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Treehouse Daily3 Jan 2024

🌳 PBoC Infuses $50 Billion to Revitalize Economy; Fidelity, Galaxy/Invesco Reveal Bitcoin ETF Fees

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BTC

ETH

S&P Futures 500

$45,154.18

$2,362.22

$4,786.75

(+0.17%)

 (-1.11%)

(-0.68%)

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

  • China boosts economy with PSL funding; UK fund launches hit 20-year low (More in Macro & TradFi)
  • Fidelity, Galaxy/Invesco unveil Bitcoin ETF fees; Michael Saylor sells Microstrategy stock options to potentially purchase more BTC on his personal account (More in DeFi & CeFi)
  • Helium NFT subscriptions soar; Bitcoin leads market recovery and investor confidence (More in On-Chain)
  • BTC IV drops as the potentially overhyped market quiets down from the first trading day of the year (More in Crypto Derivatives)
  • Bitcoin consolidates at $45K; ETH forms an ascending triangle near $2.37K (More in Crypto Technical Analysis)

Macro & TradFi

In a strategic move to boost its economy, the People's Bank of China (PBoC) has infused approximately $50 billion into policy-oriented banks through its Pledged Supplementary Lending (PSL) program, signaling a robust focus on enhancing housing and infrastructure projects. This move, marking the largest increase in PSL funding since November 2022, elevates the program's total to 3.25 trillion yuan ($456 billion). The PSL, a critical component of Beijing's economic strategy, is anticipated to play a key role in stabilizing growth and revitalizing the property sector, which has been experiencing a prolonged slump. This initiative reflects a shift in China's fiscal strategy, potentially substituting traditional stimulus measures and aligning with predictions of a constrained official budget deficit of 3% for the year. This recent injection is part of a broader plan to facilitate large-scale infrastructure projects and public housing construction, reflecting the government's commitment to driving economic recovery through targeted financial interventions.

In other news, the UK witnessed a significant decline in fund launches, reaching a 20-year low, primarily driven by volatile markets and the appeal of high returns from cash products. The data from Morningstar reveals that only 397 funds were initiated in the UK in 2023, a sharp drop from the previous year and significantly lower than the peak of 899 in 2010. The Investment Association reports that £37 billion was withdrawn from funds in the first ten months of 2023, adding to the record £50 billion redemption in 2022. This outflow, exacerbated by rising living costs and inflation, has adversely affected the investment management sector, prompting asset managers to adopt cost-cutting measures and focus on business consolidation. Despite a recent decrease in UK inflation, experts like Doug Abbott of Schroders advise investors to diversify their portfolio across various asset classes, considering the long-term structural trends like demographics, deglobalization, and decarbonization, which are likely to sustain higher inflation rates than those experienced in the past decade.

Yesterday's US equity markets saw mixed results, with the Dow marginally rising by 0.07%, while the Nasdaq and S&P 500 fell by 1.68% and 0.57%, respectively, as traders scaled back expectations for interest rate cuts. There has also been an increase in Treasury yields, with the 10-year yield peaking above 4% before settling at 3.937%. Significant losses largely influenced the downturn in major tech stocks, notably Apple's 3.58% drop and Alphabet's 1.09% decrease, alongside a 2.55% fall in ASML following the Dutch government's restrictions on exporting some chipmaking tools to China, highlighting the market's sensitivity to both policy shifts and sector-specific developments.

DeFi & CeFi

  • Fidelity and Galaxy announce fees for proposed Bitcoin ETFs
  • Crypto tax rules now require reporting of transactions over $10K
  • Grayscale files amended Bitcoin ETF application, omits details of AP and fee structure
  • Michael Saylor Commences Plan to Sell $216M Worth of MicroStrategy Stock Options

Fidelity Investments and Galaxy/Invesco have disclosed their fee structures for their proposed Bitcoin ETFs, as per a Fortune report citing a recent court filing. Fidelity's Wise Origin Bitcoin Trust will impose a 0.39% annual fee on investors, while Galaxy/Invesco's BTCO fund will initially offer a six-month fee waiver before instituting a 0.59% annual fee. Additionally, Jane Street Capital has a role as an authorized participant for several Bitcoin ETFs, including Fidelity's, allowing them to arbitrage price differences. The ETFs will operate on a cash model for creation and redemption, in line with SEC preferences to avoid direct Bitcoin handling by broker-dealers. This development is significant as it represents a potential breakthrough in the long-awaited approval of spot Bitcoin ETFs in the U.S., potentially opening Bitcoin investment to a broader audience and impacting its market value. However, the SEC has not made an official announcement of any spot Bitcoin ETF approval as of yet.

According to a regulatory filing, MicroStrategy's executive chairman, Michael Saylor, has initiated the sale of $216 million worth of stock options. Saylor plans to sell 310,000 stock option awards granted in 2014, set to expire in April. He disclosed his intention during MicroStrategy's third-quarter earnings call, stating that he aims to sell 5,000 shares per trading day over the next four months, with the option to sell up to 400,000 shares through April 26. Saylor mentioned that the proceeds would be used to address personal obligations and acquire additional Bitcoin for his personal account. MicroStrategy remains a major holder of Bitcoin, with around 189,000 BTC in its treasury.

