9.20 AI Daily Report on New Trends in the Encryption World: Acceleration of Technological Innovation and Regulatory Game

1. Headlines

1. Musk announces that the X platform will implement "pure AI algorithms" in November.

Nikita Bier, the product manager of platform X, recently stated that the platform is working to move away from mainstream algorithms, allowing users to find their own place. In response, Musk said that platform X expects to achieve "pure AI algorithms" in November, at which point users can adjust their personal information flow by asking the AI assistant Grok.

Musk emphasized that the AI algorithm work of X platform has made significant progress, and it will be open-sourced every two weeks. If a pure AI algorithm cannot be realized in November, it will definitely be achieved in December. This initiative aims to provide users with more personalized and transparent content recommendations, breaking free from the constraints of traditional algorithms.

Analysts believe that the implementation of pure AI algorithms will fundamentally change the operating model of social media. Users will have greater autonomy, and content recommendations will be more aligned with personal interests. However, there are also potential risks, such as algorithmic bias and the spread of false information, which require corresponding regulatory mechanisms. In addition, the transparency and interpretability of algorithms will also become a focus of attention.

2. Grayscale Capital applies to list the first Dogecoin ETF

The cryptocurrency asset management company Grayscale Capital recently submitted an application to the U.S. Securities and Exchange Commission (SEC) to launch the first ETF product tracking Dogecoin, with the trading code "GDOG". If approved, the product will be listed on the New York Stock Exchange.

Grayscale pointed out in the application that Dogecoin has been trading in futures and options for more than six months on exchanges regulated by the U.S. Commodity Futures Trading Commission, meeting the relevant listing requirements. The company also stated that the trust should not be considered an "investment company" as defined by the Investment Company Act of 1940, and therefore is not subject to its constraints.

Analysts say that the launch of the Dogecoin ETF will provide investors with a more convenient and regulated investment channel, helping to attract more institutional funds into the cryptocurrency market. However, some analysts argue that Dogecoin, as a "meme coin", has significant price volatility and strong speculative attributes, and whether ETF products are suitable for ordinary investors is debatable.

3. Anchorage Digital applies for a Federal Reserve master account, becoming the first crypto bank.

According to information disclosed by the Federal Reserve database, the cryptocurrency custody unicorn company Anchorage Digital has applied for a master account with the Federal Reserve. Once approved, Anchorage Digital will become the first cryptocurrency bank in the United States to qualify for a master account.

The master account is the operational basis for banks to settle transactions directly with the Federal Reserve and hold balances. Without such access, banks must use third-party intermediaries to process payments. Having a master account will significantly improve the operational efficiency and security of Anchorage Digital.

Industry insiders believe that this move signifies that regulators are gradually accepting the crypto industry, clearing obstacles for its integration into the traditional financial system. However, some analysts point out that crypto banks still face numerous regulatory challenges in obtaining master account qualifications, and need to establish a sound risk control system and anti-money laundering mechanisms.

4. Federal Reserve Governor Michelle Bowman calls for faster rate cuts, differing from mainstream positions.

Milan, a member of the Federal Reserve Board, recently publicly stated that he will work to persuade other policymakers to lower interest rates more quickly. This differs from the Federal Reserve's current gradual rate-cutting path.

Milan believes that the Federal Reserve should accelerate the pace of interest rate cuts to stimulate economic growth. Her comments immediately drew market attention, leading to a brief rise in risk assets such as Bitcoin. However, Federal Reserve Chairman Powell had previously made it clear that he would continue with the planned gradual rate cuts, and the tone has not changed for now.

Analysts point out that Milan's remarks reflect internal disagreements within the Federal Reserve regarding the pace of interest rate hikes. Rapid rate cuts may exacerbate inflationary pressures, but maintaining a high interest rate environment could also push the economy into recession. The Federal Reserve needs to seek a balance between the two, which will be a difficult trade-off process.

5. Bitcoin is expected to return to the $120,000 level, but we need to wait for the market to digest the impact of the Federal Reserve's interest rate cuts.

Renowned analyst Yuya Hasegawa stated that Bitcoin traders may need about a week to digest the impact of the Federal Reserve's first interest rate cut in nine months. With the continuation of risk appetite and an improvement in technical sentiment, Bitcoin is expected to test the $120,000 level again, and if it breaks through, it may trigger a complete correction.

