Trakx Weekly Update: Digital Assets Steady As Fed Easing Resumes

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices were little changed over the week as evidenced by our large cap Top 10 Crypto CTI dipping a modest 1%. Top of the performance ranking was the AI CTI, after it gained a shade over 4%, while last place went to the Meme CTI, which declined just over 9% over the preceding seven day period.

Fed Cuts, Crypto Shrugs

By an overwhelming majority of 11-1 the Fed last week decided to restart its 2024 easing cycle, cutting the target funds rate by 25bp. While ostensibly bullish, because of the implied boost to global liquidity conditions, digital asset prices largely shrugged off the decision. This lack of movement was primarily due to a cut of this magnitude being widely anticipated. Moreover, in explaining the decision Chair Powell said the reduction, which was in response to the clear softening in US labour demand, should be seen as a “risk management” measure rather than a signal that the US central bank was about to begin a more aggressive easing campaign. In fact, the dot-plot, which contains FOMC participants’ projections for the funds rate over the next two years, pointed to either 25bp or 50bp of additional cuts by year-end, a range already reflected in market pricing.

ETH Exit Queue Hits Record

Last week the exit queue for Ethereum validators whose staked tokens secure the network following the Merge, when the second largest cryptocurrency by market cap transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS), hit a record high at over 2.6 million ETH (USD 12.3bn). Given how the protocol is structured, the process of unstaking is throttled, meaning that validators will have to wait 45 days – the longest period ever.

Given the drop in Ethereum’s staking APR to 2.84% the exodus is partly due to crypto players rotating out of Ethereum into higher yield DeFi opportunities, amid increasing conviction that alt-coin season has begun. However, the majority (some ETH 1.6 million) is due to Kiln – a company offering Validators-as-a-Service on PoS blockchains – withdrawing all of its validators for security reasons following the recent NPM supply chain attack, where some malicious packages where able to divert cryptocurrency holdings covertly, and the $42 million hack of SwissBorg’s SOL Earn programme operated by Kiln.

UK Weighs Crypto Rule Exemptions

In regulatory news, the UK’s Financial Conduct Authority proposed exempting crypto firms from certain rules that normally apply to financial services, such as those covering integrity, duty of care, and acting in customers’ best interests. The move is aimed at strengthening the UK’s competitiveness as a hub for digital assets and mirrors the more relaxed approach to digital assets adopted by the Trump administration. While still at the consultation stage, the announcement was seen as supportive for the sector and added to a cautiously optimistic tone in markets.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Fed Cuts Rate in ‘Risk Management’ Move as Bitcoin Eyes Possible Upside: CoinDesk
• Ethereum validator exit queue to spike as Kiln moves tokens: Cointelegraph
• UK regulator proposes exempting crypto firms from ‘integrity’ and other rules: Reuters
• SEC approves new exchange listing standards fast-tracking crypto ETF listings: The Block
• Vietnam’s bank account purge is the best publicity for Bitcoin: CryptoSlate

Trakx News

• We are pleased to announce that Trakx has been approved by Canton Network, a public, permissioned blockchain purpose-built for institutional finance to include our CTI tokens as a featured app on their platform.
• Trakx also published a blog post about Stefan Thomas, who lost access to $220 million in Bitcoin after forgetting his password, highlighting both the promise and the peril of self-custody in crypto.

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

Trakx is a global fintech company creating new standards for digital asset investments. Through our trading platform, we offer thematic Crypto Tradable Indices (CTIs) and customised solutions, providing sophisticated investors with a high degree of compliance, custody and liquidity.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.