February 21, 2024

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Next FOMC meeting: Mar 20th 2024

  • Probability of a 25bps ease → 6%
  • Probability of a 0bps hike → 94%

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The News Room

HKMA Sets Regulatory Standards for Tokenized Financial Products in Hong Kong

The Hong Kong Monetary Authority (HKMA) introduced regulatory standards on February 20 for the sale and distribution of tokenized financial products by authorized institutions, aiming to balance innovation with consumer protection in the rapidly evolving tokenization space. These guidelines, which exclude products regulated under existing ordinances, signify Hong Kong's progressive stance towards Web3 technologies. The HKMA emphasizes that traditional financial product regulations apply to tokenized assets, demanding thorough due diligence on products, issuers, and service providers involved in tokenization. Authorized institutions must provide comprehensive disclosures on product risks, including those related to distributed ledger technology, and establish robust risk management frameworks. Additionally, institutions offering custody services for tokenized products are expected to adhere to the HKMA’s standards for digital asset custody, ensuring security and reliability in these services.

Puffer Amasses $1B in Deposits, Highlighting Rising DeFi Interest in Liquid Restaking

Liquid restaking protocols, particularly Puffer, have rapidly gained prominence in the crypto market, with Puffer amassing $1 billion in deposits less than three weeks after its launch on February 1, showcasing the burgeoning interest in "liquid restaking" within the DeFi sector on Ethereum. These protocols, including Puffer and Ether.Fi, leverage EigenLayer's restaking protocol to allow Ethereum (ETH) stakers to earn interest by redeploying their assets for securing additional networks, offering a dynamic way to engage with decentralized finance beyond traditional ETH staking. Puffer issues a liquid restaking token, pufETH, symbolizing users' deposits and potential for interest earnings, while promoting "slash-resistant" technology to mitigate restaking risks. Amidst their rapid growth, these platforms also introduce speculative elements through "points" for user engagement, hinting at possible future rewards but with unclear specifics, highlighting both the potential and uncertainties of restaking in the evolving DeFi landscape.

Mastercard Partners with Swoo Pay to Offer Crypto Rewards in Emerging Markets

Mastercard has teamed up with Swoo Pay to introduce cryptocurrency loyalty rewards targeting emerging markets in Africa and Southeast Asia where Google Pay is absent, focusing on users with Huawei smartphones affected by U.S. sanctions. This partnership seeks to bridge the digital payment gap, allowing billions of Mastercard and Visa cardholders in these regions to earn crypto rewards. The initiative includes the issuance of Swoo tokens backed by Mastercard, which can be converted into major cryptocurrencies like Bitcoin or USDC. A successful pilot in January attracted 17,000 participants, demonstrating the scheme's potential to enhance access to tokenized payments and offer innovative purchase incentives, thereby addressing the challenges faced by Android users without Google services.

Trading Desk Insights

Bitcoin, along with the broader market, is beginning to experience some downward pressure. BTCUSDT is on the verge of breaking below a double top pattern, potentially driving prices towards $49,000 and even $47,000, presenting an intriguing buying opportunity at those prices. Notably, the top performers are now witnessing profit-taking, a prudent move by traders.

In the market, we observed significant declines, with AGIX down by 11%, OP by 11%, SEI by 10%, FET by 10%, ARB by 9%, and RNDR by 7%.

The BTC ETFs recently witnessed their highest volume day since their launch, with a staggering $2 billion traded. This places them among the top 10 ETFs and within the top 20 among stocks. Despite Grayscale's outflows exceeding $100 million for the fourth consecutive day, the market saw net inflows of $135.6 million yesterday.

In other developments, Optimism announced its fourth airdrop, with a focus on NFT artists, distributing over 10 million OP worth nearly $41 million. Ethereum's Dencun upgrade, scheduled for March 12th, bodes well for layer-2 scaling solutions such as Arbitrum, Optimism, and Polygon zkEVM. These solutions leverage rollup technology, allowing them to alleviate congestion on the mainnet and process more transactions at a reduced cost. Arbitrum is leading the DeFi trading volume surge as the fourth-largest chain, boasting a 24-hour trading volume of $420 million, followed by Polygon at $179 million and Optimism at $133 million.

In the stablecoin realm, Circle, the issuer of USDC, is phasing out support for the Tron network. With $300 million of USDC on Tron compared to $22 billion on Ethereum, the decision is attributed to the firm's risk management framework, among other considerations.

Turning to the US stock market, futures dipped on Wednesday morning following a second consecutive day of losses, driven by Nvidia's decline. Additionally, investors await the minutes from the Federal Reserve's January meeting for insights into the central bank's stance on rates, against the backdrop of hotter-than-expected economic data from the previous week.

In the housing market, mortgage demand plummeted as 30-year fixed-rate mortgages surpassed 7%. Applications for home purchase mortgages declined by 10% for the week and were 13% lower compared to the same week last 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.

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