February 8, 2024

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Next FOMC meeting: Mar 20th 2024

  • Probability of a 25bps ease → 18%
  • Probability of a 0bps hike → 82%

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The News Room

Hong Kong Launches Consultation on Regulatory Proposals for OTC Virtual Asset Trading

Hong Kong has initiated a public consultation on regulatory proposals for licensing over-the-counter (OTC) trading services for virtual assets, aiming to establish a transparent and robust regulatory framework for the sustainable development of virtual assets and Web3. Running until April 12, 2024, the consultation seeks to address money laundering and terrorist financing risks associated with virtual asset activities and enhance investor protection. The proposals call for mandatory licensing by the Commissioner of Customs and Excise for businesses providing spot trade services of virtual assets for money in Hong Kong, covering all OTC services across various platforms. Additionally, the framework grants supervisory powers to oversee anti-money laundering and counter-terrorist financing measures of virtual asset licensees. This move follows concerns raised by Christopher Hui, Secretary for Financial Services and the Treasury, regarding the involvement of OTC venues in fraud cases and underscores the government's commitment to regulating the sector. Since June 2023, Hong Kong has been implementing a crypto licensing regime, with licenses already granted to platforms like HashKey and OSL, marking a significant step towards formalizing the virtual asset market in the jurisdiction.

Ark 21Shares Amends Spot Ether ETF Proposal to Include Staking Language

Ark 21Shares has updated the S-1 for its spot Ether ETF, notably adding a section on potential staking and similar language to its Bitcoin ETF regarding cash creation. The inclusion of staking discussions, marked in brackets, indicates the issuer's anticipation of regulatory dialogue with the SEC on this topic. The proposed staking would involve using trusted third-party providers to stake a portion of the Trust's Ether tokens, potentially generating staking rewards, albeit with associated risks such as loss of tokens and liquidity risks due to the 'bonding' and 'unbonding' processes in Ethereum staking. This amendment, not seen in previous filings by Ark 21Shares or other applicants like BlackRock, suggests a significant step towards integrating traditional finance with digital assets, with implications for the staking industry and the development of distributed validator technology (DVT). Bloomberg Intelligence analysts highlight the importance of cash creations in ETF and forecast a decision on the spot Ether ETFs by the SEC in May, with varied expectations on the outcome.

M^0 Protocol Launches: Pioneering T-bill Backed Stablecoins for Global Institutions

M^0, a new protocol enabling global institutions to mint T-bills backed stablecoins, has launched its white paper and detailed its approach against the backdrop of increasing tokenization in the financial sector. Founded by stablecoin innovators from MakerDAO and Circle, including CEO Luca Prosperi and Chief Strategy Officer Joao Reginatto, M^0 aims to refine the concept of decentralized stablecoin issuance without centralizing control or fragmenting liquidity. Targeting the vast $5 trillion-$20 trillion offshore dollar market, M^0 proposes a governance framework that encourages interoperability among stablecoins through a multi-issuance model that adheres to local regulations, positioning itself as infrastructure for digital assets. Set to go live in Q2 2024, M^0 focuses on crypto-friendly institutions and DeFi investors as its primary users, aspiring to serve as a foundational layer for financial technology companies and to act as a digital-age "money middleware" that could improve upon and bypass aspects of the traditional banking system.

Trading Desk Insights

Bitcoin surged above the $44,000 mark, reaching levels not seen since January 12th, a day following the debut of the spot ETF. As previously noted, a breakout beyond $44,000 had been identified as a trigger for bullish sentiments, paving the way for potential further gains towards $47,000. Over the past two weeks, the number of Bitcoin addresses holding over 1,000 BTC saw a notable increase, indicating significant whale accumulation and reinforcing confidence in the upward price movement. The data reveals that approximately 73 new whales now possess 1,000 BTC or more, reflecting a 3.66% rise in just two weeks.

In terms of ETF flows, the market experienced substantial inflows totaling $146.1 million, marking the most significant influx since January 31st. While GBTC outflows remained consistent at $80.8 million, Fidelity witnessed a surge, reaching a weekly high of $130.1 million.

ETH made a noteworthy ascent, surpassing the $2,400 threshold for the first time in two weeks, fueled by renewed optimism surrounding the spot ETF. Ark Invest and 21Shares, in an effort to align more closely with recently approved spot bitcoin ETFs, amended their joint application. The adjustment, allowing cash creations and tentatively exploring the staking of fund tokens for rewards, appears to be a proactive measure to appease regulators.

The annual volume of stablecoins continues its upward trajectory, nearing figures comparable to VISA and other traditional financial systems.

Altcoins are experiencing upward momentum today, with ORDI rising by 7%, SEI by 5%, and SOL by 4%.

In the stock market, Thursday saw stocks hovering near the flatline, with the S&P 500 teetering on the verge of breaching the historic 5,000 milestone for the first time.

Yields inched higher on Thursday, with the 10-year Treasury note standing at 4.15%. Despite a slew of stronger-than-expected earnings reports boosting investor confidence in a robust economy, rising yields exerted pressure on stocks.

Crude oil futures extended their gains for the fourth consecutive day on Thursday, spurred by the U.S. military action in Iraq and Israel's rejection of a ceasefire proposal by Hamas.

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