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Treehouse Daily12 Oct 2023

🌳President Biden Warns Iran With The Aftermath of Hamas; Stars Arena Recovered 90% Of The Exploited Funds Through The Bounty Program

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BTC

ETH

S&P Futures 500

$26,795.50

$1,561.25

$4,420.25

(-2.42%)

 (-0.82%)

(+0.65%)

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

  • President Biden warns Iran to “be careful” following the Hamas-Israel conflict; US PPI rose more than expected, indicating ongoing inflation (More in Macro & TradFi)
  • Hamas and other militant groups received $130M in crypto assets; Stars Arena recovered 90% of stolen funds after bounty paid (More in DeFi & CeFi)
  • Illiquid supply increases signal market confidence; Chainlink sees institutional interest growth (More in On-Chain)
  • BTC's IVs decline amid hawkish FOMC stance; options suggest downside market hedging (More in Crypto Derivatives)
  • Both BTC and ETH inched lower towards their subsequent support levels (More in Crypto Technical Analysis)

Macro & TradFi

President Joe Biden has cautioned Iran to "be careful" in the wake of attacks by the militant organization Hamas on Israel. He mentioned the aid the U.S. is sending to Israel and the deployment of a U.S. carrier fleet to the region before stating, "I made it clear to the Iranians: Be careful." U.S. intelligence suggested that Iranian leaders were surprised by the Hamas attack, but a definitive conclusion has not been reached by the Biden administration. The White House National Security Advisor, Jake Sullivan, mentioned that Iran was "complicit" in the attack due to its long-standing support for Hamas. President Biden made these remarks during a roundtable discussion with Jewish leaders at the White House, emphasizing the need for Israel to "operate by the rules of war." He referred to the attacks as "a campaign of pure cruelty" and expressed his commitment to supporting Israel's success in the situation.

On the other hand, the U.S. producer price index (PPI) for September revealed higher-than-expected wholesale prices, indicating lingering inflation pressures for the economy. The PPI rose by 0.5% during the month, surpassing the Dow Jones estimate of a 0.3% increase, although it was lower than August's 0.7% rise. Excluding food and energy, the core PPI increased by 0.3%, versus the forecast for a 0.2% rise. Inflation pressures were primarily driven by a 0.9% surge in final demand for goods, with gasoline and food prices contributing significantly. The PPI is viewed as a leading indicator for inflation and factors into Federal Reserve policy decisions, as the central bank has been raising interest rates to combat inflation.

U.S. equities advanced on Wednesday, with the S&P 500 gaining 0.4%, as the Federal Reserve's more cautious stance on interest rate hikes to combat inflation provided support. DJIA and NASDAQ have similarly advanced by 0.19% and 0.72% respectively. Notable stock movements include Novo Nordisk, whose early positive results for kidney disease treatment with Ozempic boosted its ADRs by 6%. Catalent shares surged 5.5%, benefiting from expected increased demand for syringes following the Ozempic news. CPI data will be released today at 20:30 SGT, and Q3 Earnings season will unofficially begin this Friday when major US banks like JPMorgan and Wells Fargo report earnings.

DeFi & CeFi

  • Hamas and other militant groups received $130M in crypto assets
  • Stars Arena recovered 90% of stolen funds after bounty paid
  • WOO Network buys back shares and tokens from bankrupt Three Arrows Capital
  • USDR stablecoin de-pegs to $0.53, but team vows to provide solution
  • iFinex proposes $150M share buyback from Bitfinex hack victims
  • JPMorgan’s blockchain-based settlement solution TCN goes live
  • Solana validator health report shows improvement in node count, Nakamoto coefficient, node distribution

Hamas, along with other militant groups like Palestinian Islamic Jihad (PIJ) and Hezbollah, reportedly received significant amounts of cryptocurrency in the year leading up to the recent attack on Israel. From Aug 2021 to Jun 2023, digital wallets associated with PIJ received approximately $93M in crypto, while wallets linked to Hamas received approximately $41M. Cryptocurrency impedes efforts to prevent foreign funding by enabling militant groups to bypass traditional banking systems, and instantly transfer tokens between digital wallets. Since at least 2019, Bitcoin donations solicited through a Telegram channel allowed them to amass weaponry and raise funds, using various tactics to obfuscate transactions. The exact extent to which cryptocurrency financed the attack is unclear.

