Morning Crypto Briefing: Strong Start To Week As Traders Eye Incoming US CPI Data & Consensus 2022

Key Points

  • Cryptocurrencies have started the week on a strong footing, with total market cap up 5.0% on Monday.
  • US CPI will be the main macro event this week and could support crypto if it shows easing price pressures.
  • Bitcoin was last trading around $31,400, with its market back around $600 billion with traders monitoring CoinDesk’s Consensus 2022 conference.

State Of The Market

After data last Friday revealed stronger than expected job gains in May in the US, which at the time triggered some strength in the US dollar and weakness in US equities (both a result of markets pricing in a marginally more hawkish Fed), cryptocurrencies came under some temporary pressure.

Total crypto market capitalization fell momentarily as low as $1.185 trillion last Friday, the lowest point of the week, before then stabilizing in the low $1.20s trillion over the weekend. However, as the new week has begun, spirits have taken a significant turn for the better, with total crypto market cap last having risen about 5.0% on Monday to the $1.275 trillion area.

US equity index futures are higher in premarket trade and the US dollar is weaker, as markets unwind some of last Friday’s moves and these favorable flows appear to be giving crypto markets some tailwinds on Monday. Some analysts are citing last Friday’s US jobs data as actually relieving the pressure on the Fed to tighten so aggressively amid easing wage-price pressures, thus perhaps helping market sentiment.

Others are citing an easing of lockdown measures in Beijing as a positive helping to boost the macro mood. Either way, crypto is up, but the bulls won’t be getting too excited, as most major coins continue to trade well within the ranges established over the last few weeks.

Monday is a quiet day in terms of notable economic events that might impact macro/crypto sentiment. The main focus will be on Thursday and Friday when the European Central Bank (the second most important in the world) sets policy and then US Consumer Price Inflation (CPI) data is released.

Last month’s US CPI showed signs of inflation having peaked in the US back in April. Should the upcoming report for May show that price pressures have continued to ease, this could set the stage for further upside for crypto.

Away from the macro, crypto traders will also be monitoring this week’s Consensus 2022 conference put on by CoinDesk. Plenty of notable names in the crypto space will be attending and there will be plenty of commentary and announcements, some of which could be market moving.

Bitcoin Surges Back To Mid-$31,000s, Eyes Last Week’s Highs

Bitcoin was last trading around $31,400, with gains of roughly 5.0% on Monday and the bulls eyeing a test of last week’s highs around $32,400. That gives the world’s largest cryptocurrency a market cap of close to $600 billion once again.

In terms of notable commentary related to bitcoin, widely followed Bloomberg strategist Mike McGlone told Kitco News over the weekend that he thinks bitcoin will hit $100,000 by 2025. He said that the current market weakness reflects the most significant inflation in 40 years and argued that, once this difficult period is over, bitcoin’s price could soar, making it one of the best assets to hold in the world.

Meanwhile, ARK Invest founder Cathe Wood said in a new episode of ARK’s In The Know YouTube series that on-chain metrics suggest that bitcoin is in the process of carving out a bottom. Wood said that “according to our metrics… short-term holders have capitulated… (which is) very good news in terms of putting in a bottom”.

Moreover, “long-term holders are at an all-time high at 65.7%… That means they’ve been holding Bitcoin for at least a year… We’ve got some very strong holders or HODLers here,” Wood continued. “That’s also very good news, although we might see some long-term holder capitulation to mark the bottom”.

Ethereum, meanwhile, was last trading with slightly better gains of about 5.5% on Monday around $1,900, where it is probing its 21-Day Moving Average. This is a notable level of resistance for ETH/USD, as the pair hasn’t been able to break sustainably above its 21DMA in nearly two months. If ETH/USD can make a clean run above the $1900 area, its in with a decent shot of testing last week’s highs around $2,000.

Regarding the major non-stablecoin altcoins, Binance’s BNB was last trading with gains of around 5.0% in the last 24 hours, according to CoinMarketCap data. Over the same time period, Solana’s SOL was up 12.5%, Ripple’s XRP was up 3.8%, Dogecoin was up 3.0% and Cardano was the standout performer with gains of close to 15%.

DeFi, NFT Update: Tron Wants To Avert Terra-like Disaster, 200 ETH Stolen In BAYC Discord Hack

Tron founder Justin Sun announced over the weekend that modifications would be made to the blockchain’s algorithmic USDD stablecoin in order to avert the kind of collapse seen with Terra’s UST and LUNA tokens. At present, the way USDD maintains its peg is very similar to how UST used to, and many analysts are worried USDD may ultimately face the same fate. Sun said that he plans to overcollaterize USDD in order to boost investor confidence, with a reserve that must maintain at least a 130% collateral ratio. At present, Tron’s reserve hold about $1.4 billion worth of assets versus around $670 million in total USDD supply, which is likely sufficient collateralization to maintain confidence in USDD for now.

According to data on DeFi Llama, Tron’s Decentralised Finance (DeFi) ecosystem remains the only real bright spot when compared to its major peers. In wake of Terra’s collapse this time last month, the Trave Value Locked (TVL) on the likes of ethereum, the Binance Smart Chain (BSC), Avalanche and Solana has fallen between 30-50%. Meanwhile, by contrast, in the last 30 days, Tron’s TVL has risen by more than 30%, launching it into 3rd place in the DeFi space (by TVL behind ethereum and BSC).

In terms of notable DeFi stories, the native token to the PancakeSwap platform CAKE was last up nearly 10.0% on Monday after news broke that Binance’s venture capital division had made an investment in the platform. PancakeSwap is one of the most widely used Decentralised Exchanges (DEX).

In notable news related to the non-fungible token (NFT) space, the community Discord channel for the Bored Ape Yacht Club (BAYC) collect was hacked over the weekend, resulting in 200 ETH being stolen (worth around $360,000), BAYC creator Yuga Labs confirmed. The project’s community manager Boris Vagner had his Discord channel hacked and used to post a phishing link. The hack did not seem to impact BAYC NFT prices, or Yuga Labs’ associated ApeCoin token that functions as the medium of exchange in its recently released metaverse Otherside.

According to NFT Price Floor data, the minimum required to purchase a BAYC NFT (its price floor) had risen to around $165,000 on Monday from the low $150,000s over the weekend, with prices seemingly getting a boost in tandem with the broader market. In further BAYC/NFT-related news, famous US rapper Snoop Dogg over the weekend announced plans to create a new BAYC-themed dessert restaurant in collaboration with Food Fighters Universe.

Regulation Update: Fed’s Waller Warns Intolerable Losses Could Spur Regulation, FTC Estimates Over $1.0B Lost In Crypto Fraud Since 2021

US Federal Reserve Board of Governors member Christoper Waller said over the weekend that if crypto investors continue to sustain large losses, such as what happened to many holders of Terra’s stablecoin UST, the situation could become “morally intolerable”, strengthening demand from consumers for more regulation/protections. Waller thus recommended that lawmakers in the US take action now to protect investors.

Speaking of investor losses, a new report by the US Federal Trade Commission (FTC) estimated that between January 2021 and March 2022, consumers lost over $1.0 billion to fraud involving cryptocurrencies. Allegedly, roughly $575 million of these losses were due to fake/phony crypto investment opportunities, which are sometimes referred to in the crypto community as “rug pulls”.

Two members of the US Congress have put forth a bipartisan bill to require lawmakers to disclose their crypto holdings. Any purchase or sale of crypto worth more than $1000 would need to be disclosed and failure to comply would incur fines. Transactions made by spouses and children would also need to be reported. Lawmakers must currently disclose their holdings of traditional assets (like stocks), so introducing a new law to include crypto seems a natural step.

Elsewhere, the latest commentary from the deputy governor of India’s central bank Rabi Sankar suggests that sentiment at the bank remains resoundingly anti-crypto. Sankar said over the weekend that central bank digital currencies will “kill whatever little case there could be for private cryptocurrencies”.

Morning Crypto Brief: BTC Pivots $30K, ETH Eyes Break Below Key Support Pre-US NFP Data Release

Key Points

  • Cryptocurrency markets are trading cautiously ahead of the release of US jobs data at 1330BST.
  • Bitcoin continues to pivot $30,000 whilst ethereum is eyeing a break below key support in the $1,700s.
  • Any signs of building US wage pressures could hurt crypto sentiment.

State Of The Market

Cryptocurrency markets were largely unenthused by Thursday’s healthy rebound on Wall Street and for the most part continue to trade within recent intra-day ranges in the run-up to the release of key US jobs data for May. Total crypto market capitalization was last around $1.21 trillion, down just over 2.0% on the day having found resistance at Thursday’s highs around the 21-Day Moving Average in the $1.25 trillion area, but still above support in the $1.20 trillion area for now.

The upcoming release of the US labor market report for May at 1330BST poses two-sided risks to crypto, with wage growth data set to be the most closely scrutinized metric. If it comes in hotter than expected, that would exacerbate inflation fears and, given that Fed policymakers (like Vice Chairwoman Lael Brainard on Thursday) have emphasized the central bank’s data-dependent approach to tightening in beyond September, would likely trigger a fresh build-up of Fed tightening bets.

This would likely send US yields higher, hurting crypto amid the higher “opportunity cost” of holding non-yielding assets, and the US dollar higher, hurting crypto by making the purchase of USD-denominated cryptocurrencies more expensive for international buyers.

Conversely, an easing of wage pressures would come as a relief to crypto investors, as it would contribute to the narrative of US inflation having now peaked and ease some of the pressure on the Fed to tighten so quickly. The YoY pace of US wage growth is expected to have declined to 5.2% in May, according to a Reuters poll of economists, though the MoM growth rate it seen accelerating slightly to 0.4% from 0.3%.

The headline non-farm payroll (NFP) change number (i.e. the number of jobs added/lost in the US economy last month) is expected to come in at 325K, a slight slowdown from April’s 428K, while the unemployment rate is seen dropping from 3.6% to 3.5%. Unless there is a massive deviation from expectations, these numbers probably won’t impact crypto and broader markets too massively, as the US labor market is known to be robust and suffering from a shortage of willing workers.

Note also that the US ISM Service PMI survey for May is also scheduled to be released on Friday at 1500BST, and will also be closely scrutinized as a timely indicator as to the health of the dominant US service sector.

Bitcoin Pivots $30,000, Ethereum Eyes Test Of Key Support In $1,700s

Bitcoin continues to pivot on either side of the $30,000 level, with the 21-Day Moving Average at $29,875 acting as a magnet for the time being, as traders await upcoming macro risk events. At current levels just under the big figure, bitcoin’s market cap is just above $570 billion, while its market dominance just hit a fresh high since last October above 47%, suggesting a still risk-averse feel to crypto market conditions.

Ethereum is trading with a slightly more bearish bias and was last down around 4.0% on the day at weekly lows near $1,750 per token, with the bears eyeing a test of last month’s annual lows, and mid-2021 lows, in the mid-$1,700s. A break below this key support area could see prices swiftly drop to the next area of support around $1,550. At present, ethereum’s market cap is around $215 billion.

Most of the major altcoins are trading with similar-sized losses to ethereum, with Cardano’s ADA, Solana’s SOL and Avalanche’s AVAX each down between 4-7% on Friday, whilst Binance’s BNB and Ripple’s XRP are down closer to 3.0%.

Cardano remains the standout performer on the week and is still holding onto gains of over 15%, despite the broader market trading roughly flat. Analysts continued to cite FOMO/hype ahead of Cardano’s upcoming Vasil hard fork, which will deliver a number of significant upgrades to the network.

Exchange/Miner News: FTX Expands To Japan As Others Suffer, Bitzero To Build $500M Facility In North Dakota

Even as many of its competitors suffer amid the ongoing “crypto winter”, leading global crypto exchange FTX announced its expansion into the Japanese market on Friday. The company announced the launch of FTX Japan, its new exchange in the country, which will allegedly support the fast deposit and withdrawal of the Japanese yen. FTX CEO Sam Bankman-Fried hailed the expansion, saying it “not only gives us a technological advantage but also allows us to work directly with Japanese regulators in a transparent, constructive and positive manner”. Japan has a potential crypto trading market size of almost $1 trillion, he continued.

Regarding FTX’s suffering competitors, Gemini announced on Friday that it would be laying off 10% of its staff. In a memo to employees, the Winklevoss brothers (who created Gemini) said “this is where we are now, in the contraction phase that is settling into a period of stasis — what our industry refers to as crypto winter”. “This has all been further compounded by the current macroeconomic and geopolitical turmoil… We are not alone” they continued.

