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Treehouse Daily10 Oct 2023

🌳President Xi Jinping Urged To Condemn Hamas By Senator Schumer; Blocknative Reduces Headcount By 33%

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BTC

ETH

S&P Futures 500

$27,564.75

$1,578.50

$4,372.75

(-0.90%)

 (-2.92%)

(+1.42%)

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 Xi Jinping urged to condemn Hamas by Senator Schumer; Ukraine engaging investors to restructure its substantial $20B in international debt (More in Macro & TradFi)
  • Blocknative reduces headcount by 33%; Ripple CTO seeks community consensus for XRPL AMM feature adoption (More in DeFi & CeFi)
  • Ethereum Foundations sells 1.7K $ETH; Early holder of $MTL deposits 1.5M $MTL to Binance, leading to an immediate 2.6% price decrement (More in On-Chain)
  • BTC's muted implied volatilities reflect dovish Fed sentiments; skew metrics indicate heightened bearish outlook (More in Crypto Derivatives)
  • ETH's breach of SMA support from the Ethereum Foundation news exerted influence on BTC's break of the triangle to the downside. (More in Crypto Technical Analysis)

Macro & TradFi

In a tension-filled first meeting in eight years with US congressional leaders, Chinese President Xi Jinping was urged by US Senate Majority Leader Chuck Schumer to condemn Hamas’ attacks on Israel. Xi, not directly addressing the Middle East conflict, expressed aspirations for enhanced US-China relations marked by mutual respect and coexistence. The interaction between Xi and the US senators, including Schumer and Republican Senator Mike Crapo, is noteworthy amidst plans for an upcoming meeting between Xi and US President Joe Biden. The delegation also pressed for “economic reciprocity” and fair competition for American companies in China, raising concerns about the Asian nation's business practices, including forced technology transfers and requirements for joint ventures with Chinese firms.

On the other hand, Ukraine is actively engaging with major investors to contemplate restructuring its substantial $20B in international debt while also considering options for raising additional financing, according to informed sources. Headed by Yuri Butsa, the debt management office has reportedly ramped up these discussions as the country grapples with significant economic challenges post-Russia’s invasion. With an accelerated need for financial support and a looming two-year payment freeze agreed upon in August 2022, Ukraine is eager to tap into markets to ensure stable financing until 2027, aligning with its ongoing International Monetary Fund (IMF) programme. However, the success of securing fresh capital remains uncertain given the complexities and risks involved in the process.

Wall Street edged higher again, with the S&P 500, DJIA, and Nasdaq Composite gaining 0.63%, 0.59%, and 0.39% respectively. These moves follow Fed Vice Chair Philip Jefferson who said officials are in a position to “proceed carefully” after the recent rise in Treasury yields. In Asia, the Nikkei 225 surged 2.41%, leading gains in the region as the country comes back from a public holiday, sparked by energy and distribution stocks such as Inpex Corporation and Mitsubishi Heavy Industries which rose 9.76% and 5.16% respectively.

DeFi & CeFi

  • Blocknative reduces headcount by 33%
  • Ripple CTO seeks community consensus for XRPL AMM feature adoption
  • Ripple's chief financial officer steps down amid SEC lawsuit
  • Ethereum Foundation swaps $2.7M ETH on Uniswap
  • Deribit to list XRP, SOL, MATIC; seeks license in EU

Blocknative, a provider of tools for Ethereum blockchain transactions, has recently completed a restructuring effort that led to a reduction of over 33% of its workforce. CEO Matt Cutler stated that the primary goal of this restructuring was to extend their financial runway, enabling them to pursue their "Real-Time Observability thesis." The restructuring allegedly extends their runway by three years, and comes a few weeks after the company announced an exit from its MEV-Boost Relay services. The move aligns with a broader trend of job cuts in the blockchain industry amid a market slowdown. Despite the restructuring, Blocknative assures that its existing services will continue without disruption, and they have plans to launch new services before the end of the year.

In other news, Ripple's chief technology officer David Schwartz has expressed support for implementing an automated market maker (AMM) feature in the XRP Ledger (XRPL), but only with community consensus within XRPL validators. Schwartz mentioned AMMs as an intriguing component of decentralized finance and noted that if a majority supports the amendment, the changes could be implemented in as little as two weeks. However, he emphasized the need for validators to vote in alignment with community consensus rather than independently promoting the modifications.

