2024-01-15 10:13

The newly created ETFs could attract inflows of up to $36 billion from other crypto products like Grayscale Bitcoin Trust (GBTC), a report said. It’s unclear how much fresh capital the new spot bitcoin exchange-traded funds (ETF) will attract, but significant funds from other crypto products are expected to pour in, J.P. Morgan said in a Thursday research report. The market reaction to the U.S. Securities and Exchange Commission’s (SEC) reluctant approval of spot bitcoin (BTC) ETFs has been relatively muted, with the focus now shifting to how much capital these new ETFs will pull in, the report said “We are skeptical of the optimism shared by many market participants at the moment that a lot of fresh capital will enter the crypto space as a result of the spot bitcoin ETF approval,” analysts led by Nikolaos Panigirtzoglou wrote. Still, the bank does see a significant rotation from existing crypto products into the newly created ETFs, so even if no new capital enters the cryptocurrency market, the new ETFs could still attract inflows of up to $36 billion. The bank says about $3 billion could exit the Grayscale Bitcoin Trust (GBTC) and migrate to the new spot ETFs as a result of investors taking profit after buying discounted GBTC shares in the secondary market in the last year. It also sees up to $20 billion from retail investors migrating from digital wallets held at crypto exchanges to the new ETFs. Grayscale’s high fees could also trigger outflows, and unless it lowers its rates toward the level set by Blackrock (BLK) and other providers, “a lot more capital, perhaps an additional $5 billion-$10 billion could exit GBTC relatively quickly to migrate towards cheaper spot bitcoin ETFs,” the bank added. Institutional investors that hold their crypto in fund format could shift from futures-based ETFs and GBTC to cheaper spot ETFs, especially if GBTC is slow to cut its fees, the report added. Read more: Bitcoin ETF Approval Is Likely to Benefit Institutional Investors: Goldman Sachs https://www.coindesk.com/markets/2024/01/15/jpmorgan-sees-significant-capital-from-existing-crypto-products-pouring-into-new-spot-bitcoin-etfs/

2024-01-15 09:00

Entities providing tokenization tech have a limited track record and may contribute to increased risk, a new report by analysts at the credit-rating agency says. The adoption of tokenized investment funds is on the rise – but the technology providers have a “limited track record,” contributing to increased risk, a Monday report by credit-rating agency Moody’s Investor Services warned. Tokenized funds are investment funds whose units are digitally represented with the use of distributed ledger technology (DLT), which powers crypto. Asset or fund tokenization is having a moment as financial institutions worldwide attempt to improve market liquidity, efficiency and transparency. The growing adoption of tokenized funds – mostly fueled by the tokenization of funds that invest in government securities like bonds – signals untapped market potential, according to the report by Moody's DeFi and Digital Assets team. “Tokenized funds’ potential applications extend beyond merely enhancing asset liquidity. These funds have a variety of other possible functions, including serving as collateral,” the report said. However, tokenization requires “additional” technological expertise, the report’s authors warned. Investment funds come with their risks stemming from things like the underlying assets and fund management. Tokenized funds could bring additional risks connected to DLT, according to the report. “The entities involved on the technology side often have limited track records, increasing the risk that in the case of bankruptcy or technological failure, payments may be disrupted,” the report said. That’s not stopping adoption, though, according to Moody's analysts. Big players from Franklin Templeton and Goldman Sachs to Hong Kong’s Monetary Authority have recently participated in the issuance of tokenized assets. https://www.coindesk.com/markets/2024/01/15/tokenized-fund-adoption-grows-but-brings-technology-risks-moodys/

