Shalini Nagarajan


<p>The World Bank has initiated the first issuance of digital securities on Euroclear&#8217;s newly launched Digital Securities platform.</p>



<p>Euroclear&#8217;s Digital Financial Market Infrastructure (D-FMI), a platform based on distributed ledger technology, facilitates the establishment, issuance and settlement of international securities digitally, all under English law, according to a Tuesday press release.</p>



<p>The World Bank <a href="https://www.worldbank.org/en/news/press-release/2018/08/23/world-bank-prices-first-global-blockchain-bond-raising-a110-million">said</a> it has raised 100 million euros ($105.9 million) from the three-year digital bond, dedicated to backing its sustainable development projects, with the bond making its debut on the Luxembourg Stock Exchange.</p>



<p>The bond&#8217;s release involved Citi overseeing the issuance and payment processes, TD Securities serving as the dealer and Euroclear Bank functioning as the Central Securities Depository for the issuer.&nbsp;</p>



<p>R3, the developer behind the platform, <a href="https://r3.com/press-media/r3s-corda-powers-first-digital-bond-issuance-on-euroclears-digital-financial-market-infrastructure/">said</a> that the Corda permissioned blockchain was used for the bond issuance.</p>



<p>The World Bank first <a href="https://www.worldbank.org/en/news/press-release/2018/08/23/world-bank-prices-first-global-blockchain-bond-raising-a110-million">experimented</a> with blockchain bonds in 2018 by raising around $73 million.</p>



<p>Other experiments with blockchain-based bond issuance, <a href="https://blockworks.co/news/major-french-bank-wants-to-back-the-dai-stablecoin-with-40m-in-bonds">such as those by Société Générale</a>, have used public Ethereum.</p>



<p><a href="https://blockworks.co/news/2023-year-of-asset-tokenization">Asset tokenization</a> is transforming finance by making transactions more efficient and reducing costs through digital processing.&nbsp;</p>



<p>It democratizes investment by breaking down high-value assets into purchasable tokens, thereby broadening market access.&nbsp;</p>



<p>This process enhances liquidity, turning illiquid assets like real estate or art into easily tradable forms. Additionally, it transcends geographic restrictions, creating a round-the-clock global market and facilitating smoother international transactions.</p>



<p>“The integration of DLT in asset issuance is a critical step forward in the evolution of our ecosystem’s digital capabilities, as we continue to deliver on our goal of becoming a fully digital and data enabled Financial Market Infrastructure,” Lieve Mostrey, Euroclear’s CEO, said in a statement.</p>



<p>Boston Consulting Group <a href="https://www.hubbis.com/news/tokenization-of-real-world-assets-gains-momentum-predicted-to-reach-16-trillion-industry#:~:text=According%20to%20projections%20from%20Boston,of%20%242.75%20billion%20in%20August.">forecasts</a> that by 2030, the global industry for tokenizing illiquid assets could expand to $16 trillion, accounting for 10% of the world&#8217;s gross domestic product.</p>



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World Bank rolls out first digital bond issuance on Euroclear

Bessie Liu


<p>Superstate, a company built by the founders of Compound Labs, has just secured $4 million in equity funding to bring regulated financial products to blockchain networks.</p>



<p>Investors participating in the round include ParaFi Capital, 1kx, Cumberland Ventures, Coinfund and Distributed Global.</p>



<p>One of the first products that Superstate plans to bring is a short-term government bond fund that can be held in a cryptocurrency wallet or by a crypto custodian.</p>



<p>Superstate <a href="https://www.sec.gov/Archives/edgar/data/1982577/000110465923074744/tm2319534d2_n1a.htm">filed a draft prospectus </a>with the US Securities and Exchange Commission for the product on Monday.&nbsp;</p>



<p>The fund will enable shareholders to record that they own a government bond fund on the Ethereum blockchain.&nbsp;</p>



<p>“We are creating a new fund that has its own prospectus, which then shares of that fund can be held in blockchain wallets,” Robert Leshner, the founder of Compound Labs, told Blockworks.</p>



<p>Holding bond funds on a crypto wallet will primarily benefit crypto-native hedge funds and venture funds, he said.</p>



<p>“If you’re set up to trade crypto assets, you’re probably not set up with traditional brokerage accounts,” Leshner said.&nbsp;</p>



<p>With yields in DeFi now often lower than in traditional finance markets, holding government bonds in your crypto wallet enables you to use all existing systems that these investors already have in place.</p>



<p>“This is an opportunity to hold a TradFi fund in your crypto custody process,” he said. “So you as a firm can hold a record of your ownership of this mutual fund alongside stablecoins or other crypto assets in the same place in the same platform.”</p>



<p>Government bond funds in crypto wallets will only be available to US customers and not available to any offshore investors, Lensher notes.&nbsp;</p>



<p>Although Superstate will not be the first company to bring institutional-grade products onto the blockchain, Jake Brukhman, the founder and CEO of CoinFund, told Blockworks blockchain technology will have to converge with traditional technologies and regulators and governments to “sensibly come to market.”</p>



<p>“The founder, the strategy and the approach are just world-class, so we’re just very excited about it,” Brukhman said.</p>



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Compound Labs founders developing regulated financial products for the blockchain


<p>German engineering company Siemens issued its first digital bond on a public blockchain as the company looks to reduce intermediaries and access a wider pool of buyers.</p>



<p>Siemens, the largest industrial manufacturer in Europe, chose Polygon’s public mainnet as the blockchain to issue the bond worth 60 million euros ($64 million), which has a one-year maturity in accordance with Germany’s Electronic Securities Act.</p>



<p>The act, which came into force in June 2021, allows the issuances of securities in electronic form and does not require a physical securities certificate.&nbsp;</p>



<p>Such a bond issuance makes paperwork more efficient and removes the requirement of a central clearinghouse, according to a Tuesday <a href="https://assets.new.siemens.com/siemens/assets/api/uuid:313284ea-53db-4fea-8eb6-f1ceb33a518d/HQCOPR202302136650EN.pdf" target="_blank" rel="noreferrer noopener">press release</a> Tuesday. There was no mention of an interest rate on the bond.</p>



<p>DekaBank, DZ Bank and Union Investment are among investors in the digital bond. Siemens said payments for the bond were made using classic methods since the digital euro isn’t yet available, and the transaction was completed within two days. A Polygon spokesperson confirmed the transaction took place but declined to give further detail, including transaction IDs.</p>



<p>“By moving away from paper and toward public blockchains for issuing securities, we can execute transactions significantly faster and more efficiently than when issuing bonds in the past,” Peter Rathgeb, corporate treasurer at Siemens, said.&nbsp;</p>



<p>Munich-based Siemens has previously worked on a blockchain-based project. In 2021, JPMorgan collaborated with the German company to <a href="https://www.ft.com/content/e14582fc-a154-4c96-9d65-9bc86c89a7a3" target="_blank" rel="noreferrer noopener">develop</a> a blockchain system to manage payments between its own accounts.&nbsp;</p>



<p>Sandeep Nailwal, Polygon’s CEO, said he hadn’t realized the network was being used by Siemens, adding that it is truly becoming the hub of institutional DeFi.</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">Ohh man! So much happening on <a href="https://twitter.com/0xPolygon?ref_src=twsrc%5Etfw">@0xPolygon</a> ecosystem. <br><br>Didn’t even know <a href="https://twitter.com/Siemens?ref_src=twsrc%5Etfw">@Siemens</a> is doing this 🔥💜.<br><br>Polygon is truly becoming hub of Institutional defi 🚀<br><br>First <a href="https://twitter.com/hamilton_lane?ref_src=twsrc%5Etfw">@hamilton_lane</a> then <a href="https://twitter.com/ClearpoolFin?ref_src=twsrc%5Etfw">@ClearpoolFin</a> and now <a href="https://twitter.com/Siemens?ref_src=twsrc%5Etfw">@Siemens</a> all in last 2-3 weeks. Hard to keep track 🤯. <a href="https://t.co/VuIbBDcorq">https://t.co/VuIbBDcorq</a></p>&mdash; Sandeep | Polygon 💜 Top 3 by impact (@sandeepnailwal) <a href="https://twitter.com/sandeepnailwal/status/1625615343472222227?ref_src=twsrc%5Etfw">February 14, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<p>Issuing digital bonds seems to be popular among European banking institutions. The European Investment Bank has already <a href="https://www.reuters.com/markets/rates-bonds/eib-launches-second-euro-digital-bond-2022-11-29/" target="_blank" rel="noreferrer noopener">issued</a> two blockchain bonds. The first one, announced in 2021, was deployed on Ethereum while the second was issued on HSBC’s tokenization platform, with a secondary record issued on Ethereum, per press materials.</p>