On-Chain

Moving on to on-chain, Helium Mobile Subscriber NFTs saw a sharp increase in the cumulative subscription count to 26.6K, according to Dune data from @helium_foundation. Subscriber NFTs are minted every time a new Helium Mobile user opts in to share their location. The data, extending from July 25th to January 3rd, showcases a significant uptick starting in late November, leading to a near doubling of subscriber NFTs in a relatively short time frame. This suggests a growing adoption of Helium’s services and potential market expansion in the decentralized mobile services sector, underpinned by blockchain technology. The rapid growth may imply escalating trust and utility in decentralized networks for mobile services. 

Meanwhile, Glassnode's analysis reveals a notable uptick in BTC and ETH exchange inflow and outflow volumes over the year, indicating a surge in spot trading interest. Significantly, BTC volumes are escalating more rapidly than ETH, underscoring Bitcoin's increasing market dominance. This trend typically reflects a resurgence in investor confidence, particularly in post-extended bear markets, a phenomenon clearly illustrated in the current market data. This suggests that Bitcoin, often seen as a market leader, is once again at the forefront of revitalizing investor sentiment in the cryptocurrency market. 


Crypto Derivatives

  • Funding rates remained positive for BTC and ETH. 
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH dropped to 63.75% and 70.53% respectively.
  • The futures market witnessed $179.49M liquidations, with shorts representing 50.13%.
  • The 30-day 25-delta skew (C-P) for BTC declined slightly to 2.72% while that of ETH increased to 3.66%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

49.11%

ADA

dYdX

Bybit

46.22%

AVAX

OKX

dYdX

26.36%

BNB

Binance

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.


The implied volatility (IV) for Bitcoin (BTC) in both the 30-day and 7-day periods has experienced a slight decline, falling to 65.45% and 64.47%, respectively. This subtle decrease suggests a potential easing in market activity from the earlier elevated enthusiasm surrounding the ETF at the beginning of the year. Despite the pullback, the IVs remain at a level close to the monthly high, indicating ongoing anticipation of upside volatility if the ETF receives approval.

The term structure chart conveys a similar narrative, with the backwardation on the shadow 1-day term structure being less pronounced as the implied volatilities (IVs) for near-dated contracts decline to more normal ranges. Notably, contracts with a 9-day expiry onwards (corresponding to the anticipated ETF approval period) saw their IVs decline as much as 3.6%. This change in IVs indicates that traders are recalibrating their expectations in response to potential market reactions following the anticipated dynamic change related to BTC ETF approvals.

Meanwhile, the 25-delta 30-day call-put skew for Bitcoin has sustained its uptrend. Notably, the 7-day skew, in particular, has experienced a rise from 3.46% to 5.14% in the last 24 hours, nearing the monthly high. This uptick indicates a growing bullish sentiment among BTC option traders, with call options being priced at a notably higher premium compared to puts. This pricing reflects expectations of heightened volatilities in the upcoming week.

According to the report by @Paradigm, yesterday's Asia/Europe trading session witnessed notable flows on BTC. Bullish sentiments prevailed at the beginning of the next week, accompanied by some selling activities for the Jan 5th contracts. Particularly noteworthy in this session were the top structures, including the acquisition of a 1,090x 29-Mar-24 $60,000 / 28-Jun-24 $70,000 BTC Call Calendar and the sale of a 1,000x +1 26-Jan-24 54,000 Call/ -2 26-Jan-24 60,000 Call custom structure. In contrast, ETH, on the other hand, was relatively quiet, with the only notable exception being the purchase of 4,000x 12-Jan-24 2,500 ETH Call.

Crypto Technical Analysis

Onto technical analysis, Bitcoin is exhibiting a price consolidation pattern on the 4-hour chart, with the current price oscillating around the $45K mark. The price action has formed what appears to be a rising channel. A decisive breakout above the current resistance at $45K could see resistance near the $48K level - a resistance level identified back in March of 2022, representing an approximate 4% increase from the current price levels. Conversely, should the price break below the pattern, the next significant support is found near the $44K level. Notably, the Relative Strength Index (RSI) reads at 73.03, highlighting a strong upward momentum and verging into overbought territory, which often precedes a retracement or consolidation in price. The proximity of the RSI to the overbought threshold merits close monitoring for signs of a momentum reversal that could influence the breakout direction.

On the other hand, the price action for ETH on the 4-hour chart reveals the formation of an ascending triangle pattern, characterized by a flat top resistance around the $2.37K level and higher lows forming the ascending trendline. This pattern typically indicates accumulation as each retracement finds buyers at a higher level, implying a buildup of buying pressure. The apex of the triangle is approaching, which could precipitate a volatile price movement. A conclusive breakout above the resistance could lead to a continuation of the uptrend with an initial target at the $2.4K mark, which would represent a slight rise of 1.8% from the current price. Conversely, should the price fail to sustain upward momentum and breach the ascending trendline, it may find support at the $2.1K level, a dip of 8.5%. The RSI hovering near 60 supports the possibility of an upward breakout; however, it remains critical to watch for either a bullish confirmation through a resistance breach or bearish signals indicating a false breakout or reversal.

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