September 21, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Nov 1st 2023

Probability of a 0bps hike → 68.7%
Probability of a 25bps hike → 31.3%

The News Room

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South Korea's Second-Largest City Plans Digital-Assets Exchange for November

Busan, South Korea's second-largest city, aims to launch a digital assets exchange by November, with a full-scale business commencement slated for the first half of the upcoming year. Unlike traditional crypto platforms, this exchange will facilitate the trade of tokenized commodities using blockchain. The city government plans to initiate a public offering process soon, determine a business operator by November, and subsequently register the exchange as a corporate entity.

Entirely funded through private capital, the endeavor will benefit from administrative and financial assistance from the city. Furthermore, as part of its vision to become a "blockchain city", Busan intends to invest 100 billion won ($75 million) in blockchain technology development and is in the process of creating a mainnet anticipated to be interoperable with prominent networks such as Ethereum and Cosmos.

Controversial Crypto Bill Seeks to Restrict U.S. CBDC Development

The House Financial Services Committee has endorsed Rep. Tom Emmer's "CBDC Anti-Surveillance State Act," a bill aiming to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly or indirectly to individuals. Emmer voiced concerns about potential governmental surveillance and restrictions on American transactions via CBDCs, labeling it "un-American." However, this move faced significant opposition, especially from Democrats.

With 130 countries (representing 98% of global GDP) researching CBDCs, critics argue this bill could hinder the U.S.'s competitive stance in the evolving digital currency landscape. While the Blockchain Association backs Emmer's legislation, citing privacy issues, its fate remains uncertain in the Senate. The committee has recently advanced other crypto-focused bills as well, emphasizing the sector's growing legislative attention.

Tether Acquires 20% Stake in German Bitcoin Miner Northern Data

Stablecoin firm Tether is venturing into a $420 million deal with German crypto mining company Northern Data, as reported by Forbes on Sept. 20. The deal involves Tether procuring 100,000 Nvidia H100 GPUs on behalf of Northern Data, accounting for roughly 2% of Nvidia's total GPU shipments for the year. The mining company plans to rent these chips to AI startups and in return, Tether will gain a 20% stake in Northern Data.

Interestingly, the entire operation is channeled through Damoon, a Northern Data-owned Irish front company retaining a dominant 70% stake. The article also sheds light on certain contentious issues surrounding Northern Data's previous commercial activities and reporting inconsistencies. Tether's inaugural entry into the crypto mining realm was marked by a separate investment in an Uruguayan mining entity earlier this May.

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Trading Desk Insights

Stock futures declined further on Thursday, extending this week's downtrend, following the surge in the 10-year Treasury yield to a 15-year high of 4.48%. This movement was in response to the Federal Reserve's strategy to maintain elevated interest rates over an extended period.

The Federal Reserve has held its rates firm in the range of 5.25% to 5.50%, signaling a hawkish outlook with expectations of an additional rate hike this year and diminished prospects for rate reductions next year.

The FOMC remains open to a potential twelfth rate increase, anticipating rates to touch between 5.5% and 5.75% within the year. Considering the persisting inflation rates surpassing the Fed's 2% benchmark and continued robust economic performance that could reinvigorate inflation, the committee remains cautious and is not quick to pronounce a triumph over inflation at this juncture.

In a sign that the Fed is committed to its higher-for-longer rate regime, Fed members now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024, compared with four rate cuts projected previously. For 2025, interest rates are expected to drop to 3.9%, but that well above the 3.4% previously projected, and fall further to 2.9% in 2026.

Moving on with Bitcoin. On an intraday basis, BTCUSDT broke below the short term rising trend channel that we have been tracking for the last couple of days. As mentioned recently, a breakdown of this pattern would serve as a warning sign that the recent short term rally could be near its end. Since the breakdown, prices tumbled by 2%. Prices are getting closer to our support of 26,200 which might attract more buyers. On the daily chart, prices pulled back from the 50-day moving average, a key indicator of trend shifts.

In other news, both ETH and BTC have shown promising activity this past week. ETH experienced a surge in its 7-day moving average of active addresses, jumping from 372k to a notable 508k — a peak for 2023. Meanwhile, BTC climbed from 906k to an impressive 1.11M, reaching a level that hasn't been witnessed since 2021.

In the altcoin market, ADA, FTM, MATIC, MANA and SAND are about to make yearly lows while DOGE is flirting with an important support of 0.0555. SOL is still being supported by a rising trend line despite feeling the pressure that FTX could get ready for a fire sale.

Technical Charts

Disclaimer

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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.

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