In other news, social platform Stars Arena reportedly recovered 90% of lost funds by paying its hacker a 10% bounty fee equivalent to 1000 AVAX tokens (approximately $9,333). The hacker indicated a willingness to cooperate through an on-chain message signed by their smart contract address—a common communication approach among pseudonymous hackers. This development follows an exploit on Stars Arena last week, resulting in a loss of $3M in AVAX tokens. Stars Arena was an emerging social platform associated with the Avalanche protocol and contributed to a rise in AVAX token value. However, AVAX slid 3% in the week following the hack.

On-Chain

According to analysis from @Glassnode, there is an observed increase in the volume of Illiquid Supply, whereas there has been a declining aggregate Exchange Balances, presenting a compelling dynamic in BTC’s landscape. This contrast actively indicates that coins are consistently being transferred out of exchanges into less liquid, HODLer-controlled wallets. Notably, as these coins remain in these wallets, they mature into Long-Term Holder status. From an analytical standpoint, this movement indicates growing confidence among investors in holding their assets long-term, potentially suggesting a bullish sentiment and reduced sell-off pressure in the market.

On the other hand, analysis by @Santiment shows that the current market value of Chainlink stands at $7.31, outperforming a majority of the cryptocurrency market in the recent 12-hour span. It's imperative to monitor the flow of institutional investments, especially focusing on wallets holding between 100K to 10M LINK tokens. As of now, there's a 6% increase in the number of such addresses when compared to September 18th. This uptick suggests heightened institutional interest in Chainlink.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 36.90% and 36.87%, respectively.
  • 30-day 25-delta skew (C-P) for BTC and ETH maintained at -2.67% and -6.21%, respectively.
  • The futures market witnessed $63.55M worth of liquidations yesterday, with longs representing 80.55% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

15.71%

BNB

Bybit

Binance

11.16%

SOL

dYdX

OKX

10.00%

LTC

dYdX

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.


In the recent 24-hour analysis, BTC's implied volatilities (IVs) have exhibited subdued fluctuations. The 7-day IV contracted from 32.61% to 31.35%, paralleled by the 30-day IV's decrement from 32.80% to 31.11%. This trend aligns with the hawkish undertones emanating from the latest FOMC minutes, where a predominant consensus anticipates an additional rate hike as judicious.

Turning our attention to term structures, BTC continues to underscore a contango formation, with minimal changes across the curve. All IVs fell across the curve. ETH remains in contango, notably, it saw the front end of the curve increase and a decrease in the longer-dated tenors, possibly caused by Lido Finance disclosing 20 slashing events due to validator configuration issues.

Diving into the skew dynamics, BTC's 30-day 25-delta (C-P) fell from -2.60% to -2.67%. This trend, further solidified by the 7-day skew's descent from -2.78% to -4.47%, indicates that BTC option investors are increasingly hedging against downside movements of the market.

As highlighted by @Paradigm in yesterday’s Asia / Europe Session Hours, notable BTC option movements encompassed the purchase of 575x 27-Oct-23 28000 BTC calls and 300x 24-Nov-23 25000 BTC puts, both acquired. On the ETH front, transactions involved a sale of 7000x 29-Mar-24 1400/2000 ETH bear risk reversal and a procurement of 5000x 20-Oct-23 1500 ETH puts.

Crypto Technical Analysis

Transitioning to technical analysis for BTC, the downward trend has persisted over the last 24 hours. Currently, the price has broken below the 100 SMA line and now rests on the 200 SMA line, which is the immediate support level. If this support fails to hold, it aligns with our previous analysis, suggesting that a potential support level could emerge around the $25.6K mark in the event of sustained selling pressure. On the flip side, if a rebound occurs from the current position, it may initially encounter minor resistance around the $27.8K level before advancing toward the $28.9K support-turned-resistance zone.

Turning our attention to ETH, a similar scenario has unfolded with a further decline over the last 24 hours. Presently, ETH is trading just below the previously noted delicate support at the $1.57K level. Confirmation of a breach from this level would likely direct the price towards the $1.54K level, representing the 30-day low. Conversely, if ETH initiates a reversal from its current position, our previous analysis remains valid, suggesting that the price is expected to progress towards the resistance level observed at $1.65K before aiming for the local highs at $1.74K.

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