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The Confident FED

Weekly News Wrap Up

September FOMC saw the Fed leaving rates unchanged (expected) at 5.25%-5.50% but delivered a more “hawkish hold” than expected, which its officials are becoming more confident will effectively combat inflation without causing substantial economic disruption or substantial job losses.

The updated summary of economic projections skewed even more hawkishly: 2024 and 2025 median dots were revised higher by 50bps, supported by stronger growth and inflation projections remaining above target through 2026. U.S. equity markets legged down after the announcement and closed the week in the red with SPX -2.93%, DJIA -1.89% and NASDAQ -3.62%.

In other central bank action, the Bank of England ended its run of 14 straight interest rate hikes after new data showed that inflation is now running below expectations, whilst the Bank of Japan maintained its ultra-loose policy and left rates unchanged.

BTC closed the week -0.20%, outperforming ETH -3.01%. The ether-to-bitcoin ratio dropped to a 14-month low as large token holders, including Ethereum co-founder Vitalik Buterin, moved coins to crypto exchanges, possibly as a prelude to selling. ETH-BTC dipped to near 0.0602 last Tuesday, according to TradingView data (chart below), its lowest reading since July.

Network fees on Ethereum, a proxy for usage, has dropped more than 9% last week to $22.1mm, which is the lowest in nine months. ETH has reverted to be inflationary given that the supply has been increasing with lesser tokens burned. During lull periods such as now, the network burns less tokens than created, which inflates its supply and is usually considered bearish for the price. However, the reverse holds true when network demand is busy. The decline in network fees is partly driven by the adoption of layer 2 networks and potentially could continue in the near term.

JPMorgan analysts said in a report that Ethereum’s much-anticipated Shanghai upgrade failed to boost network activity, as transaction counts, active addresses and total value locked on the blockchain have all fallen since April.

Cryptocurrency News

The New York Department of Financial Services (NYFDS) has proposed strengthened crypto guidelines, which adopts enhanced criteria for coin-listing and delisting procedures, as well as updated guidance on the framework for designating coins or tokens to the NYDFS greenlist.
The crypto exchange JPEX has frozen certain operations and raised withdrawal fees following a liquidity crisis on the platform. The crisis follows a warning from Hong Kong’s regulators that the exchange has made misleading statements regarding its business and regulatory relationships. The Hong Kong Monetary Authority has further put out a warning that unlicensed crypto firms should avoid describing their services as banking.
Citigroup is expanding its digital asset services by becoming the first digital custodian for BondbloX Bond Exchange (BBX), a fractional bond exchange that uses atomic settlement and distributed ledger technology. The partnership gives Citi’s eligible clients access to BBX’s fractionalized bond trading, with Citi offering settlement and custodial services. Citigroup is also debuting a pilot program, Citi Token Services, for turning customer deposits into digital tokens with an initiative that will use a private blockchain owned and managed by the bank.
The UK’s Economic Crime and Corporate Transparency Bill has been passed to the final stages of approval by the House of Lords. If final approval is granted later this year, the bill will give local courts and law enforcement agencies new powers to quickly seize crypto assets associated with crime. Currently, such crypto assets can be frozen but cannot be seized in criminal proceedings unless there is an arrest or conviction.
The U.S. SEC’s crypto enforcement chief has warned that more changes could be coming to crypto exchanges and decentralised finance projects. The SEC could bring new charges against crypto brokers, dealers, exchanges, clearing agencies and others who don’t make proper disclosures or register with the agency.
Coinbase data shows that 1 in 5 adults own crypto in America, which rounds off to about 52 million Americans. Polling in the fall of 2022 showed that in the key states of NH, NV, OH, and PA, over half (55%) of voters stated that they would be less likely to vote for candidates who oppose crypto and web3.
Republicans in the House Financial Services Committee advanced a bill that would ban any CBDC pilot programs before they are proposed. In addition, it prohibits the Fed from introducing a retail digital currency that could be used for citizen surveillance. The bill was met with strong pushback from some Democrats on the committee.
Venmo, a social payment platform under PayPal, will soon offer the PayPal USD stablecoin (PYUSD). The move introduces another digital asset that users can transact with on Venmo, which began offering crypto purchases in 2021.
Walmart plans to “reinvent retail” by combining physical and virtual shopping experiences and allowing customers to purchase physical versions of items they use within its House Flip virtual world. Earlier this year, Walmart worked with game developer FUN-GI on House Flip, which allows players to renovate and sell virtual homes.
Digital currency investment company Grayscale has filed with the U.S. SEC for a new Ether futures ETF. This news comes after Grayscale scored a major, though partial, victory against the SEC last month in its efforts to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed spot Bitcoin ETF.
Mt Gox Rehabilitation Trustee has delayed the deadline for its planned repayments by a year from 31 Oct 2023 to 31 Oct 2024. Mt Gox holds 142,000 BTC, 143,000 BCH, and 69 billion yen, among others and repayments will be made in sequence as early as the end of this year.
Tether has resumed lending its own stablecoin USDT to customers after pausing for less than a year. Tether had received several short-term loan requests from customers with long-term relationships in Q2 2023 and their goal is to prevent customers from being depleted of liquidity or selling their collateral at potentially unfavourable prices.
Nomura’s digital assets subsidiary Laser Digital has introduced a new fund providing BTC exposure to institutional investors. The Bitcoin Adoption Fund will provide long-only exposure and will be the first in a range of such digital asset investment products offered by Laser Digital.
Hong Kong looks to release stablecoin regulations by mid-2024, says lawmaker Duncan Chiu. In August, a group of industry experts urged the Hong Kong government to issue its own stablecoin HKDG to compete with USDT and USDC.
India ranks second in global cryptocurrency transaction volume, as featured in a report by Chainalysis. More broadly, Central & Southern Asia and Oceania account for 20% of the world’s crypto market.
Binance, Binance.US and Changpeng Zhao has filed to dismiss a SEC lawsuit, claiming the regulator hadn’t “plausibly alleged” various securities-related violations, and that it was seeking to encompass digital assets under its authority despite Congress not explicitly spelling that out in legislation.
Tether is venturing into AI through a strategic investment in Northern Data Group, which provides data centre and cloud environment services based in Germany. Through the partnership, Tether and Northern Data Group will collaborate on AI, communication and data storage initiatives.
Google Cloud has added support for 11 additional blockchains into its BigQuery analytics service. Users can now make intricate on-chain queries, such as assessing the number of NFTs minted or contrasting transaction fees across these chains. BigQuery is a managed data warehouse service enabling users to conduct SQL-like queries on vast datasets. Google Cloud launched its blockchain data services in BigQuery in 2018 — aiming to grant developers access to on-chain data from Bitcoin and Ethereum.

Investment Consideration
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