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Coinbase to Raise $1 Billion Through Convertible Bonds in Strategy Echoing MicroStrategy
Coinbase, the U.S.'s only publicly traded cryptocurrency exchange, announced its plan to raise $1 billion through the sale of convertible bonds, capitalizing on the recent digital asset rally without diluting its stock price, akin to Michael Saylor's MicroStrategy approach to crypto financing. Opting for a private offering of unsecured convertible senior notes set for conversion in 2030, Coinbase avoids the shareholder dilution associated with new equity sales. MicroStrategy, having acquired 205,000 Bitcoin now valued at nearly $15 billion, funded much of this through over $2 billion in convertible notes sales, including a recent oversubscribed $700 million offering. Unique to Coinbase's strategy is the inclusion of "negotiated capped call transactions" to hedge against dilution upon note conversion, a move to protect existing shareholders' interests even if share prices rise significantly. This financial maneuver is part of Coinbase's broader strategy to leverage the booming crypto market, with potential uses for the raised funds including debt repayment, capped call transactions, and acquisitions.
Digital Asset's Canton Network Showcases Interoperability in Financial Sector with Major Industry Players
Digital Asset, a leading blockchain provider for financial institutions, successfully tested its Canton Network with major industry participants including Goldman Sachs, BNY Mellon, DRW, Oliver Wyman, and Paxos. This comprehensive pilot involved 15 asset managers, 13 banks, four custodians, and three exchanges, facilitating over 350 simulated transactions of tokenized assets, fund registry, digital cash, repo, securities lending, and margin management. The test showcased the network's ability to support secure, atomic transactions across different sectors of the capital markets, highlighting potential advantages such as reduced counterparty and settlement risks, optimized capital, and the facilitation of intraday margin cycles. The initiative reflects a growing interest in enterprise blockchain and tokenization to enhance efficiency within regulated financial systems, with contributions from other notable firms including abrdn, BNP Paribas, DTCC, and Visa, and support from Microsoft, demonstrating the sector's concerted move towards interconnected and synchronized financial operations.
Indonesia's OJK Sets Crypto Regulation Framework for 2025, Aiming for Financial Sector Innovation
Indonesia's Financial Services Authority (OJK) is advancing technological innovation within the financial sector through new regulations set to apply to crypto starting January 2025. This regulatory framework offers guidance for financial institutions on embracing technology, focusing on the impact of innovations on services, operations, and customer protection. It emphasizes the need for testing environments and reporting on new tech, including digital financial assets like cryptocurrency. This move signals OJK's readiness to take over crypto regulation from Bappebti and Bank Indonesia, with a transition team already in place to ensure smooth oversight transfer. Additionally, OJK's collaboration with financial authorities in Malaysia, Singapore, and Dubai aims to craft a comprehensive crypto policy, highlighting its proactive approach to managing crypto advancements.
Trading Desk Insights
Bitcoin has achieved new all-time highs, reaching $73,700. Analyzing the 4-hour chart, there's a noticeable bearish divergence with prices setting higher highs while the Relative Strength Index (RSI) shows lower highs, suggesting potential trend exhaustion. A retraction to the $70k level appears in sight. Currently, the market sentiment is overwhelmingly bullish, drawing increased attention.
In terms of ETFs, the market witnessed its largest influx to date, with $1.05 billion in net inflows, including a record-breaking $849 million for Blackrock alone. Total inflows have surpassed the $4 billion threshold. Grayscale experienced outflows amounting to $79 million, marking one of its smallest outflow volumes since the ETFs were approved.
BONK is oscillating within a symmetrical triangle formation. A breakout, particularly to the upside, is expected to catalyze an approximate 20% momentum move.
The popularity of Bitcoin NFTs is on the rise, with the 7-day moving average of daily NFT volumes on the Bitcoin network increasing from $10 million to over $30 million since mid-February. Due to rising transaction fees on the primary network, several Layer 2 initiatives have been launched to enhance Bitcoin's scalability and utility. Indicators of increased adoption include a growth from $160 million to $2.7 billion in total value locked since Q3 2023, a 15x increase in just a few months. To leverage this trend, we are closely monitoring STX and ORDI.
Decentralized perpetual swap volumes have reached new heights, with last week's turnover hitting $60 billion, a 408% increase year-over-year. GMX is on the verge of a significant breakout, with a potential price surge to $90 if it surpasses the $63 mark, indicating a 50% upside.
Coinbase is poised to secure $1 billion through a convertible debt offering, mirroring the strategy employed by Michael Saylor's MicroStrategy to avoid diluting its stock price. The proceeds may be allocated towards debt repayment, financing potential capped call transactions, and exploring acquisitions.
Equity futures were stable on Wednesday, following a session where the S&P 500 recorded a new high. Nvidia's shares surged over 7% on Tuesday, almost completely offsetting losses from the previous two sessions, and marking an approximate 86% increase year-to-date. Following a higher-than-expected CPI report, the likelihood of a Federal Reserve rate cut in May has decreased to 13.2%.
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Disclaimer
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.
The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.
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Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.
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