<p>Société Générale and Santander have <a href="https://blockworks.co/news/societe-generale-withdraws-makerdao-vault">also issued bonds on Ethereum</a>. Swiss bank <a href="https://www.reuters.com/technology/ubs-launches-digital-bond-that-straddles-blockchain-traditional-exchanges-2022-11-03/" target="_blank" rel="noreferrer noopener">UBS</a> launched a similar bond using both blockchain-based and traditional exchanges. And more recently, <a href="https://www.abnamro.com/en/news/abn-amro-registers-first-digital-bond-on-public-blockchain" target="_blank" rel="noreferrer noopener">ABN Amro</a> issued a corporate bond on an undisclosed public blockchain with custody help from Fireblocks.</p>



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German Conglomerate Siemens Issues €60M Digital Bond on Polygon

Sebastian Sinclair


<p>The European Investment Bank (EIB) is once again leveraging Ethereum in its quest to tokenize capital markets, this time while issuing the first-ever digital pound sterling (GBP) bond on a seperate private blockchain.</p>



<p>EIB, the primary lender of the European Union, deployed the £50 million ($86.6 million) bond to a permissioned network underpinned by HSBC’s tokenization platform, Orion. The EIB is a public institution owned by the EU&#8217;s 27 member states.</p>



<p>The bank opted for a private network for privacy and efficiency, according to a <a href="https://www.eib.org/en/press/all/2023-030-eib-issues-its-first-ever-digital-bond-in-british-pounds" target="_blank" rel="noreferrer noopener">statement</a>. In an effort to increase transparency, the bond was also recorded on Ethereum, a spokesperson told Blockworks. </p>



<p>This was done to provide evidence the issuance took place while still maintaining the anonymity of bondholders (Blockworks reached out for some transaction IDs but they weren&#8217;t readily available. We&#8217;ll update this piece should EIB provide them).</p>



<p>HSBC debuted Orion last November, when it first flagged intent to launch the tokenized GBP bond. BNP Paribas, HSBC, and RBC Capital Markets were named as joint lead managers of the bond, with those firms serving as custodians. Client assets will be stored in digital securities accounts kept on Orion, the bank said.</p>



<p>The EIB&#8217;s new vehicle is expected to bring a range of benefits to market participants, including reduced costs, improved efficiency and real-time data synchronization in an otherwise cumbersome process.</p>



<p>Digital bonds have garnered interest from financial institutions in various countries, including Australia, Germany, France and Sweden since at least 2017.</p>



<p>A Luxembourg legal framework that enables firms to issue dematerialized securities using distributed ledger technology was enacted into law in January 2021, paving the way for further exploration.</p>



<p>Dematerialized securities refer to digital representations of financial assets that exist only in electronic form, rather than as physical certificates or paper documents.</p>



<p>&#8220;The time has come for further innovation in the financial sector,&#8221; said EIB Vice-President Ricardo Mourinho Felix. &#8220;This new financial tool will provide additional capital flow that the EIB will invest in projects with global impact.&#8221;</p>



<p>This isn’t the first digital bond issued by the EIB. That <a href="https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain" target="_blank" rel="noreferrer noopener">happened</a> back in Apr. 2021, when the European Union&#8217;s investment bank deployed a two-year, 100 million euro ($110 million) bond entirely on Ethereum.</p>



<p><em>David Canellis contributed reporting.</em></p>



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European Union Bank Again Uses Ethereum to Explore Tokenized Bonds

Casey Wagner


<p>Investors drawn to double-digit yields in the convertible bond market should be prepared to raise their risk tolerance, analysts say.</p>



<p>Coinbase and MicroStrategy, two crypto-related companies, saw their convertible bond yields surge as prices plummeted this month amid ongoing fallout from <a href="https://blockworks.co/news/the-last-10-days-in-the-ftx-saga-a-timeline" target="_blank" rel="noreferrer noopener">FTX’s bankruptcy</a>.&nbsp;</p>



<p>Coinbase’s <a href="https://blockworks.co/news/coinbase-wants-to-raise-1-5b-via-debt-offering" target="_blank" rel="noreferrer noopener">bond — maturing in 2026</a> — dipped to an all-time low of 53 cents on the dollar last week, a level typically associated with distressed debt, Kaiko analysts said in a note Monday. The bond later recovered slightly to 59 cents on the dollar on Monday, trading <a href="https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C1040076&amp;symbol=COIN5424425" target="_blank" rel="noreferrer noopener">data</a> shows. Bond price and yield move in opposite directions.&nbsp;</p>



<p>“Coinbase bonds look cheap to their stock,” trader Greg Foss said. “I would short Coinbase equity versus long the bonds.”&nbsp;</p>



<p>Coinbase shares are down more than 40% over the past month, to around $42 as of Monday.&nbsp;</p>



<p>MicroStrategy <a href="https://blockworks.co/news/microstrategy-is-selling-debt-to-buy-more-bitcoin-heres-what-that-means" target="_blank" rel="noreferrer noopener">bonds</a>, set to mature in 2028, also slumped on Monday to 78 cents on the dollar. The software company’s 2027 bonds trade at around 33 cents on the dollar and come with a 28% yield.&nbsp;</p>



<p>If MicroStrategy and Coinbase survive until their respective bonds’ maturity dates and pay the debt in full, investors will pocket a gain.&nbsp;</p>



<p>At the end of the third quarter of 2022, Coinbase reported about $3.4 billion in long-term debt, according to <a href="https://s27.q4cdn.com/397450999/files/doc_financials/2022/q3/a2c76620-9756-4268-9d08-4c7856f25a14.pdf" target="_blank" rel="noreferrer noopener">company filings</a>. The exchange also posted a net revenue of around $576 million for the quarter.&nbsp;</p>



<p>“We ended Q3 with $5.6 billion in total $USD resources, in addition to $483 million in crypto assets, which we believe puts us in a strong position to manage through the crypto winter,” Coinbase executives wrote in their third quarter <a href="https://s27.q4cdn.com/397450999/files/doc_financials/2022/q3/Q32022-Shareholder-Letter.pdf" target="_blank" rel="noreferrer noopener">shareholder letter</a>.</p>



<p>MicroStrategy reported about $2.4 billion in long-term debt at the end of the third quarter in 2022, according to <a href="https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/microstrategy-announces-third-quarter-2022-financial-results_11-01-2022.pdf" target="_blank" rel="noreferrer noopener">filings</a>. The company had about $2.5 billion in assets, including bitcoin holdings worth around $2 billion at the time, MicroStrategy said.</p>



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Coinbase, MicroStrategy Bonds Hammered by Industry Turmoil

<div id="highlights-block_634fa8b0f6de7" class="highlights">
        <ul>
                <li>The concept will include the digitization of a series of government debt to be issued to select participants</li>
                <li>The private permissioned blockchain is compatible with the Ethereum virtual machine</li>
            </ul>
    
</div>



<p>The Israeli government is planning to test blockchain-based digital bonds as it seeks to modernize financial market processes and reduce associated costs.</p>



<p>In a joint effort, the Office of the Accountant General in the Ministry of Finance and the Tel Aviv Stock Exchange (TASE) — the country’s only public equities bourse — will issue bonds via a permissioned private distributed ledger technology platform being readied for live testing.</p>



<p>The proof-of-concept will include the digitalization of a “new series” of government debt to be issued to select local and foreign primary dealers, marking the first time Israel has embarked on such a venture.</p>



<p>Digital assets infrastructure and custody solutions provider Fireblocks and US-based cloud computing tech firm VMWare will assist in the technical execution of the platform, while TASE has been tasked with leading the project.</p>



<p>Tokenized bonds will be sent to participants&#8217; digital wallets while the issuance consideration, in digital currency, will be transferred from the participants to the state of Israel’s own wallet, according to a statement.</p>



