February 20, 2024

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Next FOMC meeting: Mar 20th 2024

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The News Room

Y Combinator Eyes Startups in Stablecoin Finance Sector

Y Combinator (YC) has expressed interest in funding startups focused on stablecoin finance, marking the category as a key area in its updated request for startups (RFS) list. This initiative, part of a tradition dating back to 2009, signals YC's desire to invest in businesses developing B2B and consumer products atop stablecoins, alongside tools, platforms, and protocols for stablecoin finance. Highlighting the growing acceptance of stablecoins, exemplified by PayPal's issuance of its own stablecoin and major banks offering custody services, YC draws parallels between the rise of stablecoins and digital music's evolution from file-sharing models. Despite the current issuance of $136 billion in stablecoins and a relatively small user base of seven million transactors, YC sees a significant untapped potential in the stablecoin sector.

Japan Moves Closer to Allowing Venture Capital Firms to Hold Crypto Assets

Japan's cabinet has officially approved a bill to include cryptocurrencies among the assets that the country's investment funds and venture capital firms are permitted to acquire, as part of an effort to bolster the nation's Web3 sector while ensuring stringent user protection measures. This move, announced by the Ministry of Economy, Trade and Industry, aligns with Japan's leadership in creating a regulatory framework for stablecoins and its intention to stimulate Web3 innovation. The bill, reflecting Japan's strategy to relax investment regulations for venture capital firms targeting crypto startups, will be debated in the current parliamentary session. This legislative amendment aims to energize Japan's economy by encouraging new business creation and investment in industries, with a focus on supporting medium-sized companies and startups.

CME Expands Crypto Derivatives with Euro-Denominated Bitcoin and Ether Futures

The Chicago Mercantile Exchange (CME) is set to introduce euro-denominated micro Bitcoin and Ether futures on March 18, expanding its cryptocurrency derivatives offerings, subject to regulatory approval. This follows the success of its U.S. dollar-denominated micro Bitcoin and micro Ether futures launched in May 2021 and December 2021, respectively, and its euro-denominated Bitcoin and Ether futures contracts introduced in August 2022. These micro futures contracts, being one-tenth the size of their respective cryptocurrencies, offer investors a more accessible method to gain exposure to Bitcoin and Ether. The CME's decision to offer these products in euros responds to the growing global interest and demand for more precise investment and risk management tools in cryptocurrencies, particularly from the EMEA region which accounts for 24% of CME's Bitcoin and Ether futures volume. The introduction of these euro contracts aims to provide additional hedging tools for investors to manage their cryptocurrency portfolio risks. This move underscores CME's leadership in the crypto derivatives market, evidenced by the record trading volumes and open interest in Bitcoin and Ether futures observed in recent months.

Trading Desk Insights

Bitcoin surged towards its resistance level of 53,100, exhibiting signs of potential overextension, although the upward momentum may persist given the prevailing strength of the ETF narrative. BTC's dominance ratio, relative to the total crypto market cap, broke below its year-long uptrend, indicating a shift as other segments of the market gain momentum.

Examining ETF flows, the market witnessed another round of significant net inflows totaling $331 million on Friday, marking the 8th consecutive trading day with net inflows surpassing $100 million. Meanwhile, outflows from Grayscale remained elevated at $150.4 million, the second highest since February 2nd.

Delving into the 2% market depth for BTC, the order books have exhibited the highest liquidity since October, with US-based exchanges notably boosting liquidity. The volume of buy and sell orders within 2% of the market price surged to $539 million, reflecting a 30% increase since the launch of these spot ETFs.

The narrative surrounding ETH has gained traction, driven by anticipation of a potential approval for a spot ETH ETF, which could enhance its appeal among conservative institutional investors. Notably, open interest on the CME surpassed $1 billion on Friday, signaling heightened interest in the asset.

Starknet Token (STRK) commenced trading at $5 following its highly anticipated airdrop, boasting an initial market cap of $3.6 billion.

According to reports from Bloomberg, the UK government anticipates introducing legislation concerning Stablecoin and Staking within the next six months. In October 2023, The Bank of England and the Financial Conduct Authority (FCA) outlined plans for overseeing the crypto sector in a coordinated manner, with a similar timeline envisioned.

Stocks experienced a downturn on Tuesday following the market's first losing week in over a month, coupled with scrutiny over the latest earnings releases. Recent economic data has raised concerns that the Federal Reserve may delay interest rate cuts, or implement smaller cuts than initially expected by market participants, this year.

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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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