October 10, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Nov 1st 2023

  • Probability of a 0bps hike → 86%
  • Probability of a 25bps hike → 14%

The News Room

Switzerland's Backed Finance Issues Tokenized Short-Term U.S. Treasury Offering

Switzerland's Backed Finance has issued its first tokenized short-term U.S. Treasury offering on the Base blockchain, marking the inaugural real-world asset token on the network. Governed by Swiss tokenized securities law, Backed’s bIB01, a blockchain rendition of BlackRock's U.S. Treasuries ETF, assures a 5.25% annual yield to eligible investors and licensed distributors, subject to KYC and AML verifications. U.S. participants, however, are excluded from acquiring the token.

The spotlight on tokenizing real-world assets (RWAs) encompassing conventional financial entities like government bonds and private equity has intensified, potentially growing the tokenized assets market to $16 trillion by 2030, as per a Boston Consulting Group report. Amidst this surge, U.S. Treasuries have witnessed a sixfold increase and emerged as a prime focus in this space due to their combination of attractive yields and minimal risk, bringing the tokenized treasuries market to $666 million this year.

Taiwan Moves Toward Comprehensive Crypto Regulation With Proposed Special Law

Taiwan is actively moving towards more comprehensive crypto regulations, with lawmakers seeking to introduce a special law to oversee the burgeoning industry. Yung-Chang Chiang, a member of Taiwan's parliament, recently emphasized the distinct nature of crypto assets, necessitating a separate legislative approach. While Taiwan's Financial Supervisory Commission (FSC) recently suggested the crypto sector should draft its own self-supervisory guidelines, these would lack legal enforceability without the backing of a specific law. Chiang's proposed law would mandate crypto platforms in Taiwan to obtain a permit; failing to do so would lead to shutdown orders by the regulators. Despite anti-money laundering rules introduced in 2021, the crypto industry remains primarily unregulated in Taiwan, with many platforms yet to declare compliance. Representatives from crypto entities highlighted the persistent banking challenges for crypto firms in Taiwan, urging for more crypto-friendly banking solutions. While the special law might not be enacted until mid-2024 or later, discussions continue about how it should differentiate between large and small-scale crypto platforms.

Mining Companies Drive Bitcoin Hash Rate Surge Despite Challenges

In the third quarter, Bitcoin's average network hash rate witnessed a surge, driven notably by seven predominant mining companies: Bitdeer, CleanSpark, Marathon Digital, Cipher, Bit Digital, Bitfarms, and HIVE, which collectively enhanced Bitcoin’s monthly average hash rate by 13.88 EH/s from June to September. Bitdeer notably eclipsed others by augmenting its realized hash rate by over 120%.

Interestingly, these advancements occurred despite North America's record-breaking summer heat wave, compelling numerous miners to power down their rigs to divert more electricity to the grid for residential usage during the intense heat. For instance, Texas-based Riot Platforms opted to scale down a significant portion of its operations, consequently experiencing a 14% reduction in its realized hash rate in the last quarter. Despite facing operational and climatic challenges, companies like Bitdeer and Marathon Digital showcased compelling growth and strategic development in their mining operations, signaling a robust and adaptive outlook on the crypto mining landscape.

Trading Desk Insights

Due to the observance of Columbus Day in the US and Thanksgiving in Canada, banking activities were halted on Monday, causing a pause in USD & CAD wire transfer processing.

The S&P 500 saw a downtrend on Monday morning, impacted by the escalating Israel-Hamas tension, coupled with concerns regarding inflation and rising interest rates. However, significant upticks in major defense and oil sectors helped the index rally and surpass recent peaks by the afternoon. As of Tuesday morning, equity futures remained uncertain, awaiting the market's opening bell to set their course. The ongoing Israel-Hamas conflict has led Wall Street to reevaluate and react to the geopolitical implications, resulting in a recent dip in Treasury yields.

Oil prices experienced a surge on Monday due to the prolonged conflict in the Middle East, exacerbated by an unexpected offensive on Israel by the Hamas group. With Hamas having its roots in the Gaza Strip since 2007 and backed by Iran – a key player in the global oil market – any direct involvement by Iran can significantly sway the oil market dynamics. Notably, the Strait of Hormuz plays a pivotal role, handling approximately 40% of global oil exports. Any disturbance in this region could substantially influence global oil prices and availability.

Moving on with crypto.

After a couple of weeks of outperformance, Bitcoin has started to lose a bit of traction compared to Nasdaq and trade 3% lower on a relative basis. Despite its performance vs. equities, Bitcoin’s dominance has continued to grow recently from 49% at the start of September to 51.35% on Monday, thus gaining more attention amongst market participants compared to altcoins. In this market environment, Bitcoin remains king.

Crypto enthusiasts should remain vigilant of the overarching macroeconomic dynamics. As geopolitical tensions heighten, we might see an upswing in energy prices. Currently, this has catalyzed a substantial equity sell-off, bolstering the anticipation of a stricter monetary stance. Such an environment potentially casts shadows over assets like Bitcoin and the broader cryptocurrency market.

From the perspective of derivatives traders, Deribit's order books are currently demonstrating a tendency towards options sales, a play typically employed to capitalize on subdued volatility or market disturbances. This observation is underscored by the consistent bid/ask ratio, which has remained below 1. The trend aligns with the recorded decline in implied volatility (IV) for BTC and ETH since the start of the year.

Technical Charts


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