January 10, 2025

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Trading Desk Insights

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Crypto markets have experienced a significant decline in recent days, triggered by stronger-than-expected economic data that propelled interest rates higher. December's US job growth came in at 256,000, far exceeding the forecast of 164,000. This development sent Bitcoin plunging and bond yields spiking. The data raises doubts about the necessity for the Fed to continue cutting rates into 2025. In the futures market, the probability of a rate cut on January 29th has dropped to just 3%, with a 26% chance on March 19th, compared to 19% and 66%, respectively, just a month ago.

However, the market has begun to recover. From 4 p.m. ET Thursday to 5 a.m. ET Friday, Bitcoin recorded 14 consecutive green hourly candles, marking its longest streak since 2017. Prices surged from 91,700 to 95,300, a 4% increase at a crucial moment when BTC appeared poised to breach the December 5th lows, signaling potential bearish momentum. During this period, the funding rate briefly dipped into negative territory, triggering a leverage flush and a shift in market sentiment, before Bitcoin resumed its upward movement. Negative funding rates could indicate a prolonged bear market, rather than the formation of a bottom.

On-chain data reveals that Bitcoin's Spent Output Profit Ratio (SOPR) has climbed to a level where investors holding for less than six months are selling at a loss. This behavior often precedes price recoveries, potentially signaling a buying opportunity.

In other news, China’s central bank has taken measures to stabilize the yuan, which has been under pressure, by halting government bond purchases. This move raised concerns about potential capital outflows, with speculation that some of this capital might flow into the crypto market, potentially boosting Bitcoin’s bullish momentum.

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The News Room

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Hong Kong Introduces ‘Supervisory Incubator’ to Guide Banks in Blockchain Adoption

The Hong Kong Monetary Authority (HKMA) has launched a “supervisory incubator” aimed at guiding banks in safely adopting blockchain technology, with a particular focus on tokenized deposits. The initiative is designed to help financial institutions manage risks associated with experimenting with distributed ledger technology (DLT) and to review risk control approaches before launching blockchain-based services, such as deposits and loans, that integrate with both DLT-based and legacy banking systems. Arthur Yuen, deputy chief executive of the HKMA, emphasized that fostering a safe and efficient environment for innovation is essential for developing beneficial DLT-based banking solutions, aligning with Hong Kong’s broader strategy to bolster its status as a crypto hub through supportive regulatory frameworks.

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Coinbase Subpoenaed by CFTC in Polymarket Investigation, Notifies Users via Email

Coinbase has been served with a subpoena from the U.S. Commodity Futures Trading Commission (CFTC) seeking general customer information as part of an investigation into Polymarket, and has alerted its users via email about the development. The email informed customers that while no action is required from them, Coinbase may need to share account-related data with the government, and the company stated it would seek to narrow overly broad requests or object to them if legally insufficient. This marks another regulatory scrutiny for Polymarket, a blockchain-based prediction market previously settled with the CFTC in 2022, amidst ongoing investigations and enforcement actions related to its operations.

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Ripple Exec Outlines Next Steps for RLUSD Listing on Additional Exchanges, Including Coinbase

Ripple’s SVP of stablecoins, Jack McDonald, outlined plans for expanding the listing of Ripple’s new U.S. dollar-pegged stablecoin RLUSD to additional exchanges, including potential future support from Coinbase, while Bitstamp recently announced its intent to list RLUSD on Ethereum and XRP Ledger. McDonald emphasized the technical and strategic challenges involved in getting exchanges to support a new token—highlighting the need to accommodate different blockchains, manage technical lifts, and ensure sufficient volume demand—while noting that traditional exclusivity agreements with exchanges like Coinbase and Binance could complicate matters. He also pointed out that RLUSD’s recent NYDFS approval positions it favorably for adoption by NY-regulated entities, and predicted that in 2025, stablecoin issuers with strong institutional backing, robust compliance, and liquidity would likely dominate as exchanges and liquidity providers become more selective.

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Crypto Charts

ETF Flow

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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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