Connecting the Dots
Episode 116 - Navigating the Uncertainty
Welcome to the new subscribers that have joined us over the last week. The aim of this newsletter is to help you navigate the world of crypto. There’s an incredible amount of information out there so we try to distil it into the things you MUST know each week, covering both macro and crypto.
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Onto the newsletter. Here’s what you’re getting this week:
Macro Update: Our latest view on the macro and its impact on crypto markets.
Crypto Native News: The SEC shuts its investigation into Crypto .com, HashKey and Bosera announce the launch of tokenised money market ETFs, Galaxy Digital to pay a $200m settlement with NYAG, World Liberty Financial pitches its own stablecoin.
Institutional Corner: The US FDIC to take a new approach to digital assets, JP Morgan says yield bearing stablecoins should experience large growth.
Charts of the Week: Tokenised gold market cap hits record high, bitcoin liquidity at weekends is rebounding.
Top Jobs in Crypto: Featuring Keyrock, Binance, Coinbase, BTSE, Gate.io and LSEG.
Macro Update
This is where we connect the dots between macro and crypto.
Navigating the Uncertainty
We signed off last week's note suggesting to prepare for a choppy week into quarter end and we certainly had plenty of volatility to endure!
Familiar themes continue to dominate with trade policy uncertainty and stagflation fears weighing once more on risk. Markets started last week on the front foot with headlines that tariffs would take a more measured approach, but the cautiously positive sentiment reversed with Trump’s announcement on Wednesday of a 25% tariff on all non-US made automobiles. This uncertainty looks set to continue into the April 2nd “Liberation Day” and we feel there’s little value in playing the guessing games here as to what will be delivered. However, US officials have stated explicitly that these tariffs are intended as the basis for negotiation and consequently, we remain of the view that the “bad news” is being front loaded and the path through Q2 will be somewhat softer as the negotiations yield compromise.
Of course, the tariff uncertainty is also feeding the “stagflation” fears which got little reprieve from the release of the Fed’s preferred inflation measure, core PCE, which came in at 2.8% YoY for Feb, up 0.4% on the month, from 0.3% prior. Meanwhile, consumer spending rose a paltry 0.1% in Feb, versus expectations of 0.3% whilst the Conference Board reported that its consumer confidence index declined for the 4th consecutive month in March to 92.9. The expectations portion of the index at 65.2 was its lowest level in 12 years sparking renewed talk of “recession.”
Slowing, not collapsing…
Still, we push back against many of these narratives. Firstly, we remain of the view that we are witnessing a slowing, not collapsing US economy. S&P Global’s flash PMI’s for March coming in at 53.5 suggesting business activity accelerated from February and was driven by a pick up in the services sector, despite a renewed slowing in manufacturing. Jobless claims also continue to show little stress in the labour market yet (although we acknowledge this is the most lagging of indicators and should expect the DOGE cuts to start feeding some labour market indicators soon.)
Importantly however, as we’ve noted before, the reason “stagflation” is the worst risk scenario, is the idea that the Fed will be unable to respond to slowing growth due to the inflation constraint. Yet the recent mini dovish pivot from JPow where he explicitly said tariff related inflation would be deemed as “transitory” dispels this idea and with the Fed suggesting the risks have shifted more to the downside on growth, implies the Fed will still cut at the first sight of labour market weakness. 2yr yields closing the week a few bps lower at 3.91% also supports the view that growth concerns currently outweigh inflation fears and we expect a lower rate profile for the Fed lies ahead, which will provide support for risk markets.
With the high levels of tariff related uncertainty, it's perhaps of little surprise that risk is being grossed down once more ahead of a massive week with both the Liberation Day tariff announcements plus Friday’s US employment report. Quarter end also makes for lots of noise as positions adjust, portfolios rebalance and market liquidity retrenches as banks reduce balance sheet availability. Japanese financial year end too no doubt giving the “reverse carry trade” bears some false optimism 🙄
Zoom out…
We continue however, to look through much of this noise as Bitcoin suffers a very typical bear market correction.
Lower yields and a weaker dollar are helping to ease financial conditions and will start to feed through and reflexively stimulate risk over the coming weeks.
We have China and now the EU pumping fiscal stimulus, alongside rising M2 money supply growth.
The Fed is moving towards the end of QT and laying the groundwork for liquidity provision to fund the debt rollover…
…all of this against a backdrop of a crypto friendly administration and the formation of a Bitcoin reserve.