<p>The pilot project will begin within the next few days and is expected to be completed by the end of the first quarter of 2023.</p>



<p>“Israel is almost the only market in the world where government bonds are traded on the main exchange, so it’s an opportunity to generate a pilot, with the involvement of the State of Israel and leading international banks,” TASE’s head of clearing Orly Grinfeld told Blockworks in an email.</p>



<p>Unlike some experiments to tokenized bonds, such as <a href="https://cms.blockworks.co/major-french-bank-wants-to-back-the-dai-stablecoin-with-40m-in-bonds/" target="_blank" rel="noreferrer noopener">Société Générale’s partnership with MakerDAO</a> in October 2021, which used the Ethereum public blockchain, this one will remain entirely centralized for now. However, a Fireblocks spokesperson told Blockworks that the permissioned blockchain is compatible with the Ethereum virtual machine (EVM), and therefore, “if the Ministry of Finance wanted to issue digital assets on a public chain in the future, there would be little difference.”</p>



<p>The platform, which will also be based on smart contracts and tokenization, will be designed for the clearing and trading of non-crypto digital assets, TASE said.</p>



<h3 class="wp-block-heading">Blockchain bond issuance</h3>



<p>Typically, government debt raising through the issuance of bonds often requires large-scale coordination between various systems. Blockchain tech is often praised for its ability to expedite financial transactions while cutting out intermediaries.&nbsp;</p>



<p>In this instance, TASE is hoping its test will demonstrate the tech’s use in reducing bond issuance costs, speeding up settlement times, improving transparency and streamlining processes.</p>



<p>Following the first <a href="https://www.icmagroup.org/market-practice-and-regulatory-policy/fintech-and-market-electronification/distributed-ledger-technology-dlt/frequently-asked-questions-on-dlt-and-blockchain-in-bond-markets/5-what-are-dlt-bonds/" target="_blank" rel="noreferrer noopener">DLT bond</a> issued in 2018 by the <a href="https://www.worldbank.org/en/news/press-release/2018/08/23/world-bank-prices-first-global-blockchain-bond-raising-a110-million" target="_blank" rel="noreferrer noopener">World Bank</a>, TASE and the ministry said they had been following developments in the financial markets, including tokenizing various assets. </p>



<p>Both said they were eyeing central bank digital currency test runs of financial institutions, which have begun to pick up in speed.</p>



<p>Several countries have begun leveraging DLT-based bonds to raise money for infrastructure from the debt instrument, including the Philippines, which earlier this year raised 11 billion Philippine pesos ($186 million) after investors rallied behind its debut.</p>



<p>TASE and the government also said they could read the writing on the wall when it came to a shift in the digitization of financial instruments.</p>



<p>“The financial markets are undergoing drastic transformations in recent years,” TASE CEO Ittai Ben-Zeev said in the statement. “We hope to see Israel spearhead financial technology while being the first to implement cutting-edge technologies and upgrade the capital market.”</p>



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Israel To Test Blockchain-based Bonds

<div id="highlights-block_62983f2862235" class="highlights">
        <ul>
                <li>UnionBank has issued the country&#8217;s first blockchain-based digital peso bonds in a raise that generated $209 million</li>
                <li>The oversubscribed raise came in 11 times the size the bank had anticipated when it signalled its intention to raise at least 1 billion in digital peso bonds</li>
            </ul>
    
</div>



<p>The UnionBank of the Philippines has raised P11 billion (US$209 million) after investors rallied behind the country’s first-ever blockchain-based peso bonds.</p>



<p>UnionBank&#8217;s digital bonds were issued through the digital registry and digital depository of the Philippine Depository &amp; Trust Corp., <a href="https://www.cnnphilippines.com/business/2022/6/2/UnionBank-digital-peso-bonds.html" target="_blank" rel="noreferrer noopener">local media reported</a> Thursday. The bonds were kept interoperable with the Philippine Dealing &amp; Exchange Corp fixed income market.</p>



<p>Singapore-based fintech company STACS was tapped to provide the blockchain-based digital securities trading infrastructure necessary to facilitate the offering. Meanwhile, HSBC and Standard Chartered were joint lead arrangers and book runners for the transaction.</p>



<p>The oversubscribed raise came in 11 times greater than the bank had anticipated when it signalled its intention to raise at least 1 billion pesos in its <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/union-bank-of-the-philippines-seeks-to-raise-1b-pesos-in-digital-bond-offering-70492212#:~:text=The%20Union%20Bank%20of%20the,a%20May%2023%20media%20release." target="_blank" rel="noreferrer noopener">digital peso bond offering</a> in May.</p>



<p>The publicly listed bank intends to use the funds to partially finance the acquisition of the domestic consumer banking business of global banking giant Citi. Late last year, UnionBank moved to acquire <a href="https://www.philstar.com/business/2021/12/24/2149751/unionbank-buys-citis-consumer-banking-business-philippines-p55-billion" target="_blank" rel="noreferrer noopener">Citi&#8217;s consumer banking business</a> for P55 billion (US$1 billion).</p>



<p>UnionBank treasurer and head of global markets Jose Emmanuel Hilado said the&nbsp;issuance represented a &#8220;building block&#8221; in the bank&#8217;s journey to embrace digitization and industry disruption, according to the reports.</p>



<p>In January, tech giant IBM and Swiss crypto custodian Metaco were selected by the bank to safeguard digital assets on its balance sheet. The crypto-friendly bank also joined a consortium of other domestic banks to use Visa&#8217;s blockchain-based payment platform back in February 2018.</p>



<p>The bonds contain a 1.5 year tenor with a fixed rate of 3.25% per annum and are listed for trading on the Philippine Dealing &amp; Exchange Corp marketplace.</p>



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Philippines’ First Blockchain Digital Peso Bond Offering Raises $209M

<div id="highlights-block_622f9bc254635" class="highlights">
        <ul>
                <li>The so-called &#8220;volcano bonds&#8221; would be the first bitcoin-backed bonds issued by a country</li>
                <li>The International Monetary Fund has urged El Salvador to remove bitcoin as legal tender, citing volatility and additional risk for the country’s citizens</li>
            </ul>
    
</div>



<p>As El Salvador dives deeper into bitcoin, the country’s closely watched and controversial &#8220;volcano bonds&#8221; could launch as soon as Tuesday.</p>



<p>Finance Minister Alejandro Zelaya told a local TV channel that “between March 15 and 20 is the right timing,” adding that the country has “the tools almost finished.”&nbsp;</p>



<p>“But the international context will tell us&#8230;I didn&#8217;t expect the war in Ukraine,&#8221; Zelaya <a href="https://www.reuters.com/technology/el-salvador-says-could-launch-bitcoin-sovereign-bond-between-march-15-20-2022-03-11/" target="_blank" rel="noreferrer noopener">reportedly said</a>.</p>



<p>Launching the bitcoin bond — dubbed the “<a href="https://cms.blockworks.co/el-salvador-plans-bitcoin-city-funded-by-bitcoin-bonds-and-powered-by-a-volcano/" target="_blank" rel="noreferrer noopener">volcano bond</a>” after the mining operation’s power source, the Conchagua volcano — has become increasingly important due to the country’s slim loan prospects and mounting debt, Nathalie Marshik, head of emerging markets sovereign research at Stifel Financial, said.</p>



<p>No details, regulatory framework or prospectus has been issued regarding the bonds, Marshik pointed out, making it difficult to predict demand for the offering.</p>



<blockquote class="wp-block-quote"><p><strong>“These bonds started as a sovereign bond,” Marshik said. “Now, it is a securitized corporate bond, which [raises] the question of success.”</strong></p></blockquote>



<p>A loan from the International Monetary Fund (IMF), which has urged El Salvador to remove bitcoin’s status as legal tender, is unlikely, according to Marshik.</p>



<p>“Odds of an IMF loan are nil,” she said. “[El Salvador officials] are going around saying they have a pension reform pending, and they will get a $590 million bond from the pension system.”</p>



<p>Bitcoin poses significant risks to financial stability and consumer protection, IMF executive directors said in January in a <a href="https://www.imf.org/en/News/Articles/2022/01/25/pr2213-el-salvador-imf-executive-board-concludes-2021-article-iv-consultation" target="_blank" rel="noreferrer noopener">statement</a> about El Salvador’s financial health.</p>