Elsewhere, Coinbase announced earlier this week that it would be extending its current hiring pause for the foreseeable future, whilst also rescinding various several accepted job offers. “After assessing our business priorities, current headcount, and open roles, we have decided to pause hiring for as long as this macro environment requires,” the company said in a statement.

In Bitcoin miner news, Kevin O’Leary (known as a star on “Shark Tank”) backed bitcoin mining start-up Bitzero announced plans this week to build a $500 million facility in North Dakota, which has been chosen as the company’s hub for its North American operations. Akbar Shamji, the company’s CEO, said that they plan on building 200 megawatts worth of data centers in the state within the next three years.

Regulation News: Japan Passes Bill To Recognise Stablecoins, White House Drafts Bill To Reduce Energy Consumption Of BTC Mining

Japan’s parliament on Friday passed a historic bill to create a legal framework around stablecoins, making it the first major economy to do so. The legislation, which comes into effect next year, says that for a stablecoin to be considered as legal money, it must be linked to the yen or another legal tender and can only be issued by licensed banks, registered money transfer agents and trust companies. Holders of such stablecoins would be guaranteed the right to redemption at face value, much like how governments across the world guarantee citizen banking deposits.

Over in the states, the White House is drafting new policy recommendations that would aim o reduce the energy consumption and carbon emissions footprint of the crypto mining sector. US President Joe Biden issued an executive order back in March that directed government agencies to ensure the “responsible” mining of digital assets such as bitcoin.

Meanwhile, New York’s state Senate passed a bill on Thursday that would put a two-year moratorium on bitcoin mining using carbon-based energy, amid concerns about the environmental impact. Existing mining firms and those currently undergoing permit renewal would not be impacted. The bill will now be sent to New York Governor Kathy Hochul’s desk to be signed into law.

Elsewhere, California-based retirement plan provider ForUsAll is suing the US Department of Labour (DoL) over a controversial warning it issued back in March that 401(k) retirement saving plan sponsors should “exercise extreme care” when allowing savers to allocate their portfolios towards crypto. ForUSAll was the first major US retirement plan provider to allow savers to allocate money into crypto, though US asset management giant Fidelity Investments recently followed suit.

ForUsAll CEO Jeff Schulte told CoinDesk that “Congress never gave government officials the power to pick winners and losers, let alone the legal authority to arbitrarily restrict entire asset classes”. “It certainly never authorized agencies to take such sweeping and abrupt action with no public process,” he continued.

Finally, El Salvador’s government continues to delay the issuance of its much-touted bitcoin bond. Earlier this week, the country’s Finance Minister Alejandro Zelaya said that it was not yet time to launch the so-called Vulcano Bonds, given that the price of bitcoin remains “troubled”. Zelaya did not give any guidance as to when it might launch the bond.

Morning Crypto Briefing: Bitcoin Tumbles Back Below $30,000, Focus On Upcoming US Jobs Data

Key Points

  • Crypto markets tumbled on Wednesday, erasing earlier weekly gains as US stocks fell and US yields/USD rose.
  • The de-risking was attributed to strong US data and hawkish Fed commentary.
  • Bitcoin is now back under $30,000 and ethereum in the low $1,800s as macro focus turns to US jobs data.

State Of The Market

Cryptocurrency markets experienced a sharp pullback on Wednesday, erasing their outperformance earlier in the week, weighed amid a drop in US equity prices on the day, as well as a further rebound in long-term US bond yields and the US dollar. Total cryptocurrency market capitalization fell back to the low $1.20s trillion area from earlier weekly highs above $1.30 trillion, losing nearly 6.0% on the day.

Market commentators attributed Wednesday’s equity market downside/US bond yields and USD upside to a combination of further hawkish rhetoric from Fed policymakers and the stronger than expected May ISM Manufacturing PMI survey. Worries about worsening US economic growth, as well as US inflation that looks like it may have peaked, have weighed on the outlook for Fed tightening in recent weeks, weighing on the US dollar/US yields and offering (some) support to stocks and crypto.

But a US economy that is holding up better than expected (as per the latest ISM data) might embolden the Fed to press ahead with the faster pace of tightening that the equity/crypto bulls are keen to avoid. This might explain some of the intra-day de-risking seen on Wednesday. In the weeks ahead, markets are likely to remain at the whim of shifting expectations about US inflation, growth and Fed policy, amid unusually elevated uncertainty regarding all of these themes, so traders should be prepared for choppy conditions.

Trading conditions on Thursday are calm as investors look ahead to upcoming US labor market data releases that could spark fresh cross-asset volatility, starting with US payroll company ADP’s estimate of private employment change in May at 1315BST. At current levels around $1.225 trillion, total crypto market cap is around 7.5% below earlier weekly highs around $1.326 trillion.

Bitcoin Drops Back Under $30K, Altcoins Also Suffer

Bitcoin, having dipped more than 6.0% on Wednesday back from earlier session highs near $32,000, is on Thursday trading just below the $30,000 level. That means the cryptocurrency’s on the week gains have now been pared to less than 2.0%, having at one point on Tuesday stood at more than 10.0%. At current levels, bitcoin’s market cap is around $570 billion, while its crypto market dominance has remained stable near multi-month highs in the mid-46% area.

Continued inflows into Canada’s Purpose Bitcoin Exchange Traded Fund (ETF) over the past few days suggest that dip-buying demand remains robust. The total number of bitcoins held by the fund hit a record high of 43,701.7 on Tuesday, according to data on Glassnode, though this was admittedly just before the latest minor pullback on Wednesday.

Separately, falling bitcoin miner profitability amid the decline in bitcoin’s price in May has been in focus. According to Blockchain.com data, daily miner revenue had fallen below $30 million by the end of May, down from above $40 million at the start of the month, near its worst levels over the past 12 months. That marks a more than 60% pullback from record daily revenues of around $80 million last April.

Despite this, the bitcoin network has maintained a relatively high hash rate, which at 211.82 exahashes per second (Eh/s), is only about 16% below the record high of over 250 Eh/s it hit at the beginning of last month, Bitinfocharts data on Thursday showed. Crypto analysts said that in past bear markets, miners have temporarily powered down their rigs, with some arguing that reluctance to do so this time around could be indicative of expectations for a near-term rebound in bitcoin’s price. Glassnode data on Thursday showed that miner to exchange wallet flows of bitcoin hit a four-month high, which some analysts said could suggest minors are looking to sell some of their bitcoin holdings in order to tide themselves over in the short-term.

Turning now to altcoins, ethereum also tumbled on Wednesday, dropping nearly 6.5% on the day back to the low $1,800s per token. At current levels on Wednesday near $1,820, ETH/USD is nearly 10% below earlier weekly peaks above the $2,000 level and is back to trading below its 21-Day Moving Average at $1,942.

Other major altcoins also suffered, with Binance’s BNB last down nearly 5.0% in the last 24 hours according to CoinMarketCap data and with Cardano’s ADA, Ripple’s XRP and Dogecoin all down a similar margin.

Meanwhile, Solana is the major underperformer of the major altcoins, down over 11% in the last 24 hours, with downside exaccerbated after its network was halted for over four hours due to a bug. Solana’s network has suffered from full or partial outages on at least seven other occasions in the past 12 months.

Crypto Adoption: 11% Of US-based Insurers Considering/Invested In Crypto, SK To Create Digital Assets Committee

On Wednesday, Goldman Sachs released its annual global insurance investment survey, revealing that 11% of US-based insurance firms are either interested in investing, or are already invested in crypto. The survey of 328 chief financial and investment officers, which included questions regarding cryptocurrency for the first time, revealed that globally, 6% of industry respondents are either invested or considering investing in crypto. Goldman’s latest survey follows similar surveys in recent months which have shown a significant minority of US-based asset managers are interested in investing in crypto, though many would be more likely to do so if there was an approved US bitcoin/crypto Exchange Traded Fund.

South Korea is planning the creation of a new committee specifically tasked with overseeing digital asset markets in wake of the collapse of Terra, which is believed to have impacted as many as 280,000 of the nation’s citizens, reported NewsPim on Thursday. The so-called Digital Assets Committee could be launched as soon as this month and would provide criteria to exchanges for them to list coins, will introduce new investor protections and will seek to monitor unfair trading practices.

This would make South Korea one of the leading nations in the world when it comes to the regulation of digital asset markets and, if successful, could provide a template for other countries to go off of. Many crypto analysts/proponents are of the opinion that a robust, fair regulatory framework would hasten the mainstream adoption of digital asset usage, as it would increase investor/consumer confidence in the technology.

In further news related to South Korea, the government has set up a $177.1 million metaverse investment fund, making it one of the first national governments to do so. The fund is part of the so-called “Digital New Deal” program recent set up to invest in emerging technologies and is will be directed by the country’s Information & Communications Technologies Minister Lim Hyesook, who referred to the metaverse as “an uncharted digital continent with indefinite potential”.

Elsewhere, influential US Federal Reserve policymaker John Williams on Wednesday warned his fellow central bank officials, academics and financial industry leaders to prepare for a fundamental change to money and payments. In remarks delivered at a workshop co-hosted by the NY Fed and Columbia University, Williams said that central bank digital currencies and stablecoins backed by safe, liquid assets have the potential for innovation.

In news relating to the adoption of cryptocurrencies as a means of payment, Chipotle, one of the most recognizable food chain names in the US, will now accept payment in bitcoin and other cryptocurrencies from customers.

Finally, in terms of notable commentary, billionaire tech entrepreneur Marc Andreessen this week compared Web3 and the emergence of blockchain technology to the rise of the internet back in the 90s. “I’ve never said it about any other kind of technology because I just wanted people to know like I don’t take the comparison lightly,” Andreessen remarked.

Exchange News: Victorious Argentina NFC Sponsored By Binance, FTX Trading Volumes Surpass Coinbase in May

Argentina’s national football club, which beat Italy on Wednesday to win The Finalissima following a spectacular performance from football megastar Lionel Messi, played under the sponsorship of the world’s largest crypto exchange Binance. Elsewhere, relative newbie crypto exchange FTX continues its ascent within the industry, with reports on Thursday suggesting that it had a higher total trading volume in May than US-based crypto trading giant Coinbase.

Elsewhere, KuCoin is reportedly set to launch its own decentralized crypto wallet that will allegedly feature cross-blockchain trading, DeFi and NFT functionality. Meanwhile, Nate Chastain, an ex-executive at the world’s largest NFT marketplace OpenSea, is reportedly being charged by US authorities of insider trading.

Crypto Morning Brew: BTC, ETH Consolidate Pre-Key Macro Risk Events, Two DeFi Tokens Surge

Key Points

  • Major cryptocurrencies are still in consolidation mode ahead of upcoming macro risk events.
  • Bitcoin continues to trade in thin intra-day ranges in the mid-$31,000s.
  • Tron and Waves’ native tokens have surged on Wednesday amid recent DeFi capital inflows.

State Of The Market

Amid a subdued tone to broader macro trading conditions on Wednesday with market participants globally in wait-and-see mode ahead of key upcoming market risk events, cryptocurrency trade on Wednesday has been uneventful, much like trade on Tuesday. The total market capitalization of cryptocurrencies remains close to but just below $1.30 trillion, having held on to but not extended earlier weekly gains that saw market cap jump from closer to $1.20 trillion.

The widely watched US ISM Manufacturing PMI survey for May, which will give a timely insight into business/economic conditions in the US industrial sector, is scheduled for release at 1400GMT on Wednesday. It is expected to signal that growth in the US economy remains robust, though continuing to wane from its 2021 peaks amid ongoing global headwinds such as rampant inflation and supply chain snags as a result of the Russo-Ukraine war and recent lockdowns in China. Meanwhile, a couple of important Fed policymakers will be speaking later in the session.

In terms of the playbook for crypto traders, anything that suggests a better growth outlook, as well as an easing of inflationary pressures/easing of the pressure on the Fed to hike so aggressively in H2 2022 and 2023, would likely be good for stocks and crypto and vice versa. But ahead of the release of US private payroll firm ADP’s estimate of employment change in the US in May on Thursday and then the release of the official US labor market report for May on Friday, traders are unlikely to overly commit to big new positions. That suggests trading conditions might well remain subdued on Wednesday.

