treasuries

‘I’m a big fan’: Cantor Fitzgerald CEO praises Tether and Bitcoin

Cantor Fitzgerald has been managing Tether’s now $90 billion Treasury portfolio since late 2021.

Howard Lutnick, the CEO of Wall Street firm Cantor Fitzgerald, has praised USDT stablecoin issuer Tether, describing himself as a “big fan” of the firm.

“I’m a big fan of this stablecoin called Tether…I hold their treasuries. So I keep their treasuries, and they have a lot of treasuries,” Lutnick said in a Dec. 11 interview with CNBC.

“They’re over $90 billion now, so I’m a big fan of Tether,” the Cantor Fitzgerald CEO said.

DAO treasuries top $25 billion for the first time: DeepDAO

Assets held in DAO treasuries have more than doubled since the beginning of 2023, according to DeepDAO.

Decentralized autonomous organization (DAO) treasuries are rapidly growing, having just surpassed a major milestone, according to DeepDAO.

According to figures from the DAO data platform, on March 31, total assets for all decentralized autonomous organizations reached a record $25.1 billion.

The treasury is the total sum of assets the DAO may use at its own discretion. It excludes DAO-managed but unowned assets such as staking accounts and reward fees.

Around $22 billion of that total is liquid with around $3.5 billion set aside for vesting, according to DeepDAO.

Remarkably, assets in DAO treasuries have more than doubled since the beginning of 2023, which is no mean feat during a bear market.

Eyal Eithcowich, founder of DeepDAO told Cointelegraph, “The first time we aggregated DAO treasuries on DeepDAO the total was $23M, so we’re seeing growth at the scale of a 1000X.”

*Total DAO treasury assets. Source: DeepDAO*

Furthermore, the figure of $25.1 billion represents around 40% of the total value locked for all of DeFi, as reported by DeFiLlama. This is currently $61.7 billion, having increased by 39% since the beginning of the year.

DeepDAO is a discovery and analytics engine for the DAO ecosystem that lists and analyzes financial and governance data for the fast-growing sector. DeepDAO reports that there are 12,108 DAOs, 2,353 of which are analyzed by the platform.

Eithcowich said that the big movers are layer 2 DAOs, with infrastructure now the leading category overtaking DeFi.

DeepDAO’s Daniel Bar said that, “For a long while only Uniswap and BitDAO were DAOs that held treasuries if more than $2 billion, but, this past week alone three gianst were added to the DeepDAO organizations ranking board: Arbitrum (over $4B) Optimism (over $5B) and Polygon (over $1B). This marked a point where total DAO treasuries aggregated by DeepDAO crossed $25B”

total value across all DAO treasuries surpassed $25B for first time ever pic.twitter.com/VcymWJOkOy

— Jacquelyn Melinek (@jacqmelinek) March 30, 2023

The Optimism Collective is the leader in terms of treasury funds, with $5.5 billion giving it a market share of 22%. Optimism is the second most popular Ethereum layer-2 solutions provider after Arbitrum One, according to L2beat.

However, Arbitrum has a slightly lower DAO treasury of $4.4 billion giving it a share of 17.5%.

The remaining DAOs comprising the top five are BitDAO, Uniswap and Polygon, with treasuries of $2.6 billion, $2.5 billion, and $1.5 billion respectively.

DeepDAO also reports that the most active DAO over the past week has been PancakeSwap with 66 decisions. The total number of decisions made for all DAOs analyzed over the past month was 3,300, a fall from February’s 3,700 decisions.

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Bitcoin corrects on Fed rate hike, but bulls are prepared for Friday’s $1.2B options expiry

BTC price dropped as the Fed rolled out a 0.25% rate hike, but improving housing market data and Bitcoin options data suggests that bulls are ready for this week’s expiry.

Bitcoin’s (BTC) 17.5% rally between March 16 and 22 surprised options traders betting on price levels below $26,000. The movement resulted from investors seeking protection against persistent inflation and the ongoing banking crisis .

Bitcoin bulls have been paying close attention to the negative effects of near-zero interest rates between April 2020 and April 2022, and some have used the information to profit from the $1.2 billion in BTC options that are set to expire on March 24.

Resilient inflation and improving housing markets

According to the official Consumer Price Index (CPI) released on March 22, Inflation in England unexpectedly increased to 10.4% in February due to higher food prices. This outcome is likely to prompt the Bank of England to raise interest rates on March 23, thereby increasing the likelihood of a recession. A higher cost of capital is detrimental to businesses and families, but it is the only way to stem the rise in consumer prices.

Meanwhile, existing home sales in the United States increased 14.5% in February, following the first annual price decline in over a decade. The numbers released on March 21 reflect the decrease in mortgage rates resulting from the increased demand for government bonds. In addition, the increase in sales suggests that the housing market has reached a price floor.

