February 1, 2024

Markets Insights

Economic Calendar

Next FOMC meeting: Mar 20th 2024

  • Probability of a 25bps ease → 35%
  • Probability of a 0bps hike → 65%

The News Room

DZ Bank to Pilot Cryptocurrency Trading, Expanding Crypto Services in Germany

DZ Bank, Germany's second-largest bank by assets, is set to launch a cryptocurrency trading pilot later this year, aiming to introduce a variety of cryptocurrencies for customers interested in investing without advisory services. Board member Souad Benkredda highlighted the bank's initiative as part of a broader trend identified by the Genoverband study, which found that every second bank is looking to offer similar solutions to their customers. With $627 billion in assets under management, the Frankfurt-based bank expanded its crypto services by launching a cryptocurrency custody platform in November, utilizing Metaco's technology. This move towards embracing Bitcoin trading reflects the growing global institutional adoption of cryptocurrencies, as seen with major players like BlackRock and Fidelity receiving approval for their spot exchange-traded fund applications in the U.S., signaling a significant milestone in the integration of cryptocurrencies into mainstream financial services.

Celsius Network Concludes Bankruptcy with $3 Billion Payout and New Mining Venture Ionic Digital Inc.

Crypto lender Celsius Network is finalizing its bankruptcy process by distributing over $3 billion to creditors and offering them stakes in Ionic Digital Inc., its new mining operation, which is expected to become publicly traded. This resolution comes after 18 months in bankruptcy court, with about 98% of creditors approving the plan. The company's successful navigation through bankruptcy, led by special board committee members David Barse and Alan Carr, involved securing cryptocurrency assets, negotiating creditor agreements, reorganizing viable business segments, and settling cases with the U.S. Department of Justice, SEC, and CFTC. Matt Prusak of Hut 8, which manages Ionic's mining, has been appointed CEO of Ionic. Payments will be distributed by PayPal and Coinbase, with Celsius's mobile and web applications shutting down by February 28. Additionally, Celsius's bankruptcy included a $4.7 billion settlement with U.S. authorities over fraud allegations. Former CEO Alex Mashinsky, arrested on charges of manipulating the lender's CEL token's price, which he denies, was released on a $40 million bond and awaits trial in September 2024, with his banking and real estate assets frozen.

Tether's Record Q4 2023: $2.9 Billion Profit and Substantial Growth in Reserves

In Q4 2023, stablecoin issuer Tether achieved a record $2.9 billion net profit and a significant increase in excess reserves backing its tokens, as reported in its latest attestation by BDO. The profit, primarily from U.S. Treasuries holdings and the appreciation of Bitcoin and gold reserves, boosted Tether's excess reserves to $5.4 billion. The company invested the remaining profits in projects such as mining, AI infrastructure, and P2P communications, separate from its reserves. Tether confirmed its $4.8 billion in outstanding unsecured loans were fully covered by excess reserves, addressing community concerns about secured loans in its portfolio. The company reported a $6.2 billion net profit for the year and acquired an additional 8,888 Bitcoin in Q4, bringing its total holdings to approximately 66,465 BTC, valued at around $2.8 billion. As of December 31, Tether's consolidated reserves were at least $97 billion, including $80.3 billion in U.S. Treasuries and $3.5 billion in gold, with liabilities related to issued digital tokens at $91.6 billion, 90% backed by cash or equivalents. CEO Paolo Ardoino emphasized Tether's commitment to transparency, stability, and responsible financial management.

Trading Desk Insights

Bitcoin's recent price action has slipped below the critical 50-day moving average, prompting a shift in our technical stance to a neutral position. Additionally, the Relative Strength Index (RSI) remains constrained by its descending trend line, signaling that the previously bullish trend may be approaching exhaustion. Our outlook remains cautious, and unless prices manage to breach and close above the 43,500 level, we anticipate further downside pressure with a target around 40,000.

Turning our attention to ETHBTC, it has experienced a retracement of approximately 12% from this year's peak but seems to have found support. Nevertheless, the overall trend for this pair remains bearish, indicating that BTC continues to dominate in the current market environment. We maintain our belief that ETH has the potential to outperform BTC in the year 2024.

Over the past seven years, Bitcoin has consistently outperformed every major asset class. During this period, Bitcoin has achieved an average annualized return of 44%, significantly surpassing the average return of 5.7% observed in other major assets.

In recent developments, FTX, the insolvent cryptocurrency exchange previously led by Sam Bankman-Fried, has stated its commitment to fully reimburse its customers, as confirmed in a court hearing. However, FTT, the exchange's native token, initially surged on this news but subsequently experienced a sharp decline, currently trading down by -14%.

In other news, Celsius is poised to distribute $3 billion worth of cryptocurrency to its creditors as the company's bankruptcy proceedings draw to a close. This distribution will be facilitated through platforms like PayPal and Coinbase.

Lastly, ARK Invest has released a research report affirming Bitcoin's role as an effective diversification asset for traditional investment portfolios. The report recommends an optimal portfolio allocation of 20% to Bitcoin, emphasizing its potential for unprecedented growth among digital assets.
"Bitcoin is not merely a new investment option but an essential component for diversifying investment portfolios, offering unparalleled growth potential within the digital asset space."

Equity futures have rebounded on Thursday, following a challenging day for major stock indices after the Federal Reserve chose to maintain interest rates but signaled reluctance to implement a rate cut in March. Wall Street endured a difficult session, with the S&P 500 posting its most substantial decline since September, down 1.6%, and the Nasdaq losing 2.2%, marking its worst session since October.

Federal Reserve Chair Jerome Powell has been steadfast in his commitment to maintaining higher rates for an extended duration during this tightening cycle, despite market pressures for a different approach. Powell's statement reinforces the Fed's position: "I don't believe it's probable that the committee will have sufficient confidence by the March meeting to justify a rate cut."

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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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