Weekly News Wrap Up
It was a positive week for markets this Thanksgiving as FOMC minutes indicated some officials supported the idea of moderating the size of future rate hikes and upbeat earnings from retailers supported prices. Elsewhere, lockdowns across China have begun again amidst spikes in COVID cases as it reached concerningly high levels last seen in April at 28,000 cases daily. In crypto, concern around Genesis grows after reports indicate a potential bankruptcy, spreading to its parent Digital Currency Group (DCG) and its related Grayscale entities.
US equities ended the holiday-shortened week in the green with SPX +1.53% and NASDAQ +0.72% while China equities remained under pressure with CSI300 -0.68% as lockdowns resumed. USD retreated -0.91% as markets reacted positively to indications of a slowdown in rate hikes from the FOMC minutes with US2Y and US10Y yields lower by 6bps and 13bps respectively. BTC and ETH staged a comeback +1.05% and +4.58% respectively, breaking above $16,000 and $1,100 successfully.
For on-chain, BTC balance on exchanges just reached a 4-year low of 2,304,055 BTC. In addition, exchange net flow for BTC (1d MA) just reached a 1-month low of -$30,596,214, indicating that BTC investors increasingly prefer to have self-custody. This shows that trust in CEXes continues to waver even as most CEXes have committed to showing proof of reserves.
- Jump Crypto and Aptos Labs commit to Binance-led $1 billion Industry Recovery Initiative (IRI) according to a press release. Other crypto-heavyweights include Polygon Ventures, Animoca Brands, GSR, Kronos and Brooker Group. Initial total aggregate commitment of the companies listed above amount to approximately $50 million. The press release also indicates an intent to ramp up to $2 billion. Separately, Binance.US also announced that it will be bidding on Voyager Digital’s assets after its deal with FTX fell through.
Our View: the industry recovery fund is a positive development that spawned from FTX’s collapse. It is shaping up as a reputable incubation vehicle, and Binance is also looking to invite traditional finance firms to the fund. It will be interesting to see what this initiative can produce down the road.
- Genesis Trading warns of possible bankruptcy after suspending withdrawals and lending services post-FTX on 16 November, Bloomberg reports. It is looking to raise $1 billion from investors and have sought Binance and Apollo Global Management for capital assistance. However, Binance has decided not to proceed to avoid a potential conflict of interest down the line.
Our View: there has been a lot of speculation around a bankrupt Genesis and the impact on its parent company, Digital Currency Group (DCG), which the company has come out to address in a letter. It states that the liabilities are limited to a $575 million loan due May 2023 and a $1.1 billion promissory note due in June 2032 related to the Three Arrows Capital (3AC) default.
- Grayscale’s Bitcoin Trust (GBTC) discount hits record low, trading at a 45.2% discount to Net Asset Value (NAV), data from Coinglass shows. There is also uncertainty around Grayscale’s parent company, Digital Currency Group (DCG), which also owns troubled crypto lending firm Genesis Capital. However, Bernstein has pointed out that if Genesis is unable to raise funds, creditors would not have a claim on Greyscale’s assets as the trust structure ring-fences its assets from other DCG group entities.
Our View: GBTC’s discount is a result of supply/demand (too much supply, too little demand) mechanics due to the trust structure, which is why the firm is keen to transition to an Exchange Traded Fund (ETF) structure which the US Securities and Exchange (SEC) have blocked. You can read more about the discount here. The discount has existed since Feb 2021 as new methods to gain BTC exposure emerged, and our preference is still to own the underlying asset (through Spot) as it allows you to utilize the asset to gain yield (through Fixed Deposits or Lending)
- Crypto mining and staking firm, Foundry, purchases some of troubled Bitcoin miner Compute North’s assets, buying two “turnkey” crypto mining assets with a total of 17 megawatt (MW) capacity, according to a statement. Foundry is a subsidiary of Digital Currency Group (DCG).
Our View: despite Genesis facing potential bankruptcy, it seems like business-as-usual for other DCG entities as they continue to invest and grow. This is a positive sign that the management and operations of DCG entities do not seem to be commingled and the fall of Genesis would not result in greater contagion
- Singapore police investigations into Binance.com ongoing, Bloomberg reports. The Monetary Authority of Singapore (MAS) said the probe started for possible rules breach, where Binance.com was “actively soliciting” users in Singapore to the extent of offering listings in the local currency among other incentives. Binance has commented that they do not actively solicit Singapore users.
Our View: as the regulatory landscape matures, enforcement will become more commonplace and act as a deterrent. Overall, this is a good thing as it builds trust in the industry
- The thanksgiving moment gave a breath of fresh air to the equity market but this also gave new hope to the Crypto Market where you can see the price of BTC / ETH managed to survive amidst a storm of negative news from FTX which had a domino effect on several Crypto companies such as Genesis. The strategy that can be done at this time is to stay calm and not be too hasty to enter the market, but one can consider to buy the major crypto assets such as BTC and/or ETH in stages because many predict that fundamentally Crypto Assets will soon rebound when the negative news begin to subside.
- Our best strategy for the moment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking because we still have potential return in DCD and Staking especially in BTC.
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