October 17, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Nov 1st 2023

  • Probability of a 0bps hike → 91%
  • Probability of a 25bps hike → 9%

The News Room

California Governor Signs Crypto Licensing Bill, Implementation Set for July 2025

California Governor Gavin Newsom has officially signed into law a crypto licensing bill with an implementation date set for July 2025. Drawing parallels to New York's "BitLicense", the Digital Financial Assets Law encountered substantial industry skepticism but successfully navigated its passage through the state's Assembly in September 2022. This law mandates that the California Department of Financial Protection and Innovation devise a comprehensive regulatory framework for cryptocurrency.

This framework will encompass a licensing system, along with bestowing the department with both enforcement and rulemaking powers. Acknowledging the intricate nature of the sector, the legislation also offers an 18-month implementation window to ensure that regulations are deliberately crafted to resonate with industry shifts and safeguard consumers. Governor Newsom, in his address, highlighted the need for further clarity in the bill's terminology and emphasized striking a judicious balance between consumer safety and fostering responsible technological innovation.

New York Judge Orders Genesis to Submit Documents in SEC Case Against Terraform Labs

A New York judge has ordered Genesis and its associated firms to submit documents within five days, relating to a case initiated by the U.S. Securities and Exchange Commission (SEC) against Terraform Labs and its failed TerraUSD stablecoin. On Sept. 12, Terraform Labs sought to subpoena three Genesis entities, with a deadline set for Oct. 9. However, Genesis failed to respond or produce the requested documents.

While the details of the subpoena and the relationship between Terraform Labs and Genesis remain undisclosed, both entities have faced significant challenges. Terraform Labs dissolved its Korean offices in 2021 and saw the value of TerraUSD plummet, while Genesis' lending division filed for bankruptcy in January 2023. The SEC has also separately sued Genesis earlier this year, a case that Genesis sought to dismiss in May without success.

Global Regulator Mandates Crypto Exposure Disclosure for Banks

The Basel Committee on Banking Supervision, an international banking standard-setter, has released draft guidance mandating that banks provide both qualitative and quantitative data on their cryptocurrency activities. Set to be effective from 2025, these guidelines supplement existing capital requirements intended to deter banks from holding unbacked cryptocurrencies like Bitcoin and Ethereum. This comes in the wake of challenges faced by crypto-affiliated banks such as Signature Bank and Silicon Valley Bank. The committee, affiliated with the Bank for International Settlements, emphasized that a standardized disclosure format would enhance market discipline and minimize information disparities between banks and other market players.

Trading Desk Insights

Equity futures dipped this morning, with rising rate fears back on the table. U.S. Treasury yields ticked up as market participants digested the implications of recent robust economic figures on interest rates and the broader economic trajectory.

Retail figures in September outperformed, registering a notable uptick despite headwinds from lofty interest rates and an atmosphere of economic unease. Core retail sales reported a solid 0.6%, overshooting the anticipated 0.2%. As a consequence, bond yields are climbing, placing strain on the markets. The 10-year is currently hovering around 4.82%, inching towards its multi-year peak of 4.89%.

Eyes will be on several key speeches from Fed officials in the coming days, notably from Chairman Jerome Powell. Market sentiments, as gauged by the CME FedWatch, suggest a nearly 90% probability that rates will remain steady in the Fed's upcoming November 1st decision.

Bitcoin is still trading higher than it was before the ETF rumor frenzy, hinting at a prevailing market sentiment that an ETF green light might be on the horizon. Liquidity concerns have surfaced as a notable number of traders reported slippage on leading exchanges. This turbulence has triggered around $100m in liquidations, comprised of $72m in short positions and $31m in longs.

Technical Charts


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