2024-01-15 08:38

Recent developments in the U.S. Treasury yield curve suggest a recession may arrive soon, strengthening the case for investing in assets with safe-haven appeal. Crypto propounders have long-hailed bitcoin (BTC) as a haven asset or a hedge against economic and political turmoil and fiat currency malaise. The hedging properties could be put to the test soon as the U.S. Treasury market is normalizing through a process called “bull steepener,” which has historically preceded economic recessions, a period of sustained weakness in economic output and joblessness. The U.S. Treasury yield curve plots the yields of different government bond maturities. The curve is normally upward-sloping, with longer-duration bonds offering higher yields than shorter-duration bonds. In mid-2022, the curve inverted, with the two-year yield rising above the 10-year yield. The spread between the 10- and two-year yields dropped as low as -100 basis points in July 2023 before beginning the recovery, often called de-inversion or normalization. The normalization has gathered pace this month, with the spread rising from -38 basis points to -0.20, primarily due to bull steepening or the two-year yield falling more than the ten-year yield. The two-year yield has declined by 10 basis points to 4.14% this month, thanks to expectations for the Fed rate cuts, while the 10-year yield has risen by eight basis points to 3.94%. Historically, bull steepeners have been followed by recessions, according to pseudonymous observer The Spread Thread. Investment management firm Lord Abbett said the same in a blog post in October last year. In other words, the ongoing bull steepening might be a sign of an impending recession. A drop in consumer and business confidence seen during recessions can result in less demand for assets like bitcoin and technology stocks, although a potential monetary easing by the Federal Reserve to counter the recession and the resulting slide in the dollar index could eventually prove bullish for bitcoin, as it did during the coronavirus-induced recession of 2020. The vertical shaded lines represent U.S. recessions. https://www.coindesk.com/markets/2024/01/15/bitcoins-safe-haven-appeal-could-be-tested-soon-us-bond-market-suggests/

2024-01-15 06:48

The failed token transfers spooked some market watchers as they amounted to nearly half of XRP’s $30 billion market capitalization. A feature of the XRP Ledger network was used in an unsuccessful exploit attempt on prominent crypto exchange Bitfinex, chief technology officer Paolo Ardoino confirmed in an X post on Monday. Nearly $15 billion worth of XRP were flagged by on-chain service WhaleAlerts to be moved in an apparent transaction early Monday – amounting to nearly half of the token’s $31 billion market capitalization. But the actual transfer was just for a few cents worth of XRP, and failed as the sender “did not have enough liquidity,” blockchain data from the transaction shows. The motive was to seemingly trick Bitfinex into taking the transfer as real, which could have possibly opened the door to a hack. However, Bitfinex’s systems flagged the transfers as a “partial payment,” an XRP Ledger feature that allows a payment to succeed by reducing the amount received. “Someone attempted to attack @bitfinex via “Partial Payments Exploit”, Ardoino said on X. “Attack failed since Bitfinex properly handles 'delivered_amount’ data field.” Partial payments are useful for returning payments without incurring additional costs to oneself. These are a known attack vector, XRP Ledger transactional documents show. “If a financial institution’s integration with the XRP Ledger assumes that the Amount field of a Payment is always the full amount delivered, malicious actors may be able to exploit that assumption to steal money from the institution,” the documents state. “The malicious actor withdraws as much of the balance as possible to another system before the vulnerable institution notices the discrepancy.” Security risks remain a huge concern in the broader cryptocurrency market. In 2023, users lost nearly $2 billion to scams, rug pulls and hacks. https://www.coindesk.com/tech/2024/01/15/in-failed-bitfinex-exploit-attempt-billions-in-xrp-moved/

