October 13, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Nov 1st 2023

  • Probability of a 0bps hike → 89%
  • Probability of a 25bps hike → 11%

The News Room

Mastercard Successfully Wraps Up CBDC Pilot with Reserve Bank of Australia

Mastercard has completed a pivotal central bank digital currency (CBDC) pilot in partnership with the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre. The project specifically assessed how authorized participants, having undergone the mandatory KYC procedures, could effectively handle, use, and redeem CBDCs. A notable component of the pilot was the method by which holders could acquire Ethereum-based NFTs. This was achieved by locking up the pilot's CBDC and then minting a corresponding amount of Ethereum-based wrapped coins.

Richard Wormald, President of Mastercard's Australasia division, highlighted the transformative potential of this technology. He noted its ability to offer consumers more diverse choices and emphasized the significance of collaboration between public and private sectors in the evolving digital currency landscape. Mastercard's foray into CBDCs began as early as 2020, and by August 2023, they had established a strategic CBDC program with Ripple and Consensys.

ARK Invest Submits Updated Proposal for Spot Bitcoin ETF

ARK Invest, seeking approval for a spot Bitcoin ETF, submitted an updated proposal to the U.S. Securities and Exchange Commission (SEC) addressing several concerns previously raised by the agency. The amendment provides details about Coinbase’s custodial practices, emphasizing the segregation of ETF assets from corporate and customer assets on the Bitcoin blockchain. It also navigates issues related to non-compliance with U.S. GAAP for certain valuation methods and provides commentary on potential risk factors, including the environmental impact of Bitcoin mining and the implications of the cryptocurrency being used in illicit activities. Although the SEC has greenlit Bitcoin and Ethereum futures ETFs, it has yet to approve a spot Bitcoin ETF, often citing concerns about fraud and manipulative practices in the Bitcoin market. ARK’s update appears to proactively address some of these concerns, indicating a cautious and strategic approach to regulatory compliance.

CFTC and FTC Sue Former Voyager CEO Over Alleged Deceptive Practices in Crypto Lending

The U.S. Federal Trade Commission (FTC) and the Commodity Futures Trading Commission (CFTC) have filed legal complaints against Stephen Ehrlich, former CEO of the now-bankrupt crypto lending firm Voyager, accusing him of deceiving customers regarding the platform’s financial stability and insurance. While the CFTC targets Ehrlich alone, seeking penalties and trading bans, the FTC has named both the CEO and Voyager as defendants, alleging fraudulent claims about FDIC insurance of customer funds. The FTC is also pursuing a $1.65 billion penalty from Voyager and has named Ehrlich's wife, Francine, as a relief defendant. Ehrlich vehemently denies the allegations, suggesting he is being scapegoated and expressing confidence in his forthcoming vindication in court. Voyager had declared bankruptcy in 2022 following a domino effect initiated by the collapse of crypto hedge fund Three Arrows Capital, and finalized a customer repayment plan through asset liquidation earlier this year.

Trading Desk Insights

Early Friday saw stock futures inching up as traders delved into the earnings of major banks. JPMorgan, Wells Fargo, and Citigroup picked up steam post their encouraging earnings announcements. Following the release of the preliminary University of Michigan Consumer Sentiment report, which fell short of expectations, equities dipped while the US Dollar Index surged to a session peak of 106.30.

Despite closing in the red on Thursday, the major indices are gearing up for weekly gains. As of Thursday's close, the S&P 500 has risen by 0.9%, and the Nasdaq has advanced by 1%. This would mark Nasdaq's third consecutive positive week and S&P 500's back-to-back gainful week.

Thursday presented challenges for equity markets. A lackluster 30-year bond auction acted as a cautionary tale regarding diminishing demand for U.S. government bonds. This subpar auction propelled yields on longer-duration Treasuries significantly. The auction tail, reflecting the disparity between the lowest bid price and the average, was its narrowest since November 2021.

In other news, Philadelphia Federal Reserve President, Patrick Harker, opined early Friday that there might be no alterations in rates.

Bitcoin's price has been locked between 26,550 and 26,950 since Wednesday afternoon. A surge past this bracket heightens the probability of hitting the intraday level of 27,450, while a descent might see values plummeting to 26,000.

Observing the recent Bitcoin/Nasdaq chart, the ratio appears to be retracting to a potential support level. While Nasdaq has eclipsed Bitcoin by 8.5% since October 7th, Bitcoin still boasts a 10% gain against Nasdaq since September 12th. We might be on the cusp of witnessing another period of relative outperformance in the crypto realm, particularly with the S&P 500 flirting with resistance levels.

On a regulatory note, the SEC has a deadline of midnight to challenge the Grayscale verdict. Absence of a challenge means that in a week's time, the case concludes, paving the way for Grayscale to initiate discussions with SEC for approval procedures. A glance at the GBTC discount reveals its continual shrinkage, now standing at 16.5%, an improvement from its 43% in mid-June when BlackRock lodged its Bitcoin ETF.

Technical Charts


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