Recession Fears Weigh on Markets Again

Weekly News Wrap Up

Once again, recession fears weighed on markets last week as several new hawkish speeches by Federal Reserve members re-emphasising the 2% inflation target led to repricing on terminal rates above 5%. In crypto, Hong Kong positions itself as a regional crypto hub. Friendlier regulations see more firms moving to the country, and partnerships/collaborations with traditional industries continue with brands like Mastercard, Deutsche Bank and Saudi Aramco.

U.S. equities ended in the red: SPX -2.67%, DJIA -2.99% and NASDAQ -3.33%, and cryptocurrency majors BTC -2.93% and ETH -2.57%, following the broader weaker macro environment. The former traded back to the range between $22,400-$24,000 seen after the pump in late-Jan, while the latter broke below the rising channel experienced for most of Feb.

On-chain,  the popularity of Ordinals is driving up the average block size in BTC as Inscriptions include more data in the “Data Discounted” witness part of the transaction. 

Cryptocurrency News

• Hong Kong proposes rules for crypto trading platforms. The new legislation requires platforms to access customer risk profiles and establish concentration limits for reasonable exposure. Only tokens that meet the Securities and Futures Committee’s (SFC) definition of a “large-cap virtual asset” and have security-related smart contract audits will be permitted offerings. Amidst the changing regulatory landscape, Huobi announced its  expansion to Hong Kong to serve High-Net-Worth-Individuals and institutions, joining the likes of DBS and Interactive Brokers we covered last week.
  Our View: Hong Kong is shaping up to be a regional crypto-hub after the SFC signalled its willingness to shift towards a friendlier regulatory stance at Hong Kong FinTech Week in November 2022, rivalling countries like Singapore, where the MAS is more conservative after the events in 2022.
• The Financial Stability Board (FSB) says “many existing stablecoins would not meet” proposed global standards, a letter to G-20 finance ministers and central bank governors show. Recommendations on the regulation of crypto and stablecoins could be finalized by July 2023.
  Our View: stablecoins have been in the regulatory crosshairs after SEC’s crackdown on Paxos’ BUSD, which could point towards further headwinds. However, we should also recognize that existing leading stablecoins have made considerable progress towards improving their reserves by cutting commercial paper exposure in late-2022 and increasing transparency with proof-of-reserves. Will it be enough to satisfy regulators?
• eToro attains New York BitLicense to provide crypto services. It also secured a money transmitter license from the New York State Department of Financial Services (NYDFS). The company has yet to set a date for when the New York platform becomes operational and accessible to users.
  Our View: in light of the recent regulatory action from U.S. regulators, it is welcome news to see the approval of new applicants.  However, providers have to be cautious in their offerings to avoid cases of the “unregistered sale of securities” that have been the focus of the SEC.
• Mastercard partners with Immersive for USDc settlements. The partnership would allow users to make real-time USDC payments at outlets that accept Mastercard online. When the transaction is successful, USDC will be converted to fiat before being settled on Mastercard’s network. Furthermore, Web3 wallets and DeFi protocols could integrate into Immersve’s API and smart contracts to transact anywhere Mastercard is accepted.
• Deutsche Bank completed its proof-of-concept for Project DAMA (Digital Assets Management Access) in collaboration with Memento Blockchain. DAMA would allow asset managers to launch their digital asset funds with its Soulbound token (SBT) as a direct fiat-to-crypto on-ramp for users. Institutional investors holding the SBT would provide the collateral to mint and receive the tokenized shares of the underlying digital investment. The next step would be exploring the use case for the DAMA project in Singapore, where there are currently 1,100 fund managers.
  Our View: while still in its early phase, the project further legitimizes digital investments in the asset management industry, making the launching/accessing cryptocurrency funds process faster, cheaper and more trustworthy.
• Galois Capital shuts down after losing $40 million from FTX’s collapse. The Financial Times reported the crypto-focused quantitative hedge fund has sold its bankruptcy claims for 16 cents on the dollar and will return the remaining capital to its investors.
• Saudi Aramco signs an agreement with droppGroup to build Web3 technology. The largest energy group having $2 trillion in market capitalization is exploring applications to aid its employees with onboarding, training ecosystems and a tokenized network and rewards program.
  Our View: more traditional companies are embracing the shift towards Web3, and we are likely only at the beginning of the trend. As the technology matures and improves, more use cases will be discovered and disrupted.
• UPDATE: Platypus to work on compensation plan after $8.5M attack. According to the DeFi protocol, different parties, including legal enforcement officials, are involved in the funds’ recovery process.

Investment Consideration

Our best strategy for medium to long term investment 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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