Market Watch
Things to Watch This Week (Oct 30 – Nov 3)
November 1: U.S. FOMC Interest Rate Decision
The Federal Open Market Committee announces its monetary-policy decision on Wednesday EST time. Wall Street is nearly unanimous in expecting the FOMC to leave the federal-funds rate unchanged at 5.25%-5.50%. However, traders are pricing in a one-in-four chance the Fed hikes interest rates by a quarter of a percentage point at its last meeting of the year, in mid-December. Markets will be watching subsequent comments on the US economic outlook in Fed Chair Jerome Powell's speech that might hold the key for a potential market moving indication.
Random Musing This Week (Oct 30 – Nov 3)
Market Recap
The past week saw significant moves in the crypto market. The total capitalization experienced an increase of 15.1%, indicating noteworthy growth. In particular, Bitcoin’s price experienced a dramatic surge. Its market dominance reached a record 51.5%, the highest since the bull run in April 2021. Additionally, the volatility index, which had remained on a downward trend, also managed to reverse course and climb in the past few weeks.
Bitcoin Dominance
Bitcoin Volatility Index
Bitcoin Spot ETF and Market Reaction
The market's excitement was largely driven by the increasing anticipation surrounding the approval of a Bitcoin spot ETF. This momentum was amplified with the news of BlackRock's Bitcoin spot ETF registration with DTCC. However, DTCC quickly clarified that this registration, in place since the previous August, was merely a procedural step in the ETF's launch and should not be interpreted as an indication of the SEC's formal approval. Interestingly, a temporary delisting of the ETF from DTCC caused a brief dip in Bitcoin's price, but it promptly rebounded upon re-registration.
Market Sensitivity
The market's heightened sensitivity to developments in Bitcoin spot ETFs is signaling potential higher volatility, and we should expect to continue to see signs of sensitivity to various news about Bitcoin. The ongoing amendments to the application indicate positive progression. The SEC's final decision deadline for major Bitcoin spot ETFs is set between January and March of the upcoming year.
Recap of Top Stories (Oct 23 – Oct 27)
Bullish
BlackRock's spot bitcoin ETF appears on the DTCC website with ticker IBTC.
Commentary: BlackRock's highly anticipated spot bitcoin ETF, the iShares Bitcoin Trust, has made an appearance on a list maintained by the Depository Trust and Clearing Corporation, which Nasdaq says provides post-trade clearance, settlement, custody, and information services.
While still awaiting approval from the Securities and Exchange Commission, along with other proposed spot bitcoin funds, the DTCC lists the BlackRock fund's ticker as IBTC. BlackRock's iShares Bitcoin Trust is one of around 12 spot bitcoin ETFs currently awaiting approval by the SEC. Along with BlackRock, applications have been filed by asset managers including Grayscale Investments, Fidelity, and WisdomTree.
US court issues mandate for Grayscale ruling, paving way for SEC to review spot Bitcoin ETF.
Commentary: The U.S. Court of Appeals has issued its highly anticipated order for the Securities and Exchange (SEC) to review Grayscale’s spot Bitcoin ETF application.
In an Oct. 23 filing, the “formal mandate” of the court took effect, paving the way for the SEC to review its decision on Grayscale’s spot Bitcoin exchange-traded fund, or ETF. The mandate followed the court’s initial ruling on Aug. 29 and the SEC’s failure to present an appeal by Oct. 13. The Oct. 23 mandate reaffirmed the court’s Aug. 29 ruling, giving Grayscale a second chance at converting its Grayscale Bitcoin Trust into a listed BTC ETF. To date, the SEC has yet to approve a single spot crypto ETF for listing on U.S. exchanges but has given the green light to investment vehicles linked to Bitcoin and Ether (ETH) futures.
Interesting
Grayscale partners with FTSE Russell for new crypto indexes business.
Commentary: U.S. crypto asset manager Grayscale Investments has entered into a partnership with FTSE Russell – the index division of London Stock Exchange parent LSE Group – to create a new crypto indexes business. They revealed five indexes that track the performance of different crypto sectors, including currencies, smart contract platforms, financials, consumer and culture, and utilities and services.
