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Treehouse Daily25 Apr 2023

Market Looks For Directional Clues In Busy Calendar Week; EU Gives Green Light to Landmark Crypto Law

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BTC

ETH

S&P Futures 500

$27,454.00

$1,841.00

$4,155.00

(-1.34%)

 (-2.00%)

(+0.20%)

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

  • Corporate earnings and economic data releases are the focus of this week; First Republic and Credit Suisse shed light on their precarious financial situation (more in Macro & TradFi)
  • The EU becomes the first major jurisdiction to approve comprehensive crypto laws with the introduction of MiCA; Thetanuts raises $17M to expand partnerships and launch altcoin options market (more in DeFi & CeFi)
  • Bitcoin SOPR suggests the start of the recovery cycle; ETH gas remains historically high despite falling by 35% (more in On-Chain)
  • BTC in steep contango as front-end IVs take a beating; skews continue to be in favor of put premiums for both majors (more in Crypto Derivatives)
  • Quiet market over the past 3 days with BTC and ETH trading largely sideways (more in Crypto Technical Analysis)

Macro & TradFi

The week started with a deluge of corporate earnings and economic data, including the releases of first-quarter earnings results from tech giants Amazon.com, Microsoft, Alphabet, and Meta. Investors are also closely monitoring US GDP data and core PCE deflator which are both scheduled to be released this week.

Walt Disney is cutting around 7,000 workers in three rounds of dismissals. The second round of dismissals began on Monday and will continue through Thursday. The company is trying to reduce losses on its Disney+ streaming service, which launched in 2019. First Republic Bank reported a decline in deposits and profit with deposits falling more than 40%, from $176B to $104B. The bank's profit also fell by 33% to $269 million, and revenue dropped 13% to $1.2 billion. To restructure its balance sheet and reduce expenses and short-term borrowings, First Republic will reduce its headcount by 20% to 25% and slash executive pay.

Lastly, Credit Suisse has reported a loss of over $2 billion for the first quarter, with customers withdrawing around $75 billion in deposits. The bank posted a net profit of CHF12.43 billion ($13.9 billion), thanks to the paper gains from writing off $17 billion in bonds.

US stocks closed Monday mixed with the major US indices remaining relatively unchanged. S&P500 was up 0.12% higher, DJIA up 0.07% while Nasdaq dropped 0.11% lower. Swaps markets are predicting a peak in interest rates in the coming weeks, followed by a series of cuts later in the year. However, not all investors hold this view, as leveraged investors have increased net short positions on 10-year Treasury futures to a record this month, indicating a belief that the Fed will keep raising rates to address inflation. The US 10-year note yield dropped by six basis points and approached its 200-day moving average at 3.51% while the 30-year yield closed at 3.73%.

DeFi & CeFi

  • Aptos introduces delegated staking feature
  • Privacy-focused blockchain Iron Fish launches on mainnet
  • EU becomes first major jurisdiction to introduce comprehensive crypto law with approval of MiCA
  • Bancor launches on-chain trading platform Carbon
  • Gemini to launch non-US crypto derivatives platform called Gemini Foundation
  • Ethereum Cancun-Deneb upgrade expected to be finalized this year
  • Multi-chain MEV-protected DEX aggregator Cashmere launches testnet
  • Thetanuts Finance closes $17 million funding round led by Polychain Capital and others

The EU has become the first major jurisdiction to approve comprehensive crypto laws with the introduction of MiCA (Markets in Crypto-Assets). The new regulation covers the supervision, consumer protection, and environmental safeguards of crypto-assets, and targets crypto-assets not regulated by existing financial services legislation. MiCA also aims to prevent market manipulation, money laundering, terrorist financing, and other criminal activities. Service providers with significant energy consumption will have to disclose their carbon footprint. The law will start applying next year, subject to the final vote in the Council of the EU on 16 May 2023.