Bitcoin Continues Consolidation In Mid-$31,000s

Bitcoin continues to trade in tight intra-day ranges in the mid-$31,000s, not far below earlier weekly highs closer to $32,000, leaving it with a market cap of around $600 billion according to CoinMarketCap. For now, support in the form of the 15 May highs in the $31,400 area is holding up, while bulls continue to eye a potential test of early 2022 lows in the $33,000 area and around $34,200, though any such move will likely have to wait until this week’s aforementioned macro risk events are out of the way.

Turning to ethereum, the world’s second-largest cryptocurrency by market cap continues to consolidate close to its 21-Day Moving Average in the mid-$1,900s and is roughly flat on the day. That leaves its market cap around $233 billion.

In terms of some of the notable major altcoin movers, Cardano, Avalanche, Solana and Polygon are all underperformers, posting losses of between 3-6% over the last 24 hours, according to CoinMarketCap data.

Meanwhile, the native token on the Binance Smart Chain BNB has barely budged in the last 24 hours, despite Binance announcing a new technical roadmap designed to enhance the network’s decentralized structure, and infrastructure capacity for sidechains, as well as the potential for decentralized application development. The new roadmap comes after Binance merged its Binance Chain and Binance Smart Chain back in February.

DeFi, NFT Update: Tron, Waves Ecosystems Experience Rapid Capital Inflow

Trade Value Locked (TVL) into Decentralised Finance (DeFi) smart contracts on the Tron blockchain surged above $6 billion on Tuesday before hitting $6.2 billion on Wednesday, data on DeFi Llama showed, its highest level since last November, when the broader crypto market was just beginning a pullback from record highs reached earlier in the month. Recent inflows have coincided with fresh upside in Tron’s native token TRX, which was last up over 10.0% in the last 24 hours according to CoinMarketCap data, despite the broader subdued tone to crypto trade.

The surge in Tron TVL from under $4.0 billion as recently as mid-way through last month comes at a time when the rest of the DeFi market is struggling to attract/retain capital. According to DeFi Llama, TVL across the entire space remains close to $100 billion on Wednesday, roughly in line with where it has been for the past few weeks and still substantially lower than its pre-TerraUST collapse levels of closer to $200 billion.

Another bright spot in the DeFi space this week has been a new surge of flows into the Waves ecosystem. After surging to nearly as high as $4.75 billion in late March thanks to the attractive stablecoin yields on offer on Waves’ Vires Finance DeFi protocol, the depegging of Waves’ algorithmic stablecoin USDN triggered a massive outflow and, over the past weekend, TVL fell to as low as $900 million.

However, over the weekend Waves released a plan to revive its DeFi ecosystem, even as its algorithmic stablecoin USDN continues to struggle to maintain its 1:1 peg to the US dollar. USDN is currently changing hands just under $0.95. As a result of the new revival plan, Waves has seen its TVL jump back $1.0 billion and towards $1.1 billion, while Waves’ native token WAVES has surged more than 90% in the past three days to around $4.50 to closer to $9.0.

Meanwhile, the broader rebound in cryptocurrency markets in recent days seems to have helped the price floors of major non-fungible token (NFT) collections find support. The minimum price to get your hands on one of the 10,000 Bored Ape Yacht Club NFTs fell under $150,000 over the weekend but has since rebounded to about $170,000. Meanwhile, the price floor to secure one of 10,000 CryptoPunks NFTs is back above $90,000 having dipped as low as $80,000 at the end of last week.

In notable NFT-related news, popular self-help, motivation, and business advice entrepreneur Gary Vaynerchuk, who has already established a strong presence in the NFT space, is set to launch his own NFT consulting business, according to a trademark filing back on 25 May. According to the filing, the firm will offer “technical consulting in the field of non-fungible tokens, cryptocurrencies, and other metaverse and Web 3 activities and assets”. Vaynerchuk has already launched his VeeFriends NFT collection, conducted an NFT conference (VeeCon), and created the “FlyFish Club”, a restaurant that requires NFT ownership for entrance.

Crypto Adoption: UAE Rolls Out Binance Pay, Crypto Sponsorships 2nd Most Profitable For NBA

Binance Labs on Wednesday announced that it has raised a $500 million fund to focus on supporting Web3 and blockchain start-up companies. However, in a recent report, Morgan Stanley outlined that it expects venture capital investments in the crypto space to slow for the remainder of the year, given that the era of “easy money” is finished (the bank thinks). According to the report, a record $30 billion was raised by crypto startups in 2021, while investments are currently still tracking for a new record high in 2022, despite the slowdown.

29 malls, 13 hotels and four mixed-use communities in the United Arab Emirates (UAE) are now accepting payment in crypto via Binance Pay, crypto media reported on Tuesday. Crypto enthusiasts view the rollout of Binance Pay as a new testing ground for the viability of crypto as an alternate payment means.

A report by IEG suggested that cryptocurrency partnerships are the second most profitable sponsorship category for the NBA. Analysts suspect this bodes well for the spread of crypto advertising/sponsorships across other industries/franchises, which will help bring crypto further into the mainstream.

Singapore’s central bank, the Monetary Authority of Singapore (MAS) launched Project Guardian on Tuesday to test new blockchain-based ideas surrounding the potential tokenization of digital assets. Regulated financial institutions including JP Morgan and DBS Bank will take part in the project, serving as so-called “trust anchors”. The project will see MAS explore potential applications of DeFi in the wholesale funding market, with the central bank to set up a liquidity pool of tokenized bonds and deposits through which it will execute borrowing and lending, all via a public blockchain network.

Executives from two of Australia’s largest four banks, speaking at the Australian Financial Review Banking Summit on Tuesday, ruled out allowing retail customers to engage in cryptocurrency trading. Maile Carnegie, an executive at ANZ, reasoned (somewhat patronizingly according to critics) that “the vast majority of them (retail customers) don’t understand really basic financial well-being concepts”.

Regulation News: Anti-crypto Lobby Sends Letter To US Lawmakers, Basel Committee To Regulate Banks’ Crypto Exposure

26 anti-crypto signatories wrote a letter to leading US lawmakers criticising crypto and blockchain technology, reported the Financial Times on Wednesday, in what it said was the first major attempt to counter lobbying by the crypto industry. The letter, signed by a mixture of tech experts and academics, said “we urge you to resist pressure from digital asset industry financiers, lobbyists, and boosters to create a regulatory safe haven for these risky, flawed, and unproven digital financial instruments”. The crypto industry spent around $9 million on lobbying in the US in 2021, more than triple the amount of 2020, with that number expected to have further risen this year.

Elsewhere, global banking standards setter the Basel Committee on Banking Supervision said on Wednesday that it would set new norms to govern banks’ exposure to crypto-assets later this year. “Recent developments have further highlighted the importance of having a global minimum prudential framework to mitigate risks from crypto-assets,” the committee stated, which analysts said was a likely referral to the recent collapse of Terra’s US dollar-pegged stablecoin UST.

“The committee plans to publish another consultation paper over the coming month, with a view to finalizing the prudential treatment around the end of this year,” they continued. The Basel Committee last year proposed rules that banks should hold $1 in capital for every $1 of crypto they hold, a proposal that received significant opposition from the likes of global megabanks including JP Morgan and Deutsche Bank, who said these standards were overly restrictive.

Meanwhile, the director of the United Nations’ (UN) International Computing Centre (the UNICC) Sameer Chauhan is “smitten” with crypto, various crypto market commentators said on Wednesday citing his recent remarks in a conversation with Cointelegraph at the World Economic Forum (WEF) last week. Chauhan said he sees “massive opportunities” in crypto.

“It’s a tool,” he noted. “You could use it for good or you could use it for profiting—which is not bad… In the future, crypto will be a very strong component of how the world interacts and how they transact, making it a more level playing field.”

Morning Crypto Briefing: Bitcoin Hits Three-week Highs, Analysts Discuss Improving Macro Backdrop

Key Points

  • Cryptocurrencies are stabilizing on Tuesday following a bullish Monday as US traders return from a long weekend.
  • Bitcoin recently three-week highs above $32,000, as analysts discuss a potentially improving macro backdrop.
  • Cardano’s ADA is the best performing major altcoin this week, already gaining over 35%.

State Of The Market

The total market capitalization of cryptocurrency markets has stabilized close to $1.3 trillion, up an impressive roughly 7.5% so far on the week, though admittedly still within the ranges of the last two weeks. A variety of factors are being cited as helping support the most recent rebound, with analysts pointing to a seemingly improving Covid-19 situation in China that has boosted Asia Pacific equities.

Meanwhile, there is growing chatter on Wall Street about how inflation in the US might have peaked and, with it, expectations for Fed policy tightening. Indeed, in the last few weeks following US CPI and Core PCE data, bets on Fed tightening in H2 2022 and 2023 have been moderated, coinciding with a pullback in US yields from multi-year peaks hit earlier in the month. Analysts seem to think that, barring fresh inflationary shocks, there is room for these trends to continue, which could foster a more favorable macro backdrop for crypto.

Indeed, lower bond US yields reduce the “opportunity cost” of holding non-yielding assets (like crypto), and a more benign Fed tightening outlook should boost US equities, with which crypto has a close positive correlation.

Whilst all of the above is all well and good, and crypto bulls might be in a good mood as a result, the return of US market participants to the market on Tuesday following a long holiday weekend and an upcoming barrage of tier one US data releases this week will put these narratives to the test. Crypto bulls will nonetheless be on the lookout for a rebound in market cap to the $1.5 trillion area.

Bitcoin Hits Three-Week Highs Above $32,000

After breaking out to fresh three-week highs on Monday above $32,000 per token, bitcoin has stabilized in the $31,700 area on Tuesday as it awaits the entrance of US market participants following their long weekend. If recent bullish momentum can gain further traction, the bulls are eyeing a test of resistance at the $33,000 and $34,300 levels.

The recent rebound has seen bitcoin’s market cap move back above $600 billion, CoinMarketCap data on Tuesday showed. Bitcoin’s crypto market dominance, meanwhile, has remained in the 46-47% area, close to multi-month highs.

On-chain analytics firm Glassnode released an interesting report on Monday and concluded that, according to wallet activity data, bitcoin HODLers are “the only ones left” in the market and they appear to be “doubling down as prices correct below $30,000”. The recent pullback from November 2021 highs has yet to “inspire an influx of new users into the space”, the report continued, unlike sell-offs in March 2020 and November 2018, which were followed by a rise in on-chain activity that Glassnodes said “initiated the subsequent bull runs” at the time.

The takeaways from this report for traders are thus mixed. On the one hand, on-chain data is showing that buyers now would be getting ahead of the next bull market. But on the other, the lack of new buyers coming into the space may be indicative of the fact that recent pain may not yet be over.

Ethereum Fails To Hold Above $2,000

Ethereum is on Tuesday changing hands just below $2,000 per token, having failed to sustain a meaningful breakout above the psychologically important figure or its 21-Day Moving Average which resides at $1,963. The cryptocurrency has also failed to break above its recent ranges of the last few weeks.

Nonetheless, if the macro backdrop is set to continue to improve for cryptocurrencies more broadly, ETH/USD bulls will be eyeing a move higher towards resistance in the $2,200-$2,300 area. Ethereum’s market cap was last around $240 billion according to CoinMarketCap data on Tuesday.

There has been a lot of focus as of late on the falling ethereum gas fee, which reportedly hit a record low around $3.70 according to on-chain data on Tuesday, well below the $38-$52 range at the start of the year. Crypto analysts said while this should spur ethereum network usage, it isn’t necessarily a good thing, as it is indicative of unhealthy market conditions.

Some cited gas fee-intensive transactions like selling a non-fungible token on OpenSea or completing a trade on UniSwap as being at all-time lows. Analysts said the recent collapse of the Terra (classic) ecosystem sent a chill across the entire crypto/DeFi space.

ADA Already Up Over 35% This Week

The native token to Cardano’s blockchain ADA is up another 15% on Tuesday after surging over 18% on Monday, taking weekly gains to more than 35%, during which time the token has rallied from under $0.50 to around $0.65. The recent surge has seen its market cap jump to over $22 billion, making the cryptocurrency the sixth-largest in the world by market cap, according to CoinMarketCap data.

The recent surge has seen the market cap of Cardano’s ADA surpass that of Ripple’s XRP, which has slipped to seventh place by market cap. Crypto analysts cited recent reports showing over 5 million native assets (such as NFTs) have now been issued on the Cardano network, as well as hype ahead of the Vasil hardfork next month that is expected to improve the blockchain’s scaling capabilities as boosting prices.