Hasegawa analysis states that whether Bitcoin can return to the $120,000 level depends on three key conditions: rising contract premiums, increasing open interest, and price stabilization. Only if all three conditions are met can Bitcoin be expected to break through the current range.

However, some analysts are cautious about this. They believe that although the Federal Reserve's interest rate cuts are beneficial for risk assets, uncertainties such as inflation and geopolitical risks still exist, which may pose resistance to Bitcoin's upward momentum. Overall, whether Bitcoin can return to $120,000 will require some time for the market to observe and verify.

2. Industry News

1. Bitcoin short-term pullback but the medium-term bullish expectation remains unchanged.

Bitcoin experienced a short-term correction after the Federal Reserve's first rate cut in nine months, but analysts believe the mid-term bullish outlook remains unchanged. Bitcoin briefly broke through the $120,000 mark earlier this week, but fell back on the 20th, dropping to around $114,000 at its lowest. Analysts pointed out that Bitcoin's short-term correction is mainly influenced by profit-taking, but with continued risk appetite and improving technical sentiment, Bitcoin is expected to digest the impact of the Federal Reserve's rate cut within a week and test the $120,000 level again.

Many institutions expect the Federal Reserve to cut interest rates by another 25 basis points in October, and Fed Chairman Powell's speech this Tuesday will also provide important guidance for the market. Overall, analysts believe that the medium-term bullish logic for Bitcoin remains, with main driving forces including the Fed's continued easing, institutional capital inflow, and increasing demand for Bitcoin as an inflation hedge. However, geopolitical risks and uncertainty in regulatory policies may constrain Bitcoin's upside potential.

2. Ethereum faces pullback pressure but long-term outlook is positive.

Ethereum also experienced a pullback on the 20th, dipping to around $1460. Analysts pointed out that the recent pullback pressure on Ethereum mainly stems from profit-taking and a decline in investor sentiment. However, the long-term outlook for Ethereum remains positive, with key supporting factors including Ethereum's solid position as a leading smart contract platform, increasing institutional demand for Ethereum, and the continuous development of the Ethereum ecosystem.

Citigroup Group's latest report predicts that if a bull market occurs, Ethereum could reach a price level of $6,400 by 2025. The report believes that Ethereum will benefit from rising institutional demand and capital inflows from crypto ETFs. In addition, the development of innovative applications in the Ethereum ecosystem, such as DeFi and NFTs, will also provide long-term support for Ethereum's price.

3. The approval of the Dogecoin ETF for listing has attracted market attention.

Dogecoin became the market focus on the 20th, as the Dogecoin ETF submitted by Grayscale Asset Management was approved by the U.S. Securities and Exchange Commission and will be listed on the New York Stock Exchange under the trading code GDOG. This is the second securitized product tracking the price of Dogecoin in the U.S. market, following the Dogecoin ETF launched by REX in collaboration with Osprey earlier this week.

The approval of the Dogecoin ETF brings some positive signals to the cryptocurrency market. On one hand, it signifies that U.S. regulators are gradually accepting cryptocurrency assets, clearing obstacles for institutional funds to enter. On the other hand, it also reflects the ongoing increase in demand from investors for popular altcoins like Dogecoin.

However, some analysts hold a cautious attitude towards the long-term prospects of the Dogecoin ETF. They believe that Dogecoin lacks practical application scenarios and is mainly a speculative asset, thus its long-term value is questionable. Additionally, the regulatory stance of authorities on cryptocurrencies may also impact the development prospects of the Dogecoin ETF.

4. Cryptocurrency custody company Go applies for IPO

The cryptocurrency custody company Go officially submitted its prospectus to the U.S. Securities and Exchange Commission on the 20th, initiating the IPO process. As one of the largest cryptocurrency custody companies in the United States, Go's IPO plan has attracted market attention. Analysts believe that this move reflects the growing demand from institutional investors for cryptocurrency assets and is also conducive to promoting the development of cryptocurrency infrastructure.

However, some individuals have expressed concerns about Go's valuation and profitability. The cryptocurrency custody business is currently still in its early stages, and future regulatory policies may also impact the industry's development prospects. Therefore, investors need to carefully assess Go's investment value.