Investors frantically sought protection against monetary debasement as governments were forced to inject capital to prevent banking sector contagion. For example, the yield on five-year U.S. Treasurys decreased from 4.34% on March 8 to 3.6% on March 22, indicating increased demand for fixed-income instruments.

Is the new world one where the prices of all assets are rising?

Consumer prices continue to rise even as the S&P 500 reclaimed the 4,000 mark. Housing market demand is increasing, and gold gained 7.8% in 2023. Every asset with a chance to profit from inflation is increasing, a typical sign of fiat currency debasement.

The movement is not consistent with the macroeconomic scenario in which banks required emergency bailouts and major corporations were forced to lay off thousands of employees due to declining sales prospects. Therefore, a portion of Bitcoin’s recent gains toward $28,000 is due to the weakening U.S. dollar.

If the fear of a recession continues to have a negative impact on risk markets, Bitcoin may struggle to maintain the price levels necessary for bulls to earn $380 million or more by March 24 when weekly options expire.

Data also shows that bears were caught by surprise as Bitcoin surpassed $26,000

The weekly BTC options expiry has $1.2 billion in open interest, but the actual figure will be lower because bears have concentrated their bets on Bitcoin trading below $26,000.

*Bitcoin options aggregate open interest for March 24. Source: CoinGlass*

The 1.17 call-to-put ratio reflects the difference in open interest between the $675 million call (buy) options and the $575 million put (sell) options. Bears were caught off guard on March 17 when Bitcoin’s price surged above $26,000, so the likely outcome will be much lower than anticipated.

For instance, if Bitcoin’s price remains near $27,700 on March 24 at 8:00 am UTC, there will be only $21 million in put (sell) options. This distinction arises due to the fact that the right to sell Bitcoin at $26,000 or $27,000 is null if BTC trades above that price on the expiry date.

The most likely outcomes favor bulls by a wide margin

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 24 for call (buy) and put (sell) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $25,000 and $26,000: 7,400 calls vs. 5,500 puts. The net result favors the call (buy) instruments by $50 million.
Between $26,000 and $27,000: 9,100 calls vs. 3,700 puts. The net result favors the call instruments by $140 million.
Between $27,000 and $28,000: 12,700 calls vs. 800 puts. Bulls increase their advantage to $330 million.
Between $28,000 and $29,000: 14,300 calls vs. 20 puts. Bulls’ advantage increases to $405 million.

This rough estimate considers only call options in bullish bets and put options in neutral-to-bearish trades. Nonetheless, this oversimplification excludes more complex investment strategies. A trader, for example, could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but this effect is difficult to estimate.

Bears can only reduce their losses, so they are likely to throw in the towel and concentrate on the $3.8 billion monthly expiry on March 31. However, based on the weekly options data, bulls are in a great position to profit at least $330 million.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin price drops to $20.8K as regulatory and macroeconomic pressure mounts

BTC margin and options markets are steady, even as investors run for cover as crypto and stock prices fall.

Bitcoin (BTC) traders saw continued downward pressure after the 5.5% decline in BTC price on March 7. Higher odds of further interest rate increases by the U.S. Federal Reserve and regulatory pressure in the cryptocurrency space explain some of the movement.

Financial markets showed signs of stress as the inverted bond curve reached its highest level since the 1980s. Longer-term dated yields have stalled at 4%, while two-year treasury notes traded above 5% yield in March.

Since July, longer-dated treasury yields have failed to keep pace with the surging two-year benchmark, resulting in the inverted curve distortion that typically precedes economic downturns. According to Bloomberg, the indicator reached a full percentage point on March 7, the highest level since 1981, when Fed Chair Paul Volcker faced double-digit inflation.

This week, BlackRock, the world’s largest asset manager, increased its forecast for U.S. federal funds to 6%. Rick Rieder, chief investment officer of global fixed income at BlackRock, believes the Fed will keep interest rates high for “an extended period to slow the economy and get inflation down to near 2%.”

Fear of cryptocurrency regulation grows

According to a Wall Street Journal report, the Biden administration wants to apply the wash sale rule to crypto, which would put an end to a strategy in which a trader sells and then immediately buys digital assets for tax purposes.

Furthermore, the Public Company Accounting Oversight Board, an organization that keeps an eye on audits of public companies in the United States, recently put out a warning to investors about proof-of-reserves reports that auditing firms send out.

The organization, backed by the U.S. Securities and Exchange Commission, said that “Investors should note that PoR engagements are not audits and, consequently, the related reports do not provide any meaningful assurance.”

Let’s look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Bitcoin margin markets have returned to normalcy

Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins and buying Bitcoin. Borrowers of Bitcoin, on the other hand, can only take short bets against the cryptocurrency.