In the short term, headline risk remains and augurs for caution. Yet the bigger picture, longer term thematics and macro cycle continues to remain bullish for Bitcoin. These are the pull backs where we like to add to longer term positions.
Native News
Key news from the crypto native space this week.
Crypto .com says the U.S. Securities and Exchange Commission has shut its investigation into the exchange, marking the last crypto firm to have the agency's enforcements dropped. Crypto .com said in a statement that the SEC would not file an enforcement action against the company. "Under the previous administration, the SEC weaponised and attempted to expand its congressionally granted power in order to harm an industry that its former chair disfavoured," said Crypto.com Chief Legal Officer Nick Lundgren in the statement. "It is unfortunate that we were forced to endure this years-long investigation and file our own suit against the SEC to protect the rule of law." As a reminder, the SEC has now dropped several investigations and lawsuits against crypto firms over the past several weeks, including against Kraken, Robinhood and Coinbase. Crypto .com sued the SEC in October after it said it received a Wells notice from the agency, meaning that the SEC could be bringing charges. In the lawsuit, Crypto .com asserted the SEC had overexpanded its jurisdiction while also pushing back on the agency's claim that most cryptocurrencies are securities. That lawsuit was dropped in December. Read the full statement from Crypto .com HERE.
HashKey Group and Bosera Asset Management announced the launch of the tokenised money market ETFs, Bosera HKD Money Market ETF (Tokenised Class) and Bosera USD Money Market ETF (Tokenised Class). The products have been approved by Hong Kong Securities and Futures Commission (SFC) and will be formally launched in April. Dr. Xiao Feng, Chairman and CEO of HashKey Group said "Bringing money market ETFs on-chain through blockchain technology is a crucial step for traditional finance to embrace Web3. As an important bridge connecting traditional finance and crypto finance, HashKey Group has established a complete Web3 financial infrastructure. Under the current market trend of compliance, we expect more traditional financial institutions to actively enter the crypto finance sector through innovative tokenisation products. This will not only drive the development of the crypto finance market, but also promote the integration of blockchain technology and mainstream financial systems, creating sustainable investment value for institutional and individual investors." Ms. Lian Shaodong M.H., Chairman and CEO, Bosera Asset Management (International) Co., Limited said "As an investment value discoverer, Bosera International has always been committed to providing professional and comprehensive asset management services to all kinds of institutional and individual investors at home and abroad. One of Bosera International's key strategies is to leverage financial innovation to promote financial inclusion and empower investor services through financial technology. This issuance is our latest product in the Web 3.0 sector, after our Virtual Asset Spot ETF, and we hope to create value for investors. As a leading asset management institution in Hong Kong, we attach great importance to innovation in the financial sector and continuously explore changes in business models through technological advancements. We also pay close attention to the investment preferences and demands of on-chain investors and Generation Z investors. In the future, we will further summarise the experience of this project, apply blockchain technology to more products, and provide investors with more investment options and a better investment experience."
Galaxy Digital will pay $200 million as a settlement with the New York Attorney General's (NYAG) office relating to the collapse of the Terra-Luna ecosystem in 2022. Galaxy said on Friday that they will pay $200 million to the State of New York for matters relating to its investment, trading and public statements of LUNA, which collapsed in May 2022, wiping out around $60 billion in value. Galaxy disclosed the settlement as part of its latest earnings statement, which reported profit of $174 million and $365 million for Q4 and the full year of 2024 respectively, when the accrued legal provision for the settlement with NYAG is included.
World Liberty Financial, the financial protocol backed by President Donald Trump and his family, pitched its own stablecoin at a Washington crypto event on Wednesday, where lawmakers also attended to give the industry updates on their progress with U.S. policy efforts. The company had already confirmed the launch of its USD1 stablecoin this week, saying it would first be available on Ethereum and the Binance-linked BNB Chain. The announcement came as Congress is moving forward on legislation to regulate stablecoins in the U.S.; many of the lawmakers working on that were also at the same DC Blockchain Summit on Wednesday, hosted by the Digital Chamber. The Washington event gave the Trump-connected business its main stage, where the executives were followed by two Republican lawmakers central to the potential passage of the stablecoin legislation — Sen. Tim Scott and Rep. French Hill. "You don't make permanent change in policy though executive action," Hill said. "That's why leadership in the Senate and House [is crafting] a stablecoin regime that can make America the principal home for stablecoins, dollar-backed stablecoins."
