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Treehouse Daily6 Oct 2023

🌳Ledger Becomes Another Web 3.0 Company To Reduce Its Workforce; FTX Hacker Moves His $ETH As SBF’s Trial Starts

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BTC

ETH

S&P Futures 500

$27,456.00

$1,616.75

$4,290.00

(-1.19%)

 (-1.94%)

(-0.08%)

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

  • Oil price continues to decline amidst economic uncertainties; Americans face new challenges as used car prices drop again (More in Macro & TradFi)
  • Crypto custody firm Ledger cuts 12% of staff; FTX exploiter moves $36.8M in Ether as Sam Bankman-Fried’s trial starts (More in DeFi & CeFi)
  • Aave sees stETH influx affecting liquidity; Avalanche's transactions surge with Star Arena's debut (More in On-Chain)
  • Major derivatives indicators remain quiet unchanged as the market continues to move sideways (More in Crypto Derivatives)
  • BTC challenges $28K resistance; ETH oscillates in established 50-day horizontal channel (More in Crypto Technical Analysis)

Macro & TradFi

Oil prices continued to decline due to concerns about slowing global economic growth following the market's largest drop in over a year. Crude had previously surged in the third quarter but reversed course amid worries about the impact of higher interest rates on the global economy. Gasoline futures also fell as US stockpiles increased and demand decreased. West Texas Intermediate settled around $82 a barrel, falling below its 50-day moving average for the first time since July, causing increased volatility. The rapid selloff was attributed to a buildup of low-conviction momentum traders in the market. Despite earlier speculation of $100 oil, some remained skeptical, including Citigroup, which predicted a market surplus. Saudi Arabia and Russia maintained production cuts, but prices still declined.

In other news, Americans are once again facing rising negative equity on their car loans as used-car values have dropped about 16% from pandemic-driven highs, according to the Manheim Used Vehicle Value Index. In September, new car buyers carrying negative equity on their trade-ins were underwater by an average of $5,820, compared to less than $4,100 in late 2021. This trend has been exacerbated by low down payments and the emergence of longer loan terms. While it's not uncommon for motorists to have negative equity, the rise in recent times is causing challenges for both dealers and buyers, making it difficult to roll the owed amount into a new loan when it's too high.

Rising Treasury yields in the United States have triggered a significant impact across various financial markets. As yields on the 10-year US Treasury reached levels not seen since 2007 due to a hawkish Federal Reserve and fiscal concerns, the S&P 500 has fallen by another 0.13%, or 8% from its yearly highs as investors shift toward guaranteed yields on government debt. NASDAQ and Dow Jones have similarly dropped by 0.12% and 0.03$ respectively. The MOVE index, measuring expected Treasury market volatility, has surged to a four-month high, indicating expectations of continued market turbulence.

DeFi & CeFi

  • Crypto custody firm Ledger cuts 12% of staff
  • FTX exploiter moves $36.8M in Ether as Sam Bankman-Fried’s trial starts
  • Binance released its eleventh proof of reserves
  • Friend.tech targeted SIM swaps worsen as users lose more Ether

Cryptocurrency wallet hardware manufacturer Ledger is laying off 12% of its employees, amid challenging macroeconomic conditions impacting revenue generation. The Paris-based company, with around 734 employees according to LinkedIn, is expected to cut approximately 88 jobs. This move follows Ledger's recent announcement of a $109M funding round at a valuation of approximately $1.4B. These staff reductions align with the broader trend of layoffs within the cryptocurrency industry due to the current bear market conditions, with Chainalysis laying off 15% of its staff earlier this week.

In other news, the wallet address associated with the FTX exchange hack has seen the movement of about $36.8M worth of ETH in the last 24 hours, while the trial of former FTX CEO Sam Bankman-Fried (SBF) continues. The exploiter, who originally had 175,496 ETH (valued at $294M), now holds $196.014M in their portfolio. From Sep 30 onwards, approximately 67,500 ETH has been moved out of five of the 15 wallet addresses connected to the FTX exploit. Among these, 64,948 ETH were sent through the THORchain router, 52 ETH went to the Railgun contract, and the remaining 2,500 ETH were exchanged for Bitcoin (tBTC). This activity coincides with the trial of SBF, who has pleaded not guilty to seven counts of fraud and money laundering charges.