<p>“[Directors] stressed that there are large risks associated with the use of bitcoin,” the statement said. “They urged the authorities to narrow the scope of the bitcoin law by removing bitcoin’s legal tender status.”</p>



<p>The IMF expects El Salvador’s fiscal deficit to reach 5.75% of gross domestic product (GDP) in 2021 and about 5% of GDP in 2022. Public debt is also anticipated to rise to about 96% of GDP in 2026. Given the circumstances, the IMF estimates El Salvador is on an “unsustainable path.”</p>



<blockquote class="wp-block-quote"><p><strong>“The IMF forecasts a primary balance for 2022, yet says the debt is unsustainable under current policies,” Marshik said. “El Salvador needs a 3% of GDP adjustment to get the debt to a sustainable level.”</strong></p></blockquote>



<p>Persistent fiscal deficits and high debt service are leading to large and increasing financing needs, the IMF report noted.&nbsp;</p>



<p>El Salvador has an $800 million bond maturing in January 2023. In July 2021, ratings agency Moody’s downgraded the country’s debt rating to CAA1 — putting it at risk of default.</p>



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El Salvador’s ‘Volcano Bond’ Could Launch This Week

Sam Martin

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>Less accommodative Federal Reserve policy brings bearish price action to BTC</li>
                <li>Market participants are now pricing in a high chance of three to four rate hikes in 2022</li>
            </ul>
    
</div>



<p>The market is now pricing in a good chance of three or four rate hikes in 2022.</p>



<p>Yields on government bonds have been soaring higher as the market expects a less accommodative US Federal Reserve.</p>



<p>The US dollar has shown strength over the past few months, a headwind for digital assets.</p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul><li>S&amp;P 500: 4,670, -0.14%</li><li>NASDAQ: 14,942, -0.05%</li><li>Gold: $1,801, +0.36%</li><li>WTI Crude Oil: $78.43, -0.60%</li><li>10-Year Treasury: 1.755%, -0.014%</li></ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul><li>BTC: $41,737, -1.80%</li><li>ETH: $3,076, -3.80%</li><li>ETH/BTC: 0.0737, -1.98%</li><li>BTC.D: 40.91%, +1.36%</li></ul>



<h3 class="wp-block-heading">Tighter fiscal and monetary policy </h3>



<p>Volatility has been in full force as of late with the market expecting three to four rate hikes by the end of 2022 and fewer <a href="https://cms.blockworks.co/fed-minutes-show-supply-chain-woes-inflation-will-drag-on/" target="_blank" rel="noreferrer noopener">asset purchases by the Fed</a> in the face of higher inflation, which in theory would lead to less dollar liquidity. </p>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="834" height="407" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png" alt="" class="wp-image-13695" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=834 834w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rate-hikes.png?w=80 80w" sizes="(max-width: 834px) 100vw, 834px" /><figcaption>Source: Bianco Research</figcaption></figure>



<p>The US 10-year <a href="https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm" target="_blank" rel="noreferrer noopener">TIPS</a> yield surged last week, which could be bond market participants waking up to the reality that the Fed may be less accommodative in 2022.</p>



<p>Jim Bianco, President of Bianco Research, <a href="https://twitter.com/biancoresearch/status/1480245556819677188?s=20" target="_blank" rel="noreferrer noopener">wrote</a>, &#8220;Simply put, the bond market saw one of its worst weeks in history because bond market players finally &#8216;got it&#8217; that the Fed is going to end liquidity. This kicked off a big the scramble to get out and not be the &#8216;bond bag holder&#8217; when the Fed printer is turned off.&#8221;</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="768" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg" alt="" class="wp-image-13696" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=343 343w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=348 348w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=292 292w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/tips-1024x768.jpg?w=1200 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Bianco Research</figcaption></figure>



<p>&#8220;Meanwhile, growing expectations for higher rates + tighter liquidity conditions (coupled with a relatively strong economic outlook in the US vs. other regions) has helped breathe life back into the US dollar,&#8221; <a href="https://twitter.com/Kevin_Kelly_II/status/1480604636193116161?s=20" target="_blank" rel="noreferrer noopener">wrote</a> Kevin Kelly, Co-Founder of Delphi Digital.</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="515" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg" alt="" class="wp-image-13697" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/rates-and-dxy-1024x515.jpg?w=1045 1045w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Delphi Digital</figcaption></figure>



<h3 class="wp-block-heading">BTC note</h3>



<p>BTC dropped as low as $39,692 earlier today, according to data from <a href="https://www.coingecko.com/en/coins/bitcoin" target="_blank" rel="noreferrer noopener">CoinGecko</a>. The aforementioned expectations of &#8220;tightening&#8221; by the Fed in conjunction with the inherent amount of leverage used in digital asset markets are likely to blame for the bearish price action.</p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="961" height="486" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png" alt="" class="wp-image-13698" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=961 961w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-3.51.29-PM.png?w=80 80w" sizes="(max-width: 961px) 100vw, 961px" /><figcaption>Source: Delphi Digital</figcaption></figure></div>



<p>Billions of dollars of long positions have been liquidated since the December 4th crash, according to data from <a href="https://www.coinglass.com/LiquidationData" target="_blank" rel="noreferrer noopener">Coinglass</a>. </p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="412" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png" alt="" class="wp-image-13699" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/bybt_chart-7-2-1024x412.png?w=1242 1242w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: coinglass.com </figcaption></figure>



<h3 class="wp-block-heading">NFTs</h3>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="341" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png" alt="" class="wp-image-13700" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-4.59.47-PM-1024x341.png?w=1218 1218w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="351" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png" alt="" class="wp-image-13701" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-10-at-5.00.00-PM-1024x351.png?w=1188 1188w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



<hr class="wp-block-separator"/>


BTC Hovers Near Critical Support: Markets Wrap

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>Digital assets trade sideways after yesterday&#8217;s sell-off</li>
                <li>Illicit activity makes up .15% of crypto transaction volume</li>
            </ul>
    
</div>



<p>Risk assets sell-off as bond yields rally.</p>



<p>BTC and ETH trade sideways after yesterday&#8217;s sell-off.</p>



<p>Illicit activity makes up .15% of crypto transaction volume.</p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul><li>S&amp;P 500: 4,696, -0.10%</li><li>NASDAQ: 15,080, -0.13%</li><li>Gold: $1,788, -1.19%</li><li>WTI Crude Oil: $79.47, +2.08%</li><li>10-Year Treasury: 1.73%, +0.027%</li></ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul><li>BTC: $43,221, -0.10%</li><li>ETH: $3,436, -2.50%</li><li>ETH/BTC: 0.0793, -2.51%</li><li>BTC.D: 39.60%, -0.31%</li></ul>



<h3 class="wp-block-heading">Bond yields rally</h3>



<p>Jurrien Timmer, director of global macro at Fidelity, wrote, &#8220;The 30y TIPS real yield has jumped 30 bps in the last 4 days. Less-negative real rates could become part of the landscape during this Fed cycle, with implications for the liquidity highfliers and SoV (Store of Value) plays.&#8221;</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="585" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png" alt="" class="wp-image-13612" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=457 457w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=383 383w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbVFGnUYAc5vDF-1024x585.png?w=1896 1896w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Fidelity</figcaption></figure>



<p>The rise in rates likely comes as a result of the FOMC minutes released yesterday. “We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support,” Powell <a href="https://cms.blockworks.co/fed-minutes-show-supply-chain-woes-inflation-will-drag-on/" target="_blank" rel="noreferrer noopener">said</a> during a press conference in December following the conclusion of the two-day FOMC meeting.</p>



<p>The Wall Street Journal <a href="https://www.wsj.com/articles/fed-weighs-proposals-for-eventual-reduction-in-bond-holdings-11641292201" target="_blank" rel="noreferrer noopener">wrote</a>: &#8220;They noted that current conditions included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization&#8221;.</p>



<h3 class="wp-block-heading">BTC &amp; ETH</h3>



<p>The rise in rates and news of tightening sent digital asset markets tumbling yesterday. </p>



<p>Timmer continued by adding, &#8220;I remain constructive on BTC &amp; ETH over the long-term (and still see $100k as fair value for BTC in a few years based on my supply/demand models). But there is no denying that the short-term charts don’t look great&#8221;.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="581" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg" alt="" class="wp-image-13613" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=460 460w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/FIbqGLjX0AIb-SB-1024x581.jpg?w=1199 1199w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Bitcoin Fidelity</figcaption></figure></div>



