Markets Insights
Economic Calendar
Next FOMC meeting: Sept 20th 2023
- Probability of a 0bps hike → 93%
- Probability of a 25bps hike → 7%
The News Room
Phishing Attack on Cloud Provider Leads to $15M Crypto Theft From Fortress Trust
Fortress Trust recently disclosed a theft of nearly $15 million in customer funds, attributing the breach to an external third-party vendor. This vendor has been identified as Retool, a San Francisco-based firm that constructed the portal through which certain Fortress clients accessed their funds. The security lapse was triggered by a phishing attack, a fact Retool confirmed without directly naming Fortress. Though Retool has mechanisms to guard against such attacks, particularly for on-premise users, the affected customers apparently didn't employ the advised security configurations.
In the aftermath, blockchain tech company Ripple, which was already in talks to acquire Fortress, fast-tracked a takeover agreement and made a $15 million "down payment" to ensure that the victims of the theft were compensated. While the breach highlighted vulnerabilities in the system, both Fireblocks and BitGo, wallet providers for Fortress, clarified that their platforms were not compromised. This incident underscores the critical importance of robust security measures at every point in the cryptocurrency management chain.
Judge Allows Bankrupt FTX to Sell Its Crypto Holdings, Including BTC and SOL
The U.S. Bankruptcy Court for the District of Delaware has granted crypto exchange FTX permission to sell, stake, and hedge its crypto assets to settle debts with creditors - this decision gives FTX the green light to manage assets it claims are valued at over $3.4 billion. Despite objections raised during the hearing, the urgency to facilitate the repayment process was emphasized.
It was noted that hedging crypto assets would not only minimize potential downside risks associated with the sales of assets such as Bitcoin or Ethereum but would also foster low-risk returns generated through the staking of certain digital assets. However, concerns were raised about the traceability of the individual assets to customers, with FTX officials indicating the assets were pooled, making it challenging to detail individual ownership. The exchange has enlisted the advisory services of Mike Novogratz from Galaxy Digital and disclosed that it possesses assets valued at $1.16 billion in Solana (SOL) and $560 million in Bitcoin (BTC), in addition to holdings in Ethereum and lessser-known illiquid tokens.
Deutsche Bank Partners with Taurus to Offer Digital Asset Custody and Tokenization Services
Deutsche Bank has announced its venture into the cryptocurrency realm by establishing digital asset custody and tokenization services through a partnership with Taurus, a Switzerland-based firm. The bank aims to provide custody for select cryptocurrencies and stablecoins, mainly catering to corporate and institutional clients in its core market regions. Deutsche Bank's initial focus on tokenization will be on traditional financial securities. This move follows a trend of traditional finance firms exploring the tokenization space, with Paul Maley from Deutsche Bank emphasizing the anticipated shift of more traditional assets to blockchain. The partnership with Taurus further strengthens Deutsche Bank's initiatives in the crypto space, having previously participated in Taurus' funding round and applying for a crypto custody license from Germany's financial regulator.
Trading Desk Insights
U.S. equity futures traded higher on Thursday morning despite the Producer Price Index coming in hotter than expected with a figure of 0.7%, beating estimates of 0.4%. Excluding food and energy, core PPI increased 0.2%, in line with the estimate.
This morning, the European Central Bank implemented a 0.25% rate increase and acknowledged that inflation is showing signs of moderation, potentially signaling the conclusion of its series of rate hikes.
While the Federal Reserve may opt to maintain its current interest rates at this juncture, it is prudent to anticipate ongoing market volatility in the forthcoming months. Notably, data from fed funds futures pricing indicates a roughly 40% likelihood of a rate hike occurring during the November meeting.
In a separate development, oil prices surged on Thursday, with U.S. crude surpassing the $90 per barrel threshold for the first time since November 2022. This price surge has been fueled by mounting expectations of a tighter supply situation. WTI crude has gained nearly 3% over the course of this week, marking its third consecutive weekly increase. To date, these prices have climbed approximately 13% over the course of this year.
Bitcoin has finally started to trade higher and has broken above its intraday resistance of 26,300. We are now testing the next resistance at 26,825 which intersects with the high posted on August 23rd as well as the declining trend line that has capped prices since mid-July. A break above these levels would trigger bullish implications potentially sending prices much higher towards $28,000.
Looking at the daily chart, BTCUSDT broke above its 20-day moving average, a positive sign, while the RSI broke above a declining trend line, another bullish element.
In recent developments, Deutsche Bank, the esteemed asset manager boasting assets totaling €1.34 trillion, has forged a strategic alliance with the Swiss cryptocurrency firm Taurus. This partnership has been established with the primary objective of furnishing custody services tailored to the distinctive needs of institutional clients who engage in the realm of cryptocurrencies and tokenized assets. Notably, Deutsche Bank had previously articulated its intention to venture into the domain of cryptocurrency trading, as delineated in a white paper it presented at the World Economic Forum back in 2020. It's noteworthy that several other prominent financial institutions, including Standard Chartered, BNY Mellon, and Societe Generale, have also ventured into the provision of cryptocurrency custody services, marking a burgeoning trend in the industry.
Technical Charts
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.
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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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