On-Chain

According to @spotonchain, the Ethereum Foundation recently executed a substantial transaction of 1.7K $ETH for 2.738M $USDC. This transaction marks the Foundation's largest swap in 2023, bringing their total $ETH sales this year to 2.2K $ETH. Whether divesting for operational liquidity or anticipating market corrections, this activity warrants attention from investors looking for strategic cues where such substantive transactions often ripple through the market, influencing price trajectories and investor sentiment alike.

According to @lookonchain, an early holder of $MTL deposited 1.5M $MTL ($1.8M USD) to Binance. This sell-off exerted immediate downward pressure resulting in a 2.6% price decrement. With the wallet still holding a balance of 1M $MTL, equivalent to $1.23M, the possibility of further sell-offs remains high. Market participants should remain vigilant, as impending transactions from this wallet may offer timely opportunities to short $MTL.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remained relatively unchanged at 36.86% and 36.70%, respectively.
  • 30-day 25-delta skew (C-P) for BTC fell to -1.47% while that of ETH dropped further to -7.11%.
  • The futures market witnessed $115.38M worth of liquidations yesterday, with longs representing 89.52% of the total.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

17.98%

ETH

Binance

dYdX

6.61%

DOGE

Bybit

dYdX

5.41%

BTC

Bybit

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.


Over the last 24 hours, BTC's IVs have exhibited a muted behavior. The 7-day IV retreated from 33.80% to 32.23%, while the 30-day IV witnessed a marginal descent, moving from 33.30% to 32.44%. These movements resonate with recent dovish statements, particularly by Fed Vice Chair Philip Jefferson, indicating that the Federal Reserve might eschew rate hikes for the remainder of the year.

Turning our attention to term structures, BTC continues to underscore a contango formation, with minimal changes across the curve. ETH, however, saw a noticeable surge in the near-term IV, possibly a result of the traders reacting to the recent sell-off from the Ethereum Foundation.

Diving into the skew dynamics, BTC's 30-day 25-delta (C-P) fell from -0.64% to a pronounced -1.47%. This trend, further solidified by the 7-day skew's descent from -1.20% to -2.02%, indicates a strengthening bearish sentiment among option investors towards BTC.

ETH’s 30-day 25-delta, on the other hand, has experienced an even larger decline, from -4.54% to -7.11%, marking the lowest point in the last 30 days. Additionally, the 7-day skew descended from -3.55% to -6.77%, likely stemming from investors’ willingness to hedge further downside risks in the near term following the adverse development of Ethereum Foundation’s sell-off.

Yesterday, as highlighted by @Paradigm, notable BTC option movements encompassed the procurement of a 200x 29-Dec-23 23000/20000 BTC put spread and a 137x 27-Oct-23 25000/23000 BTC put spread, both bought. For ETH options, there was a purchase of 8000x 29-Dec-23 3500 ETH calls and 4000x 24-Nov-23 1300/1800 ETH bull risk reversal.

Crypto Technical Analysis

Turning to technical analysis, our analysis from yesterday remains valid. BTC, influenced by the ETH sell-off, exhibited increased volatility as it approached the end of the triangular pattern. Consequently, the BTC price has breached the 50 SMA and is gradually approaching the 100 SMA, which could serve as a potential support level for a minor rebound. If this scenario unfolds, our previous analysis suggests that BTC will probably test the minor resistance at the $28,000 level before encountering the $28,900 support-turned-resistance zone. Conversely, should selling pressure persist, we might witness a potential support level emerging around $25,600, indicating a further 7% retracement.

Turning our attention to ETH, its price experienced a 5% decline, reaching a low of $1,550 just hours after various on-chain sources reported Ethereum Foundation's activity involving the sale of ETH from its treasury. This development has subsequently breached all SMA supports, and the price is currently approaching the modest support seen at $1,570. Should this support fail to hold, the price is likely to head towards the $1,540 level, marking the lowest point observed in the last 30 days.

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Treehouse Research 🌳

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