imminent regulatory action. Meta, in particular, faced scrutiny, given its large user base and recent legal challenges related to child safety.

Lastly, on Wednesday, stocks experienced a significant downturn, with the Nasdaq Composite plunging 2.2%, marking its most substantial single-day decline since October. The S&P 500 slipped 1.6%, and the Dow Jones Industrial Average lost 0.8%. Alphabet (GOOGL), Google's parent company, reported cloud sales growth exceeding 25%, surpassing analyst estimates. However, the stock faced a considerable decline due to lower-than-expected Google ad revenue and margins. Microsoft (MSFT) also slid despite reporting its fastest earnings growth in two years. Boeing (BA) shares rose by 5.3%, driven by better-than-expected fourth-quarter results, while UnitedHealth Group (UNH) advanced 1.6%. Paramount Global (PARA) surged 6.7%, following reports of a $30 billion acquisition offer from media entrepreneur Byron Allen. Investors will be looking at Nonfarm Payrolls, Unemployment rate, and Average Hourly Earnings on Friday, at 21:30 SGT.

CeFi & DeFi

  • FTX plans to aim for full repayment to creditors, instead of restarting
  • Ripple chairman Chris Larsen hacked for a reported 213M XRP worth approximately $112.5M
  • Visa Introduces Crypto Withdrawals and Payments on Debit Card
  • Singapore High Court greenlights DeFiance Capital suit against 3AC
  • Celsius exits bankruptcy, commences return of over $3B to creditors
  • Swell Launched Liquid Restaking Token rswETH
  • Quantstamp reports $38.9M lost in DeFi attacks in January

FTX, the bankrupt cryptocurrency exchange, is focusing its restructuring efforts on fully repaying customers and creditors but has no plans to relaunch the exchange, as confirmed by their attorney Andy Dietderich. During a January 31 hearing in the U.S. Bankruptcy Court for the District of Delaware, Dietderich, representing FTX, stated that while the exchange aims to fully repay users, this is an objective rather than a guarantee. He emphasized the absence of any investor interest or capital commitment for restarting FTX, referred to as FTX 2.0. The lawyer highlighted the challenges and risks involved in reviving the exchange after it collapsed under former CEO Sam Bankman-Fried, who was found guilty of multiple felony fraud counts. The exchange's token, FTT, experienced a brief surge in value following these announcements. Additionally, the court ruled in favor of reimbursing claimants based on the value of crypto assets at the time of FTX's bankruptcy filing, aligning with the proposal from FTX debtors.

In other news, Chris Larsen, co-founder and executive chairman of Ripple, experienced a security breach on January 31, where unauthorized access to his personal XRP accounts resulted in the theft of approximately 213 million XRP, valued at around $112.5 million. The breach was first identified by crypto analyst ZachXBT. Larsen confirmed that he had quickly addressed the issue, involving law enforcement and notifying exchanges to freeze the affected addresses. Despite initial concerns, Ripple's corporate accounts were not implicated in the breach. This incident highlights significant security risks in the cryptocurrency world and is one of the largest cryptocurrency-related hacks in 2024, underscoring the need for enhanced security measures for individual and corporate digital asset holders.

On-Chain

The on-chain investigation by @zachxbt suggests that Ripple co-founder Chris Larsen's personal XRP accounts experienced unauthorized access, resulting in the extraction of approximately 213 million XRP, valued at around $112.5 million. Following the breach, Larsen has confirmed that the issue was swiftly identified, leading to quick action to notify exchanges to freeze the involved addresses and engage law enforcement. The stolen funds were dispersed and laundered through multiple cryptocurrency exchanges, including MEXC, Gate, Binance, Kraken, OKX, HTX, and HitBTC. This event highlights the need for robust security measures for personal cryptocurrency accounts, even for high-profile individuals. It also serves as a reminder of the agility of the cryptocurrency community in responding to such events, with exchanges cooperating to prevent further movement of the stolen assets and law enforcement getting involved to address the situation.

In an analysis by @spotonchain, there has been a notable influx of $PENDLE tokens to Binance, with six wallets, primarily investors, transferring 4.043 million $PENDLE, which is valued at approximately $10.97 million, at an average price of around $2.71. The Spartan Group is observed to have moved 1.98 million PENDLE worth $5.4 million, while a multisig wallet, potentially associated with the Pendle Finance team, has deposited 600,000 PENDLE equating to $1.63 million. This significant move to Binance during a price pump period may suggest a strategic decision by these holders to take profits or reallocate their investments following the recent appreciation of $PENDLE's value.


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 46.00% and 46.52%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH fell to 0.98% and 2.57% respectively.
  • The futures market witnessed $161.48M liquidations, with longs representing 77.4%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

15.08%

XRP

OKX

Bybit

12.07%

XRP

OKX

Binance

11.27%

BNB

OKX

Bybit

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.


Building on yesterday’s analysis, we see a close tracking between the 7-day ATM and the 30-day ATM. This suggests market sentiments of steady expectations for volatility over the near to medium-term future. The convergence of these lines indicates a consensus on price volatility expectations across different time horizons. The ATM IV levels for BTC seem to have stabilized from the divergence at the start of the month. The overall flat trend currently suggests that the market has largely absorbed any factors contributing to volatility earlier in the month, and traders may not be expecting significant price movements in the immediate future.

BTC Market’s term structure maintains its contango shape. Considering the Federal Reserve’s interest rate decision today, the term structure continues to display a spike in the short-term IV of expiries ranging up to 2 days, suggesting that option investors are still likely purchasing options to hedge against potential volatility in BTC following the release of Nonfarm Payrolls, Unemployment rate, and Average Hourly Earnings due on Friday.

Lastly, @Paradigm’s highlighted option flows during US Session Hours emphasized downside coverage with strategic Call purchases. Key BTC trades encompassed the procurement of 375x 9-Feb-24 45k Calls and the purchase of 300x 23-Feb-24 45/50k Call Spreads. On the ETH front, significant moves included the acquisition of 8250x 23-Feb-24 2.5k Calls and a notable transaction involving 6000x 23-Feb-24 2.7/3.1k Call Spreads.

Crypto Technical Analysis

Moving on to technical analysis, BTC is currently experiencing a breakdown from its ascending channel, with the price now testing the support level at $41.8K. This critical juncture of $41.8K is further substantiated by the presence of the 50 and 100 SMAs, which could act as dynamic support levels during any potential moves downward. Should the price breach the $41.8K support, the next significant support is situated at approximately $39.2K, marking a potential decrease of around 4.52% from the current price levels. Conversely, resistance can be anticipated at the $44.5K level, which would represent an approximate 6.21% rise from where the market is trading now. The Relative Strength Index (RSI) is showing a reading of 42.57, indicating a downtrend momentum but not yet in the oversold territory.

Similar to BTC, ETH has made a decisive move down, breaking down from its ascending wedge pattern, and simultaneously breaching the 50 SMAs, which is a bearish signal. This breakdown suggests a shift in market sentiment, as the price slices through these key support levels. The current price is hovering around $2.2K, and if the downward momentum continues, the next key support level could be established near $2.18K, indicating a potential further decline of approximately 2.65%. On the upside, any recovery would now have to contend with 100 and 200 SMAs, which may serve as resistance levels around 2.3K. The RSI is at 39.34, approaching the oversold territory, which could imply that selling pressure is nearing a point of exhaustion. However, without clear bullish signals, the path of least resistance appears to be downward for the time being.

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