August 18, 2023

Markets Insights

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Next FOMC meeting: Sept 20th 2023.

Probability of a 0bps hike → 88.5%
Probability of a 25bps hike → 11.5%

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The News Room

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SEC Granted Permission to Pursue Appeal Against Ripple's XRP Ruling

The U.S. Securities and Exchange Commission (SEC) has received permission from Judge Analisa Torres to argue its case for an appeal against her earlier ruling that Ripple didn't breach securities regulations when it made XRP available to retail traders. The SEC has until August 18 to submit its motion for this interlocutory appeal, while Ripple will respond by Sept. 1, and the SEC's reply is due by Sept. 8. If successful, the SEC will then seek permission from an appellate court to challenge Judge Torres's ruling.

Ripple Chief Legal Officer, Stuart Alderoty, expressed the company's opposition to this appeal on X (formerly Twitter). Legal experts highlight the challenges the SEC might face in its pursuit of an appeal, with the process not expected to halt the current case. However, should the SEC gain the necessary approvals, the appellate court could decide to suspend all related proceedings until the appeal is finalized.

U.S. District Court Rules Against Plaintiffs in Tornado Cash Sanctions Case

A U.S. District Court judge, Robert Pitman, ruled in favor of the Treasury Department, denying a summary judgment request from six plaintiffs who contested the department's decision to sanction crypto mixer Tornado Cash. The plaintiffs, financially backed by Coinbase, argued that the Treasury overstepped its authority, asserting that Tornado Cash isn't an entity that can be sanctioned. Judge Pitman disagreed, stating that Tornado Cash, with its founders, developers, and governing decentralized autonomous organization (DAO), qualifies as an association and can be sanctioned under OFAC regulations. Following the ruling, indications arose suggesting a potential appeal against the decision.

Take-Two Interactive, Creator of GTA Series, Launches Blockchain-Based Game 'Sugartown' with NFT Integration

Take-Two Interactive Software, known for its "Grand Theft Auto” (GTA) series has unveiled a blockchain-based game, signaling a potential shift towards mass adoption of digital ownership in gaming. The new game, "Sugartown," developed under its subsidiary Zynga, allows players to engage with NFTs on the Ethereum blockchain.

Urvit Goel, from Polygon Labs, believes this move will pave the way for other major publishers to delve into blockchain gaming. Supporting this trend are partnerships like Epic Games' collaboration with Nike for "Fortnite" NFTs. Furthermore, major Asian developers, Nexon and Square Enix, have partnered with Polygon for crypto gaming projects. Polygon Labs' Layer 2 blockchain offers a more efficient alternative to Ethereum, attracting companies such as Reddit and Ubisoft.

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Trading Desk Insights

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What a day.

Turning our attention to the Traditional Finance (TradFi) market, we observe significant developments out of China. Evergrande Group, one of China's largest property developers burdened with debt, formally submitted its Chapter 15 bankruptcy protection application to a U.S. court this past Thursday. This move has raised concerns among investors about potential ripple effects in China's property sector, which has historically been a crucial growth driver for the country, contributing up to 30% of China's GDP.

Market sentiments were further dampened on Friday as stock futures slipped, marking the potential for a third consecutive day of losses for major indices. Investor concerns are mounting over signs of a slowdown in China's economy, compounded by the prevailing high interest rates in the U.S. Notably, the S&P 500 and Nasdaq Composite indices are both on track for their third successive weekly decline, occurrences we haven't seen since February and December respectively.

In the coming week, market participants will be keenly watching the Federal Reserve's Jackson Hole symposium. Additionally, the release of flash PMI data from several major economies is on the radar, with particular emphasis on U.S. figures, given its consistent outperformance in growth metrics.

The S&P500 was on a freefall starting yesterday afternoon and has been trying to recover ever since. Given that the index is trading near the gap that was posted in June, we believe the market should recover in the short term.

Moving on with Bitcoin. Following the recent negative news from China, BTCUSDT dropped a whopping 10% from $29,000 to $25,200. Liquidations jumped to $1,000,000,000 in the past 24 hours with open interest dropping by 17% to $11.6 billion. The Wall Street Journal reported that documents show SpaceX wrote down the value of its bitcoin holdings by $373 million last year and in 2021. Given that Elon Musk, SpaceX’s CEO, has historically been a vocal supporter of cryptocurrency, the market hasn’t digested this news positively.

BTCUSDT has fallen back to the previous range of high volume between $25.5k and $27k. A break below $25k would trigger bearish implications, potentially sending BTC towards $23k, $21k and $19k.

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Economic calendar:

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MONDAY

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TUESDAY

CAD CPI
US retail sales

WEDNESDAY

Crude oil inventories
FOMC meeting minutes

THURSDAY

US unemployment claims
US Philly Fed Manufacturing Index

FRIDAY‍

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Technical Charts

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Altcoin Watch

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On August 16th, the Shiba Inu team successfully unveiled the Shibarium mainnet, an innovative Ethereum layer-2 scaling solution.

This significant milestone was achieved after exhaustive testing phases, during which we witnessed the active participation of millions and the creation of over 21 million wallets.

Notably, Shibarium operates on a novel consensus mechanism, the "proof-of-participation (PoP)." This system strategically selects validators based on the magnitude of their holdings in the corresponding cryptocurrency, optimizing efficiency by bypassing the computational intensity of traditional proof-of-work models. Seamlessly integrated with Ethereum's layer-1 blockchain, this advanced L2 blockchain solution aims to offer a more scalable and economically efficient transactional platform.

For now, it seems that SHIB is outperforming its memecoin peer DOGE.

SHIBUSDT has pulled back towards a price range acting as support. For now, prices are supported by a rising trend line. If the market recovers, we can expect SHIB to continue higher and continue to outperform DOGE.

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Disclaimer

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This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.

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Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

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