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Stocks rally on Nvidia’s AI fervor and debt deal optimism

Fed swaps earlier priced in a quarter-point rate rise by July FOMC Meeting 10-year Treasury yield rises 4.4 bps to 3.784% Nvidia delivers biggest one-day…

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  • Fed swaps earlier priced in a quarter-point rate rise by July FOMC Meeting
  • 10-year Treasury yield rises 4.4 bps to 3.784%
  • Nvidia delivers biggest one-day market value gain in US history

Wall Street is taking a very short break from debt ceiling angst/Fed tightening and focusing on Nvidia’s AI boom. The Nasdaq is rallying as Nvidia’s outlook bolstered bets that AI will be the key to mega-cap tech’s growth story. ​ ​ Most of the morning’s data supported more Fed tightening so traders ignored Fed’s Collin’s comment that a rate pause would give us space to assess actions to date. ​ Debt ceiling drama also eased as Speaker McCarthy stated that some progress was made, though issues remain. Representative Kevin Hern said that a debt ceiling deal is likely by tomorrow afternoon. ​

Nasdaq 100 Index

As the risk of default grows, it comes as no surprise that the credit rating agencies are preparing for the worse case scenarios. ​ The decision by Fitch Ratings to put the US credit rating at risk of downgrade is a necessary step and will likely trigger limited market stress. Markets should be growing more nervous as we get closer the real X-date which is probably in the first week of June. ​

Nvidia

NVIDIA’s AI boom is making it climb up the big tech ladder and is positioning itself to become a must-own stock for everyone. The days of talking of FAANG (Facebook, Apple, Amazon, Netflix, and Alphabet) have morphed into MATANA (Microsoft, Apple, Tesla, Alphabet, Nvidia, and Amazon). AI investment will likely be entering a boom stage.

Nvidia is poised to become a trillion-dollar company as the chipmaker is planning on a substantial increase in the second half of the year. ​ Robust orders for data centers is a great way to kick off what could be an amazing 10-year cycle. ​ Second quarter sales are eyed at $11 billion +/- 2%, which is well above the consensus estimate of $7.18 billion. ​ Everyone is pushing AI in the cloud and you will need Nvidia to do that.

US data

This week’s weekly jobless claim included a major downward revision that addressed the fraudulent claims that hurt the argument that we are starting to see meaningful weakness with the labor market. After a major downward revision in the prior week, initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 229,000 for the week ended May 20. ​

For Massachusetts, a revision was done for the prior 3 months that lowered jobless claims by an average of 14,000 per week.

Claims were steadily rising at the beginning of the year but a resilient economy is not ​ triggering enough job losses that will allow wages to cool. ​

The second look at Q1 GDP was revised higher alongside personal consumption and Core PCE data. The news was not all positive as gross domestic income posted the worst consecutive declines since early in the pandemic. ​ GDI printed -2.3%, a slight improvement from -3.3% seen in the fourth quarter.

The US economy is showing resilience here and that should have Fed officials maintaining their hawkish tone.

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VanEck to donate 10% of profits from Ether ETF to core developers

The Protocol Guild, a team of over 150 Ethereum core developers, will be the beneficiary. VanEck argues that asset managers should give back some Ether…

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October 1, 2023

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The Protocol Guild, a team of over 150 Ethereum core developers, will be the beneficiary. VanEck argues that asset managers should give back some Ether ETF proceeds to the community.

Global asset manager VanEck will donate 10% of all profits from its upcoming Ether futures exchange-traded fund (ETF) to Ethereum core developers for 10 years, the company announced on X (formerly Twitter) on Sept. 29. 

The beneficiary will be the Protocol Guild, a group of over 150 developers maintaining Ethereum’s core technology. According to VanEck, it’s only fair for asset managers to return part of their proceeds to the community building the crypto protocol. It stated:

“If TradFi stands to gain from the efforts of Ethereum’s core contributors, it makes sense that we also give back to their work. We urge other asset managers/ETF issuers to consider also giving back in the same way.“

With this move, VanEck joins other crypto-native communities supporting the Ethereum network, including Lido Finance, Uniswap, Arbitrum, Optimism, ENS Domains, MolochDAO and Nouns DAO.

According to a public dashboard tracking donations sent to the Guild’s mainnet, 4,846 contributions have generated over $12 million in donations. Funds are then distributed among its members according to a weighted ratio based on their contribution periods.

The network core developers are reportedly working on Ethereum Improvement Proposal EIP-4844 (Proto-Danksharding). The upgrade will introduce a new kind of transaction type to Ethereum, promising to reduce transaction fees for layer-2 protocols.

VanEck disclosed its upcoming Ethereum Strategy ETF on Sept. 28, saying it will invest in Ether futures contracts. The fund will be actively managed by Greg Krenzer, head of active trading at VanEck, and is expected to be listed on the Chicago Board Options Exchange in the coming days.