Overall, the cryptocurrency market on September 20 showed a trend of correction, but the medium to long-term bullish expectations remain unchanged. Institutional funds continue to enter the market, regulations are becoming clearer, and the launch of innovative applications will bring new development momentum to the cryptocurrency market. However, geopolitical risks and regulatory uncertainties may also constrain the market's upward potential, and investors should maintain a cautiously optimistic attitude.

3. Project News

1. Sui Network: Move ecosystem rising star accelerates emergence.

Sui Network is a brand new blockchain project developed by a team of engineers who were involved in the design of Diem. The project is built on the Move programming language and aims to provide high-performance, low-cost distributed applications.

Latest News: Sui Network recently announced the completion of a $300 million financing round, with investments from well-known institutions such as Andreessen Horowitz and Jump Crypto. The project launched its testnet in May this year and plans to release its mainnet in the fourth quarter of 2023. The Sui team is accelerating development work, including optimizing the consensus mechanism and enhancing scalability. Notably, Sui employs an innovative parallel execution model, which is expected to break through the performance bottlenecks of traditional blockchains.

Market Impact: As a rising star project in the Move ecosystem, Sui's emergence will inject new vitality into the entire Move ecosystem. The Move language is considered the next generation smart contract language, with higher security and composability. Sui's success will help promote the development of the Move ecosystem and bring spillover effects to other Move projects such as Aptos and Starlord.

Industry feedback: Crypto analyst Tascha stated: "Sui's parallel execution model is very promising and is expected to be a breakthrough in blockchain performance." Well-known investor Haseeb Qureshi also has a positive outlook on Sui, believing it has the potential to become the next generation of blockchain infrastructure. However, some analysts are concerned that Sui's innovative design may bring new security risks.

2. Gensyn launches AI-generated video product Gensyn Video

Gensyn is a startup focused on AI-generated content, and its latest product Gensyn Video is garnering widespread attention.

Project Background: Gensyn was founded by former OpenAI engineers and is dedicated to applying artificial intelligence technology in the field of visual content generation. The company previously launched the AI image generation tool Gensyn Image, which received a good market response.

Latest Update: Gensyn recently launched a brand new video generation product, Gensyn Video. Users only need to input text descriptions, and the tool can generate corresponding video content based on AI models. Gensyn Video supports various styles and themes, and can be used for creating short videos, animations, etc. The core of this product is Gensyn's self-developed video generation model, which boasts industry-leading generation quality.

Market Impact: Video content generation is seen as the new frontier in the field of AI creation. The emergence of Gensyn Video will further promote the development of this field. In the future, AI-generated videos are expected to play an important role in film production, marketing promotion, and other areas, improving content creation efficiency. However, some analysts are concerned that AI video generation may impact the employment of creators.

Industry feedback: Anjney Midha, the founder of the video creation platform Vimeo, gave a positive evaluation of Gensyn Video, believing it will bring new possibilities for video creation. However, he also warned that the copyright issues of AI-generated content need to be taken seriously. Notable investor Naval Ravikant stated that AI video generation will become the next trillion-dollar market.

3. Hyperbolic releases AI acceleration chip Hyperbolic-1

Hyperbolic is a startup focused on AI chip design, and its latest release, the Hyperbolic-1 chip, is attracting attention in the industry.

Project Background: Hyperbolic was founded by former Google engineers and focuses on the development of high-performance AI acceleration chips. The company has previously received investments from several well-known institutions, including Andreessen Horowitz.

Latest News: Hyperbolic has just released its first AI-specific chip, the Hyperbolic-1. This chip utilizes an innovative vector computation architecture, significantly enhancing the inference performance of AI models. Official data shows that the Hyperbolic-1 outperforms similar chips from Nvidia and Google in various benchmark tests. This chip will initially be applied in data centers, and it is expected to enter edge computing and other scenarios in the future.

Market Impact: AI chips are seen as a key infrastructure supporting the development of artificial intelligence. The emergence of Hyperbolic-1 will bring new competitive forces to the AI chip market. If this chip is as exceptional as advertised, it will pose a certain threat to existing AI chip giants like Nvidia and Google. However, some analysts believe that Hyperbolic, as a newcomer, still needs time to prove itself.

