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March 19, 2021

Weekly Market Roundup

Once upon a time, back in 2013, Federal Reserve Chairman Ben Bernanke announced that the Fed would reduce the volume of its bond purchases at a future date – this was enough to send traumatic shockwaves through the markets even though no asset sales actually happened.

Fast forward to the present day, and the latest statement by current Fed Chairman Jerome Powell, where he pushed back against hiking rates in the wake of rising inflation expectation, and the markets aren’t as decisive. Dovish policy comments don’t appear to have nearly the impact they used to.

Furthermore, the number of members seeing a hike in 2022 picked up to four from one, while seven expect a hike in 2023, up from five in December. This may actually rally inflation vigilantes. Offsetting this was the announcement to increase in the RRP counterparty limit from $30 billion to $80 billion per counterparty is actually dovish and implies that the Fed wants to keep overnight rates lower.

All in all, mixed messages, and this is not something that supports confidence in markets. Digital assets are no longer an isolated asset and the growing adoption by institutional investors is the case in point. If the sentiment towards risk is cautious, one would expect a money manager to put off putting capital to work in what is deemed to be a riskier asset. Whether crypto maxis like it or not, but it is cash that is king, not Bitcoin.

Still, as noted earlier, the interest among market participants is growing at a rapid pace.

The banks are coming

Morgan Stanley told its financial advisors Wednesday in an internal memo that the bank is launching access to three funds that enable ownership of bitcoin, according to people with direct knowledge of the matter. Two of the funds on offer are from Galaxy Digital, the crypto firm founded by Mike Novogratz, while the third is a joint effort from asset manager FS Investments and bitcoin company NYDIG. The bank is only allowing its wealthier clients access to the volatile asset: The bank considers it suitable for people with “an aggressive risk tolerance” who have at least $2 million in assets held by the firm. Investment firms need at least $5 million at the bank to qualify for the new stakes.

Institutional adoption doesn’t just mean digital assets such as Bitcoin, Ethereum and others, but also infrastructure and the underlying piping that serves market participants. On that note, CoinDesk reported that Bitpanda, a digital investment platform, has closed a Series B funding round for $170 million, pushing the company’s valuation to $1.2 billion. In other corporate related news, trading platform eToro said Tuesday it will become publicly traded via a merger with a special purpose acquisition company (SPAC). Through a merger with FinTech Acquisition Corp. V, the combined entity will have a implied equity value of about $10.4 billion, reflecting an implied enterprise value for eToro of about $9.6 billion, eToro said.

Furthermore, Bank of New York Mellon Corp has invested in Fireblocks, a platform that allows banks and other financial institutes to store, move and issue cryptocurrencies, as the world’s largest custodian bank deepens its focus on digital assets. BNY Mellon’s investment was part of a $133 million funding round.

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