December 14, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Jan 31st 2024

  • Probability of a 25bps ease → 19%
  • Probability of a 0bps hike → 81%

The News Room

Deutsche Bank-Backed Taurus Starts Tokenizing German SME Loans

Swiss crypto custody firm Taurus, backed by Deutsche Bank, has partnered with Zurich-based fintech lending platform Teylor to delve into the tokenization of assets, particularly targeting the German SME market. Teylor's credit portfolio tokens, structured by Allen and Overy, will be available for secondary market trading on Taurus' TDX marketplace. This tokenization, involving a Luxembourg-based investment vehicle, adheres to Swiss and European regulations. Taurus co-founder Lamine Brahimi expects significant institutional investment in the coming weeks for this tokenized debt product. Taurus' TDX market, alongside its custody services, has completed over 20 transactions involving various assets, totaling over $1 billion in notional value. Teylor, supported by investors such as Barclays, focuses on loans to Germany's Mittelstand economy, ranging from 100,000 to 1.5 million euros, and has recently issued nearly $25 million in loans. The loans to be tokenized will support a range of German businesses, from industrials and chemicals to precision machinery and import/export, indicating the growing global trend of tokenizing traditional financial assets.

Fnality Starts First Phase of Payment Operations Using Funds at Bank of England

Fnality, a London-based blockchain payments firm, has initiated the first phase of live transactions using digital funds represented at the Bank of England. This phase, involving the Sterling Fnality Payment System, sees participation from Lloyds Banking Group, Banco Santander, and UBS. The system integrates the security of central bank funds with the innovative features of blockchain technology, aiming to establish a global liquidity management ecosystem in wholesale financial markets and tokenized asset markets. The initial live transactions mark a step towards a larger multi-jurisdictional goal, though they are currently under operational limits set by the Bank of England. CEO Angus Fletcher stated that Fnality's focus for 2024 is on scaling operations within the Bank of England's regulatory framework and exploring new market use cases. Last month, Fnality raised $95 million in a funding round led by Goldman Sachs and BNP Paribas, with participation from DTCC, Euroclear, Nomura, WisdomTree, and several bank backers.

U.S. CFTC Approves Bitcoin Futures Platform Bitnomial's Derivatives Clearing Application

The Commodity Futures Trading Commission (CFTC) has approved Bitnomial to register as a derivatives clearing organization in the U.S., allowing the company to settle margined futures and options contracts tied to Bitcoin. The decision came with a 2-1 vote, with CFTC Commissioner Kristin Johnson and Chairman Rostin Behnam voting in favor, while Christy Goldsmith Romero opposed. Commissioners Caroline Pham and Summer Mersinger concurred with the majority. Bitnomial, which has been operational for four years, previously had approval to list futures and options contracts as a designated contract market and to trade with customers as a futures commission merchant. Following a debate over conflicts of interest, the CFTC approved Bitnomial's application, paving the way for the company to expand its offerings in physical and digital commodities. Bitnomial CEO Luke Hoersten stated that the firm aims to broaden its product range and customer base, focusing on providing wholesale digital asset-related services to brokerage partners, institutions, and dealers.

Trading Desk Insights

In the realm of cryptocurrency trading, Bitcoin recently experienced a retracement, dipping to a session low of 41,400 before surging to as high as 43,400, representing a noteworthy 5% gain. Notably, a number of altcoins, particularly those associated with Artificial Intelligence (AI) tokens such as RNDR, FET, and AGIX, have shown strong positive performance.

Regarding Bitcoin's current upward trajectory, there appears to be ample potential for further growth. However, it's crucial to guard against the psychological trap of anchoring bias, which may tempt one to wait for more favorable entry prices, especially for those accustomed to the recent bearish market conditions. Various on-chain indicators, including the Puell Multiple, the MVRV Z-score, and the Mayer Multiple, consistently suggest that Bitcoin is far from being overvalued.

In the world of decentralized finance (DeFi), the Ledger Connect Kit software was recently exploited, causing ripple effects across several DeFi protocols. Notably, platforms like Lido, Metamask, and Sushi rely on this software for connecting to decentralized applications (dApps). The exploit reportedly prompts users with a pop-up, leading to the unauthorized draining of tokens.

Shifting gears to traditional financial markets, the Dow Jones Industrial Average continued its upward momentum on Thursday, building on the previous day's historic milestone of closing above 37,000 for the first time ever. This surge comes as the 10-year Treasury yield dropped below 4%, indicating increasing speculation on potential interest rate cuts in 2024. Additionally, the S&P 500 index is inching closer to reaching its all-time closing high set in January 2022, with a margin of less than 2%, while the Nasdaq index remains about 9% away from its previous record peak.

The Federal Reserve recently executed the expected dovish pivot during its December meeting, now anticipating three rate cuts in 2024. In contrast, the futures market is pricing in approximately 130 basis points (equivalent to around 6 rate cuts) by the end of 2024, reflecting an interesting divergence in expectations between the central bank and market participants.

Technical Charts


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