“Powell pivot invigorates fiat and cryptocurrency markets, Asian digital asset regulation worth emulating, Start-up raises money to combat copywrite theft.”
TradFi & Global Market News
Global Market: S&P 500 & NASDAQ
Both the S&P500 and NASDAQ closed Monday in a slight red, dropping by 0.32% and 0.85%, respectively, as tech giant Nvidia has fallen 2.25% since early August due to reports of a delayed release date for their next generation of AI chips because of design flaws, muddying long-term expectations. Furthermore, anything less-than-optimal in their coming quarterly earnings review could spill over into other AI powerhouses like Microsoft or Meta, which have been the backbone of these ETFs in recent years. Nevertheless, most investors are still very bullish about Nvidia’s short-run position, as tech firms’ capital expenditure on AI infrastructure has been beating historical targets.
Investors cite the coming earnings report as a critical indicator of the economic outlook, given that the Chair of the Federal Reserve, Jerome Powell, has promised interest rate cuts soon. Late last week, Powell declared a pivoting position for the US government, giving certainty to the markets about an impending interest rate cut as the US is on track with their inflation target of 2% and showing signs of a loosened employment market. Powell states that the magnitude of rate cuts and risk management methods will be crucial in their strategy to lower inflation expectations. Hence, the position of tech giants will significantly influence the coming decision.
Global Market: FTSE100
Across the Atlantic, UK private sector activity has overperformed, hitting the fastest growth rate in 4 months, especially seeing strong performance in services and manufacturing as the FTSE 100 climbs to 8288.00. For the first time in years, the UK has been the bright spark in Europe as it outperforms the Eurozone in two consecutive quarters. Over in Europe, inflation expectations have been dropping; however, they may not stem from the same positive considerations in the US. The narrative in Europe has shifted from stagflation into concerns of demand-driven economic stagnation as slowing wage growth statistics signal long-term wage pressures in ageing economies prevalent in Europe. A fine line between managing inflation and fiscal expenditure needs to be navigated with finesse, and it is yet to be seen how Mr Starmer will manage to convey this pessimistic yet realistic message to his people amidst the immediate social unrest in the country.
Competition Law News: Google
Judge Amit Mehta of the United States District Court for D.C. has made his opinion of the DOJ vs Googlecase, stating that Google had organically developed a dominant position in the search engine services and search text advertising space by being the superior product. Still, it is unlawfully maintained by exclusive-dealing agreements with hardware manufacturers to make Google the default search engine. Judge Mehta shares concerns over these agreements preventing rivals from accessing sufficient user data to scale to compete with Google, therefore limiting any financial incentive for rivals to invest in these markets. Looking ahead, the data monopoly is even more concerning as it is a core input for AI development. This strengthens Google’s core expertise in building superior AI products and developing a third monopoly in the AI market, which may limit consumer choice in the future.
While no currently available remedies exist, a standard view is to break up Google’s operations entirely. Alternatively, other policy analysts are focused on equalising Google’s data advantage. Their search engine infrastructure is supported by the most extensive search index in the world, which they have created organically as websites only want to grant access to their data to a few engines that give them the best traffic. One suggestion is to make this index public and allow new search engines to build on this index akin to an API. Tech enthusiasts will follow this case for years to see what concrete actions Google will be forced to take and their implications.
DeFi & Digital Assets News
Cryptocurrency Market: Bitcoin & Ethereum
Bitcoin has been the biggest beneficiary of the interest rate cut news. Macroeconomic dynamics and investor expectations culminated in a kneejerk influx of $252 million into Bitcoin assets, spiking prices to 65000 on the same day as the Powell pivot. Surprisingly, the push was not sustained over the weekend, as Bitcoin immediately fell to 62500 at Monday’s close. A look at trading behaviour shows that long liquidations were taking place closer to the 63000-60000 price range, which could explain the downward trend. Most analysts encourage trading discipline, recognising the volatility of the market.
Conversely, Ethereum has remained on a downtrend, falling by 3% on Monday as Spot Ethereum ETFs in the US experienced a total net outflow of $44.5 million over 7 consecutive days of negative flows. This contrarian market movement, despite interest rate expectations, coupled with low transaction counts, reflects a reduction of interest among institutional investors. This aligns with historical patterns of risk-averse behaviour towards the end of summer. In response, the Ethereum Foundation has made a treasury management decision to transfer ETH into a Kraken wallet, opening up the possibility of a sales event shortly after settling management expenses, a move which has historically pumped prices in 2020. Toncoin has also been a big loser this week as the affiliated Telegram messaging app, known for hosting various Web3 communities, has fallen under financial scrutiny following the arrest of its CEO in light of mishandled security concerns and missing moderation on the app.
Regulation News: South Asia
Nigeria’s Digital Asset Industry
The regulation of cryptocurrencies has been a central topic of conversation over the past year. The world has witnessed battles between the SEC and crypto-giants like Binance or institutional players seeking approval for their Spot ETFs. The balance between regulation and innovation is a tale as old as time, but the challenges look very different in emerging economies as they lack the same regulatory infrastructures and practices.
Cryptocurrency has been widely adopted across Africa as it could be the financial tool that enables inclusive financial participation. At the same time, the industry presents a new growth opportunity for the nation. Developing nations often rely on private companies to help with technological development, where the government needs more expertise. To prevent being outpowered by these private players, the government takes an archaic approach to regulation, as seen in the dentation of a Binance executive following money laundering and tax evasion charges. While regulation is encouraged, these approaches come at the expense of innovative growth, as industry leaders cannot continue operations.
Asian Leadership
By contrast, South Asian and Southeast Asian economies have taken a more moderated approach to regulation that could be emulated. India’s Financial Intelligence Unit imposed hefty fines on Binance, forcing the exchange to register as a reporting entity to the government, creating an avenue for compliance without jeopardising Binance’s operations. The focus on cooperation over punishment has proven successful in Hong Kong and Singapore, two Asian tigers fighting to be the icon for Web3 innovation in the region. This has since evolved into calls for regulatory frameworks on transparent governance models in Hong Kong and FinTech sandboxes in Singapore to encourage innovation under more controlled circumstances. For Nigeria to remain competitive, it needs to consider more “win-win” situations between private entities.
In Other News…
Short Updates:
Nvidia – Nvidia created an atmospheric dynamics GenAI model, StormCast, that will be integrated with their digital twin platform, Earth-2, to predict weather volatility and its consequences. The model will aid scientists and policy researchers in disaster planning and formulating mitigation strategies against Typhoons at an energy-savvy and efficient rate.
Story – The San Francisco start-up raised $80 million to build a blockchain network embedded with smart contracts to enable creators to prove ownership over their content and automatically execute licensing fees or even royalty-sharing agreements. They serve to combat AI intellectual property theft from GenAI models that have plagued creatives since the beginning of the AI boom.
Opportunity Spotlight
About Moonraker Search
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