January 23, 2024

Markets Insights

Economic Calendar

Next FOMC meeting: Jan 31st 2024

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

The News Room

Crypto Custody Specialist Taurus Receives FINMA Approval to Offer Tokenized Securities to Retail Investors in Switzerland

Swiss cryptocurrency custody and trading firm Taurus has received approval from FINMA, Switzerland's financial regulator, to offer tokenized securities of unlisted companies to retail investors via its TDX marketplace. This move significantly democratizes access to tokenized shares, previously limited to professional investors. TDX supports transactions in cryptocurrencies, as well as in Swiss Francs, Euros, and U.S. Dollars. Several Swiss firms, including Investis, la Mobilière, Qoqa, Structured Commodity & Corporate Finance, Swissroc, and Teylor (a fintech lending firm already issuing tokenized shares with Taurus), have opted to use TDX for share issuance. The expansion of TDX to retail investors enables them to participate in both primary and secondary market activities related to unlisted firms. While currently focused on Swiss residents, TDX may extend its services to international investors, subject to compliance with respective trading segment and issuer requirements. This development reflects the growing trend in financial markets towards leveraging blockchain technology for more efficient and accessible trading and investment opportunities.

BIS Confirms Tokenization Project as part of Six Projects for 2024

The Bank for International Settlements (BIS) Innovation Hub has unveiled its 2024 work program, highlighting six new projects focused on areas like cybersecurity, financial crime, central bank digital currencies (CBDCs), and green finance. Among these, a notable initiative is Project Promissa, a collaborative effort with the Swiss National Bank and the World Bank. This project aims to create a proof-of-concept for a blockchain-based platform for managing digital tokenized promissory notes, enhancing their management and transparency. Additionally, the BIS Innovation Hub's Hong Kong Centre will continue Project Aurum, which explores privacy in retail CBDC payments, collaborating with academia and privacy regulators. This project, conducted jointly with the Hong Kong Monetary Authority, focuses on developing a comprehensive CBDC system including both a wholesale interbank system and a retail e-wallet system, and investigates two types of tokens withink this interbank framework: an intermediated CBDC and a stablecoin backed by CBDCs.

FTX's $1 Billion GBTC Sell-off Contributes to $2 Billion Exodus from Grayscale Bitcoin Trust

Investors have withdrawn over $2 billion from the Grayscale Bitcoin Trust (GBTC) following its conversion to an exchange-traded fund (ETF) this month, with a significant portion attributed to FTX's bankruptcy estate selling approximately 22 million shares. This mass exodus contrasts with the inflows seen in newly approved spot Bitcoin ETFs from entities like BlackRock and Fidelity. FTX, a major player in the crypto market, had capitalized on the price disparity between Grayscale trust shares and the underlying Bitcoin asset value. At the time of its ETF conversion, GBTC had nearly $30 billion in assets, but the approval of new ETFs and FTX's liquidation significantly impacted its value. Bitcoin's price has declined since these developments, suggesting a market adjustment following initial high expectations for ETFs as a mainstream investment vehicle. FTX's complete divestment from GBTC, valued at nearly $1 billion, is a notable event in the crypto market, reflecting the ongoing adjustments and realignments in the aftermath of FTX's bankruptcy.

Trading Desk Insights

Bitcoin experienced a further decline on Tuesday, reaching a session low of $38,500, marking its lowest level since the start of December. Notably, prices have dropped by 20% since the introduction of spot Bitcoin ETFs in the U.S. on January 11th. Some attribute the short-term selling pressure to significant outflows from the Grayscale Bitcoin Trust (GBTC), which has seen approximately $2 billion in exits since January 19th, while ETFs from BlackRock and Fidelity have each recorded inflows exceeding $1 billion.

Despite the recent challenges, there remains an optimistic outlook for Bitcoin reaching a new all-time high later in the year. Funding rates continue to signal a bullish sentiment, with dominant buyer activity. The absence of a mass unwinding of bullish perpetual futures and negative funding rates indicates ongoing buyer dominance, and leverage remains tilted toward the bullish side.

Observing changes in BTC trading patterns across U.S. platforms post the spot ETF approvals reveals a notable spike in hourly trade volume around the U.S. market close, typically occurring between 3-4 pm EST. This pattern is expected to persist with increasing ETF inflows, particularly as institutional clients, active in ETF trading, operate during U.S. hours.

In the broader financial landscape, U.S. stock futures showed marginal changes on Tuesday, following the Dow Jones breaking 38,000 for the first time. However, investors are contemplating the sustainability of these gains, especially considering the recent tech-centric rally, particularly in stocks like Nvidia, while broader market participation remains lackluster.

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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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