Industry Feedback: Karl Freund, a senior analyst in the AI chip field, expressed confidence in the performance of Hyperbolic-1, believing its innovative architecture is expected to bring new breakthroughs. However, he also pointed out that competition in the AI chip market will become increasingly fierce, and Hyperbolic needs to maintain its pace of innovation. Well-known investor Chris Dixon believes that with its outstanding technical strength and financial resources, Hyperbolic is likely to become a new star in the AI chip field.

4. Economic Dynamics

1. The Federal Reserve has signaled a hawkish stance, and the rate hike cycle is expected to be extended.

Economic Background: The U.S. economy performed strongly in the first half of this year, with a 2.4% annualized GDP growth in the second quarter, far exceeding expectations. However, the inflation rate remains high, with the core PCE price index rising 4.9% year-on-year in August, well above the Federal Reserve's target of 2%. The job market continues to be robust, with an unemployment rate of only 3.7%.

Important event: The Federal Reserve announced a 75 basis point interest rate hike at its rate decision meeting on September 20, raising the target range for the federal funds rate to 3%-3.25%. At the same time, the Federal Reserve reiterated its commitment to intensifying efforts to curb inflation. According to the newly released dot plot forecast, the median interest rate is expected to reach 4.6% by the end of 2023, nearly 1 percentage point higher than the forecast in June.

Market Reaction: U.S. stocks experienced significant volatility after the Federal Reserve's interest rate decision was announced. The S&P 500 index fell nearly 1% at one point, but then reversed its decline and closed up 0.7%. The dollar index surged, briefly surpassing the 112 mark. Bond yields soared, with the 10-year Treasury yield nearing 3.6%. Investors expect the Federal Reserve to continue raising interest rates aggressively to curb rising inflation.

Expert Opinion: Goldman Sachs Chief Economist Jan Hatzius stated that the Federal Reserve's hawkish stance is impressive. He expects the Fed to raise interest rates by 75 basis points in November and December, with an additional 50 basis points in 2023. HSBC believes that the Fed may end the rate hike cycle in March next year, but interest rates are likely to remain at a high level of 5%.

2. The new UK government has launched a tax cut plan, causing the pound to plunge to a 37-year low.

Economic Background: The UK economy is on the brink of recession, with an inflation rate reaching 9.9%, the highest in 40 years. However, the new Prime Minister Truss immediately launched a large-scale tax reduction plan after taking office, aimed at stimulating economic growth.

Important events: The "Growth, Growth, Growth" plan announced by the new UK government includes several tax reduction measures such as canceling the previously planned increase in corporate value-added tax, canceling the increase in the highest marginal tax rate for high-income earners, and freezing the basic income tax rate. This plan is expected to reduce tax revenue by approximately £161 billion over the next 5 years.

Market reaction: The GBP/USD exchange rate plummeted after the announcement of the tax cut plan, dipping to 1.0327, a new low since 1985. The yield on the UK's 10-year government bonds surged to 3.8%, the highest since 2010. Investors are worried that the tax cut plan will exacerbate the UK's fiscal deficit and inflationary pressures.

Expert opinion: Standard Chartered Bank published a report stating that the new government's tax reduction plan in the UK is "shocking" and will exacerbate inflationary pressures and the debt burden in the UK. Goldman Sachs warned that the pound could further depreciate to $1.05. Former Bank of England Governor Mervyn King bluntly stated that this plan will "increase inflationary pressures" and push the UK economy towards a "sustained trade deficit."

3. The energy crisis in Europe continues to worsen, and the risk of economic recession is increasing.

Economic Background: Due to the impact of the Russia-Ukraine conflict, the energy supply shortage in Europe has intensified, and energy prices have soared. The inflation rate in the Eurozone reached 9.1% in August, setting a new record high. The economic growth in several countries, including Germany, has stagnated.

Important event: Russia has announced an indefinite closure of natural gas supplies to Europe starting from September 27. Previously, Russia had repeatedly reduced its natural gas exports to Europe. The EU is accelerating its natural gas reserve and energy conservation plans to cope with potential supply disruptions.

Market reaction: European natural gas futures prices surged nearly 30% after Russia's announcement. The euro fell below the 0.97 mark against the US dollar. European stock markets plummeted, with the German DAX index dropping 2.6%. Investors are worried that the energy crisis will further impact the European economy and raise inflation expectations.