LUNA 2.0 Surges After Binance Listing

News that the world’s largest cryptocurrency exchange Binance will list the native token of the new Terra blockchain, LUNA (2.0), sent its price surging from around $6.5 to as high as $12 before the cryptocurrency then fell back to around $8.50 on Tuesday. Binance will initiate its airdrop of the LUNA 2.0 tokens to the wallets of those holding LUNC (the old Luna token) and UST.

In related Terra news, founder Do Kwon’s company Terraform Labs is reportedly working on a new decentralized stablecoin that would be built on the Terra 2.0 blockchain. The reports were met with criticism from the Terra community who are keen for Terraform Labs to avoid past mistakes. But some were open to the idea of a decentralized stablecoin if it is backed 1:1 to the US dollar, similar to how USDT and USDC work.

Crypto Adoption: Moneygram Moving Towards Stablecoins, Draftkings Looking To Accept Crypto

Moneygram, one of the world’s leading cross-border payment services, announced on Monday that it is to partner with decentralized crypto to fiat exchange Stellar. Moneygram’s new services will reportedly allow Stellar wallet holders to send USDC to recipients, who will then be able to exchange the stablecoin for fiat through Moneygram. “We’re trying to be a bridge from the crypto world to the fiat world,” the MoneyGram CEO said.

Elsewhere, the CEO of popular US-based sports betting company DraftKings announced that the company is looking to begin accepting payments in cryptocurrency. The company is also looking to allow users to actually engage in betting using their crypto, as opposed to having to place bets in fiat.

Meanwhile, a report by Americas Market Intelligence cited by Reuters on Monday highlighted the extent of so-called “crypto penetration” in Argentina, which has reportedly now reached 12%, more than double that of Peru, Mexico and other countries in South America.

Argentina has been battling rampant inflation for around six years now and the government has imposed strict capital controls on foreign exchange services in order to manage the decline of the value of the Argentinian peso on international markets. The report highlighted how Argentines aren’t just turning to bitcoin in order to hedge against inflation, but also to US dollar-pegged stablecoins.

Regulation Update: China May Toughen Crypto Rules After Terra’s Collapse

Chinese authorities may toughen regulations on cryptocurrencies and stablecoins in wake of the recent collapse of the Terra ecosystem following the de-peg of its UST stablecoin, according to an article published on Tuesday by Chinese state-owned media outlet the Economic Daily. The article praised the Chinese government’s decision to ban crypto as having protected Chinese consumers against what it called the “black swan” event.

Elsewhere, the Russian government released a report on Tuesday estimating that crypto mining now accounts for more than 2% of the country’s electricity usage, more than the country’s agricultural sector. As a result, Vasily Shpak, the country’s Deputy Minister of Trade and Industry, called for crypto mining to be brought into the regulatory fold. Russia’s share of the global bitcoin network hash rate was 4.66% in January 2022 according to a recently released report by the Cambridge Bitcoin Electricity Consumption Index (CBECI).

Meanwhile, the Kazak government on Monday released a report detailing how much money it had raised from so-called “energy fees” on local crypto miners in Q1 2022. Only around $1.5 million was generated, but the country has nonetheless forecast that it could raise as much as $1.5 billion over the next five years. Kazakhstan’s share of the global bitcoin network hash rate was 13.22% in January 2022 according to the recent CBECI report.

Morning Crypto Briefing: Bitcoin Eyes Two-Week Highs In Mid-$31,000s Amid Strong Start To Week

Key Points

  • Cryptocurrencies are starting the week positively, building on a solid weekend, despite quiet trading conditions amid the US market holiday.
  • Bitcoin was last trading in the mid-$30,000s, above its 21DMA and eyeing two-week highs.
  • Cryptocurrency and macro traders are focused on a barrage of upcoming US data releases this week.

State Of The Market

Global risk appetite is amid what is set to be a quiet start to a busy week of macro risk events. US markets are shut on Monday for the Memorial Day public holiday, suggesting trading is likely to remain fairly uneventful. Nonetheless, major US equity index futures are trading in the green, with Nasdaq 100 futures up more than 1.0%.

Cryptocurrency markets have had a close correlation with US equities (particularly the US tech-dense Nasdaq 100) in recent months, and so this is helping cryptocurrency prices extend upside momentum after a broadly positive weekend.

The total market capitalization of cryptocurrencies rose back above $1.25 trillion on Monday, up about 3.8% on the day and extending its three-day run of gains to nearly 7.5%, pushing it above its 21-Day Moving Average for the first time since 5 May. Total market cap is more than 9.0% higher versus last week’s lows around $1.15 trillion.

US economic data will be a big focus this week and is likely to shape various narratives/debates about the US economy, such as whether demand for labor remains strong and whether economic growth momentum remains solid, despite the Q1 disappointment.

In terms of the chronological order of things, May Conference Board Consumer Confidence survey data is out on Tuesday, May ISM Manufacturing PMI survey data and April JOLTs Job Openings data is out on Wednesday, May ADP Private Employment Change data is out on Thursday, while the official May labor market report is out on Friday.

Cryptocurrencies will be sensitive to how the data impacts expectations for Fed policy in the coming quarters. In an ideal world for the crypto bulls, data will over the next few weeks/months show inflationary pressures in the US economy easing (meaning the Fed doesn’t have to tighten so aggressively) but growth remaining strong (meaning strong risk appetite). Various Fed policymakers will be speaking throughout the week and will also be worth monitoring.

Bitcoin Eyes Two-Week Highs In Mid-$31,000s

Bitcoin was last trading just above the $30,500 level and eyeing a test of two-week highs in the mid-$31,000s per token, having rallied 6.81% in the last three days and back above its 21-Day Moving Average around $29,650. That marks the first significant upside break of the 21DMA since mid-March and the bulls will be hoping may set the stage for some near-term upside.

However, despite a decent weekend and further upside on Monday, bitcoin still confirmed a record ninth successive negative weekly close on Sunday. The world’s largest cryptocurrency by market cap remains on course to have dropped a little more than 18% in May, a second successive monthly loss, with prices down around 55% at current levels versus last November’s record peak.

In terms of notable bitcoin-related stories, social media users and various crypto news outlets highlighted that, over the weekend, someone transferred $329,220,000 worth of bitcoin and paid a transaction fee of just $0.12. Crypto enthusiasts used this example to laud bitcoin and crypto’s potential to create massive upheaval in the global financial system.

Elsewhere, despite the recent pullback in bitcoin’s price from record highs last year, the network continues to strengthen, as evidenced most recently in the fact that Bitcoin’s Lightning Network reached a new all-time high capacity of over 3,900 BTC over the weekend.

As per Investopedia, “Bitcoin’s Lightning Network (LN) is a second layer added to Bitcoin’s network enabling transactions to be done between parties off of the blockchain—called off-chain transactions”.

Meanwhile, in terms of notable commentary, veteran crypto trader and billionaire Tim Draper said over the weekend that he stands by his $250,000 price target for bitcoin in the medium-term future. Draper explained that he expects bitcoin usage amongst women, who control a majority of consumption decisions in the US, to rise, driving long-term gains. He added that US retailers are yet to realize that they can save a lot by accepting bitcoin rather than traditional payment methods.

Ethereum Recovers To $1,900 Amid Altcoin Outperformance

Altcoins were mostly performing better than bitcoin on Monday amid the decent tone to crypto risk appetite. Ethereum was last trading about 4.5% higher on Monday near the $1,900 per token level, taking its rebound in the last three days to over 10%.

However, ETH/USD continues to trade below its levels this time last week around the $2,000, as well as a fair amount below its 21DMA at $1,975.

In terms of some of the other major altcoins, Cardano’s ADA and Solana’s SOL were last trading with gains of more than 10% and about 6.0% respectively in the last 24 hours, CoinMarketCap data showed on Monday. Binance’s BNB and Ripple’s XRP were last up about 4.5% and 3.2% over the same time period.

In terms of the meme coins, Shiba Inu was last trading around 10% higher on the day, while Dogecoin was lagging its fellow dog-meme-inspired coin with gains of about 4.0% in the last 24 hours. Dogecoin’s underperformance versus Shiba Inu comes despite Elon Musk confirming over the weekend that SpaceX will soon follow in the path of Tesla in accepting Dogecoin as a payment method for merchandise.

In terms of notable commentary, Real Vision CEO and well-known voice on all things macro Raoul Pal said that, in the long run, he expects altcoins like ethereum to outperform bitcoin. “If you believe the future is in the technology, in blockchain technology, then this whole digital asset space should outperform the safe haven”, he said, referring to bitcoin as the safe haven.

In other notable altcoin news, Terra’s new blockchain that exists without an algorithmic stablecoin, referred to by some as Terra 2.0, launched on Saturday. The price of its new LUNA token initially opened on major exchanges at around $18.0, but very quickly slumped to around $6.0 per token, where it has remained ever since.

Tron’s DeFi TVL Catching Binance Smart Chain

The Trade Value Locked (TVL) across the Decentralised Finance (DeFi) space (i.e. the total amount committed in DeFi smart contracts) remains close to $100 billion on Monday, according to DeFi Llama data. That’s pretty much unchanged since midway through the month, after cross DeFi TVL saw a rapid collapse from around $180 billion at the end of April during the first half of the month amid the collapse of the Terra ecosystem.

Terra’s collapse, triggered by the de-pegging of its algorithmic stablecoin UST, sent a chill across the whole of the DeFi space that continues to hang overconfidence in the market. However, one notable bright spot in recent weeks has been the Tron ecosystem, which continues to grow its TVL. As of Monday, Tron’s TVL is at its highest of the year so far at just under $6.0 billion, up from closer to $4.0 billion at the start of the month.

That makes Tron the only major layer one blockchain ecosystem to have seen DeFi inflows this month. Analysts highlighted that if recent trends continue, Tron may soon surpass the Binance Smart Chain in terms of TVL, which currently stands at around $8.6 billion.

Regulation News

The US state of Louisiana has introduced a bill that would study the impact of crypto donations to political campaigns. If it passes, the Supervisory Committee on Campaign Finance will be given a mandate to carry out an in-depth review.

Elsewhere, Russia has introduced a proposal to allow bitcoin and other cryptocurrency payments in foreign trade. The proposal comes as the country’s economy suffers amid a wave of sanctions from Western powers over its invasion of Ukraine three months ago which have had the effect of largely isolating Russia from the global economy.

Morning Crypto Briefing: BTC Stabilizes Under $29K, ETH Licks Wounds Pre-US Core PCE Data

Key Points

  • Cryptocurrency markets are consolidating following a bearish Thursday session in tandem with calm macro trading conditions.
  • Markets are awaiting the release of key US Core PCE inflation data at 1230GMT that could affect Fed tightening expectations.
  • Bitcoin was last trading just under $29,000, having held up better than the broader crypto market this week.

State Of The Market

In fitting with a sense of calm across markets as trading conditions cool off ahead of the release of key US April Core PCE inflation data at 1230GMT, cryptocurrency markets are seeing some stabilization on Friday following Thursday’s bearish session. Total crypto market capitalization is currently about 1.0% lower on Friday in the $1.18 trillion area, having hit more than two-week lows just above $1.15 trillion on Thursday.

As a reminder, altcoins led the losses on Thursday while bitcoin (a relative safe haven in the crypto space) held up better. Downside came despite upside in US (and global) equities, which would normally lift the highly risk-sensitive crypto sector, and despite a recent pullback in long-term US bond yields and the US dollar (both of which are at or close to monthly lows on Friday).

Normally lower yields help crypto owing to the lower “opportunity cost” of holding non-yielding assets (like crypto), while a weaker buck can boost foreign demand for USD-denominated assets (like crypto). Total crypto market cap currently looks on course to end the week about 7.5% lower, marking a record-breaking eighth successive week in the red.

The crypto bulls will be hoping that markets can at the very least end the week on a high if upcoming US inflation data lends support to the idea that price pressures have peaked, thus removing the pressure on the Fed to tighten its monetary policy settings so quickly. Prices are expected to have risen at a pace of 0.3% MoM and 4.9% YoY in April, according to the Core PCE Price Index, after prices rose 0.3% MoM and 5.2% YoY in March.

