February 28, 2024

Markets Insights

Economic Calendar

Next FOMC meeting: Mar 20th 2024

Probability of a 25bps ease → 3%

Probability of a 0bps hike → 97%

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The News Room

Hut 8 Mining Adopts New Treasury Strategy Utilizing Bitcoin Reserves for Growth

Hut 8 Mining Corp. is implementing a new treasury strategy to leverage its Bitcoin reserves for growth and strategic investments, potentially involving direct sales, option strategies, or other methods. This approach aims to fortify the company's balance sheet while exploring both organic and inorganic expansion opportunities, especially as the market anticipates distressed assets post-Bitcoin halving. The strategy comes as the crypto mining sector prepares for the halving event, which will reduce mining rewards and possibly lead to favorable asset valuations for Hut 8. Newly appointed CEO Asher Genoot emphasizes the company's focus on deploying capital to maximize shareholder value, including funding capital expenditures for its new site in Culberson County, TX, expected to commence mining operations in Q2 of this year. This site presents an opportunity for Hut 8 to expand its mining activities with a 30% lower cost than at its existing sites, aligning with the company’s strategic direction post-merger with US Bitcoin Corp.

Hong Kong to Launch Regulatory Sandbox for Stablecoin Issuers

The Hong Kong Monetary Authority (HKMA) is set to launch a regulatory sandbox for stablecoin issuers, announced by the city's financial secretary, Paul Chan, during the 2024 budget speech. This initiative aims to allow companies to test their stablecoin projects within a secure environment, focusing on investor protection and risk management while adhering to the principle of equivalent regulation for similar activities and risks. This move is part of Hong Kong's broader efforts to establish itself as a leading crypto hub in Asia, following the introduction of a licensing regime for digital asset trading platforms last June and a consultation on licensing requirements for stablecoin issuers conducted in December. The Securities and Futures Commission has mandated that crypto trading platforms without a license by the end of February cease operations by May, with OSL and Hashkey being the only platforms to have secured licenses thus far.

Ark Invest and 21Shares Leverage Chainlink for Enhanced Bitcoin ETF Transparency

Ark Invest and 21Shares have partnered with Chainlink to enhance the transparency of their ARK 21Shares Bitcoin ETF (ARKB) by using Chainlink’s Proof of Reserve platform to verify the ETF's Bitcoin holdings. This initiative, aimed at providing investors with unparalleled insights and security for their investments in ARKB, makes Ark/21Shares the second spot Bitcoin ETF issuer to bring holdings data onchain after Bitwise's earlier move to disclose its digital wallet for the Bitwise Bitcoin ETF (BITB). As of recently, ARKB has secured its position as one of the leading spot Bitcoin ETFs since its launch on January 11, holding 33,274 Bitcoin and boasting over $1.8 billion in assets under management, ranking third in capital attraction behind Fidelity’s FBTC and BlackRock’s IBIT.

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Trading Desk Insights

On Wednesday, Bitcoin sustained its upward momentum, surpassing $61,000 for the first time since November 2021. The influx of fresh capital into spot ETFs remains significant, with notable increases observed. These funds acquired over 12,000 BTC on Tuesday, following a previous acquisition of 10,000 BTC on Monday.

Delving into the details of BTC ETFs, the market witnessed remarkable net inflows amounting to $576.8 million, primarily driven by Blackrock's contribution of $520.2 million. Grayscale's selling spree continued, resulting in outflows of $125.6 million. Total net inflows for these BTC spot ETFs since January 11th have now reached $6.7 billion. Notably, yesterday's trading activity in bitcoin ETFs surpassed that of $SPY or $QQQ, even before the introduction of options or their availability on numerous advisory platforms. Given the magnitude of these trades, participation may still be skewed towards the retail market.

The divergence between BTC and ETH funding rates is widening. While the spread typically fluctuates between -3% to +3%, it recently plummeted to an annualized level of -9%. This indicates investors' willingness to pay higher premiums for leveraged long positions in ETH perps compared to BTC, signaling a growing appetite for risk as investors allocate funds into smaller, more volatile altcoins in anticipation of significant returns.

ETHBTC retraced by 9% since Monday as BTC's dominance persists.

In the equities market, stock futures edged lower on Wednesday as investors awaited a pivotal inflation report scheduled later in the week. Major indices have retreated from the recent highs achieved late last week.

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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.

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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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