October 11, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Nov 1st 2023

  • Probability of a 0bps hike → 84%
  • Probability of a 25bps hike → 16%

The News Room

JPMorgan Debuts Tokenized BlackRock Shares as Collateral with Barclays

JPMorgan has successfully conducted its inaugural live blockchain-based collateral settlement involving BlackRock and Barclays using its Ethereum-based Onyx blockchain and Tokenized Collateral Network (TCN). In this transaction, BlackRock tokenized shares of its money market funds, which were subsequently transferred to Barclays as collateral for an OTC derivatives trade. Achieved in minutes, this near-instantaneous transfer marks a pioneering shift in how traditional financial assets can be tokenized for increased efficiency. As JPMorgan and other major banks explore tokenization, this innovation offers a more rapid and cost-effective method for meeting margin requirements in the financial sector.

Hedge Fund Manager Paul Tudor Jones Reiterates Support for Bitcoin

Prominent hedge fund manager Paul Tudor Jones reiterated his support for Bitcoin in a recent CNBC interview, recommending a mix of gold and Bitcoin for portfolios given the challenging macroeconomic and geopolitical climate. Jones forecasted a potential US recession in early 2024 and expressed concern over the nation's precarious fiscal position, the most fragile since World War II. This sentiment coincides with escalating tensions in the Middle East as Israel responds to attacks by Hamas.

The ongoing strife has spurred investors to seek safer assets, with increased interest in bonds, oil, and gold. Amidst these headwinds, Edward Moya of OANDA noted the positive trajectory for gold due to the Federal Reserve's dovish stance. Jones's continuous advocacy for Bitcoin stems from its capped supply and immunity from human interference, making it a unique asset in tumultuous times.

Former CEO of Alameda Research Testifies That She Committed Fraud at the Direction of Sam Bankman-Fried

In the ongoing trial of FTX exchange founder Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison testified that she committed fraud under Bankman-Fried's directives. Ellison, who had earlier pled guilty to fraud and conspiracy charges, confessed to manipulating balance sheets to make Alameda's finances seem less precarious to investors and diverting funds from FTX for Alameda's ventures. She highlighted their strategy of borrowing extensively from FTX customers, often to finance loans for Bankman-Fried's inner circle, with funds earmarked for investments and political donations.

While Ellison had been Alameda's CEO, she confirmed she continuously reported to and took directives from Bankman-Fried. Her testimony also revealed Alameda's considerable borrowings using FTX's token, FTT, as collateral. Meanwhile, earlier testimonies from insiders, including Gary Wang, have further intensified the focus on the alleged malpractices within FTX and Alameda Research.

Trading Desk Insights

Stock futures rose on Wednesday as investors digested improved inflation data and cheered the largest merger of the year with Exxon Mobil buying pioneer Natural Resources for $60b. Treasury yields continued to retreat from the 16-year highs reached last week, providing more breathing room for risk assets as a whole.

Minutes from the Federal Reserve’s latest meeting due in the afternoon will offer further insight into the central bank’s hiking cycle after it chose to skip an interest rate increase last month. Traders are also looking ahead to Thursday’s consumer price index report for September.

Bitcoin continues to trade lower as safe haven assets like Treasuries are more attractive in this market environment. The equity market witnessed a rise this morning as PPI improved month-over-month but BTC isn’t convinced. The #1 cryptocurrency has been underperforming Nasdaq by 7% since the weekend. On an intraday basis, prices broke below a rising trend channel that has been in place since mid-September, advocating for further downside. We expect to eventually retest the previous trading range of 25,500 - 26,700.

According to the crypto data provider Kaiko, Bitcoin Cash (BCH) witnessed the biggest liquidity jump in Q3 of 10% vs. the previous quarter. Liquidity refers to the market's ability to absorb large orders at stable prices. These liquidity rankings are based on market depth measures, bid-ask spreads, volumes from "tradable" exchanges.

In other news, JPMorgan started its tokenization initiative using BlackRock Shares as collateral with Barclays. JPMorgan’s blockchain was used by BlackRock to tokenize shares in one of its money market funds. The tokens were then transferred to Barclays for collateral in an OTC derivatives trade. The plan is to see if tokenizing assets can be treated as collateral in clearing and margin transactions and if it helps reduce the operational friction in meeting margin calls.

Finally, Tornado Cash trading volumes fell by 90% following U.S. Sanctions. A group of crypto investors and developers lost a lawsuit funded by Coinbase that argued the Treasury Department overstepped its authority.

Technical Charts


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.

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