February 29, 2024

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Next FOMC meeting: Mar 20th 2024

  • Probability of a 25bps ease → 3%
  • Probability of a 0bps hike → 97%

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The News Room

Record Inflows into U.S. Spot Bitcoin ETFs as BlackRock's IBIT Leads with $612M

U.S. spot Bitcoin exchange-traded funds (ETFs) experienced a record net inflow of $673.4 million on Wednesday, with BlackRock’s IBIT spot Bitcoin ETF leading the charge by adding $612.1 million. Despite record inflows, Grayscale’s GBTC fund saw significant outflows. Total net inflows for all spot Bitcoin ETFs have now reached nearly $7.4 billion. BlackRock’s IBIT fund now manages over 150,000 BTC, and Fidelity’s FBTC exceeds 100,000 BTC in assets. The nine new spot Bitcoin ETFs hold over 330,000 BTC, contributing to the collective holding of 768,280 BTC by U.S. spot Bitcoin ETFs. Despite Grayscale’s GBTC fund experiencing a decrease in assets, global net inflows for Bitcoin exchange-traded products (ETPs) were significant on Wednesday. The U.S. spot Bitcoin ETFs also recorded a combined trading volume of $7.61 billion on the same day, indicating a surge in investor interest and trading activity as Bitcoin’s price ascended to $64,000 before correcting.

Hong Kong Expands e-CNY Pilot and Advances Digital Finance Initiatives

Hong Kong is set to enhance cross-border payment efficiency by expanding the pilot scope of China's central bank digital currency (CBDC), the e-CNY, allowing more residents to top up their e-CNY wallets through the local "Faster Payment System" (FPS). This move is part of a broader effort by Hong Kong to embrace digital currency and blockchain technology, as evidenced by the completion of the first-phase pilot of its own CBDC, the e-HKD, and participation in the mBridge CBDC project with the Bank for International Settlements and central banks of China, Thailand, and the UAE for a multi-CBDC platform for wholesale cross-border payments. Moreover, Hong Kong has been pioneering in tokenized green bond issuances, with the world's first-ever multi-currency tokenized bond issuance attracting significant global investment. Plans to roll out a sandbox for stablecoin issuers further underscore Hong Kong's commitment to developing a robust regulatory framework for digital finance, following a consultation on regulating stablecoin issuers proposed by the Financial Services and the Treasury Bureau and the HKMA.

Gemini Earn Customers to Fully Recover $1.1 Billion Following NYDFS Settlement

Gemini Earn customers are set to receive 100% of their holdings from the defunct program, totaling over $1.1 billion, following a settlement with the New York Department of Financial Services (NYDFS). This settlement includes a $40 million contribution from Gemini to Genesis for its bankruptcy proceedings and a $37 million payment to NYDFS. The settlement aims to fully recover Earn customers' virtual currency once Genesis concludes its bankruptcy process. Gemini Earn, which offered customers interest on crypto investments, faced challenges when Genesis, providing backend services, filed for bankruptcy in January 2023, affecting around 200,000 customers. NYDFS's investigation found that Gemini engaged in unsafe practices and failed to conduct due diligence on Genesis Global Capital. Furthermore, NYDFS warned it might sue Gemini if it fails to reimburse the $1.1 billion following Genesis's bankruptcy resolution.

Trading Desk Insights

Bitcoin continues its ascent, reaching yearly highs at $64,000, propelled by promising ETF flows and the nearing halving date. However, the recent downturn in pricing, which wiped out $1.4 billion in BTC open interest, raises the possibility of a local top. Bitcoin's market cap, currently at $1.23 trillion, is poised to surpass that of Silver at $1.27 trillion, positioning it as the 14th largest currency globally, surpassing even the Russian Ruble.

BTC ETFs experienced a record $677 million in daily net inflows on Wednesday, marking the third consecutive day of inflows exceeding $500 million. Grayscale witnessed outflows totaling $216.4 million, the highest since January 30th, as the firm reportedly lobbies with the SEC for options approval for these BTC ETFs.

TradeFi firms are abuzz with discussions surrounding BTC spot ETFs, anticipating the imminent arrival of major registered investment advisor (RIA) networks and broker-dealer platforms. Morgan Stanley is deliberating offering spot BTC ETFs to its clientele, having been the first major U.S. bank to provide access to bitcoin funds to wealthy clients in 2021.

DOGE futures reached a milestone with a record open interest of $1 billion, with 70% leaning towards the buy side. The Dogecoin network underwent an update on Tuesday, enhancing security and upgrading node operators. Additionally, the introduction of Ordinals on the Dogecoin blockchain likely bolstered community sentiment.

In the equities market, stock futures edged higher following in-line inflation data. The core PCE index, the Federal Reserve's preferred inflation gauge, rose by 0.4% MoM and 2.8% YoY, matching expectations. While still above the central bank's target in January, the index did not exceed Wall Street forecasts, indicating resilient consumer spending.

Thursday's session concludes February trading, marking another positive month for the three major averages, despite concerns about the sustainability of the AI-driven rally. The Nasdaq leads the pack with a 5.2% gain, while the S&P 500 has surged by 4.6%.

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