A shift in expectations for Fed policy in the past six to seven months has been a key reason why crypto has pulled back so aggressively from last November’s record levels. The Fed has in that time pivoted from insisting that inflation was “transitory”, thus not warranting a policy tightening response, to realizing the error of their ways and signaling an intent to lift interest rates back to at least neutral (around 2.5%) in order to tame inflation, as well as begin shrinking its balance sheet.

This shift sent the US dollar and US bond yields surging, whilst weighing heavily on US equities (particularly tech/growth names), creating a toxic environment for crypto.

Price Action Update

Bitcoin was last trading just below the $29,00 level, down a little over 1.0% on the day, but having rebounded well from a brief stumble to fresh two-week lows at $28,000 on Thursday. Bitcoin has held up better than the rest of the cryptocurrency market this week, sending its crypto dominance to at one point on Friday as high as 47% (its highest since October 2021).

However, the world’s largest cryptocurrency by market cap is still on course to have dropped just over 4.5% this week and looks on course to record a record ninth successive week of losses.

Turning to ethereum, the world’s second-largest cryptocurrency by market cap is probing earlier monthly lows at $1,701 and is at present trading in the mid-$1,700s, down a further 1.2% on Friday after sliding more than 7.5% on Thursday following a break below key support at $1,900.

The cryptocurrency is on course to have dropped more than 13% this week, an eighth successive week in the red. Its underperformance versus bitcoin this week has seen it’s crypto market dominance drop from above 19% to current levels around 18%.

In terms of some of the other major non-stablecoin altcoins, the native tokens of layer 1 blockchain protocols Avalanche, Solana and Cardano are underperforming the broader market and down between 5-8% on the day according to CoinMarketCap data, following what has already been an ugly week of losses.

Another notable mover was GMT, the native token of the world’s most popular move-to-earn crypto platform StepN, which collapsed more than 35% on Thursday from highs close to $1.40 per token to current levels below $1.0. The drop came after StepN announced that it would be halted GPS services to users located in China as of 15 July, meaning owners of the platform’s non-fungible token (NFT) “shoes” will no longer be able to earn GMT tokens for their steps.

US CBDC Still A Long Way Off, Says Fed Vice Chair Brainard

Speaking in a testimony before the US House of Representative’s Financial Services Committee on Thursday, Vice Chairwoman of the US Federal Reserve Lael Brainard said that it could take as long as five years to develop a US central bank digital currency (CBDC). A Fed “CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money,” Brainard said in her statement, the text of which was released prior to the hearing.

Wall Street and major banks have expressed concern that an interest-bearing CBDC could disrupt the US banking system. Meanwhile, Circle, the issuer of the world’s second-largest US dollar-pegged stablecoin by market cap USDC, recently warned that any Fed issued CBDC might crush private sector stablecoin innovation.

Notable Stories: Former Binance Execs Launch $100M Crypto Fund, JPM Trails Inhouse Blockchain

Two former executives of the world’s largest cryptocurrency exchange Binance launched a $100 million venture fund on Wednesday that will focus on Web3 and blockchain development, as well as promote the adoption of crypto in emerging markets.

Reports emerged on Thursday that major global investment bank JP Morgan Chase & Co is trailing the use of an in-house blockchain for collateral settlement outside of market opening hours.

Coinbase Global has a structural advantage over its rival global cryptocurrency exchanges due to its security infrastructure and regulatory adherence, Cowen equity research analyst Stephen Glagola wrote in a note to clients on Thursday. Coinbase’s share price is up 15% over the past two days, though still trades with losses of more than 70% on the year.

In further exchange-related news, Huobi announced on Thursday that it has acquired Latin American crypto exchange Bitex as it looks to expand its presence in the region. Meanwhile, fellow Latin American crypto exchange Bitso announced on Thursday that it would be letting go of 80 employees. This comes after another Latin American crypto exchange (Buenbit) announced plans to lay off 45% of its staff earlier in the week citing the “global overhaul” of the tech industry.

In terms of notable regulatory commentary, US chairman of the Securities and Exchange Commission (SEC) Gary Gensler said on Thursday that the US has “dropped the ball” on crypto regulation. Pro-crypto SEC Commissioner Hester Peirce reportedly remarked that the recent collapse of UST means that crypto regulation will happen faster.

DeFi Deep Dive: How Crypto Investors Can Generate Impressive Yields

Key Points

  • DeFi is an emergent financial technology that allows users to consume and provide financial services without a third party.
  • Some of the most popular yield generation strategies include Staking, Liquidity Provision and Lending.
  • Smart Contract, Impermanent Loss and Rug Pull risks are some of the main pitfalls investors will need to navigate.

What is DeFi?

Decentralized Finance (DeFi) is a new and emergent financial technology that allows users to consume and provide financial services without the need to rely on a third party, with transactions secured utilizing blockchain/distributed ledger technology, much like that used by cryptocurrencies.

In traditional centralized finance, when consumers transact, save and invest, they rely upon a centralized entity (such as a credit card company like Visa, a bank or an investment management company) whose goal is to turn a profit. Thus, they usually take a cut at the cost of the consumer.

While cryptocurrency solves the problem of having a middle-man at the center of each monetary transaction, the aim of DeFi is to cut out the middle-man from the saving/lending/investing process, thus also removing fees here.

Of course, it isn’t all just about reducing fees. Just like cryptocurrency, DeFi is decentralized and permissionless in its nature, thus removing the ability of any one centralized power (be that governments or banks) to manipulate an individual’s access to financial services.

At present, individuals are able to secure loans and other financial services without the need for credit checks or going through the Know Your Customer (KYC) process, so long as they have sufficient collateral (usually in the form of crypto) to put up.

DeFi developers have built a multitude of so-called Decentralised Applications (dApps) that run on one or multiple smart-contract enabled layer 1 blockchains (such as the ethereum, Tron, Solana or Cardano blockchains). dApps are the heart of DeFi and the health of a smart-contract enabled blockchain’s DeFi ecosystem can often be measured by how many/the variety of dApps it has running.

Those seeking to invest can go into the websites of these dApps, connect their wallets and deposit funds into various yield-producing strategies as they choose. Those seeking to borrow can utilize a variety of DeFi platforms to borrow against collateral (usually bitcoin or ethereum).

How Can You Utilise DeFi To Generate Yield?

The generation of yield in DeFi, often referred to as “yield farming”, can be done in a number of ways. A few of the most popular methods are summarised below:

1) Staking – Proof of Stake (PoS) cryptocurrencies require a certain number of holders to lock up their crypto for a certain period of time in order to secure the network. This is called “Staking”, and the holders of Staked cryptocurrencies are compensated via yield (almost always in the same cryptocurrency as that being staked).

According to staked.us, stakers of Ethereum (2.0), Cardano and Solana can expect a yield of between 4-6%. Most centralized cryptocurrency exchanges will allow users to stake their crypto on their website, but it is also possible to stake crypto via various dApps.

2) Liquidity Provision – When crypto investors provide liquidity, they are essentially pooling their crypto into a fund that facilitates trade on a Decentralised Exchange (a type of dApp, also referred to as a DEX) or other type of DeFi application. In contrast to centralized finance where there is a high barrier to outside entrants into the world of market-making, crypto Liquidity Providers (LPs) are able to participate through the use of automated market makers (AMMs), one of DeFi’s most promising emergent technologies.

In most cases, prospective LPs will need to provide liquidity in both of the cryptocurrencies of the trading pair they are providing liquidity for. Crypto holders can become LPs using a number of DEX platforms. Some of the most popular include Uniswap, PancakeSwap, Orca, Curve Finance and SunSwap. Yields can vary wildly based on the perceived riskiness of the cryptocurrencies involved.

3) Lending – Crypto holders can utilise a variety of centralized and decentralized applications to lend their tokens to borrowers by locking their crypto into so-called “vaults”. Rates on leading cryptocurrencies such as bitcoin and ethereum are typically quite low, but rates on stablecoins can be very attractive (anything up to 30%). Some examples of the most popular Lending DeFi platforms include AAVE, Compound and JustLend.

What Are The Risks?

Given the youth of the DeFi space and its lack of regulation, prospective investors face a litany of risks. Below are summarised a few of the main ones to take note of.

1) Smart Contract Risks – DeFi is powered by smart contracts, which are essentially just code. Poorly written code can expose potential DeFi investors to loss if it leaves room for hackers to exploit funds.

2) Impermanent Loss – Some investment tactics in DeFi, such as staking and liquidity provision, require that investors lock up funds for a certain period of time. During this time, the price of cryptocurrencies can move wildly, exposing investors to losses.

3) Rug Pulls – This is when a fraudulent developer creates a new DeFi token with the intention of pumping the price to draw in gullible investors, only to then pull out as much value as possible before abandoning the project and letting the value of the token crash to zero. Sometimes investors in scam tokens aren’t even able to sell them, as happened famously happened with the Squid token last year. Unfortunately, due to a lack of regulation to protect investors from bad actors, DeFi is rife with such pitfalls.

4) Regulation Risk – There is practically no regulation in the DeFi space at the moment. But this could quickly change in the coming years and the impact on investments across the space will be hard to gauge.

5) Market Risks – Stablecoins play a key role in the DeFi space, with investors keen to lend them out for high yields and borrowers keen to borrow them against collateral. But as seen earlier in the month with Terra’s algorithmic stablecoin UST, investors in stablecoins must factor in the risk of a de-pegging event that could see them lose much of or all of their capital.

Current State Of The DeFi Market

According to DeFi analytics website DeFi Llama, the total Trade Value Locked (i.e. the total sum of money committed in DeFi smart contracts) across the entire space stands at just below $100 billion as of 26 May. That compares to a TVL of more than $172 billion at the start of the month and a TVL of over $220 as recently as the end of December.

This month’s sharp decline came in wake of the collapse of the Terra ecosystem, which was triggered by the de-pegging of its US dollar stablecoin UST and a subsequent “bank-run” like rush of capital out of the stablecoin that triggered hyperinflation in LUNA. The Terra ecosystem was at one point the second largest in the DeFi space (only behind ethereum) with a TVL of nearly $22 billion as recently as 5 May. TVL is now only around $170 million, with the collapse sending a chill across the entire industry.

A further headwind to the growth of the DeFi space in recent months has been the broad downturn in cryptocurrency prices, with the likes of bitcoin and ethereum down in the region of 60% versus the record peaks they printed last November. DeFi investments are still viewed as highly speculative in nature, hence in risk-off cryptocurrency market conditions, it isn’t surprising to see investors avoid pouring more money into the space.

Still, despite recent de-risking that has seen capital leave DeFi in recent weeks, TVL in the space is still nearly 100x versus this time two years. DeFi remains very much at a nascent stage in its development. As developers and innovations build better and more trustworthy dApps, the long-term trajectory is almost certainly tilted towards greater adoption and further growth.

Regulation could also play a pivotal role in allowing DeFi to break into the mainstream. A strong, well-thought-out regulatory environment could protect prospective investors from many of the aforementioned risks (like rug pulls and centralization by stealth). Indeed, regulation is likely a pre-requisite if big money is ever to come anywhere near the space (i.e. major asset/pension fund managers, for example).

Morning Crypto Briefing: Altcoins Tumble As ETH Breaks Below $1,900, BTC Holds Firm

Key Points

  • Despite a benign broad market reaction to Wednesday’s Fed minutes, crypto markets are pressured on Thursday.
  • Altcoins are behind most of the decline, with ethereum breaking below $1,900 support.
  • By contrast, Bitcoin is holding within recent ranges near $30K, while its market dominance has risen to multi-month highs.

Crypto Stumbles Post-Fed Minutes, Even As Stocks Rise/Yields Ease

The broad market reaction to Wednesday’s Fed meeting minutes release was benign. US equities have been able to push a little higher from recent lows, US government bond yields continue to ease to fresh monthly lows (with the 10-year probing 2.70%), while the Dollar Index (DXY) remains close to monthly lows under 102.00.

Analysts said the minutes contained few surprises and indicated that FOMC members broadly support 50 bps hikes at the next two meetings and rates reaching neutral by the year’s end. Some said the tone of the meeting minutes lent itself towards FOMC members favoring a pause (or slow down) in hiking once the Fed gets rates back to neutral, as it reassesses the need for further tightening.

For a market fearful that the Fed will dive headlong into taking interest rates to outright restrictive territory in early 2023 (i.e. above 3.0%), this appears to have come as a relief, hence the benign market reaction.