<p>ETH has begun to bounce back versus BTC after trading as low as $3,331 earlier today, according to data from <a href="https://www.coingecko.com/en/coins/ethereum" target="_blank" rel="noreferrer noopener">CoinGecko</a>. The ETH/BTC ratio was last hovering near .0795, according to <a href="https://www.tradingview.com/chart/5GPs0hRQ/?symbol=BINANCE%3AETHBTC" target="_blank" rel="noreferrer noopener">Trading View,</a> as it tries to reclaim its longer-term uptrend.</p>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1000" height="683" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png" alt="" class="wp-image-13616" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=1000 1000w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=376 376w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=382 382w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=321 321w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/ETHBTC_2022-01-06_17-06-50.png?w=80 80w" sizes="(max-width: 1000px) 100vw, 1000px" /></figure>



<h3 class="wp-block-heading">Crime in crypto on the decline</h3>



<p>Illicit activity as a percentage of transaction volume has fallen drastically over the past five years, according to a <a href="https://blog.chainalysis.com/reports/2022-crypto-crime-report-introduction/" target="_blank" rel="noreferrer noopener">Chainalysis report</a> released today. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="589" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png" alt="" class="wp-image-13626" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=454 454w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/chart-2-shares-1024x589.png?w=1366 1366w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Chainalysis</figcaption></figure></div>



<p>&#8220;Across all cryptocurrencies tracked by Chainalysis, total transaction volume grew to $15.8 trillion in 2021, up 567% from 2020’s totals,&#8221; said Chainalysis. &#8220;Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency. But the fact that the increase was just 79% — nearly an order of magnitude lower than overall adoption — might be the biggest surprise of all.&nbsp;In fact, with the growth of legitimate cryptocurrency usage far outpacing the growth of criminal usage, illicit activity’s share of cryptocurrency transaction volume has never been lower.&#8221;</p>



<h3 class="wp-block-heading">NFTs</h3>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="336" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png" alt="" class="wp-image-13623" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.06-PM-1024x336.png?w=1223 1223w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="349" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png" alt="" class="wp-image-13624" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Screen-Shot-2022-01-06-at-5.26.26-PM-1024x349.png?w=1181 1181w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



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BTC and ETH Trade Sideways After Yesterday’s Sell-off: Markets Wrap

<div id="highlights-block_9395deceadc1e6f2393411af7d750ead" class="highlights">
        <ul>
                <li>Bitcoin’s weekly outflows reached a five-month high with nearly $3 billion worth of BTC leaving centralized exchanges</li>
                <li>The inflation outlook for December remains unclear as shipping and energy costs begin to rollover.</li>
            </ul>
    
</div>



<p>BTC rallied to near $50,000 after the 6.8% CPI print before erasing the gains and trading below $47,500.</p>



<p>Real yields on the US 10-year are at their lowest level since the 1940s.</p>



<p>The inflation outlook for December remains unclear as shipping and energy costs begin to roll over.</p>



<p>Bitcoin’s weekly outflows reached a&nbsp;five-month high&nbsp;with nearly $3 billion worth of BTC leaving centralized exchanges.</p>



<p>Axie Infinity teases future aspects of gameplay and provides an overall update of the largest blockchain-based game.</p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul>
<li>S&amp;P 500: 4,712, +0.95%</li>



<li>NASDAQ: 15,5630, +0.73%</li>



<li>Gold: $1,782, +0.36%</li>



<li>WTI Crude Oil: $71.95, +1.42%</li>



<li>10-Year Treasury: 1.482%, -0.005%</li>
</ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul>
<li><a href="https://blockworks.co/price/btc">BTC</a>: $48,348, +0.97%</li>



<li><a href="https://blockworks.co/price/eth">ETH</a>: $4,043, -2.61%</li>



<li>ETH/BTC: 0.0836, -3.31%</li>



<li>BTC.D: 41.19%, +1.54%</li>
</ul>



<h3 class="wp-block-heading">6.8% CPI print</h3>



<p>After a <a href="https://cms.blockworks.co/bonds-sell-off-on-6-2-cpi-print-bitcoin-liquidations-spur-correction-markets-wrap/" target="_blank" rel="noreferrer noopener">6.2% Consumer Price Index (CPI)</a> print for the month of October, November&#8217;s numbers showed a 6.8% year-over-year inflation rate. This is the highest inflation rate since June of 1982, <a href="https://twitter.com/JackFarley96/status/1469300999860989955?s=20" target="_blank" rel="noreferrer noopener">according</a> to Jack Farley.</p>



<p>Moreover, the 10-year real yield is also officially at its lowest level since the 1940s, <a href="https://twitter.com/TaviCosta/status/1469312450445123584?s=20" target="_blank" rel="noreferrer noopener">per</a> Crescat Capital portfolio manager, Otavio Costa. Real yields are calculated by subtracting the prevailing inflation rate from the nominal Treasury yield, thus providing investors with the real rate of return of bond yields.</p>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="791" height="578" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png" alt="" class="wp-image-12432" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png?w=791 791w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png?w=352 352w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png?w=357 357w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/10-year-real-yield.png?w=80 80w" sizes="(max-width: 791px) 100vw, 791px" /></figure>



<p>Container shipping rates have begun to roll over, which should help ease CPI prints going forward.</p>



<p>&#8220;If the Fed errs, the bond market and its deflationary signals will say, &#8216;Told you so!&#8217; Long yields are very low considering low jobless rates and inflation, and inflation expectations are falling. Note the 5-yr-5-yr forward TIPS break-even spread and container shipping rates,&#8221; <a href="https://twitter.com/TimmerFidelity/status/1469336106764316685?s=20" target="_blank" rel="noreferrer noopener">wrote</a> Jurrien Timmer, Director of Global Macro at Fidelity.</p>



<p>US President Joe Biden also signaled ahead of today&#8217;s CPI number that, &#8220;the information being released tomorrow on energy in November does not reflect today&#8217;s reality, and it does not reflect the expected price decreases in the weeks and months ahead, such as in the auto market,&#8221; according to a <a href="https://www.reuters.com/business/biden-says-inflation-data-due-friday-will-not-reflect-recent-drop-some-prices-2021-12-09/" target="_blank" rel="noreferrer noopener">Reuters report</a>.</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="553" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg" alt="" class="wp-image-12433" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/inflation-exp-1024x553.jpg?w=1193 1193w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: Fidelity</figcaption></figure>



<h3 class="wp-block-heading">BTC fake-out</h3>



<p>Similar to last month when <a href="https://cms.blockworks.co/bonds-sell-off-on-6-2-cpi-print-bitcoin-liquidations-spur-correction-markets-wrap/" target="_blank" rel="noreferrer noopener">BTC rallied to an ATH</a> following the CPI print for the month of October only to quickly erase the gains shortly thereafter, the same thing happened today. BTC rallied close to $50,000 before dropping below $47,500 moments later, according to data from <a href="https://coinmarketcap.com/currencies/bitcoin/" target="_blank" rel="noreferrer noopener">CoinMarketCap</a>.</p>



<p>&#8220;Bitcoin is below the short-term holder cost basis, which currently sits at $53K. Until this is reclaimed, not bullish. Not saying I am a &#8216;giga bear&#8217;, just cautious until the market shows me otherwise. Happy to flip bullish if reclaimed. Bearish confirmation would be a failed underside retest of the band,&#8221; reads a <a href="https://www.blockwareintelligence.com/p/blockware-intelligence-newsletter-35b?r=fg8t4&amp;utm_campaign=post&amp;utm_medium=web" target="_blank" rel="noreferrer noopener">Blockware Intelligence Newsletter.</a></p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/on-chain-cost-1024x576-1.jpg" alt="" class="wp-image-12434"/><figcaption class="wp-element-caption">Source: Blockware Intelligence</figcaption></figure></div>


<p>Some other bitcoin highlights from an <a href="https://medium.com/intotheblock/macro-conditions-dominating-cryptos-outlook-f323bdec3043" target="_blank" rel="noreferrer noopener">Intotheblock report</a> include:</p>



