AI Spending Worries Hit Chipmakers as BTC Holds Above $82K

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In Today's Note

• AI-spending worries after a softer OpenAI revenue report sent the Nasdaq-100 down 1.39% and chipmakers 3.39% lower, while BTC slipped 0.2% to $82.6K and ETH fell 2.1% to $2,504 overnight.
• Securitize launched tokenized US stocks on Solana, Nasdaq's CEO touted tokenized collateral, and Standard Chartered plans crypto custody in Singapore.

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Market Snapshot: Overnight Moves

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Macro & Markets

• Another phase of risk-off sentiment gripped financial markets as chipmakers, US benchmark indices, and BTC all sold off concurrently in the last 24 hours. 
• Losses in Big Tech and chipmakers were driven by reports that OpenAI is on track to generate an annualised revenue of around $50B based on its current performance, below recent estimates closer to $70B only a month ago. 
• That revived worries around the durability and sustainability of the AI-spending spree and whether it would pay off, which as we’ve seen several times over the course of the year, has dragged risk sentiment lower. 
• The S&P 500 ended the day down 0.47% with the Nasdaq-100 declining a larger 1.39% for its worst one-day drop in seven weeks while a gauge of chipmakers sank 3.39%. 
• BTC followed US equities lower, falling from $83K in Asian trading on Thursday to a low of $80K by the evening, but has since pared back most of those losses to trade above $82.5K. 

• The selloff in riskier assets occurred against a backdrop of lower long-end Treasury yields and a drop in oil prices. 
• Yields on the 30-year Treasury fell close to 10bps after a 30-year bond auction was met with solid demand, suggesting a willingness from investors to still buy long-dated government debt, despite the ongoing market selloff.
• The auction was priced at a yield of 5.618%, below the expected rate at the bid deadline, indicating resilient demand from investors. 

• President Trump posted on Truth Social, "We are having productive discussions with the Islamic Republic of Iran” and went on to say "we will not be attacking Iran at any time prior to the Midterm Elections to be held in the United States on November 3rd."
• That helped oil prices trim their gains, with Brent crude falling to $102 per barrel and West Texas Intermediate crude dropping to $90 a barrel.
• His comments come after recent reports that the White House was mulling plans to strike Iran before the midterms and had asked the Pentagon to prepare different options for strikes. 
• The US President also said in an interview with Time Magazine published earlier in the month that escalated military strikes against Iran were “possible” following the elections.

• Speaking at a Bloomberg event in New York, St. Louis Federal Reserve President Alberto Musalem said the central bank will need to raise interest rates again to bring inflation down to 2%, but fell short of directly endorsing a hike in this month’s meeting. 
• Musalem said, "To bring inflation back to target in a timely manner, more monetary policy firming will be required … If a timely manner is something like 18 months, that kind of suggests that rates ought to be going up further in an appropriate period of time in the next six to nine months”. 
• In his remarks, Musalem claimed that inflation is the US economy's main problem given strong growth and a stable job market, adding that even with the notable rise in bond yields, "financial conditions remain accommodative and supportive of economic growth."
• According to the St. Louis President, the rise in yields has not been a signal of investors losing confidence in the Fed, but instead has been driven by expectations that real rates will go up in a strong economy marked by a lot of competition for capital. 

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Defi/ Crypto

• Securitize, a regulated digital securities platform, has launched tokenized U.S. stocks on Solana, initially covering Apple, Microsoft, Nvidia, Alphabet, Tesla, Meta and Amazon, with additional companies including Circle, Strategy, Palantir and SpaceX expected to follow.
• The tokens, called Convertible Entitlement Tokens (CETs), are backed 1:1 by actual shares held through Securitize Markets, its regulated brokerage, giving holders applicable dividend, shareholder and corporate-action rights, rather than only exposure to stock prices.
• Trading settles in USDC, a U.S. dollar-backed stablecoin, and initially operates during extended U.S. market hours, with plans to expand toward 24/7 trading, while Jump, a trading firm, and Jupiter, a Solana-based trading aggregator, have been selected to support liquidity and access.

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• Adena Friedman, CEO of Nasdaq, the U.S. stock exchange operator, said tokenizing U.S. Treasurys, equities and money market funds could unlock "tens of billions of dollars" in capital currently tied up as collateral, by allowing financial institutions to transfer and reuse assets more efficiently through blockchain-based settlement.
• Nasdaq is developing tokenized securities and collateral infrastructure, including work with the Depository Trust & Clearing Corporation (DTCC), a U.S. securities clearing and settlement provider, and Kraken, a crypto exchange, with Friedman describing the goal as enabling "instantaneous settlements" while preserving investors' underlying shareholder rights.

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• Standard Chartered, a UK-based multinational bank, plans to launch institutional crypto custody services in Singapore by year-end, covering selected cryptocurrencies, stablecoins and tokenized real-world assets, subject to regulatory requirements.
• The expansion will extend Standard Chartered's existing digital asset custody operations in the United Arab Emirates, Luxembourg and Hong Kong, integrating custody with its Singapore unit's financing and securities services for institutional clients.
• The move follows Standard Chartered's efforts to bring more custody operations in-house, including its proposed integration of parts of Zodia Custody, an institutional digital asset custodian established with Northern Trust, whose existing operations include Singapore, Hong Kong and Luxembourg.

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• Vitalik Buterin, Ethereum's co-founder, warned that advances in AI-driven mathematics could weaken widely used cryptographic systems, including the Elliptic Curve Digital Signature Algorithm (ECDSA), which Bitcoin and Ethereum use to verify transactions, but advised holders against urgently moving funds to new wallets.
• Responding to Justin Drake, an Ethereum Foundation researcher who called for "bunker mode" preparations, Buterin said storing assets in addresses that have never signed transactions is a reasonable precaution when straightforward, but warned that "it's very easy to lose funds from a misconfigured rushed upgrade" and urged users to "don't rush anything."
• Buterin also raised concerns that AI advances could weaken lattice-based cryptography, including systems used in post-quantum security, and recommended more conservative security parameters, greater reliance on hash-based cryptography and avoiding the storage of encrypted private data directly onchain.

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• France's National Assembly Finance Committee approved an amendment to the proposed 2027 budget that would make conversions from cryptocurrencies into fiat-backed stablecoins taxable events, removing the current exemption that allows investors to exchange crypto assets without immediately paying capital gains tax.
• The committee also approved a crypto exit tax targeting unrealized gains on portfolios exceeding €800,000 when holders who have been French tax residents for at least six of the previous ten years move abroad, although both proposals require further parliamentary approval to become law.

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This Week's Calendar

Charts of the Day

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Figure 1. Block Scholes BTC Risk-Appetite Index (white, left-hand axis) and BTC spot price (orange, right-hand axis).

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Figure 2. Block Scholes ETH Risk-Appetite Index (white, left-hand axis) and ETH spot price (purple, right-hand axis).

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Figure 3. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

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Figure 4. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

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Figure 5. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

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Figure 6. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

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