Sadly for the crypto bulls, (modest) upside in equities and (modest) further downside in bonds and the US dollar has not been enough to lift crypto sentiment. Indeed, total cryptocurrency market capitalization briefly fell to its lowest level in more than two weeks under $1.20 trillion on Thursday.

At the time of writing, total crypto market cap is around just under $1.21 trillion, down nearly 3.0% on the day. Admittedly, recent downside doesn’t represent a convincing bearish breakout below recent $1.20-$1.35ish trillion ranges.

In the immediate future, so long as this week’s macro trends continue (i.e. gradually rising stocks, falling yields, and a weakening US dollar), cryptocurrency markets are expected to remain supported within recent ranges.

Aside from the potential for more cryptocurrency regulation chatter at the final day of the World Economic Forum and a speech from Fed Vice Chairwoman Lael Brainard later in the day on central bank digital currencies, crypto traders will mostly be focused on US economic data.

The second estimate of US GDP growth in the first quarter of the year will be released at 1330BST, ahead of the release of US April Core PCE inflation data (the Fed’s favored inflation gauge) on Friday.

Analysts have warned that economic data presents two-sided risks to stock and crypto markets at the moment. Firstly, if data signals weaker than expected US economic growth and triggers recession fears, that could hurt risk assets (like crypto and stocks). Bulls will be hoping that US Q1 GDP data, which is already expected to show a contraction in the size of the economy last quarter, doesn’t receive any negative revisions.

Secondly, lots of analysts have been talking about how they think inflation has peaked and should Friday’s Core PCE report support this narrative, this could trigger some relief risk assets as traders wind in their hawkish Fed bets.

Altcoins Underperform As Ethereum Breaks Below $1,900 Support

Bitcoin is holding up better than the broader crypto market on Thursday and was last only down about 1.0% in the $29,200 region per token, leaving it still well within recent $28,750-$31,400ish ranges. That means bitcoin maintains a market cap of around $550 billion.

Ethereum, by contrast, was last trading over 5.0% lower on Thursday in the low $1,800s per token, having broken below recent support at the $1,900 level. The recent break lower appears mostly technical, with the cryptocurrency having formed something of a descending triangle in recent sessions (which often precedes bearish breakouts).

ETH/USD is now eyeing a test of monthly lows around the $1,700 level. The world’s second-largest cryptocurrency currently has a market cap of around $220 billion.

Other altcoins have also been suffering. The likes of Binance’s BNB, Cardano’s ADA, Polkadot’s DOT and Dogecoin were all last down in the region of 6.0% over the last 24 hours, CoinMarketCap data on Thursday suggested. Solana’s SOL was last down about 10% over the same time period.

As a result of altcoin underperformance, which is reflective of risk-off flows or a so-called “flight to quality” within the crypto space, bitcoin’s crypto market dominance jumped on Thursday to above 46%, its highest level since October 2021.

JP Morgan Bullish On Bitcoin

Major US investment bank JP Morgan is bullish on bitcoin in the short and long-run, analysts at the bank said in a note released on Wednesday. Strategist Nikolaos Panigirtzoglou said that the bank think’s the cryptocurrency’s fair value in the short-run is around $38,000, around 28% higher than current levels under $30,000.

Moreover, its long-term price estimate for bitcoin is $150,000. Panigirtzoglou said that digital assets have replaced real estate as the bank’s preferred alternative asset class.

Terra Revival Plan Approved, Terra 2.0 Incoming

Back on 16 May, Terraform Labs CEO and Terra blockchain founder Do Kwon proposed a so-called “Revival Plan” which would see the creation of a new Terra blockchain that wouldn’t be linked to an algorithmic stablecoin. The proposal (Proposal 1623) to create Terra 2.0 was approved on Wednesday by the Terra community by 65.55%.

LUNA tokens on the new Terra blockchain will be allocated to holders of LUNA and UST in an airdrop according to two snapshots, the first prior to Terra 1.0’s collapse at 14:59:37 UTC on 7 May and the second after the collapse at 19:59:51 Bejing time on 26 May.

The genesis of the new Terra 2.0 blockchain will occur on 27 May. Various crypto exchanges (including FTX, KuCoin and Binance) have been lining up to say they will work with Terra to support the migration and airdrop, as well as support trading in the new LUNA token.

Portugal Rejects Crypto Tax Proposals, Circle Tells Fed To Ditch CBDC Plans

On Wednesday, Portugal’s Congress rejected two opposition-sponsored bills that sought to put a tax on cryptocurrencies. The country’s ruling Socialist Party, which holds a majority in Congress, is yet to submit its own proposal for the taxation of crypto after the Portuguese Finance Minister Fernando Medina said that new tax plans would be coming in the near future.

Portugal has up until now been viewed as somewhat of a crypto tax haven in Europe, given its effective capital gains tax of 0% on crypto investments. Its capital gains tax on traditional financial investments is 28%. Any new crypto tax proposal is expected to contain a new capital gains tax.

Circle Interest Financial, the issuer of the world’s second-largest US dollar-backed stablecoin by market cap (around $53.4 billion) USDC, sent a letter to the US Federal Reserve on Wednesday arguing that it should refrain from the creation of its own digital dollar. “A host of companies, including Circle, have leveraged blockchain technology to support trillions of dollars of economic activity with fiat-referenced stablecoins,” the company said, adding that USDC is already fulfilling “many of the potential benefits” of a central bank digital currency.

“The introduction of a CBDC by the Federal Reserve could have a chilling effect on new innovations,” Circle continued. Moreover, the company argued that USDC supports the US dollar’s position as the world’s leading reserve currency.

In further international regulatory news, Paraguay’s lower house of its legislative body approved a modified bill that will regulate the country’s crypto mining and trading industries. The bill will now return to the country’s Senate with modifications and, once approved, will go to the executive branch for approval. Paraguay’s government hasn’t yet signaled whether it plans to sign or veto the bill.

One of the authors of the bill last year told various members of the crypto press that the aim of the legislation is to attract international crypto miners to the country, given it has amongst the cheapest electricity rates in all of Latin America of around 5 cents per kilowatt-hour.

Elsewhere, Thailand just approved a 7.0% VAT exemption on cryptocurrency transactions through exchanges that is set to last into 2023. Meanwhile, Binance is reportedly working with Kazakhstan to help develop a legislative and regulatory framework.

Morning Crypto Briefing: BTC Pivots $30,000, ETH $2,000 As Market Consolidation Contines

Key Points

  • Stabilization within recent ranges remains the dominant theme of this week’s trade in cryptocurrency markets.
  • Bitcoin and ethereum are back to pivoting $30,000 and $2,000 respectively.
  • Familiar themes (central bank tightening, growth/inflation fears) remain in focus amid quiet trade.  

State Of The Market

Stabilization within recent ranges remains the dominant theme of trade in cryptocurrency markets this week. After dipping once again to the low $1.20s trillion on Tuesday, total cryptocurrency market capitalization has once again bounced back to the mid-$1.20s trillion, leaving it well within the $1.20-35ish ranges of the past nearly two weeks.

Recent stabilization is in fitting with price action in US equity markets, with which crypto tends to maintain a strong positive correlation. For example, in pre-market trade on Wednesday, futures of the S&P 500 index are trading in the mid-3,900s, little changed versus levels two weeks ago.

Whilst recent stabilization is a relief for crypto holders, it remains too early to bet on a substantial near-term rebound given ongoing bearish market themes that continue to keep macro risk sentiment suppressed. These include fears about aggressive central bank tightening from major global central banks (namely the US Federal Reserve), concerns about weakening global growth and concerns about still very elevated inflationary pressures, which mean fiscal and monetary easing will not be coming to the rescue.

Already this week, we have had downbeat Snap earnings and soft US PMI data for May allude to a weakening macro environment in the US, which comes on the heels of downbeat commentary on the economy from major US retailers last week. All the while, the Russo-Ukraine war rumbles on and Chinese lockdowns persist as the nation pursues what feels like its increasingly untenable “zero Covid” strategy, dampening the global growth outlook and worsening inflationary supply chain snags/shortages.

There hasn’t been much by way of notable updates regarding these themes and Wednesday will be a quiet session, with the most notable event commentary from Fed Vice Chair Lael Brainard at 1715BST. Brainard is expected to stick to the script in reiterating that the Fed will be taking rates to neutral “expeditiously” by the end of 2021 and that further hikes in 2023 remain a strong possibility if inflation doesn’t abate.

The US dollar and US yields have been waning on increased US growth concerns as of late. Should any hawkish Fed vibes spark upside in either of these, that could hurt crypto. Cryptocurrencies tend to have a negative correlation to both the US dollar and US yields. Amid what is expected to be a quiet session, traders will also be monitoring the World Economic Forum for any further notable commentary, perhaps in the form of more calls for crypto regulation.

Price Action Update

Amid the broad theme of stabilization, bitcoin was back to pivoting either side of the $30,000 level on Wednesday as crypto traders await fresh fundamental (or technical) catalysts. At current levels just below the psychologically important level, bitcoin’s market cap sits at close to $570 billion and it’s crypto market dominance at just above 45%.

Ethereum was last trading just below the $2,000 level and also well within recent ranges, giving it a market cap of just under $240 billion and a market dominance of around 19%.

In terms of the major non-stablecoin altcoins, conditions have been unusually subdued for cryptocurrency markets, with BNB up 2.8%, XRP down 1.3%, ADA up 0.3%, SOL down 1.0%, DOGE down 0.4%, DOT up 2.3% and AVAX down 0.4% over the course of the last 24 hours, according to CoinMarketCap data.

Crypto News, Commentary

The largest US cryptocurrency exchange Coinbase has just become the first crypto company to break into Forbes’ Fortune 500 list, after posting revenue of $7.8 billion in 2021, placing it at number 437. The company was first listed on the Nasdaq exchange in April 2021.

In terms of some notable commentary at this week’s meeting of the World Economic Forum (WEF) in Davos, Switzerland (which began on 22 May and ends on 26 May), the CEO of Circle Jeremy Allaire has continued to push the adoption of digital currency with cash-like features. According to Allaire, for any digital currency to succeed, it must provide the economic sovereignty provided by physical cash, i.e. privacy, portability and censorship resistance. Crypto has been a hot topic at this year’s WEF, with calls for more regulation in the industry following Terra’s collapse two weeks ago.

Meanwhile, in further WEF commentary, Guggenheim Partners founder Scott Minerd warned of the possibility that bitcoin might drop to sub-$10,000 levels if it loses its grip on $10,000. “We’re seeing crypto collapse the way it is, I think it’s got more downside to it,” he noted, adding that “when I look at Bitcoin, which the technicals have been better than anything else, when we break below $30,000 consistently, then $8,000 is the ultimate bottom”. “I think we’ve got a lot more room to the downside, especially with the Fed being restrictive,” Minerd said.

Elsewhere, in a webinar on the blockchain, MasterCard’s Vice President for new product development and innovation Harold Bosse said on Monday that the mass adoption of crypto will happen sooner rather than later. He noted the fact that millions are already using and transferring crypto around the world.

DeFi, NFT Update

The market cap of the top 100 Decentralised Finance (DeFi) tokens, according to CoinGecko data, was around $53.3 billion on Wednesday, roughly in line with where it has been for the past two weeks, after the collapse from above $100 billion at the start of the month following the collapse of Terra’s LUNA and UST tokens.

Speaking of, Terra’s native governance token LUNA continues to move in and out of the top ten tokens by market cap. On Wednesday, it was number nine, with a market cap of about $1.1 billion. Terra 2.0 will be launched soon (a new blockchain without a stablecoin). Terra has probably been able to maintain some market cap despite its recent collapse owing to the (former) strength of its user base, developer community and wealth/variety of dApps.

In terms of trade value locked (TVL) across the entire DeFi space, that remained stable near $100 billion on Wednesday according to DeFi Llama data. Tron remains a bright spot, with TVL at its highest since the end of 2021 around $5.5 billion, up about $1.5 billion since the start of the month.

Turning now to the Non-fungible token (NFT) space, the bear market continues. The price floor to bag one of the Bored Ape Yacht Club (BAYC) NFTs fell under $180,000 on Wednesday (down 3.4% in the last 24 hours), according to NFT Price Floor data and is nearing its lowest levels since November 2021 and down over 50% from April highs above $400,000. BAYC is the most valuable collection with a floor cap (i.e. an implied minimum value of the entire collection based on the current price floor) of about $1.79 billion.

