July 19, 2024

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The News Room

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$520B State-Owned Italian Bank Trials Digital Bonds on Polygon

Italy’s state-owned bank, Cassa Depositi e Prestiti SpA, in collaboration with Intesa Sanpaolo, completed a $27.2 million digital bond issuance on the Ethereum layer-2 network, Polygon. This trial, part of the European Central Bank's initiative to explore blockchain-based central bank money settlement solutions, was the first since Italy's FinTech decree law. The bond, maturing in November 2024, offers a 3.63% annual fixed coupon. The transaction was settled via the Bank of Italy’s "TIPS Hash Link" tool. Intesa Sanpaolo emphasized the potential of public blockchains for financial transactions, predicting widespread technological impacts on various asset classes. While some experts, like BlackRock’s Larry Fink, advocate for widespread tokenization, others remain skeptical about blockchain's efficiency and capacity. The tokenized asset market is projected to grow significantly, potentially reaching $16 trillion by 2030.

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Tornado Cash Sees $1.9B Resurgence in 2024 Despite Sanctions

Despite ongoing sanctions and legal challenges, Tornado Cash, the OFAC-sanctioned crypto mixer, has seen a significant increase in deposit volume in the first half of 2024. According to Flipside Crypto, Tornado Cash received $1.9 billion in deposits during this period, a 50% rise compared to the entire year of 2023. Sanctioned by OFAC in August 2022 for its use by North Korean hackers to launder $455 million, Tornado Cash continues to attract large-scale illicit funds. High-profile exploits, such as the Poloniex exchange, HECO Bridge, Orbit Chain, and WazirX hacks, funneled millions into the mixer. Despite the sanctions, legal challenges persist, with industry figures arguing the sanctions are unconstitutional, while the US Treasury maintains the mixer is a national security threat. Co-founders Alexey Pertsev, Roman Storm, and Roman Semenov have faced various legal actions, with Pertsev serving a prison sentence, Storm out on bail, and Semenov still at large.

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North Korean Hackers Likely Responsible for $235 Million WazirX Exploit

Blockchain analytics firm Elliptic reported that on-chain analysis suggests North Korean hackers were behind the $235 million WazirX exploit. The stolen assets included Shiba Inu, Ether, Polygon's MATIC, and Pepe. The hackers transferred the funds to a new address using Tornado Cash and began swapping assets for ether through decentralized services, typical of North Korean money laundering tactics. Centralized exchange deposits were also linked to the exploit. North Korean hackers have previously laundered significant amounts through Tornado Cash and are known for using social engineering tactics in their exploits.

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Trading Desk Insights

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Bitcoin has surged, almost touching $66,000 this morning. Speculation is rife that Joe Biden might exit the presidential race, a move seen as favorable for risk assets. BTC holding steady above $64,000, which aligns with its 50-day moving average, signals that the bullish trend could persist.

The VIX has skyrocketed by 35% since July began, hinting at rising market volatility. This spike could spell trouble for the equity market and other risk assets. If the VIX breaches the April high of 21.40, we could see bearish effects across these assets.

Ripple (XRP) has been making waves, particularly on South Korean exchanges where its trading volumes have surpassed those of BTC recently. From Tuesday to Thursday, XRP made up nearly 40% of all trading activity on top Korean platforms, showing strong demand. Open interest in XRP futures has more than doubled this week, with a bullish sentiment prevailing. Ripple Labs CEO Brad Garlinghouse hinted at a swift resolution to the ongoing SEC legal battle, boosting confidence. As long as XRP stays above $0.50, the bullish outlook remains solid.

On Friday, a glitch in a CrowdStrike update caused widespread IT disruptions across various industries, from banking to airlines. This chaos spurred the creation and active trading of new meme tokens, as traders looked to capitalize on the trending topic.

Equity futures saw minimal changes on Friday, marking the end of a week characterized by market rotation. Despite a broad sell-off on Thursday, rotation remains a key theme. The S&P 500 is down over 1%, and the Nasdaq has slipped 2.87%, jeopardizing its six-week winning streak. This divergence is a relief to some Wall Street experts concerned about over-reliance on a few massive tech stocks. The Nasdaq's underperformance this week can be attributed to a shift away from the megacap AI stocks that had been driving its gains.

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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.

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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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