<ul>
<li>Bitcoin recorded a modest increase in the fees generated by its blockchain as network activity picked up during the crash</li>



<li>BTC&#8217;s weekly outflows reached a&nbsp;five-month high&nbsp;with nearly $3 billion worth of BTC leaving centralized exchanges</li>



<li>Bitcoin’s underperformance comes at a time when both the dollar (DXY) and the volatility index (VIX) are at their highest in months</li>



<li>Year-to-date, bitcoin has significantly outperformed traditional markets, potentially leading to profit-taking activity amid uncertain conditions</li>



<li>Bitcoin&nbsp;<a href="https://app.intotheblock.com/coin/BTC/deep-dive?group=derivatives&amp;subgroup=perpetual&amp;chart=all&amp;utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--3HthPON7RdkqvpuHQkAo5sKcLDqom_ZNmPoINz_cKzhRZDdo6RhGdAF5Y5S0AsAjgyfRx" target="_blank" rel="noreferrer noopener">perpetual swaps’ funding rate</a>&nbsp;remain near zero, pointing to neutral expectations in the near-term</li>
</ul>



<h3 class="wp-block-heading">Axie Infinity December update</h3>



<p>An <a href="https://axie.substack.com/p/dec2021" target="_blank" rel="noreferrer noopener">Axie Infinity development update</a> that was released last night shows that the popular play-to-earn game is approaching 3 million community members and significant progress in the battles, land and origins game development.</p>



<p>For comparison, there are roughly 4.1 million unique addresses in DeFi, <a href="https://dune.xyz/rchen8/defi-users-over-time" target="_blank" rel="noreferrer noopener">according to data</a> from Dune Analytics.</p>



<p>The report continues by comparing Ronin usage, the Ethereum sidechain that Axie Infinity is built upon, to activity on the Ethereum base layer. &#8220;Today, Ronin’s transaction volume has grown to roughly 4x the number of daily transactions of the Ethereum chain, and that growth has pushed us all to prepare for significant scale in 2022!&#8221; according to the report.</p>



<figure class="wp-block-image size-large"><img decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/ronin-activity-1024x879-1.jpg" alt="" class="wp-image-12436"/><figcaption class="wp-element-caption">Source: Nansen </figcaption></figure>



<p>Land gameplay is <a href="https://axie.substack.com/p/dec2021" target="_blank" rel="noreferrer noopener">still under development</a> and set to roll out in the first half of 2022. The team continues to work on resource production, gathering, and crafting mechanics and even teased what some of the in-game art will look like:</p>



<figure class="wp-block-image size-large"><img decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/axie-art-1024x491-1.jpg" alt="" class="wp-image-12438"/><figcaption class="wp-element-caption">Source: Axie Infinity Development Update </figcaption></figure>



<p>The <a href="https://axie.substack.com/p/dec2021" target="_blank" rel="noreferrer noopener">update continues</a> by adding, &#8220;We also continue to make significant progress with our next generation battles experience, where we provide opportunities for players to experience a full, brand new storyline, non-blockchain “starter” Axies, the ability to attach power-ups to Axies, and much more.&#8221;</p>



<p>Sky Mavis, the <a href="https://cms.blockworks.co/axie-infinity-developer-scores-152m-in-series-b-funding-nearing-3b-valuation/" target="_blank" rel="noreferrer noopener">developers</a> behind Axie Infinity, are also working on graphical special effects for the game and leaked some of what they have been working on:</p>



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Origin VFX Leek!" width="1024" height="576" src="https://www.youtube.com/embed/wrbEyQZGipc?start=11&#038;feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen></iframe>
</div></figure>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="332" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png" alt="" class="wp-image-12450" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.24-PM-1024x332.png?w=2048 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Top Ethereum Projects</figcaption></figure></div>

<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="283" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png" alt="" class="wp-image-12451" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-10-at-4.36.32-PM-1024x283.png?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Top Solana Projects </figcaption></figure></div>


<p>If you made it this far, thanks for reading! I am looking forward to catching up on Monday.</p>



<hr class="wp-block-separator has-css-opacity"/>



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BTC Stumbles on 6.8% CPI Print; Axie Infinity Teases Future Gameplay: Markets Wrap

Jack Farley

<div id="highlights-block_618ea6ce0f17d" class="highlights">
        <ul>
                <li>“Having traded bonds for 32 years, I’ve never seen a worse risk/return opportunity in any asset in my entire life,” Greg Foss, a veteran credit trader and executive director at Strategic Initiatives said</li>
                <li>While inflation has historically been viewed by investors as a sort of kryptonite to government bonds, the resilience of longer-term Treasurys in the face of rising inflation has been a defining feature of market conditions since April</li>
            </ul>
    
</div>



<p>The market for US government securities sold off hard on Wednesday as it learned that the <a href="https://cms.blockworks.co/bonds-sell-off-on-6-2-cpi-print-bitcoin-liquidations-spur-correction-markets-wrap/" target="_blank" rel="noreferrer noopener">October inflation rate hit 6.2%</a>, according to a <a href="https://www.bls.gov/news.release/pdf/cpi.pdf" target="_blank" rel="noreferrer noopener">report</a> from the US Bureau of Labor Statistics released Wednesday. This surge in prices marked the largest advance in the consumer price index (CPI) since 1991, and in fact the rise was dangerously close to being a 39-year high:<br></p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="442" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png" alt="" class="wp-image-11078" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-inflation-1024x442.png?w=1298 1298w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>US Annual Inflation Rate (%)</figcaption></figure>



<p>Treasurys had a day to rest yesterday as the bond market was closed due to Veterans Day. But as of this morning, it appears the rout on Treasury paper has resumed in full force. The 5-year Treasury note has surged to its highest level since February 2020:</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="642" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png" alt="US 5-year Treasury Yield (%)" class="wp-image-11080" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=410 410w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=416 416w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=349 349w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/2021-11-12-5-year-1024x642.png?w=1104 1104w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>US 5-year Treasury Yield (%)</figcaption></figure>



<p>The lofty inflation reading has brought to the fore strong views about the long-term viability of government bonds as an investment vehicle.</p>



<p>“If you’re a bond holder, you’re probably the world’s biggest fool,” said Greg Foss, a veteran credit trader and executive director at Strategic Initiatives. “Having traded bonds for 32 years, I’ve never seen a worse risk/return opportunity in any asset in my entire life,” Foss added.</p>



<p>Foss called Wednesday’s auction of 30-year Treasury bonds “horrendous,” in particular noting a wide spread or “tail” between the average price and the lowest bid.</p>



<p>Indeed, <a href="https://www.bloomberg.com/news/articles/2021-11-11/u-s-treasury-market-is-most-treacherous-since-pandemic-s-onset">accor</a><a href="https://www.bloomberg.com/news/articles/2021-11-11/u-s-treasury-market-is-most-treacherous-since-pandemic-s-onset" target="_blank" rel="noreferrer noopener">d</a><a href="https://www.bloomberg.com/news/articles/2021-11-11/u-s-treasury-market-is-most-treacherous-since-pandemic-s-onset">ing</a> to Bloomberg’s U.S. Government Securities Liquidity Index, trading conditions in the Treasury market are the worst they have been since March 2020, when a mad dash for Scramble for dollars <a href="https://www.bis.org/publ/work966.pdf" target="_blank" rel="noreferrer noopener">triggered</a> a liquidation of Treasurys alongside risk assets like stocks.</p>



<p></p>



<p>“So even though we have extremely high inflation, we also have extraordinarily high debt levels, both public and private sector debt,” Eric Basmajian, founder and editor of EPB Macro Research, told Blockworks in the <a href="https://www.youtube.com/watch?v=qJWwUFZPhnQ&amp;t=4s" target="_blank" rel="noreferrer noopener">latest episode</a> of the Forward Guidance podcast.</p>



<p>“The long-term bond yields are basically saying that the Fed can try and raise the front end rates, but pretty quickly, it’s going to have to drop those rates back to zero because the structural forces in the economy are just way too strong,” Basmajian said.</p>



<p>But not all are convinced that monetary policy has impaired Treasury bonds’ ability to accurately foresee rates of growth and inflation.</p>



<p>“The Fed has created a collateral shortage of Treasury bills, and that indirectly affects the whole Treasury curve,” noted Macro Analyst Lyn Alden.</p>



<blockquote class="wp-block-quote"><p><strong>“A lot of people view bonds as the ‘smart money’ — and traditionally they have been. But during periods of rapid treasury purchases, the measurement has become the target and therefore loses a lot of informational value,” Alden said.</strong></p></blockquote>



<p>Whether Treasury bonds will be able to keep up with inflation has profound implications for investors. While inflation can be viewed as a form of fiat monetary debasement, investors can stay afloat if bonds pay out to investors much more than the rate of inflation — and as a matter of fact they can do <em>very</em> well if bond yields are well in excess of inflation.</p>



<p>However, fixed-income investors face a much bleaker picture if yields in the bond market remain submerged well below inflation, which is Alden’s base case.</p>



<p>“The combination of higher inflation and stagnant bond yields is a very good environment for hard assets, because cash or bonds are being sharply devalued relative to something, and that something is real assets, things that are finite,” Alden said.</p>



<hr class="wp-block-separator">
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<hr class="wp-block-separator">


Are Bonds Still the “Smart Money”?