In major DeFi news, Uniswap, the largest Decentralised Exchange (DEX), surpassed $1 trillion in all-time trading volume on Tuesday, according to an announcement on Twitter. The company has “onboarded millions of users to the world of DeFi”, “introduced fiar and permissionless trading” and “lowered the barrier to liquidity provision”, it said.

The DEX was launched on the ethereum blockchain back in 2018 and has achieved the $1 trillion in transacted volume despite a relatively small userbase (just 3.9 million wallets on the DEX according to data from Uniswap Labs as of Tuesday). Analysts say that highlights the fact that the DEX has plenty of room left to grow.

Elsewhere, cryptocurrency exchange-traded product issuer 21Shares on Tuesday unveiled its latest fund, the USD Yield ETP (ticker USDY). The product aims for a 5.0% yield takes US dollars and lends them out to counterparties within the DeFi space against a minimum of 110% collateral in either bitcoin and ethereum.

“We see this ETP as a useful tool for investors to navigate market volatility and stay invested through complex market conditions — like today’s,” 21Shares President Ophelia Snyder said on Tuesday. “While investors grapple with inflation, fluctuating interest rates and a range of economic pressures, this product is a first-of-its-kind way for investors to both gain maximum exposure to risk-adjusted yield and preserve liquidity in their portfolios”, Snyder continued.

Crypto Flows

Exchange wallets saw a net inflow of just under $200 million worth of bitcoin in the last 24 hours as of Wednesday morning, data from on-chain analytics firm Glassnode showed. Meanwhile, exchange wallets saw a net outflow of around $70 million over the same time period, whilst there was a net inflow of about $141 million in Tether’s US dollar-pegged stablecoin USDT.

Regulatory Landscape

In wake of the collapse of Terra’s LUNA and UST stablecoin tokens, South Korea is prepared to introduce legal safeguards that would prevent a recurrence. As many as 280,000 South Koreans were allegedly affected by UST’s de-pegging and the subsequent collapse in value of Terra’s LUNA token.

“We need to make exchanges play their proper role, and toward that end, it is crucial for watchdogs to supervise them thoroughly,” said People Power Party representative Sung Il-jong during an emergency seminar of the National Assembly on Tuesday. “When exchanges violate rules, they should be held legally responsible to ensure that the market functions well without any troubles”.

Elsewhere, Michael Hsu, US acting director of the Office of the Comptroller of the Currency, said at a Blockchain Summit in DC that the recent collapse in value of Terra’s stablecoin UST should “serve as a wake-up call and an opportunity to reset and recalibrate the problems the industry is trying to solve”.

Hsu said it was promising that there was no wider contagion from the event, noting that “no banks are under stress, or even rumored to be under stress due to crypto exposure”. However, Hsu expects stablecoins to continue to grow in popularity, and with them, financial risks to the broader economy.

Separately, the Central African Republic (CAR), which announced bitcoin as a legal form of tender just one month ago, just announced a crypto initiative designed to attract crypto-related business investment. The so-called Sango Project will see the creation of a Digital Nation Bank and associated crypto wallet that will be compatible with layer-two bitcoin solutions such as the Lightning Network, thus facilitating transactions in bitcoin.

According to CAR President Faustin-Archange Touadéra, “the formal economy is no longer an option” given that “an impenetrable bureaucracy is keeping us stuck in systems that do not give us a chance to be competitive”.

Morning Crypto Briefing, May 24: Bitcoin dips back below $30,000, traders eye WEF crypto commentary

Key Points

  • After cryptos dipped on Monday, a turn for the worse in global risk appetite on Tuesday is preventing a rebound.
  • Bitcoin was last trading in the low $29,000s, within recent ranges ahead of key US data and more Fed speak.
  • IMF MD Georgieva said Terra’s recent collapse shouldn’t deter people from crypto.

State Of The Market

Despite US equity markets at the time holding up well on Monday, crypto market sentiment took a turn for the worse. While S&P 500 index closed Monday trade with gains of nearly 2.0%, total crypto market capitalization dropped over 3.0% to back below $1.25 trillion. Reading too much into one day of divergence/correlation breakdown probably isn’t too wise.

On the month, both crypto and US equities both still trade with substantial losses and for the same reasons. These include fears about central bank tightening and liquidity withdrawal and fears about high inflation and slowing US (and global) economic growth amid continued geopolitical and pandemic-related challenges.

Back to the recent price action, Wall Street’s Monday optimism has been cut short by a downbeat earnings release from Snap, which is weighing on sentiment across US tech and has seen S&P 500 futures drop nearly 1.5% in pre-market trade, meaning the majority of Monday’s gains have been given back. Snap delivered a new profit warning on guidance it only issued one month ago, citing a further deterioration in the macro environment, adding to the market’s fears about US economic weakening after last week’s ugly earnings from big US retail names like Walmart, Target and HomeBase.

This is seemingly for now preventing cryptocurrencies from mounting a comeback on Tuesday, with total market cap trading roughly flat on the day in the $1.24 trillion area. That leaves total crypto market cap still well within recent $1.20-1.35 trillion ranges of the past two or so weeks.

In terms of what Tuesday has in store for crypto traders, the macro themes of US growth and central bank policy will be in focus with the release of flash US PMI survey data for May at 1345GMT followed by some pre-recorded remarks from Fed Chair Jerome Powell at 1620GMT.

The survey data is expected to show that economic activity in the US has continued to expand at a robust, albeit slightly weaker pace in May versus April, despite ongoing high inflation, while Powell is expected to reiterate his hawkish message from last week. Traders will recall that he doubled down on hawkish rate guidance for two or more further 50 bps rate hikes and rates reaching so-called “neutral” by the end of the year, as well as pledged to “not hesitate” to take rates higher in 2023 if still needed (i.e. if inflation still remains too high).

In the meantime, it would probably be wise for crypto traders and investors to monitor crypto-related commentary at the World Economic Forum in Davos, Switzerland, in case there is commentary about new regulations plans, etc., which could be market moving.

Price Action

Bitcoin was last trading a little higher on the day in the low $29,000s, having briefly dipped back below $29,000 on Monday from earlier weekly highs in the upper $30,000s. On the week, the world’s largest cryptocurrency by market cap (of around $555 billion at the time of writing) was trading lower by just over 3.0%, on course for a record ninth consecutive week in the red.

Of course, there is still plenty of time for bitcoin to recover into the green on the week, but unless there is a substantial turn for the better in the macro-environment (which feels unlikely in the near future), it will be tough for bitcoin to break back to the north of its recent mid-$28,000s to mid-$31,000s range.

Ethereum was last trading in the upper $1,900s, having dipped below $2,000 on Monday. Like bitcoin, ethereum continues to trade well within recent ranges and is down on the week by about 3.5%, taking its market cap to just under $240 billion.

In terms of the major altcoins, Tron has been the best performer on the week so far, with TRX/USD higher by about 4.0% despite the broader market drop. Avalanche’s AVAX and Solana’s SOL are the worst performers thus far on the week, with the latter down about 9.0% and SOL down closer to 6.0%.

Crypto News

The world’s largest cryptocurrency exchange Binance on Monday enabled a “sell crypto for fiat” feature using debit and credit cards. The company is also reportedly preparing to launch payment and trading services in Dubai and Bahrain as soon as next month.

Well-known US retail gaming store GameStop, which garnered fame in 2021 as its stock price enjoyed massive gains/experienced huge volatility as one of a few so-called “meme stocks”, announced this week that it has launched a new ethereum-based crypto wallet that supports NFT. GameStop will soon be launching an NFT marketplace.

Fashion brand Balenciaga on Monday announced that it will now be accepting bitcoin and ethereum as payment methods across selected stores.

Amid mounting accusations against Terra blockchain developer TerraForm Labs and Terra’s associated non-profit the Luna Foundation Guard of fraud and running a Ponzi scheme, police in South Korea have asked exchanges to freeze the Luna Foundation Guard’s ability to withdraw corporate funds. South Korea has accused TerraForm labs of owing as much as $78 million in taxes and will reportedly be holding the country’s exchanges accountable for the damages caused to investors by the collapse of the Terra ecosystem two weeks ago.

DeFi, NFT Market Update

The market cap of the top DeFi governance and stablecoin tokens remains stable within recent ranges at around $52.7 billion on Tuesday.

The total trade value (TVL) locked across all major Decentralised Finance (DeFi) protocols remains steady near $100 billion, data on DeFi Llama showed on Tuesday. TVL on the ethereum blockchain continues to steadily decline, down from nearly $100 billion earlier in the month prior to the DeFi capital outflow triggered by Terra’s collapse.

TVL on the Binance smart chain has remained stable in an $8-9 billion range over the past few days, though is down from around $12 billion at the start of the month. The Tron blockchain now has the third-largest TVL of around $5.3 billion, up from about 4.0% at the start of the month.

Tron’s JustLend protocol offers a 30% yield on Tron’s native algorithmic stablecoin USDD, and has as such been attracting plenty of demand. However, many fear that USDD is vulnerable to a depeg event just like Terra’s UST, given the similarities of the mint/burn mechanism both stablecoins use (or used) to maintain the peg.

Looking at the NFT marketplace, the price floor of the top NFT collections are not showing any signs just yet of recovering to their peaks printed earlier in the year. The price floor for one of the 10,000 Bored Ape Yacht Club NFTs was last around $185,000, just above the 13 May lows around $174,000 and in line with levels of recent weeks, but well below record peaks hit at the start of the month above $400,000.

Similarly, the price floor for one of the 10,000 CryptoPunk NFTs on Tuesday fell back below $100,000 for only the second time since last August. At the start of the month, the price floor was in the $175,000 region.

Crypto Flows

According to Glassnode data, there was a net inflow of about $67 million worth of bitcoin to exchange wallets in the last 24 hours as of Monday morning, which is not too unsurprising given recent risk-off flows. Investors tend to move their crypto into exchange wallets to then be sold during times of market stress.

According to Watcher.Guru, the amount of bitcoin held on top exchanges hit its lowest level since November 2020 on Tuesday. That could be a sign that much of the “weak hand” selling of bitcoin may, for now, be over.

Meanwhile, there was also a net inflow of about $92 million worth of ethereum into exchange wallets over the same time period, Glassnode data showed.

Amid Monday’s market drop, $146 million worth of crypto long positions were liquidated on crypto exchanges, CoinGlass data showed. That was the largest liquidation of bullish positions since last Friday, when $570 million worth of long positions were liquidated.

Regulatory Landscape

Political and business leaders from around the world have this week jetted into Davos, Switzerland for this year’s (delayed) annual meeting of the World Economic Forum (WEF) and crypto has been a big topic. International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that the collapse of Terra’s algorithmic stablecoin UST shouldn’t deter people from crypto, as the space still has the potential to offer faster services at lower cost, as well as promote greater financial inclusion.

IMF Deputy Managing Director Gita Gopinath was a little more reserved in her remarks on crypto. She said she has maintained her distance from the sector which she deems as too risky, and noted that crypto is far from an “easy return” market. Various crypto industry leaders and CEOs (including of Circle and Coinbase) are attending this year’s WEF.

Separately, Bank of France head and influential European Central Bank policymaker François Villeroy de Galhau was out with further scathing criticism of crypto on Monday, saying that “citizens have lost trust in crypto”. “Cryptocurrencies are not a reliable means of payment… Someone must be responsible for the value and it must be accepted universally as a means of exchange,” he added.

ECB policymakers have generally been critical of crypto and openly favor introducing some sort of Central Bank Digital Currency instead. Indeed, in a report released by the bank on Tuesday, the ECB warned that as more and more financial institutions engage with crypto and digital assets, there is an increased risk of “spillover to the wider economy”.

Elsewhere, Texas Senator Ted Cruz said in an address at a conservative think tank event on Monday that he believes in bitcoin and that he “wants Texas to be the oasis on planet Earth for bitcoin and crypto.”

Finally, the IMF said this week that they are assisting El Salvador in compiling statistics to measure the success of the nation’s adoption of bitcoin. El Salvador made bitcoin a legal form of tender in September 2021, a move that the IMF was highly critical of at the time.

Morning Crypto Briefing, May 23: Crypto Consolidation Continues As Buck Slides

Key Points

  • Cryptocurrencies are higher on Monday as the US dollar slides and equities firm, though are mostly still within recent ranges.
  • Bitcoin was last trading just above the $30,500 mark and ethereum in the upper $2,000s.
  • Remarks from Fed’s Powell, Fed meeting minutes, US GDP and Core PCE inflation are this week’s main macro events.