Expert Opinion: Deutsche Bank has released a report stating that if Russia completely halts natural gas supplies, the eurozone economy will fall into recession in the fourth quarter of this year and the first quarter of next year. Goldman Sachs also predicts that the eurozone economy will shrink by 0.6% in 2023. European Central Bank President Christine Lagarde warned that Europe is facing "huge challenges" and must be prepared for potential disruptions in gas supply.

5. Regulation & Policy

1. Former Chairman of the U.S. Securities and Exchange Commission Gensler said he feels "proud" to take law enforcement regulation on cryptocurrencies.

Former SEC Chairman Gary Gensler admitted in an interview that he does not regret the enforcement approach taken towards cryptocurrencies during his tenure. He reiterated the view that cryptocurrencies are a "highly speculative, extremely risky asset."

Gensler stated that the SEC has been working to ensure investor protection during his tenure. He pointed out that there have been many fraudsters during this time, such as Sam Bankman-Fried. Gensler expressed that he is "proud" of the correct decisions he made regarding the regulation of digital assets while serving at the SEC.

During Gensler's tenure, multiple enforcement actions were taken against cryptocurrency companies. These included filing a lawsuit against Ripple and issuing a "Wells notice" to Coinbase, among other measures. These actions aim to regulate the cryptocurrency market and protect investor interests, but they have also faced criticism and questioning from both inside and outside the industry.

Cryptocurrency companies and investors expressed disappointment at Gensler's remarks. They believe that under Gensler's leadership, the SEC's regulation of cryptocurrencies is too strict, hindering the industry's development. However, there are also viewpoints that Gensler's regulatory measures are beneficial in curbing violations in the cryptocurrency sector and maintaining market order.

( 2. Federal Reserve Governor Mylan: Will strive to convince other decision-makers to cut interest rates faster.

Federal Reserve Governor Stephen Milan stated that he will work to persuade other policymakers to cut interest rates more quickly. Previously, Milan voted against the decision at this week's Federal Reserve rate resolution meeting, advocating for an increase in the rate cut to 50 basis points.

Milan explained that this decision is based on its independent judgment of the economic situation. He believes that the U.S. economy is slowing down and inflationary pressures are easing, so more aggressive interest rate cuts should be adopted.

Milan's remarks have sparked speculation in the market regarding the outlook of the Federal Reserve's monetary policy. Some analysts believe that if more decision-makers support Milan's viewpoint, the Federal Reserve may intensify interest rate cuts in the remaining months of this year to stimulate economic growth.

However, some experts are cautious about this. They point out that although the inflation rate has decreased, it is still far above the Federal Reserve's target of 2%. Excessively loose monetary policy could reignite inflation. Therefore, the Federal Reserve needs to balance economic growth and inflation control when adjusting interest rates.

Overall, Milan's remarks reflect the internal divisions within the Federal Reserve regarding the pace of interest rate hikes. The market will closely monitor the future policy direction of the Federal Reserve, as this will have a significant impact on the cryptocurrency market.

) 3. South Korea's Cheongju City establishes cryptocurrency accounts to recover tax payments.

The government of Cheongju, South Korea has opened its own virtual asset trading account, aiming to handle and sell the cryptocurrency assets seized from tax delinquents in order to recover unpaid taxes. This initiative is taken on the basis of years of treating seized cryptocurrency assets as "forfeited property."

The Qingzhou City Government stated that opening cryptocurrency accounts is to more effectively handle and liquidate seized virtual assets. In the past, due to the lack of specialized procedures, seized crypto assets often remained unliquidated for a long time, creating obstacles for tax recovery efforts.

This move has been welcomed by industry insiders. They believe that the government's establishment of cryptocurrency accounts will help regulate the management of virtual assets, while also demonstrating the government's determination to regulate in the digital age. However, some have expressed concerns that this may intensify regulation of cryptocurrencies, further undermining market confidence.

Financial technology experts indicate that the government's establishment of cryptocurrency accounts is a positive signal, reflecting that the government is gradually recognizing and accepting virtual assets. However, it is also necessary to formulate corresponding laws and regulations to clarify the legal status of crypto assets and establish a comprehensive regulatory framework.

Overall, the approach taken by Qingzhou City has sparked a broad discussion on cryptocurrency regulation. In the future, how the government seeks to balance maintaining tax revenue and regulatory order with supporting the development of the digital economy will be a topic worth关注.