Other traditional investment firms set to offer exposure to Ether futures include Valkyrie and Bitwise, while the line for a spot Ether ETF keeps growing with Invesco Galaxy, ARK 21Shares and VanEck waiting for regulatory approval. The United States Securities and Exchange Commission (SEC) recently delayed a decision on whether to approve a spot Ether product until December.

Magazine: Joe Lubin — The truth about ETH founders split and ‘Crypto Google’

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FTX exploiter moved over $17M in ETH in the last 24 hours

A significant portion of the 7,749 ETH, worth roughly $13 million, was directed toward the THORChain router and Railgun contract.
According…

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October 1, 2023

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A significant portion of the 7,749 ETH, worth roughly $13 million, was directed toward the THORChain router and Railgun contract.

According to recent information from Spot On Chain, an address linked to the FTX exploit identified as 0x3e9, has conducted transfers exceeding 10,000 Ether (ETH), worth roughly $17 million, across five different addresses since Sept. 30. The addresses had remained inactive for several months before the recent activity.

Within these transactions, a significant portion of 7,749 ETH, equivalent to $13 million, was directed toward the Thorchain router and Railgun contract. Furthermore, the exploiter engaged in a swap involving 2,500 ETH, valued at $4.19 million, converting it into 153.4 tBTC at an average rate of $27,281 per token. This address, which has recently become active, has exhibited noteworthy activity and is anticipated to continue transferring ETH, most likely to Thorchain.

At the time of the initial hack on Saturday, Sept. 30, the approximate losses amounted to nearly 50,000 ETH. This incident occurred just a short while before SBF's criminal trial scheduled for Oct. 2023.

Nevertheless, these occurrences have generated a significant amount of downward pressure on the ETH price, which currently maintains a level slightly above $1,650. This situation arises as the market anticipates the introduction of Ethereum futures ETFs on Monday, Oct. 2.

FTX co-founder Sam Bankman-Fried, commonly known as SBF, is scheduled to go to trial in October. This comes after his arrest in The Bahamas and subsequent extradition to the United States, marking several months since these events occurred.

The trial is expected to last for six weeks, beginning with the selection of the jury on Oct. 3, followed by the initial court proceedings on Oct. 4. Bankman-Fried faces a total of seven charges connected to fraudulent activities, comprising two substantive charges and five conspiracy charges.

Related: Valkyrie backtracks on Ether futures contract purchases until ETF launch

During the legal proceedings, the FTX founder has consistently pleaded not guilty to all allegations. Despite numerous attempts to secure temporary release, Bankman-Fried continues to be held in custody at the Metropolitan Detention Center. His most recent request for release was denied by Judge Lewis Kaplan, citing concerns about the possibility of him fleeing.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

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SEC initiates legal action against FTX’s auditor

The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor…

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3 hours ago

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October 1, 2023

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The SEC alleges that Prager Metis, an accounting firm engaged by bankrupt crypto exchange FTX in 2021, committed hundreds of violations related to auditor independence.

The United States Securities and Exchange Commission (SEC) has commenced legal proceedings against an accounting firm that had provided services to cryptocurrency exchange FTX before its bankruptcy declaration.

According to a Sept. 29 statement, the SEC alleged that accounting firm Prager Metis provided auditing services to its clients without maintaining the necessary independence as it continued to offer accounting services. This practice is prohibited under the auditor independence framework.

Extract from the SEC's September 29 statement. Source: SEC

To prevent conflicts of interest, accounting and audit tasks must be kept clearly separate. However, the SEC claims that these entwined activities spanned over a period of approximately three years:

“As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection.”

While the statement doesn't explicitly mention FTX or any other clients, it does emphasize that there were allegedly "hundreds" of auditor independence violations throughout the three-year period.

Furthermore, a previous court filing pointed out that the FTX Group engaged Metis to audit FTX US and FTX at some point in 2021. Subsequently, FTX declared bankruptcy in November 2022. 

The filing alleged that since former FTX CEO Sam Bankman-Fried publicly announced previous FTX audit results, Metis should have recognized that its work would be used by FTX to bolster public trust.

Related: FTX founder’s plea for temporary release should be denied, prosecution says

Concerns were previously reported about the material presented in FTX audit reports.

On Jan. 25, current FTX CEO John J. Ray III told a bankruptcy court that he had “substantial concerns as to the information presented in these audited financial statements.”

Furthermore, Senators Elizabeth Warren and Ron Wyden raised concerns about Prager Metis' impartiality. They argued that it functioned as an advocate for the crypto industry.

Meanwhile, a law firm that provided services to FTX has come under scrutiny in recent times.

In a Sept. 21 court filing, plaintiffs allege that U.S. based law firm, Fenwick & West, should be held partially liable for FTX's collapse because it reportedly exceeded the norm when it came to its service offerings to the exchange.

However, Fenwick & West asserts that it cannot be held accountable for a client's misconduct as long as its actions remain within the bounds of the client's representation.

Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis

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