On-Chain

In an analysis by Glassnode, Aave has observed a significant inflow of Lido's staked ETH, marking an increase of around 53.6%, with the stETH reserves being split evenly across Aave's two versions. The move is seemingly influenced by the higher yields offered by leveraged stETH positions instead of the returns from stETH liquidity provision on DEXes. However, this migration from DEXes to platforms like Aave diminishes the liquidity for stETH, raising potential risks. Reduced DEX liquidity could impair the peg of stETH and, in worst-case scenarios, lead to the accumulation of bad debt on Aave if loans can't be adequately liquidated due to insufficient liquidity.

According to Wu Blockchain, on October 4th, the Avalanche chain reported a surge to 577K transactions, marking its quarterly peak, primarily driven by the debut of Star Arena, a SocialFil software similar to friends.tech. Further analysis on Dune confirmed Star Arena's significant contribution, accounting for 248K transactions within the Avalanche ecosystem on that day. This sharp increase in transaction volume, predominantly influenced by Star Arena's launch, underscores the potential of new applications to drive significant traffic and user engagement on the Avalanche chain. However, since reaching the peak daily transaction on that day, the transaction count has subsequently dipped, raising questions on the sustainability of the growth.

Crypto Derivatives

  • Funding rates flipped to positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 36.64% and 34.68% respectively.
  • 30-day 25-delta skew (C-P) for BTC remained at -0.67% while that of ETH dropped further to -5.39%.
  • The futures market witnessed $46.60M worth of liquidations yesterday, with longs representing 70.60% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

9.57%

BTC

Binance

Bybit

8.95%

LTC

Bybit

dYdX

8.44%

ETH

dYdX

Binance

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.


As BTC continues to fluctuate within the $27K to $28K range, implied volatilities (IVs) have generally remained stable. The 7-day IV has decreased from 29.30% to 28.38%, while the 30-day IV has dropped from 32.58% to 31.80%.

Both the term structures of BTC and ETH are still in a contango state, with slight decreases in IVs across different timeframes as the market continues to move sideways. When comparing the current implied volatility curves for these two major cryptocurrencies, BTC's IV premium becomes noticeable only for options with an expiry of 14 days or longer. This may suggest that traders anticipate BTC to have a more volatile risk profile than ETH in the mid to long term, possibly due to expectations surrounding potential ETF approvals.

The 30-day 25-delta (C-P) skew for BTC has remained relatively stable over the past 24 hours. Conversely, BTC's 7-day skew now stands at -1.91%, moving closer to the neutrality zone.

As reported by @Paradigm, large ETH flows were observed in the last 24 hours. This included the sale of 51K Nov 1750 calls with a -$100k vega and 36K Nov 1700 calls sold with a -$80K vega. Other notable trades included the acquisition of a 1000x 29-Dec-23 23000/27000/31000 BTC Call Butterfly and the sale of 2500x -1.00 27-Oct-23 1600 ETH Put along with a purchase of 4.00 29-Dec-23 1300 ETH Put custom strategy.

Crypto Technical Analysis

Moving on to technical analysis, the 4-hour BTC chart shows the current price hovering around $27.5K. While it recently attempted to breach the $28K resistance, it faced a notable pullback, settling around the 0.786 level based on the Fibonacci retracement tool. Since then, the price has also been fluctuating between the 0.5 and 0.786 markers. The RSI is 52.01, indicating a neutral stance without strong selling pressure. A successful surpass of the $28K resistance may pave the way to target the next resistance at $30.8K, suggesting a potential uptick of approximately 12.58%. Conversely, the immediate downside support is pinned at $25.8K.

Moving on to ETH, the cryptocurrency is trading around the $1.62K mark, having recently retraced after an uptick to challenge its $1.62K support. Conversely, a noteworthy resistance-turned-support level to track sits at $1.95K. This ongoing price movement highlights ETH's adherence to a horizontal channel, established over the last 50 days, oscillating between its defined support and resistance levels. If this pivotal support breaks, we could anticipate a downward trend towards the next support at $1.47K, marking a potential 8.73% decline from its current level. With the RSI at 38.60, the asset appears to be veering into oversold territory.

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