August 22, 2023

Markets Insights

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Next FOMC meeting: Sept 20th 2023.

Probability of a 0bps hike → 84.5%
Probability of a 25bps hike → 15.5%

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The News Room

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HashKey to Launch Retail Crypto Trading Services in Hong Kong on Aug. 28

HashKey, Hong Kong's first licensed retail virtual asset exchange, is set to launch operations on Aug. 28. This comes after recent regulatory changes in Hong Kong's crypto sector and HashKey's upgrade in its licenses, allowing it to serve retail users. Livio Weng, COO of HashKey Group, emphasized the importance of licensed trading platforms for transparency and investor confidence.

The Securities and Futures Commission (SFC) of Hong Kong has been actively overseeing the region's crypto industry, issuing warnings to non-compliant platforms. Currently, only HashKey and OSL Exchange are regulated in Hong Kong, but more approvals are anticipated. HashKey's launch marks a significant evolution in Hong Kong's crypto environment, promoting transparency and security.

On-Chain Social App Friend.tech Gains Over 100,000 Users Within a Month of Launch

In less than a month since its launch, on-chain social app Friend.tech has garnered over 100,000 users. The platform, which allows users to buy "shares" of social media profiles, recently recorded $1.42 million in fees within 24 hours, ranking it the third most profitable crypto platform after Lido and Ethereum.

Having launched on Coinbase's Base network on Aug. 10, the platform has already overseen 1.3 million transactions, generating over $25 million in fees, according to DefiLlama. Built on the premise of social tokens, the platform has rapidly grown in popularity. Users can sign up, link their account from X (previously Twitter), and others can then buy shares of their profile. These shares grant privileges such as joining group chats with the profile owner, and each purchase gives the owner a "subject fee." Notably, as of Aug. 21, Friend.tech reported 80,000 unique buyers and 30,000 sellers, however, it remains unclear how many of those users are trading bots.

Komainu Receives Regulatory Approval to Offer Crypto Custody Services in Dubai

Komainu, a crypto custody joint venture between Nomura, Ledger, and CoinShares, has secured a full Virtual Asset Service Provider (VASP) license from Dubai's Virtual Asset Regulatory Authority (VARA). This positions Komainu among the early recipients of such a license, mirroring the growing crypto industry traction in Dubai since VARA's inception in March 2022. With the completion of VARA's four-stage licensing, Komainu can now extend institutional staking, collateral management, and other custodial services through its Komainu Connect platform to its clientele, which includes asset managers and banks. The firm, which received its preliminary operational nod in July 2022, foresees substantial growth in the Gulf region and plans to double its Dubai team size by year-end.

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Trading Desk Insights

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Stock futures are higher after Nasdaq’s best day in August. It's worth highlighting that both the broad market index and Nasdaq saw gains, even as the 10-year Treasury yield climbed to a peak not seen since October 2007, ending around 4.34%. Given that tech equities typically face headwinds in a high-interest rate scenario, the concurrent surge with yields this past Monday was indeed an attention-grabber for market participants.

Meanwhile, S&P Global took decisive action this Monday, slashing credit scores and revising its forecast for several U.S. banking entities. This move echoes a similar decision by Moody’s, emphasizing looming funding challenges and dwindling profits that may pressure the sector’s creditworthiness. Specifically, S&P reduced ratings for Associated Banc-Corp and Valley National Bancorp due to escalating funding concerns and greater dependence on brokered deposits. Further, UMB Financial Corp, Comerica Bank, and Keycorp faced downgrades, attributed to significant deposit withdrawals and the current high-interest rate climate.

The S&P500 rebounded by 2% off the important support level of 4335 which intersects with the gap posted in June during the debt ceiling debacle. On an intraday basis, price action remains capped by a declining trend line which may be a source of resistance in the short term. On a daily chart, the 20-day moving average is getting close to breaking below the 50-day moving average which would be considered a bearish sign. As long as the index trades below its 50-day moving average near 4480, we expect further downside ahead.

On an intraday basis, Bitcoin has been trading within its own tight range between 25,800 and 26,300. It might be worth taking the trade in the direction of the breakout. It seems that after such a big drop, market participants might be more willing to buy the dip rather than sell at this level, especially that we’re very close from the important support level of 25,250. Zooming out to a daily chart, we notice that the RSI was recently trading at its lowest level since the Covid crash in 2020, indicating that the recent move might be a bit overextended as it has entered oversold territory.

In other news, transaction activity for Optimism, Arbitrum, and Base soared, almost eclipsing their historical peak set in March, spurred by a sizable $1.7 billion ARB token AirDrop. With the imminent EIP-4844 upgrade poised to bolster scalability and cut down costs significantly, there's mounting anticipation for what this could mean for Layer 2 solutions within Ethereum's landscape.

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Economic calendar:

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MONDAY

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TUESDAY

BRICS Summit

WEDNESDAY

BRICS Summit
EUR + GBP + US Manufacturing & Services PMI

THURSDAY

BRICS Summit
US unemployment claims
Jackson Hole Symposium

FRIDAY‍

US Consumer Sentiment
US Inflation Expectations
Jackson Hole Symposium
FED chair speaks @ 10:05am
ECB President Lagarde Speaks @ 3pm

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Technical Charts

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Altcoin Watch

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Optimism, Arbitrum and Base have been going head-on recently.

Optimism is 2nd after Base in terms of its seven-day moving average daily transaction count reaching 597k right behind Base’s 610,000 and ahead of Arbitrum’s 576,000. Its daily revenue is also 2nd in line with $231,000 behind Arbitrum's $358,000 and ahead of Base’s $93,000. Daily unique addresses are at the top with 32,000 ahead of 24,000 for Base and 29,000 for Arbitrum.

Let’s take a look at a daily chart.

OPUSDT has been supported by a rising trend line since the summer of 2022. Its recent price action is still capped by a declining trend line formed on the yearly highs. If the network activity continues to improve, we believe this token can trade higher. For now, the price action is quite neutral. However, if prices break above $1.83, it could open the door for a breakout towards $2.05 and $2.35 in extension.

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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.

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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