Some indexes serve as the basis for exchange-traded products like ETFs, and the partnership comes as Grayscale seeks to convert its Grayscale Bitcoin Trust (GBTC) into an ETF.
Euroclear unveils RWA tokenization service with World Bank's 100M euros digital bond issuance.
Commentary: Major European clearinghouse Euroclear unveiled Tuesday its tokenized securities issuance service with the World Bank's 100 million euros ($106 million) digital bond issuance, according to a press release. Euroclear's Digital Securities Issuance (D-SI) business will assist in issuing, distributing, and settling fully digital financial assets on distributed ledgers - a database held and updated independently by each participant (or node) in a large network.
World Bank Group's International Bank for Reconstruction and Development (IBRD) will use the bond for financing sustainable development activities and is listed on the Luxembourg Stock Exchange. Citi was the issuer agent and investment manager, while TD Securities acted as the dealer. The bond was issued on the Corda blockchain, the platform's developer firm R3 said.
UK passes bill to enable authorities to seize Bitcoin used for crime.
Commentary: Lawmakers in the United Kingdom have passed legislation allowing authorities to seize and freeze cryptocurrencies like Bitcoin if used for illicit purposes. The Economic Crime and Corporate Transparency Bill is expected to receive royal assent on Oct. 26, meaning the bill would complete all the parliamentary stages in both houses of parliament.
The latest crypto-related legal development in the U.K. aligns with the government’s plans to “robustly” regulate crypto to fight the illicit use of digital assets as part of its economic crime plan from 2023 to 2026. In March, U.K. lawmakers said they targeted to pass the Economic Crime and Corporate Transparency Bill by the fourth quarter of 2023, in addition to adopting the Financial Action Task Force’s Travel Rule.
DYdX Chain officially launches on the mainnet as a standalone Cosmos Layer 1.
Commentary: The "alpha mainnet" for dYdX version 4, along with the debut of its standalone Cosmos-based blockchain, was released today, signaling a notable transition for the leading decentralized derivatives platform.
The activation of the dYdX alpha mainnet marks the first phase in transitioning to dYdX version 4 and its new, community-governed Layer 1 blockchain. The transition incorporated developments across multiple testnets during this year.
Mastercard teams up with MoonPay for web3 push.
Commentary: Mastercard has teamed up with MoonPay, a cryptocurrency and non-fungible tokens (NFTs) payments app, to explore how the blockchain-based Web3 world can connect with and build loyalty among consumers, the companies said at the Money20/20 event in Las Vegas.
The partnership allows MoonPay to avail itself of Mastercard’s Crypto Credential system, a way of ensuring transactions are trusted and compliant with regulations, as well as integrating payment tech like Mastercard Send and Click to Pay.
Hashdex sits down with SEC over spot Bitcoin ETF application.
Commentary: Asset manager Hashdex recently held a meeting with the United States Securities and Exchange Commission to address the regulator’s concerns about its application to allow the Hashdex Bitcoin Futures exchange-traded fund (ETF) to hold spot Bitcoin. Hashdex’s filing differs from other spot Bitcoin applications because it doesn’t have a surveillance-sharing agreement with crypto exchange Coinbase.
Instead, Hashdex proposes to acquire spot BTC from physical exchanges within the CME market, thus making it entirely reliant on CME pricing for transactions, according to an SEC filing by NYSE Arca in late August. As a next step, the SEC may ask for more information before the application’s first deadline on Nov. 17.
LayerZero introduces an omnichain token to move Lido's wstETH across Avalanche, BNB Chain, and Scroll.
Commentary: Interoperability protocol LayerZero has introduced the ability to move wrapped stETH token (wstETH) from the liquid staking protocol Lido Finance across Ethereum, Avalanche, BNB Chain, and Scroll. wstETH has also been integrated into LayerZero’s omnichain fungible token standard, or OFT standard, which aims to eschew wrapped asset risks in cross-chain native token transfers.
