January 29, 2024

Markets Insights

Economic Calendar

Next FOMC meeting: Jan 31st 2024

Probability of a 25bps ease → 3%

Probability of a 0bps hike → 97%

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The News Room

Harvest Fund Management Seeks to Launch Hong Kong's First Bitcoin ETF

The Hong Kong branch of Harvest Fund Management, a major Chinese asset manager, has filed an application for a spot Bitcoin ETF with the city's Securities and Futures Commission, aiming to launch the city's first ETF after the upcoming Lunar New Year. This development is part of a wider trend in Hong Kong, with about ten fund companies, including Venture Smart Financial Holdings Ltd. (VSFG), planning to introduce spot crypto ETFs. Additionally, firms like Harvest Global Investments, RD Technologies, and VSFG are in talks with the Hong Kong Monetary Authority for stablecoin trials, expected to start in the first quarter and continue through the first half of 2024. These efforts are in line with Hong Kong's ambition to become an international hub for virtual assets. The Hong Kong Monetary Authority is preparing a sandbox for fiat-reference stablecoin issuers, which aligns with a joint consultation paper requiring stablecoin issuers in Hong Kong to obtain licensing. HKMA's Chief Executive Eddie Yue emphasized the potential of stablecoins in connecting traditional finance with the virtual asset market, underlining the importance of their stability for the broader digital payment ecosystem.

UK Supreme Court Denies Craig Wright's Appeal in Bitcoin Libel Case Against Podcaster McCormack

The UK Supreme Court has refused Craig Wright's permission to appeal a ruling in his libel case against Bitcoin podcaster Peter McCormack, as confirmed by the court's official posting. In July, judges awarded Wright only 1 GBP in compensation for his claim that he is Bitcoin inventor Satoshi Nakamoto. Rupert Cowper-Coles, representing McCormack, expressed satisfaction with the Supreme Court's decision, which upholds the nominal damages award after two unsuccessful appeals by Wright. Meanwhile, Wright faces ongoing legal challenges in another case against several crypto companies and Bitcoin developers. This group, represented by the Cryptocurrency Open Patent Alliance (COPA), recently rejected Wright's settlement offer in a case alleging copyright violations related to Bitcoin's white paper and blockchain database. COPA, representing 13 Bitcoin Core developers and companies like Coinbase and Block, criticized the settlement offer for containing loopholes that could lead to further litigation, indicating the ongoing legal complexity surrounding Wright's claims and the broader crypto community.

Bitcoin Sent to Bitwise's ETF Wallet will Benefit the Fund’s Shareholders

Bitwise, the first spot Bitcoin ETF issuer to disclose its fund's wallet, has unexpectedly received gifts, including small Bitcoin amounts, BRC-20 tokens, Bitcoin domain names, and various Bitcoin NFTs, totaling over $5,000. Bitwise CIO Matt Hougan clarified that all assets benefit the shareholders of BITB, and according to the fund’s S-1 filing, involuntarily received assets may be sold for cash and distributed to shareholders. A significant concern arises from the U.S. Treasury’s sanctions on certain Bitcoin addresses, as wallets cannot prevent unsolicited funds, including those from sanctioned addresses. Bitwise addresses this challenge at the custodian level, with Coinbase, their custody provider, blocking OFAC-sanctioned addresses. Coinbase ensures compliance with laws by blocking and reporting such funds, and transferring them to an internal holding account as necessary. This situation highlights the unique challenges faced by cryptocurrency funds in adhering to regulatory requirements, especially concerning unsanctioned transactions and asset management.

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Trading Desk Insights

Bitcoin has rebounded by 12% from its recent lows recorded on January 23rd, reaching a weekly high of 43,300. Conversely, ETHBTC continues its downward trend towards yearly lows.

Solana's 7-day moving average of new addresses recently hit another all-time high, coinciding with the airdrop of the new memecoin WEN to over one million wallets. Notably, network activity on Solana has been steadily increasing.

Speaking of network activity, Sui, a blockchain launched less than a year ago by former members of Facebook's Libra project, has surged into the top 10 chains by TVL (Total Value Locked), experiencing a 15% uptick in value today.

Spot bitcoin ETFs have completed their first 10 days of trading in the US. However, over the last four days, these products have seen net daily outflows. Excluding the heavy outflows from Grayscale Investments' Bitcoin Trust ETF (GBTC), the combined net inflow for spot bitcoin ETFs since their launch on Jan. 11 exceeds $5.5 billion.

In the US stock market, futures saw minimal changes on Monday as investors awaited several mega-cap tech earnings reports and the Federal Reserve's rate policy decision.

Last week, all three major averages experienced gains following positive economic data. Fourth-quarter economic growth surpassed expectations, while yearly core inflation was lower than forecasted, indicating a potential slowdown in price increases.

This week marks a busy slate of earnings reports, with 19% of the S&P 500 companies scheduled to report. Mega-cap tech giants such as Microsoft, Apple, Meta, Amazon, and Alphabet will be among those sharing their results.

Additionally, the Federal Open Market Committee will commence its two-day policy meeting on Tuesday. Market participants anticipate that the central bank will maintain steady interest rates, with traders assigning an almost 97% probability that the Fed will refrain from rate cuts at the upcoming meeting.

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Crypto Charts

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Macro Charts

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Disclaimer

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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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