August 29, 2023

Markets Insights

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Next FOMC meeting: Sept 20th 2023.

Probability of a 0bps hike → 78.5%
Probability of a 25bps hike → 21.5%

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The News Room

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BlackRock Expands Bitcoin Exposure with Investments in Top Mining Companies

BlackRock, the world's largest asset manager, is bolstering its Bitcoin exposure by investing in four of the top five Bitcoin mining companies, with Hut 8 Mining being the only exception. Despite a recent drop in stock value for these mining companies, due to Bitcoin's price fluctuations, BlackRock has seized the opportunity to enhance its stake, with its total investment in these miners approximating $411.54 million. In addition to mining investments, BlackRock has also applied to the U.S. Securities and Exchange Commission (SEC) for a Bitcoin ETF, joining other major financial institutions in this endeavor. BlackRock's CEO, Larry Fink, has publicly shifted his stance on cryptocurrencies, equating Bitcoin to a digital form of gold and describing it as a global asset, distinct from any single currency.

SEC Orders Impact Theory to Compensate Investors in First NFT Enforcement Action

The U.S. Securities and Exchange Commission (SEC) has taken its first enforcement action related to non-fungible tokens (NFTs) by ordering Los Angeles firm, Impact Theory, to compensate investors who purchased their NFTs. The SEC argued that the company's NFT sales were unregistered securities offerings. Although not suggesting all NFTs are securities, this move highlights the SEC's stand on specific cases. Impact Theory, which raised about $30 million selling NFTs, promoted them with promises of profitability, leading to their classification as securities. The company has agreed to repay investors, destroy any remaining NFTs, and pay over $6.1 million in penalties.

Digital Currency Group Proposes Debt Restructuring Plan for Bankrupt Genesis

Digital Currency Group (DCG), the parent entity of the bankrupt trading enterprise Genesis Global Holdco, has negotiated a tentative agreement with Genesis creditors to address their claims, as revealed in a recent court document. Genesis, which sought Chapter 11 bankruptcy protection in January, is burdened with liabilities, which encompass roughly $630 million in unsecured loans due by May 2023 and a $1.1 billion promissory note payable in 2032. To navigate these liabilities, DCG proposes to initiate new debt structures, comprising a $328.8 million primary lien facility with a 2-year term and an $830 million secondary lien facility with a 7-year term. Moreover, DCG has committed to dispensing $275 million across four installments.

Should the plan materialize, unsecured creditors could anticipate recoveries ranging from 70% to 90% in U.S. dollars and 65% to 90% in digital assets, contingent on the digital asset's denomination. This bankruptcy filing was a consequence of the financial setbacks Genesis faced due to the downfall of crypto hedge fund Three Arrows Capital and FTX the previous year. Notably, Genesis owes a substantial $3.6 billion to its primary 50 creditors, with the Winklevoss twins' Gemini crypto exchange among the claimants.

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Trading Desk Insights

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Stocks were higher Tuesday as investors looked to the final days of what’s been a difficult August for the market. The latest job openings and labor turnover survey showed a decline in open listings in July — a sign of stability in the jobs market. Meanwhile, the Conference Board’s consumer confidence index fell from 114 to 106.1 in August, more than the expected figure of 116.

The S&P500 squeezed almost 3% from the recent bottom posted on August 25th and is now trading around its 50-day moving average which may serve as resistance in the short term. A clear breakout of 4490 would trigger bullish implications, potentially sending the index towards yearly highs.

This just in: Crypto asset manager Grayscale wins lawsuit against SEC.

The District of Columbia Court of Appeals has sided with Grayscale Investments, which manages the world’s biggest crypto fund, in its lawsuit against the SEC’s decision to deny its application to convert the Grayscale Bitcoin Trust to an ETF. The Circuit Court website has crashed from overwhelming interest as this news could impact other companies that want to create bitcoin ETFs, like BlackRock and Fidelity.

BTCUSDT popped by 5% and reached a session high of 27,690. Volume has been picking up across the board with altcoins gaining traction as well. Liquidations over the last 24hrs have surged by 173% reaching $124 million. We believe it’s possible to witness a pull back towards the $26,630 mark but usually this type of news starts a new trend, potentially sending prices towards $28,000 and $28,750 in extension.

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Economic calendar:

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MONDAY

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TUESDAY

US S&P Home Price Index
US JOLTS Job Openings

WEDNESDAY

US ADP Non-Farm Employment
US prelim GDP
China manufacturing + services PMI

THURSDAY

EU flash CPI
US Core PCE
US unemployment claims

FRIDAY‍

CAD GDP
US nonfarm payrolls
US unemployment rate
US ISM manufacturing PMI

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Technical Charts

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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.

Unless otherwise provided in a separate agreement, Secure Digital Markets does not represent that the report contents meet all of the presentation and/or disclosure standards applicable in the jurisdiction the recipient is located. Secure Digital Markets and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses, or opinions within the report.

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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