May 1, 2024

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Tether Reports Record $4.52 Billion Profit, Bolstered by U.S. Treasury and Cryptocurrency Gains

Tether Holdings Limited, in its first-quarter 2024 attestation, reported a record net profit of $4.52 billion, largely driven by earnings from U.S. Treasury holdings and gains in Bitcoin and gold. The firm revealed its net equity for the first time, totaling $11.37 billion as of March 31, a significant increase from $7.01 billion at the end of 2023. The attestation also noted that Tether's issuance entities and reserve management saw $1 billion in profits, with its U.S. Treasury ownership now surpassing $90 billion. Furthermore, Tether's stablecoins are backed by up to 90% in cash and cash equivalents, underscoring the firm’s commitment to transparency and financial stability in the cryptocurrency industry, as emphasized by CEO Paolo Ardoino.

BlackRock Leads $47 Million Funding Round for Securitize, Advancing Tokenization of Traditional Assets

BlackRock, the world's largest asset manager, is deepening its foray into the tokenization space by leading a $47 million funding round for Securitize, a company that specializes in converting physical and traditional financial assets into blockchain tokens. This investment marks a continued collaboration between BlackRock and Securitize, following the launch of BlackRock’s first tokenized fund—the BlackRock USD Institutional Digital Liquidity Fund—in March, which is available through Securitize Markets. The move underscores the growing interest among fintech and traditional finance sectors in tokenization, which is recognized for its potential to enhance transparency and reduce costs in capital markets. Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships, emphasized that tokenization could significantly transform capital market infrastructures and has joined Securitize's board of directors, highlighting the strategic importance of this investment. Other contributors to the funding round included Hamilton Lane, ParaFi Capital, and Tradeweb Markets, with Hamilton Lane already engaging in tokenization through a Securitize feeder fund on Polygon.

FTX Estate Nears Completion of $232 Million Solana Token Auction, Featuring Discounts and High Investor Demand

The FTX estate is nearing the completion of its second round of locked Solana token sales, auctioning off 1.8 million SOL valued at approximately $232 million. The auction concluded with successful bids mainly between $95 and $110 per token, representing discounts of 26% to 15% from current market prices. Galaxy Trading and Pantera Capital were notable participants, with Galaxy seeking minimum investments of $5 million for this round. The sold tokens are subject to a four-year vesting period. The demand for locked Solana remains high, as evidenced by the increased bid prices compared to the previous sale in March, where tokens were sold for $64 each. The next auction is scheduled to begin on May 1, facilitated by Figure Markets through a special purpose vehicle for interested investors. Galaxy Asset Management, managing the sales, and the FTX estate have not provided comments on the ongoing transactions.

Trading Desk Insights

As macroeconomic pressures persist, bearish momentum has intensified, pushing Bitcoin beneath the critical $60,000 support level. Bitcoin has tumbled to $56,700, breaking below the $57,000 mark for the first time since February 28, and logging its first monthly decline since August. This 16% plunge is the steepest since November 2022, during the FTX collapse. Immediate support now hovers between $50,000 and $53,000. With expectations for fewer rate cuts and continuous withdrawals from US BTC ETFs, the crypto market is showing signs of fatigue.

Market watchers are closely monitoring the upcoming interest rate decision by the U.S. Federal Reserve. The Federal Open Market Committee is scheduled to convene this Wednesday to deliberate on interest rate policies. The anticipation of a prolonged journey towards rate reductions has unsettled the markets further.

In ETF news, the sector experienced significant outflows, totaling $161.6 million, marking the fifth consecutive week of net withdrawals, amounting to $635 million. Particularly, Fidelity and Bitwise recorded their highest single-day outflows at $35.3 million and $34.3 million, respectively.

Altcoins, especially those recently outperforming categories like AI tokens and meme coins, have suffered notable losses.

In other developments, Changpeng Zhao (CZ) of Binance has been sentenced to a four-month prison term due to insufficient anti-money laundering measures. At his hearing, he was depicted as a philanthropic, first-time offender who voluntarily surrendered to face the consequences.

Equity futures dipped as investors await the Fed's decision on rate policy, culminating in a disappointing month for major indices. The S&P 500 and Nasdaq both registered over 4% losses in April, while the Dow recorded a 5% drop, marking its poorest monthly performance since September 2022.

Attention now turns to Federal Reserve Chair Jerome Powell for potential insights into the prerequisites for rate reductions. The most immediate update likely from today's meeting is the Fed's plan to scale back its bond portfolio reduction. The rate decision will be announced at 2pm EST, followed by a press conference at 2:30pm EST.

Current futures market odds suggest a roughly 50% probability of a rate cut by September, with expectations set for a modest quarter-percentage-point cut by the end of 2024.

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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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