Circle USDC stablecoin market cap has hit a new all-time high, surpassing $60 billion for the first time. Analysis shows USDC now has a 25.4% share of the stablecoin market, compared with 20.7% three months ago. The total value of USDT currently stands at $144 billion—representing about 63% of the sector. New USDC worth about $16.5 billion was minted over the past three months, compared with the $4.7 billion of USDT that entered circulation, likely driven by the arrival of Europe's MiCA regulations, which fully came into force on 31 December last year. USDC had become the first stablecoin to achieve full compliance with these new standards and Circle has selected France as its European headquarters.
Institutional Corner
Top stories from the big institutions
The U.S. Federal Deposit Insurance Corporation (FDIC) is taking a new approach under the Trump administration toward digital assets. In a statement released on Friday, the FDIC said it would be rescinding old guidance and providing a new one to clarify that its supervised institutions can "engage in permissible crypto-related activities" without getting the agency's go-ahead beforehand. FDIC Acting Chair Travis Hill said "With today's action, the FDIC is turning the page on the flawed approach of the past three years. I expect this to be one of several steps the FDIC will take to lay out a new approach for how banks can engage in crypto and blockchain related activities in accordance with safety and soundness standards." The FDIC previously warned that crypto activities could pose a risk to the U.S. banking system. In recognising those risks, the agency released a Financial Institution Letter in April 2022, urging its supervised institutions to inform the agency about their current and intended crypto-related activities.
According to the latest Digital Asset report from JP Morgan, Yield-bearing stablecoins, including tokenised Treasurys, which offer interest returns similar to traditional financial products, could experience massive growth. JP Morgan analysts led by managing director Nikolaos Panigirtzoglou said yield-bearing stablecoins currently make up just 6% of the total stablecoin market cap but could expand significantly, potentially capturing up to 50% of the market unless regulatory changes intervene. The report says that the top five yield-bearing stablecoins — Ethena's USDe, Sky Dollar's USDS, BlackRock's BUIDL, Usual Protocol's USD0 and Ondo Finance's USDY— have seen rapid growth since the U.S. election in November, rising from around $4 billion to over $13 billion in combined market cap. According to the report, this growth is expected to continue. They added that the U.S. Securities and Exchange Commission's recent approval of Figure Markets' application for a yield-bearing stablecoin, YLDS, which is registered as a security, provides further momentum to this segment. As a reminder, traditional stablecoins, such as Tether's USDT and Circle's USDC, do not share reserve yields with their users because doing so would classify these assets as securities. The analysts suggested a number of reasons driving the rise of yield bearing stablecoins. First, investors prefer these assets because they offer interest without requiring holders to engage in risky trading or lending activities or give up custody of their assets. Second, major crypto trading platforms such as Deribit and FalconX now accept tokenised Treasury’s as collateral, enabling traders to earn yield on posted collateral. Additionally, crypto investors are increasingly turning to tokenised Treasury’s in decentralised finance (DeFi) to obtain higher yields, as typical DeFi yields have significantly decreased from their peak levels of 2022. Projects like Frax Finance are also adopting tokenised Treasury’s as underlying assets, further fuelling this growth.
Charts of the Week
Because charts are just as important as macro.
Tokenised gold market cap has hit a record high of $1.4bn. Hat tip to CoinDesk for the chart.
Bitcoin liquidity on weekends is showing signs of a rebound in 2025. Bitcoin’s average daily 1% depth has been lowest midweek—particularly on Tuesdays and Wednesdays—while peaking on Fridays. This marks a shift from last year when Saturdays and Sundays experienced the weakest liquidity.
Top Jobs in Crypto
Well, we all want to work in Crypto don’t we. Here’s a bit of help on your job search!
Treasury Trader EMEA at Keyrock
Trading Support Specialist - VIP & Institutional at Binance (12 month contract)
Specialist, Prime Trading Execution Services at Coinbase
Listing Business Development Manager at BTSE
Listing Partnerships at Gate.io
Product Manager Digital Assets at LSEG
DISCLAIMER: The content in this newsletter is not financial advice. This newsletter is strictly educational and is not investment advice or a recommendation to buy or sell any assets or to make any financial decisions. Crypto markets are volatile, please be careful and do your own research.