*OKX stablecoin/BTC margin lending ratio. Source: OKX*

The above chart shows that OKX traders’ margin lending ratio dropped dramatically on March 9, moving away from a situation that previously favored leverage long positions. Given the general bullishness of crypto traders, the current margin lending ratio at 16 is relatively neutral.

On the other hand, a margin lending ratio above 40 is very rare, even though it has been the norm since Feb. 22. It is partially driven by a high borrowing cost for stablecoins of 25% per year. Following the recent anomaly, the margin market has returned to a neutral-to-bullish state.

Options traders are pricing in a low risk of extreme price corrections

Traders should also analyze options markets to understand whether the recent correction has caused investors to become more risk-averse. The 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the premium for protective put options is higher than the premium for risk call options.

In short, if traders anticipate a Bitcoin price drop, the skew metric will rise above 10% and generalized excitement has a negative 10% skew.

*Bitcoin 60-day options 25% delta skew: Source: Laevitas*

Even though Bitcoin failed to break the $25,000 resistance on Feb. 21 and then experienced a 14% correction in 16 days, the 25% delta skew remained in the neutral zone for the past month. The current positive 3% skew indicates a balanced demand for bullish and bearish option instruments.

Derivatives data shows that professional traders are unwilling to go bearish, as evidenced by options traders’ neutral risk assessment. Furthermore, the margin lending ratio indicates that the market is improving as some demand for bearish bets has emerged, but the structure remains neutral-to-bullish.

Given the enormous downward price pressure from a macroeconomic standpoint, as well as ongoing regulatory pressure in the United States, bulls should probably be content that Bitcoin derivatives have remained solid.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

US Treasury yields are soaring, but what does it mean for markets and crypto?

The 10-year U.S. Treasury yield recently hit its highest level in 12 years, but how might this impact investors’ sentiment toward stocks and cryptocurrencies?

Across all tradeable markets and currencies, U.S. Treasurys — government bonds — have significant influence. In finance, any risk measurement is relative, meaning, if one insures a house, the maximum liability is set in some form of money.

Similarly, if a loan is taken from a bank, the creditor has to calculate the odds of the money not being returned and the risk of the amount being devalued by inflation.

In a worst-case scenario, let’s imagine what would happen to the costs associated with issuing debt if the U.S. government temporarily suspended payments to specific regions or countries. Currently, there is over $7.6 trillion worth of bonds held by foreign entities, and multiple banks and governments depend on this cash flow.

The potential cascading effect from countries and financial institutions would immediately impact their ability to settle imports and exports, leading to further carnage in the lending markets because every participant would rush to reduce risk exposure.

There is over $24 trillion in U.S. Treasurys held by the general public, so participants generally assume that the lowest risk in existence is a government-backed debt title.

Treasury yield is nominal, so mind the inflation

The yield that is widely covered by the media is not what professional investors trade, because each bond has its own price. However, based on the contract maturity, traders can calculate the equivalent annualized yield, making it easier for the general public to understand the benefit of holding bonds. For example, buying the U.S. 10-year Treasury at 90 entices the owner with an equivalent 4% yield until the contract matures.

*U.S. government bonds’ 10-year yield. Source: TradingView*

If the investor thinks that the inflation will not be contained anytime soon, the tendency is for those participants to demand a higher yield when trading the 10-year bond. On the other hand, if other governments are running the risk of becoming insolvent or hyperinflating their currencies, odds are those investors will seek shelter in U.S. Treasurys.

A delicate balance allows the U.S. government bonds to trade lower than competing assets and even run below the expected inflation. Although inconceivable a few years ago, negative yields became quite common after central banks slashed interest rates to zero to boost their economies in 2020 and 2021.

Investors are paying for the privilege of having the security of government-backed bonds instead of facing the risk from bank deposits. As crazy as it might sound, over $2.5 trillion worth of negative-yield bonds still exist, which does not consider the inflation impact.

Regular bonds are pricing higher inflation

To understand how disconnected from reality the U.S. government bond has become, one needs to realize that the three-year note’s yield stands at 4.38%. Meanwhile, consumer inflation is running at 8.3%, so either investors think the Federal Reserve will successfully ease the metric or they are willing to lose purchasing power in exchange for the lowest-risk asset in the world.

In modern history, the U.S. has never defaulted on its debt. In simple terms, the debt ceiling is a self-imposed limit. Thus, Congress decides how much debt the federal government can issue.

As a comparison, an HSBC Holdings bond maturing in August 2025 is trading at a 5.90% yield. Essentially, one should not interpret the U.S. Treasury yields as a reliable indicator for inflation expectation. Moreover, the fact that it reached the highest level since 2008 holds less significance because data shows investors are willing to sacrifice earnings for the security of owning the lowest-risk asset.

Consequently, the U.S. Treasury yields are a great instrument to measure against other countries and corporate debt, but not in absolute terms. Those government bonds will reflect inflation expectations but could also be severely capped if the generalized risk on other issuers increases.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.