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>CPI comes in at 6.2%, marking the largest print in the last 30 years</li>
                <li>BTC hits an ATH of $69,000 before a cascade of liquidations spurred a sell-off</li>
            </ul>
    
</div>



<p>The CPI came in hot at 6.2% versus the expected 5.9%. </p>



<p><meta charset="utf-8">Bond yields rallied as investors got nervous about maintaining their purchasing power. </p>



<p>BTC raced higher after the CPI numbers were released. </p>



<p>A cascade of liquidations sent BTC lower after the morning rally, seeing prices fall below $64,000. </p>



<p>Chinese real estate giant, Evergrande has paid part of $148.13 million interest due today according to a Bloomberg report. However, Deutsche Marktscreening Agentur (DMSA) has begun bankruptcy proceedings. The news led to risk-off sentiment into the close for equities, some commodities, and digital assets.  </p>



<p>YGG partners with Genopets, a blockchain-based game that combines play-to-earn with move-to-earn mechanics to reward users who exercise. </p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul><li>S&amp;P 500: 4,646, -.82%</li><li>NASDAQ: 15,622, -1.66%</li><li>Gold: $1,850, +.92%</li><li>WTI Crude Oil: $81.30, -3.39%</li><li>10-Year Treasury: 1.57%, +.121%</li></ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul><li>BTC: $64,755, -3.85%</li><li>ETH: $4,602, -3.50%</li><li>ETH/BTC: .0709, +.39%</li><li>BTC.D: 43.99%, +.26%</li></ul>



<h3 class="wp-block-heading">Consumer Price Index (CPI)</h3>



<p>Today the <meta charset="utf-8">Consumer Price Index (CPI) came in at 6.2% year-over-year versus analysts&#8217; consensus of 5.9% ahead of the report. This marks the largest CPI reading in more than 30 years, <a href="https://www.cnbc.com/2021/11/10/consumer-price-index-october.html" target="_blank" rel="noreferrer noopener">according</a> to CNBC.</p>



<p>&#8220;We’re likely going to remain in an inflationary environment for at least another quarter or two due to rent increases, and we’ll need to assess as more data comes in as to what extent it will remain in place beyond that point or take a break. Inflation has thus far rolled from category to category, with specific price spikes and shortages in certain areas at different times, rather than altogether. There’s still a clear ongoing labor shortage.&#8221; <a href="https://www.lynalden.com/premium-2021-10-31/" target="_blank" rel="noreferrer noopener">wrote</a> investment strategist Lyn Alden. </p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="407" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg" alt="" class="wp-image-10952" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/inflation-1024x407.jpg?w=1095 1095w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



<p>The Employment Cost Index (ECI), a quarterly economic series published by the Bureau of Labor Statistics that details the&nbsp;growth of total employee compensation, is often a leading indicator for CPI. When looking at the two metrics on the same chart, it appears that inflation may remain hot for the next quarter or two. </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="710" height="448" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png" alt="" class="wp-image-10953" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=710 710w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=407 407w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=414 414w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=347 347w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/@MikaelSarwe.png?w=80 80w" sizes="(max-width: 710px) 100vw, 710px" /><figcaption>Source: @MikaelSarwe</figcaption></figure></div>



<h3 class="wp-block-heading">Bonds sell-off</h3>



<p>Bonds sold off and consequently led to a rally in yields due to the hot inflation numbers. Some industry experts <a href="https://twitter.com/CaitlinLong_/status/1458507405675880452?s=20" target="_blank" rel="noreferrer noopener">believe</a> the Fed&#8217;s recently announced taper set to begin in December is contributing to the rally in rates. Jerome Powell <a href="https://www.investopedia.com/fed-will-start-tapering-in-december-2021-5208392" target="_blank" rel="noreferrer noopener">stated</a> that these monthly asset purchases initially will be reduced by $10 billion for Treasury securities and $5 billion for agency securities. That still leaves a total of $105 billion of asset purchases per month on behalf of the Fed. </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="670" height="450" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg" alt="" class="wp-image-10957" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=670 670w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=383 383w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=326 326w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/chart-2-1.jpeg?w=80 80w" sizes="(max-width: 670px) 100vw, 670px" /></figure></div>



<p>Founder of FFTT, Luke Gromen, has been <a href="https://twitter.com/LukeGromen/status/1458523654703226885?s=20" target="_blank" rel="noreferrer noopener">warning</a> for some time that the Fed is &#8220;trying to ride 2 horses with one ass.&#8221; While US expenditures are far outpacing tax receipts and debt levels remain elevated, the Fed appears to be trying to inflate the debt away without spooking bond investors. </p>



<p>When inflation is running higher than the prevailing rates on bonds, the holders of said bonds are losing purchasing power because their return is not outpacing the rising cost of goods and services. </p>



<p>&#8220;This is the widest gap on record between the Fed&#8217;s short-term interest rate setting, and year-over-year CPI, including the 1970s. (We would have to go back to the 1940s to find a similar situation.),&#8221; <a href="https://twitter.com/LynAldenContact/status/1458462580025008129?s=20" target="_blank" rel="noreferrer noopener">according</a> to Lyn Alden. </p>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="748" height="450" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png" alt="" class="wp-image-10958" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=748 748w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=434 434w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=364 364w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD1_erNXEAMUpk5.png?w=80 80w" sizes="(max-width: 748px) 100vw, 748px" /></figure>



<h3 class="wp-block-heading">Bitcoin</h3>



<p>&#8220;The higher-than-expected US October CPI print is bullish for bitcoin,&#8221; Noelle Acheson, head of market insights at Genesis, told Blockworks. &#8220;Rising inflation with persistently low rates is a good tailwind for non-yielding inflation hedges. The macro situation is especially interesting for BTC in that a market in which you have bonds and equities rallying is one in which traditional investment theories no longer work.&#8221;</p>



<p>BTC rallied to a new ATH of $69,000 right after the CPI print, which liquidated a large number of shorts. The opposite occurred later in the day as equities closed weak, forcing a cascade of liquidations amongst longs. It appears as though the leveraged traders never learn their lesson. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="374" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png" alt="" class="wp-image-10961" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/bybt_chart-3-1-1024x374.png?w=1370 1370w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure></div>



<p>Perpetual funding rates ahead of the price correction were creeping above .05% on numerous exchanges, <a href="https://app.laevitas.ch/dashboard/btc/futures/basis" target="_blank" rel="noreferrer noopener">according</a> to data from laevitas.ch. The following chart shows that historically when funding rates reach north of .05%, corrections often follow. Although during bull markets it is not uncommon for funding rates to remain extremely elevated for extended periods of time. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="512" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg" alt="" class="wp-image-10962" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/FD2u-RzVUAQJDSV-1024x512.jpg?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source Jarvis Labs</figcaption></figure></div>