LayerZero's cross-chain interoperability of wstETH hopes to bolster DeFi opportunities outside of Ethereum and into Avalanche, BNB, and Scroll. The token has not been officially endorsed by Lido.
Polygon launches POL token contract on Ethereum to eventually replace MATIC.
Commentary: Polygon Labs has launched the Ethereum contract for the new Polygon token, POL, according to an Oct. 25 announcement. The new token is intended to replace the ecosystem’s current token, MATIC. However, the team said users presently don’t need to exchange their MATIC for POL.
In the announcement, the Polygon team claimed that POL would “power a vast ecosystem of zero knowledge-based Layer 2 chains” by implementing a “re-staking protocol” that allows tokenholders to stake it on multiple chains, performing multiple functions in the process.
Sam Bankman-Fried trial moves to final stages.
Commentary: Sam Bankman-Fried’s trial is reaching its final stages over the next few days, with the prosecution scheduled to rest their case on Oct. 26 following almost 20 testimonies. The prosecution presented a lineup of witnesses over the past three weeks, including former FTX employees, customers, investors, government officials, and law enforcement agents. At the heart of the case is the central argument that Bankman-Fried intentionally deceived all of them and that he was behind the decisions resulting in the $8 billion gap between FTX and Alameda Research in November 2022.
As for Bankman-Fried’s defense team, they still haven’t confirmed whether they will waive the case. In criminal trials, attorneys aren’t required to present a defense. Assuming his legal team will present a case, it will begin on Oct. 26.
Deutsche Bank and SC Ventures completed the first stablecoin swaps on UDPN.
Commentary: Standard Chartered Bank's SC Ventures and Deutsche Bank have completed the first stablecoin swaps on the Universal Digital Payments Network, according to a report. The on-chain swaps were between the USDC and EURS stablecoins, using SC Ventures and Deutsche Bank digital currency wallets, Financial Express reported. The transactions were signed with SC Ventures’ private key.
The UDPN was launched in January of this year at the World Economic Forum's annual meeting in Davos, Switzerland. The network aims to provide interoperability between regulated stablecoins and central bank digital currencies.
PetroChina completes first international crude oil trade in digital yuan.
Commentary: Chinese oil and gas company PetroChina has completed the first international crude oil trade using the country's central bank digital currency (CBDC), the e-CNY, China Daily reported on Saturday. PetroChina bought 1 million barrels of crude oil settled in e-CNY, or digital yuan, at the Shanghai Petroleum and Natural Gas Exchange (SHPGX) on Oct. 18.
While almost all the world's major economies are at least looking at developing a CBDC, China's is comfortably among the most advanced. Transactions using the currency hit 1.8 trillion yuan ($250 billion) as of the end of June, with e-CNY accounting for 0.16% of the cash in circulation.
Hong Kong regulator updates policy for virtual asset activities.
Commentary: Hong Kong's Securities and Futures Commission has updated its regulatory framework with two additional investor protection measures. The updates are aimed at intermediaries that are interested in providing virtual asset-related products to investors. Specifically, the new investor protection measures are for virtual assets categorized as complex products. As an illustration of such a complex product, the regulatory body provides the example of an overseas virtual asset, a non-derivative exchange-traded fund.
The first update involves a selling restriction. Virtual asset-related products which are considered complex products should only be offered to professional investors. The second update tasks intermediaries with setting up a way to assess whether their clients have knowledge of investing in virtual assets, or virtual asset products. This "virtual asset-knowledge test" must be passed before the intermediary can proceed with a transaction.
Upcoming Market Events
November 1 - U.S. FOMC Interest Rate Decision
November 17 - Franklin Bitcoin ETF Filing SEC Next Decision Date
January 14 - Bitwise Bitcoin ETP Trust Filing SEC Next Decision Date
January 15 - BlackRock iShares Bitcoin Trust Filing SEC Next Decision Date
January 17 - Valkyrie Bitcoin Fund Filing SEC Next Decision Date