2024-01-15 06:40

Bitcoin's RSI divergence signals correction, 10x Research said. Bitcoin (BTC) has declined over 5% to $42,600 since spot ETFs debuted in the U.S. on Thursday in what appears to be a classic "sell the fact" price action. The sell-off could continue over the near term, according to analysis of bitcoin's price patterns and technical indicators by 10x Research. "Bitcoin's RSI divergence signals correction," 10x Research, led by Markus Thielen, said in a note to clients Monday, adding the pullback could run out of steam near the dynamic support level of $38,000. A bearish divergence occurs when prices reach a new extreme and momentum indicators like the relative strength index (RSI) don't, hinting at upside exhaustion. BTC hit a two-year high above $49,000 last week, which the 14-day RSI failed to confirm, as seen in the chart below. The subsequent price drop has validated the bearish divergence. The MACD histogram, used to gauge trend strength and changes, has crossed below zero, signaling a bearish shift in momentum. Per Thielen, investors in Grayscale's ETF, the Grayscale Bitcoin Trust (GBTC), switching to other low-fee options will likely weigh over bitcoin's price. While Grayscale charges 1.5%, other asset managers like BlackRock charge 0.25%. GBTC, formerly a close-ended trust, is one of the largest bitcoin holders, with a coin stash of over $27 billion. GBTC shares began trading in 2013 and became redeemable on Jan. 11. "Grayscale is betting that investors will slowly switch out of their 1.5% annual management fee ETF offering (due to tax consideration) instead ofchoosing other reputable companies that offer 80% less in fees. There has been much negative news around the parent company DCG and Grayscale itself, notably charging a 2.0% management fee on a product that at one point traded at a 50% discount to its net asset value – therefore overcharging GBTC holders ($27bn market cap)," 10x said. "Investors will first sell before they transfer their BTC exposure to another ETF issuer. This will cause downside pressure for Bitcoin and remain an overhang," 10x added. https://www.coindesk.com/markets/2024/01/15/bitcoins-technicals-suggests-deeper-pullback-to-38k-analyst/

2024-01-13 00:07

The regulator's latest update on the hack suggests it never lost access to the account. The U.S. Securities and Exchange Commission said Friday its systems and devices were not breached by the party responsible for tweeting out a fake bitcoin ETF approval announcement earlier this week. On Tuesday, the SEC's official X (formerly Twitter) account, @SECgov, tweeted that the agency had approved a number of spot bitcoin exchange-traded fund (ETF) applications to begin trading, a message that was ultimately shown to be faked by someone who was able to gain access to the account through the phone number associated with it. On Friday, the SEC statement provided a timeline of events on Tuesday, saying the first "unauthorized post" came at 4:11 p.m. ET (21:11 UTC), and SEC Chair Gary Gensler published his clarification 15 minutes later. The statement suggested that SEC staff never lost access to the account, saying they had deleted the fake post, un-liked some other bitcoin-related tweets and shared an update on the main SECgov account within 30 minutes. "Staff also reached out to X.com for assistance in terminating the unauthorized access to the @SECGov account. Based on information currently available, staff believe that the unauthorized access to the account was terminated between 4:40 pm ET and 5:30 pm ET," the statement said. An SEC spokesperson said on Wednesday that the FBI was investigating the issue, adding that the SEC did not draft the message (dispelling rumors that the fake approval notice was an already planned announcement that was released prematurely). Friday's statement added that the Department of Homeland Security's Cybersecurity and Infrastructure Security Agency (CISA) are also investigating. On Wednesday, the SEC did approve nearly a dozen bitcoin ETF applications, which began trading a day later. The hack alarmed a number of lawmakers, who publicly demanded answers about how it happened. Senators Ron Wyden (D-Ore.) and Cynthia Lummis (R-Wyo.) published a letter on Thursday asking that SEC Inspector General Deborah Jeffrey's office open an investigation into the hack "and the SEC's apparent failure to follow cybersecurity best practices." Future hacks could harm public markets and their stability, the letter said. The letter followed Senators J.D. Vance (R-Ohio) and Thom Tillis (R-N.C.), who similarly asked Gensler to brief their teams on a number of questions around the hack and the SEC's decision-making on bitcoin ETFs, including how the SEC "plans to rectify any financial losses borne by investors as a result of the errant announcement." "The SEC takes its cybersecurity obligations seriously. Commission staff are still assessing the impacts of this incident on the agency, investors, and the marketplace but recognize that those impacts include concerns about the security of the SEC’s social media accounts. The staff also will continue to assess whether additional remedial measures are warranted," the SEC's statement on Friday said. https://www.coindesk.com/policy/2024/01/13/sec-says-other-systems-secure-after-x-account-hack/