<p>The BTC move also coincided with early <a href="https://cms.blockworks.co/evergrande-defaults-on-148-13m-bankruptcy-proceedings-begin/" target="_blank" rel="noreferrer noopener">reports</a> that the Chinese real estate giant, Evergrande, had missed its interest payment due on November 10. Later, <meta charset="utf-8">a source close to the matter at Clearstream reported that the company had made three payments on its $148.13 million debt. The news seemed to stir risk-off sentiment in the markets, leading to a fall in equities and digital assets across the board. </p>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p><a href="https://www.genopets.me" target="_blank" rel="noreferrer noopener">Genopets</a>, a Solana-based game, is partnering with Yield Guild Games to bring its assets to the YGG community. The Genopets game innovates by combining play-to-earn and newly coined &#8216;move-to-earn&#8217; to allow users to earn via both playing a game and exercising, <a href="https://medium.com/yield-guild-games/yield-guild-games-purchases-habitats-in-move-to-earn-solana-game-genopets-902653cd410e" target="_blank" rel="noreferrer noopener">according</a> to a company-released medium article.  </p>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found in the photos below:</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="341" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png" alt="" class="wp-image-10964" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.27-PM-1024x341.png?w=1225 1225w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="287" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png" alt="" class="wp-image-10965" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-10-at-5.29.38-PM-1024x287.png?w=1198 1198w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



<hr class="wp-block-separator"/>


Bonds Sell-off on 6.2% CPI Print; Bitcoin Liquidations Spur Correction: Markets Wrap

Sam Reynolds

<div id="highlights-block_615c7ae2b9695" class="highlights">
        <ul>
                <li>Metaco says demand for institutional grade digital asset infrastructure in Singapore and the rest of Asia is the reason its expanding in the continent</li>
                <li>Singapore has been at the forefront of digital asset adoption led by DBS Bank as well as its sovereign wealth fund Temasek</li>
            </ul>
    
</div>



<p>Digital assets infrastructure provider Metaco announced today that it has opened an Asia-Pacific office in Singapore, citing demand for digital assets in the City and the region as a whole.&nbsp;</p>



<p>Switzerland-based Metaco has played a role in digital bond issuance in Europe and Switzerland during the last year. At the same time, Singapore has been at the forefront of digital bond issuance with Temasek portfolio company Azalea Investment Management issuing its latest Temasek private-equity-backed bonds, Astrea VI, in tokenized format on the blockchain and local digital asset exchange iSTOX also issuing tokenized bonds.&nbsp;</p>



<p>“The decision to choose Singapore as the location for our APAC base made best sense for our business and strategic objectives. Singapore is one of the jurisdictions in which we are seeing the highest levels of demand for digital asset software and infrastructure by financial institutions, driven in part by the progressive regulatory framework towards digital assets by the Monetary Authority of Singapore (MAS),” Andre Israel, Chief Operating Officer at Metaco, told Blockworks in an email.&nbsp;</p>



<p>Israel also said that the country’s talent pool and prior experience with digital assets is another reason the company chose to establish its regional headquarters in Singapore.&nbsp;</p>



<p>Perhaps the most notable example of institutional acceptance of digital assets in Singapore comes via DBS, which is partially owned by the Singaporean government. <a href="https://cms.blockworks.co/can-dbs-sto-revive-a-stagnant-offering-class/" target="_blank" rel="noreferrer noopener">Earlier this year</a>, the bank announced that it was opening up a Security Token Offering issuance desk. During its last <a href="https://cms.blockworks.co/singapores-dbs-reports-100-million-in-digital-assets-in-custody/" target="_blank" rel="noreferrer noopener">earnings</a> announcement, the bank reported that it has over $100 million in digital assets custodied via its institutional-focused digital assets exchange, and it will soon begin to offer digital products via its traditional brokerage DBS Vickers.</p>



<p>In a previous interview with Blockworks, Seamus Donoghue, Vice President of Metaco, called Ethereum the new “rails for the new capital markets” believing it will play a key role in the future issuance of government debt — a “growth industry” according to Donoghue.&nbsp;</p>



<h3 class="wp-block-heading"><strong>Singapore vs. Hong Kong&nbsp;</strong></h3>



<p>While Singapore might have had competition from Hong Kong as a digital assets hub, the two are drifting further apart, with Singapore taking the lead given its friendly regulatory environment. Industry stakeholders that Blockworks has spoken to <a href="https://cms.blockworks.co/hong-kongs-digital-assets-double-standard/" target="_blank" rel="noreferrer noopener">have complained</a> about Hong Kong’s digital asset double standard, with layers of bureaucracy and strict anti-money laundering laws that stop most firms from even being able to open a bank account.&nbsp;</p>



<p>“Banking still treats crypto as something that they really don’t want to touch in Hong Kong over money laundering concerns,” Vincent Chok, CEO of First Digital Trust, a registered public trust company headquartered in Hong Kong told Blockworks in an earlier interview. “There’s a definite bias going on.”</p>



<p>It’s also been said that Hong Kong’s <a href="https://cms.blockworks.co/custodian-rules-are-missing-link-for-hong-kongs-digital-assets-industry/" target="_blank" rel="noreferrer noopener">lack of proper digital asset custodian rules</a> — so far it has only issued guidance and not a comprehensive legal framework like Singapore — is inhibiting the territory’s growth as a digital assets superpower.&nbsp;</p>



<p>But Metaco’s Israel said that Hong Kong is still a key global financial center and on the roadmap as the company “continues to grow at a significant pace”. It’s just not going to be its Asia-Pacific headquarters.</p>



<hr class="wp-block-separator">
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<hr class="wp-block-separator">


Metaco Taps Singapore as Future of Asia Digital Finance with Regional Office Opening

<div id="highlights-block_612680d63c780" class="highlights">
        <ul>
                <li>Foreign debt demand is at the highest level in over a decade</li>
                <li>More than 60% of 2-year notes went to foreign buyers</li>
            </ul>
    
</div>



<p>Despite inflation fears, foreign buyers are purchasing a staggering amount of US debt.&nbsp;</p>



<p>Foreign official entities took home $15.4 billion of the $41 billion, about 38%, available 10-year Treasuries, the latest <a href="https://home.treasury.gov/data/investor-class-auction-allotments" target="_blank" rel="noreferrer noopener">report</a> from the August 11 auction shows. More than 60% of 2-year notes went to foreign buyers, the highest in more than a decade. </p>



<p>The increase in foreign buyers, many of which were likely foreign central banks, might be due to the fact that foreign central banks are eager to offload their foreign-exchange reserve currency (USD), one analyst said.&nbsp;</p>



<p>“The United States’ biggest export is inflation, which means our biggest export is dollars,” said Steve Van Metre, founder of Steve Van Metre Financial. “Foreign banks accumulate dollars, and when the banks have too many dollars they convert them with&nbsp; foreign central banks to get local currency. As dollars pile up in a foreign central bank they become inflationary.”&nbsp;</p>



<p>Foreign central banks take foreign US dollars and exchange them for treasury securities, which pay small amounts of interest, but are not inflationary, Van Metre said.&nbsp;</p>



<p>In a surprise move, this month’s 10-year sale awarded notes at 1.34%, more than three basis points lower than the yield level prior to the auction. This is the highest premium since 2012.&nbsp;</p>



<p>Two-year notes also sold two basis points higher from the previous auction in late July at an auction-high yield of 0.24%. The Fed Funds target rate is between 0% and 0.25%.&nbsp;</p>



<p>“When the global economy is expanding, you actually see an increase in purchases from foreign investors, because they have too many dollars, and the opposite is also true,” said Van Metre.&nbsp;</p>



<p>“When the global economy is contracting, and foreign economies need dollars, they will sell the Treasury securities, you have to think of the Treasury securities almost as a foreign central bank savings account.”&nbsp;</p>



<p>The rate is not a major concern for foreign central banks because they intend to hold the treasuries rather than sell for the foreseeable future, Van Metre said. Given the current state of the global economy and due to the existing repurchasing facilities, foreign players purchasing high amounts of US debt is a trend likely to continue at future auctions.&nbsp;</p>



<p>“The Fed announced two stand-in repo facilities, domestic and foreign,” said Van Metre. “If you own any Treasury or agency-backed security, you need cash, it’s like a payday loan. Go to the Fed, and for a quarter percent for a year, that&#8217;s the interest cost, they will loan you cash on an overnight basis.”&nbsp;</p>



<p>Because bonds now have liquidity, there is little reason to anticipate lower rates of foreign debt purchasers. Refunding sales is a trend more commonly seen with 10-year bonds as opposed to shorter-dated treasuries, such as 2-year notes.</p>



<p><strong><em>Want more investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a> September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.</em></strong></p>
