Markets Insights
Next FOMC meeting: Sept 20th 2023.
- Probability of a 0bps hike → 84.5%
- Probability of a 25bps hike → 15.5%
The News Room
PayPal Launches U.S. Dollar Stablecoin
PayPal Holdings Inc. has announced the launch of its stablecoin, PayPal USD (PYUSD), a move that could significantly boost the adoption of digital tokens for payments. Issued by Paxos Trust Co., PYUSD is fully backed by U.S dollar deposits, short-term Treasuries, and similar cash equivalents, and is pegged 1:1 to the U.S dollar. The stablecoin's introduction is part of CEO Dan Schulman's plan to solidify PayPal's prominence in the digital payments sector by leveraging technology for faster, lower-cost transfers without the need for a central intermediary.
PYUSD can be redeemed for U.S dollars at any time and exchanged for other cryptocurrencies available on PayPal's network. The stablecoin is set to be progressively available on PayPal and its popular payments app Venmo. The coin can also be moved to compatible third-party wallets outside the PayPal network. Initially, PYUSD is expected to be mainly used in cryptocurrency and web3 sectors, such as trading other digital tokens and in-game payments, before gradually gaining adoption in areas like remittances and micro-payments. Paxos, subject to regulatory oversight by NYDFS, will publish monthly reports detailing the assets backing PYUSD starting in September.
HashKey Capital Aims to Raise $100M for New Digital Assets Fund
HashKey Capital, a prominent digital asset financial services provider, is set to launch a new liquid digital assets fund regulated by the Hong Kong Securities and Futures Commission (HK SFC) on September 1. Aiming to secure at least $100 million for this open-ended fund dedicated exclusively to virtual assets, this initiative underscores Hong Kong's revival as a global crypto hub following its establishment of a structured digital asset regulatory framework. This fund's introduction comes on the heels of the HashKey FinTech Investment Fund III's successful closure, which garnered $500 million from institutional stakeholders such as family offices and sovereign wealth funds. Earlier reports from Bloomberg in May had suggested that HashKey was targeting a fundraising range of $100 million to $200 million, eyeing a $1 billion valuation, underscoring the burgeoning institutional interest in Asia's digital asset sector.
Huobi Faces Scrutiny Amid Arrest Rumors, Significant Outflows, and Reserve Quality Concerns
The cryptocurrency exchange Huobi is under scrutiny following rumors that several of its executives were arrested in China, with Hong Kong's financial media being particularly vocal about these speculations over the weekend. Despite Huobi's spokesperson denying these reports, data from Nansen.ai indicates that the exchange saw net outflows of more than $73.3 million in the past seven days.
DeFiLlama data shows that Huobi's balance has declined from $3.1 billion at the start of the year to approximately $2.5 billion currently, with a significant proportion of its holdings in tokens related to crypto entrepreneur Justin Sun's businesses. Despite reportedly having no Ethereum, Huobi holds around $1 billion in highly liquid assets, including $886.92 million in Bitcoin, $48.27 million in USDT, and $5.41 million in USDC, along with $119.4 million in stETH and $21.8 million in wETH. Late last year, analytics firm CryptoQuant had flagged concerns over the quality of Huobi’s reserves.
Trading Desk Insights
Equity futures are witnessing a bullish resurgence, rallying from last week's downturn on Wall Street. The Nasdaq and the S&P500 indices experienced significant drops, specifically about 2.9% and 2.3%, respectively, recording their steepest declines since the unsettling days of March. However, they're demonstrating a rebound this morning, with the Nasdaq up by 0.30% and the S&P500 advancing 0.40%.
From a technical perspective, the S&P500 has pulled back towards the infamous support level near 4500. As mentioned previously, we expect a short term bounce from this level towards the next resistance of 4565. If we continue to flirt with this support level then we would most likely break it to the downside towards 4435 which intersects with the 50-day moving average as well as the bottom-end of the rising trend channel that has been in place since the month of March.
Looking at the crypto market, BTCUSDT is not showing any sign of life. Starting with the 4h chart, we see that prices have been stuck between 28,500 and 29,700 since July 24th. Trading volume has come down quite a bit and now represents the lowest 3 week stretch of volume since the start of the year. Moving on with the daily chart, not only are prices trading below their 20-day and 50-day moving averages, but now the 20-day recent broke below the 50-day, which is another bearish element to consider. Given the recent price action, it seems that BTC could trade lower towards 28,500 and possibly 27,250.
Digital asset investment products saw outflows this week, totalling $107m as market participants have clearly been a little less optimistic in recent weeks. This represents the largest weekly outflows since March. *** outflow chart
Rumors are surfacing online about a potential Huobi insolvency as the exchange may only hold around $90M of USDT and USDC despite a user balance of $630M. Apparently, because of this news, Binance could be reportedly selling USDT in bulk (which explains the low price of 0.9980 this morning) to avoid a situation where Huobi users find out which would lead them to dump their holdings to escape the exchange. Many online are coming up to the conclusion that Justin Sun has been using Huobi as a personal piggy bank to earn from user deposits but might not be able to honor the balances there on ETH or USDT if users withdraw or sell in bulk.
In other news, PayPal recently launched its own stablecoin PYUSD which will be issued by Paxos Trust and backed by the US dollar, short-term Treasuries and cash equivalents. The firm paused the initiative back in February as regulators stepped up scrutiny of cryptocurrencies. According to Jose Fernandez da Ponte, Head of PayPal’s blockchain and digital currencies team, the company now believes the regulatory environment is “progressing toward more clarity” and sees rising demand for an alternative stablecoin because of how concentrated the market is. * market dominance chart *
Economic calendar:
MONDAY
TUESDAY
- China CPI at 9:30pm EST
WEDNESDAY
- GBP, EUR & US 10-year bond auction
THURSDAY
- China new loans + money supply
- US CPI
- US Federal Budget Balance
FRIDAY
- US PPI
- US consumer sentiment and inflation expectations
Technical Charts
Altcoin Watch
The Litecoin halving was completed.
The total supply is maxed out at 84,000,000 LTC and mining rewards have been slashed from 12.5 LTC to 6.25 LTC.
Bitcoin’s halving will take place in 223 days on March 17th 2024 where block rewards are coming down from 6.25 BTC to 3.125 BTC.
Analyzing on-chain metrics, it appears that large-scale investors, often referred to as 'whales', have started to reduce their positions in Litecoin. Data sourced from Santiment reveals that Litecoin whales, those holding a portfolio of 1,000 to 100,000 LTC, initiated sell-offs a few days prior to the anticipated Litecoin halving event. As indicated in the chart, on July 29, these major holders collectively possessed about 9.77 million LTC. However, by August 4, these whales had lessened their holdings by approximately 60,000 LTC, representing a capital reduction of around $5 million. *** LTC onchain chart
Looking at a chart of price action, we can see that prices have been trading within a rising trend channel in place since October 2022. Last time prices got close from the bottom-end in March and June, prices surged by over 50% only one month after. We believe prices are approaching a support zone but still has a bit of room to trade lower towards our ultimate support level of $75.25. As long as LTC trades above this price, we expect further upside towards $95 and potentially $103.50.
Disclaimer
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.
Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.
The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.
Unless otherwise provided in a separate agreement, Secure Digital Markets does not represent that the report contents meet all of the presentation and/or disclosure standards applicable in the jurisdiction the recipient is located. Secure Digital Markets and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses, or opinions within the report.
Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.
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