February 2, 2024

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Next FOMC meeting: Mar 20th 2024

  • Probability of a 25bps ease → 20%
  • Probability of a 0bps hike → 80%

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The News Room

Hong Kong to Release Consultation on Regulating OTC Crypto Venues

Hong Kong is poised to introduce a regulatory framework for over-the-counter (OTC) crypto trading platforms, as announced by Christopher Hui, the Secretary for Financial Services and the Treasury. This decision comes in response to increased accessibility of OTC venues to the public and their involvement in several fraud cases, highlighting the need for regulation to protect investors. Since June 2023, Hong Kong has implemented a crypto licensing regime, granting licenses to platforms like HashKey and OSL, and is now focusing on regulating OTC venues to mitigate risks associated with unlicensed virtual asset trading platforms. The Securities and Futures Commission is gearing up for enforcement as the deadline for existing operators to apply for licenses approaches on Feb. 29. Moreover, the Hong Kong Monetary Authority (HKMA) is concluding a consultation on stablecoin regulation, requiring licensing for stablecoins pegged to fiat currencies in Hong Kong. The HKMA also plans to launch a sandbox for stablecoin issuance, with HKMA's chief executive, Eddie Yue, emphasizing the potential role of stablecoins in bridging traditional finance with the virtual asset market and underscoring the importance of stablecoin stability for the digital payment ecosystem and real economy integration.

Superstate Launches Tokenized U.S. Government Securities Fund on Ethereum Blockchain

Superstate, a tokenized asset management firm, has launched its inaugural product, the Superstate Short Duration U.S. Government Securities Fund (USTB), a private fund tokenized on the Ethereum blockchain for U.S. qualified purchasers. USTB offers a compliant alternative to traditional funds, investing in short-duration U.S. Treasury and Agency securities, aiming at the federal funds rate with a 0.15% management fee, and allowing transactions via Circle’s USDC stablecoin. Highlighted by Superstate CEO Robert Leshner, the fund aims to pioneer Superstate's fund tokenization platform, marking the beginning of developing regulated investment tokens. USTB enables on-chain transferable ownership and future peer-to-peer transactions, with self-custody options for investors or the use of qualified custodians like Anchorage Digital Bank or BitGo. The initiative, similar to Franklin Templeton’s blockchain-based mutual fund, aligns with Superstate's vision to compete with stablecoins as a crypto reserve asset and settlement choice, following its SEC prospectus filing in July 2023 and a $14 million Series A funding round in November.

Google to Permit Ads for U.S. Spot Crypto ETFs in Policy Update

Google has updated its policy to allow advertisements for U.S. spot cryptocurrency exchange-traded funds (ETFs), effective January 29, 2024. According to its restricted financial products policy, advertisements for cryptocurrency coin trusts targeting the U.S. are permissible if the advertiser is registered under Section 12 of the Exchanges Act and complies with all local legal requirements. This change, planned for over a month, marks a significant shift from Google's previous stance, which largely prohibited cryptocurrency-related advertising since 2018. Asset managers, including BlackRock and VanEck for their Bitcoin ETFs, and Franklin Templeton, have started to utilize Google ads, as evidenced by sponsored links in search results. This update could potentially extend to ads for spot Ethereum ETFs, should they receive regulatory approval. Google's gradual relaxation of its crypto advertising restrictions has evolved over the years, with allowances for certain crypto exchanges, wallets, blockchain-based NFT games without gambling features, and hardware wallet advertisements now in place.

Trading Desk Insights

Bitcoin is currently maintaining its position in proximity to its 50-day moving average, awaiting further cues to determine its next course of action. The Relative Strength Index (RSI) is currently constrained by a descending trend line and is hovering around the 50 level. This development suggests that the risk-reward ratio may be tilting toward the downside. A decisive breach and close above the 43,500 mark could propel prices higher, potentially reaching levels of 45,000 and even 47,000 as an extension.

Turning our attention to the iShares Bitcoin Trust ETF (IBIT) managed by BlackRock, it has swiftly accumulated $3 billion in assets under management within a mere three weeks. This achievement has propelled it into the esteemed ranks of the top 10 ETFs in terms of assets. Notably, IBIT outpaced GBTC in trading volume yesterday, with IBIT registering $306 million in trades, compared to BITO's $298 million and GBTC's comparatively lower $291 million.

In recent market activity, there was a total net inflow of $38 million, coupled with outflows of $182 million from GBTC.

Shifting our focus to Chainlink (LINK), it has emerged as a prime choice for investors looking to capitalize on the burgeoning trend of tokenization. The LINK token has experienced a remarkable surge of over 30% in just one week, breaking free from its recent trading range to reach a 22-month high at $18. Over time, Chainlink has established itself as a critical component of the cryptocurrency industry's infrastructure. It seamlessly connects various blockchains with external data sources, ensuring compatibility and facilitating secure coin transfers between different blockchains. The dollar value locked in open futures contracts tied to LINK has more than doubled, reaching a record high of $490 million, accompanied by a 62% surge in open interest to 27.51 million LINK tokens. While funding rates in perpetual futures contracts remain positive, they are currently well below the peaks observed in December, indicating that the market has not yet become excessively bullish.

Shifting to the equity futures market, prices have seen a decline on Friday morning. This dip comes as investors digest a robust jobs report that exceeded expectations. The U.S. economy added an impressive 353,000 jobs in January, significantly surpassing the anticipated figure of 187,000. Meanwhile, the unemployment rate held steady at 3.7%, in line with forecasts of 3.8%. This strong employment data may pose challenges for the Federal Reserve's considerations regarding interest rate cuts, particularly in a scenario where employment remains robust.

On the corporate earnings front, Amazon has delivered better-than-expected results, with a notable 14% increase in revenue. Meta's shares have surged by an impressive 17% in premarket trading following the announcement of a threefold increase in profits during the fourth quarter, along with the issuance of its inaugural cash dividend.

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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.

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