Turning to DeFi, Cashmere, a MEV-protected DEX aggregator built on LayerZero, has launched its public testnet on 11 different chains and partnered with three platforms to provide users with task flows. The design of Cashmere aims to protect users against front-run and MEV attacks while recommending the most profitable swap route. It does this by simulating the MEV bot attack pattern and disabling them. Cashmere's focus on user protection and trade optimization makes it a significant player in the DEX aggregator space.

Lastly, Thetanuts Finance, a DeFi protocol offering a range of crypto-structured products, has raised $17 million in a funding round led by Polychain Capital, Hyperchain Capital, and Magnus Capital. The new funding will help the company expand its partnerships with liquidity providers, exchanges, blockchain foundations, layer 1 and layer 2 networks, and market makers. It is also planning to launch a buy-side altcoin options market powered by Decentralized Options Vaults (DOVs) to make options strategies more accessible to a wider range of investors.

On-Chain

With data from @cryptoquant, we can see that the Bitcoin SOPR (Spent Output Profit Ratio) indicates the ratio of spent outputs in profit at the time of the window. Specifically looking at long-term holders whose wallet is live for more than 155 days, on a 7D SMA scale to smooth out short-term volatilities, the SOPR ratio has risen above 1, which typically indicates the start of a long-term recovery phase. However, this metric takes years to reach high points and does not capture short-term volatility

According to @santiment, the recent surge of ETH gas fee after ETH price dropped below $2,000 market was the highest since last May as traders floods the network. Since then, gas fees have since decreased by approximately 35% though they remain historically high.

Crypto Derivatives

  • BTC and ETH funding rates remain positive
  • 30-day ATM IV fell to 52.31% and 55.27% for BTC and ETH respectively
  • 30-day 25 delta call skew for BTC flips to put premium at -1.26% while ETH put skew tightens to -2.70%

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

Net Annualized APR

Perp (USDT pair)

Long on

Short On

20.74%

BNB

OKX

BINANCE

8.42%

XRP

BINANCE

BYBIT

7.20%

DOGE

OKX

DYDX

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 $385.5M in liquidations over the past 4 days, with longs on Friday accounting for the majority at $173.1M.

In the options market, the term structure for BTC is in steep contango while ETH has a kink at the end of May. IV has fallen across the back-end of the curve for ETH, while rising on the front-end. BTC 25-delta skews out to 6M have been trending towards puts premium while ETH 25-delta skews are firmly in favor of puts across the curve. According to @tradeparadigm, the only other time skew flipping back in favor of puts in 2023 was the strong jobs report in early Feb and during the SVB fallout. As a result, there has been rising interest in 2023 skew reversion trade via bullish riskies. The 7-day RV has started to recover for BTC, climbing from 37.62 to 42.47, while the 7-day RV for ETH remains relatively muted. The variance risk premium is now at 2.76% and 3.89% for BTC and ETH respectively.

On the flow side, BTC volumes were mainly centered around the end-of-month 28 Apr put contracts as traders switch from $23K-$25K strikes for $27K strikes as bearish momentum on spot eased. For ETH, the volumes were concentrated around 30 Jun 2.2K calls. The top strategies for BTC and ETH were $23K/$25K bull put spreads and $1.8K/$2.2K bear call spreads respectively.

Finally, the VIX continues to fall to 16.88.

Crypto Technical Analysis

On the TA front, BTC has largely traded sideways over the weekend within a tight range between roughly $27.1K - $27.9K. As the price broke below the $27.8K support on Saturday, BTC has struggled to climb back up. As the price continues to trade below the $27.8K level, the next BTC support can be seen at roughly $26.8K which represents another 2.5% downside from the current level. A death cross has also occurred on a 4H timeframe which could signal further downsides. Lastly, RSI has risen slightly and is currently at 41.1 at the 4H timeframe.

On the other hand, ETH has remained relatively flat as well over the past 3 days. However, the price level acts as a thin support at the $1.83K level. If it fails to hold, ETH will likely drop to the $1.73K support zone, representing a 6% potential downside. RSI, however, remains well below the neutral level with its current level at 37.2 for the 4H timeframe.

Access institutional-grade commentary on TradFi × Crypto markets

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Treehouse Research 🌳

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