State Of The Market

An ongoing pullback in the strength of the US dollar coupled with an upbeat start to the week in the global equity space means that cryptocurrency markets trading with a positive bias this Monday. The total market capitalization of the cryptocurrency market hit $1.30 trillion for the first time since last Wednesday on Monday, though has since pulled back to around $1.295 trillion, meaning it is higher by over 1.0% on the day.

A weaker US dollar means that USD-denominated cryptocurrencies (and other commodities like precious metals) are cheaper for international buyers, thus boosting their demand. Meanwhile, with cryptocurrencies viewed as highly speculative assets, they have developed an increasingly close correlation to the stock market, which is also viewed as highly speculative, so higher stock prices are also benefitting the crypto prices.

Near $1.3 trillion, total crypto market cap continues to trade within the $1.20-1.35 trillion range established over the past ten or so days, continuing the theme of stabilization. Whilst this has got some crypto bulls hoping that the bottom might be in (total market cap is currently down about 40% on the year and nearly 60% versus last November’s record highs), no substantial rebound is likely in the absence of a rebound in sentiment in global (namely US) equities.

Crypto traders will likely continue to closely monitor price action in the S&P 500 and Nasdaq 100 in the week ahead. The most important events that could trigger price action are Tuesday’s remarks from Fed Chair Jerome Powell, Wednesday’s release of the last FOMC meeting minutes, Thursday’s release of the second estimate of US Q1 GDP growth, and Friday’s release of April US Core PCE inflation (the Fed’s favored inflation gauge).

Expectations that the Fed will tighten interest rates rapidly in the coming quarters to reign in multi-decade high inflation levels in the US have weighed heavily on asset classes such as US equities and crypto in recent weeks. Upcoming Fed events and US inflation data in the coming week will keep this theme in focus, potentially capping any possibility of a rebound.

Meanwhile, indications of a slowdown in US economic activity (be it business surveys or Q1 earnings of major US retailers) are growing, adding to the potential headwinds. This week’s second estimate of Q1 GDP, which already showed a shock contraction, will thus be in focus.

Crypto Price Action

Bitcoin was lasting trading higher by just under 1.0% just to the north of the $30,500 level, in tandem with the broader bounce in crypto markets. That leaves the cryptocurrency still trading within recent $28,700-$31,500 ish ranges, in fitting with the broader theme of consolidation. At current levels, bitcoin’s market cap is around $580 billion and its market dominance is just under 45%.

Ethereum, meanwhile, is also trading higher, though by closer to 2.0% and in the upper $2,000s. Both cryptocurrencies are honing in on their 21-Day Moving Averages in the respective $31,800 and $2,250 areas. At current levels, ethereum has a market cap of just above $250 billion and a market dominance of just under 19.5%.

In notable ethereum-related news, co-founder Vitalik Buterin over the weekend confirmed that the transition of the ethereum blockchain to proof-of-stake from proof-of-work will likely take place this August. Core ethereum developers had last week hinted at a similar timeline.

Meanwhile, Buterin reportedly said over the weekend that, in wake of the latest crypto market tumble, he is no longer a crypto billionaire. Buterin was formerly acknowledged as the world’s youngest crypto billionaire. He wrote the etheruem white paper at the age of 19 in 2014.

Looking at some of the major altcoins, Solana’s SOL, Avalanche’s AVAX and popular ERC-20 dog-inspired meme coin Shiba Inu were all more than 4.0% higher in the last 24 hours, according to CoinMarketCap data.

In separate notable crypto news, Litecoin activated its new procacy protocol update over the weekend called Mimblewimble. LTC/USD was last trading higher by a little over 3.0% and at two-week highs in the $74.00 per token area, giving it a market cap of around $5.0 billion.

DeFi, NFTs News

As the broader Decentralised Finance (DeFi) space continues to lick its wounds post the collapse of the massively popular Terra ecosystem two weeks ago, crypto entrepreneur Justin Sun’s layer-1 Tron blockchain is a bright spot.

Trade value locked (TVL) in the total DeFi space remains stable around the $100 billion mark, where it has been for about 10 days now, data on DeFi Llama showed on Monday. But the TVL in the Tron ecosystem recently jumped to its highest level of the year so far above $5.0 billion, making it the third-largest blockchain by TVL behind ethereum and the Binance smart chain (BSC).

Just ten days ago, Tron’s TVL was around $3.7 billion, with $700 million of this rise coming over the weekend. Most of that jump came from a rise in the TVL on Tron’s largest DeFi protocol JustLend from around $1.8 billion to nearly $2.5 billion over the weekend.

Crypto investors can get a 30% yield on Tron’s algorithmic stablecoin USDD. USDD maintains its peg to the US dollar using a similar mint/burn mechanism to how Terra’s UST stablecoin did and many crypto analysts are worried that USDD could drag Tron and its ecosystem into a “death spiral” just like the de-pegging of UST did. For now, fears that history could repeat itself with USDD is not preventing massive inflows. Whether this will continue is another thing.

Separately, another notable NFT hack took place over the weekend. $70,000 worth of ETH was stolen after well-known NFT artist Beeple’s Instagram account was hacked over the weekend to post a phishing link to his followers.

Crypto Flows

Last week saw a modest net inflow of $280.7 million worth of bitcoin into crypto exchange wallets from private wallets, with $8.6 billion moving in and around $83 billion moving out. That’s not too surprising given cryptocurrency markets remain volatile and uncertainty remains high.

By contrast, ethereum saw a net outflow of around $950 million from exchange wallets, with $4.8 billion being moved into wallets versus about $5.7 moved out. That was despite last week’s near 5.0% drop.

Exchange flows in Tether’s stablecoin USDT stabilized, with a net outflow of about $190 million from exchange wallets. About $5.2 billion was moved into exchange wallets versus about $5.4 billion into private wallets.

Recall that, in wake of UST collapse from its peg two weeks ago, USDT also saw a wobble, falling as low as $0.97. While the US dollar-pegged stablecoin quickly regained its 1:1 peg with the buck after successfully fulfilling the demand for massive USDT redemptions, the market cap of the stablecoin has tumbled. As of Monday, it is around $73 billion according to CoinMarketCap, down about $10 billion since before the UST debacle.

In the past, USDT has faced accusations that it is not fully backed by US dollars or liquid equivalents. Circle’s USDC, the second-largest USD-pegged stablecoin by market cap, has not faced such allegations. As investors withdraw cash from USDT, a portion seems to be flowing into USDC.

USDC’s market cap surpassed $53 billion over the weekend, CoinMarketCap data shows, a jump of nearly $5.0 billion from pre-UST collapse levels. USDC is backed 1:1 with real US dollar/liquid equivalents. Circle this week committed to providing weekly updates on its USDC reserves and liquidity operations, a move that will likely further boost confidence in the stablecoin that many already deem as the “safest” in the cryptocurrency space.

Regulatory Landscape

US Congressman Byron Donalds recently introduced a bill that would prevent regulatory authorities from preventing US citizens from allocating their 401(k) pension savings to crypto. Fidelity has been in the limelight in recent weeks after it announced plans to allow 401(k) account holders to allocate up to 20% of their nest egg to bitcoin, subject to pension plan sponsor approval (i.e. the employer). The Department of Labor has been highly critical of this move, though has said it does not intend to prevent pensions savers from investing in crypto if they so choose.

President of the European Central Bank Christine Lagarde over the weekend said in an interview that crypto is “worth nothing” and “based on nothing”, before calling cryptocurrencies highly speculative and very risky investments. Lagarde cited the example of her son’s investments in the space, which she said have not been totally successful. Though Lagarde is a critic of crypto, she is an advocate for the creation of a digital euro that, she says, would be backed and guaranteed by the central bank.

Elon Musk tweeted over the weekend that the “true battle is between fiat and crypto… On balance, I support the latter”.

A WSJ report released over the weekend citing publically available blockchain data accused the crypto industry of having an insider trading problem. According to the report, several anonymous wallets have shown patterns of buying tokens in the days leading up to a major exchange listing, only to then sell the tokens immediately after. Allegedly, the practice is prevalent on most major exchanges like Binance, Coinbase, and FTX – when these exchanges announce plans to list a token, it often triggers a sharp rally in the cryptocurrency.

The WSJ report cited the example of a wallet that bought $360,000 Gnosis coins in the run-up to its listing on Binance in August. After the listing announcement, Gnosis rallied as much as 7x and the wallet unloaded its coins, making a $500,000 profit on the trade. FTX and Binance both publically denied any knowledge of insider trading within their companies. The accusations strengthen the argument for bringing cryptocurrency exchanges within the regulatory fold.

Daily Crypto Brew: Buoyant Global Equities, Buck Weakness Boosts Crypto Sentiment

Key Points

  • The macro backdrop of stronger global equities and a weakening US dollar is boosting crypto sentiment on Friday.
  • Bitcoin recovered $30,000 on Thursday and is now consolidating just above this key level.
  • The events to note next week are Fed minutes, US Q1 GDP (2nd estimate) and US Core PCE.

State Of The Market

Global macro risk appetite is on a better footing on Friday, with global equities rising across the board in wake of a surprise cut by China’s PBoC to one of its key lending rates. The bank cut its 5-year Loan Prime Rate (LPR) to 4.45% from 4.6%, and move analysts said should support the country’s struggling property sector.

Upside in global equity markets combined with a sharp, potentially positioning-related drop in the US dollar against most of its G10 peers on Thursday and continued subdued moves in US bond yields is helping to support cryptocurrency prices as the weekend approaches.

Nasdaq 100 index futures were last trading with pre-market gains of around 1.5%. Crypto has developed a strong positive correlation to US equities (tech stocks in particular) in recent months.

Meanwhile, the DXY fell back below the 103.00 level on Thursday, taking its losses since printed multi-decade highs above 105.00 last Friday to more than 2.0%. A weaker US dollar makes USD-denominated cryptocurrencies and other commodities cheaper for international buyers, thus boosting demand.

Elsewhere, longer-term US yields are down on the week, with the 10-year last down about 6 bps in the mid-2.80s% area. Lower yields reduce the “opportunity cost” of holding non-yielding assets like crypto (or precious metals and other commodities).

The total market capitalization of cryptocurrencies was last around $1.277 trillion according to TradingView, a bounce of around 6.0% from Thursday’s lows near $1.20 trillion. On the week, total crypto market cap is still down by about 4.3% or just under $60 billion, reflecting the fact that, on the week, US equities are also headed for losses.

But crypto bulls will take heart from the fact that the recent $1.20 trillion to $1.35 trillion (ish) range established over the last eight days continues to be respected. But broader macro conditions look set to remain difficult next week.

The release of the minutes of the Fed’s last policy meeting (where it hiked rates by 50 bps and signaled more 50 bps moves ahead) will be out on Wednesday ahead of the release of the second estimate of US GDP growth in Q1 on Thursday and then the release of US Core PCE inflation data on Friday (the Fed’s favored gauge of underlying inflation).

This will keep focus on the themes bearish themes of central bank tightening amid scorching hot inflation, despite a slowing economy. Traders will recall the first estimate of US Q1 GDP growth showed a surprise contraction, hence why the second estimate will be closely scrutinized.

If global equities can end this week on a strong footing and the moderation back from recent highs in the US dollar and US yields continue, total crypto market cap stands a good chance of recovering back into the $1.30s trillion area.

Price Action

Bitcoin is fairly stable in the $30,300 area on Friday, having bounced nearly 6.0% from Thursday’s lows in the mid-$28,000s. The world’s largest cryptocurrency by market cap still trades about 3.0% lower on the week, however, though also trades nearly 20% above last week’s lows in the $25,000s.

At current levels, bitcoin’s market cap is around $577 billion and its cryptocurrency market dominance is just above 45%, near its highest levels since last October. Analysts say that rising bitcoin market dominance is a sign of risk aversion in the crypto space, with investors allocating money out of riskier currencies/projects into the tried and tested bitcoin.

Ethereum, meanwhile, was last trading about 1.3% higher near the $2,050 per token mark on Friday, taking its gains since Thursday’s lows around $1,900 to about 7.5%. That means ethereum’s market cap is back to close to $250 billion once again.

In terms of notable ethereum news, one of the ethereum blockchain’s core developers on Thursday said that the merge to proof of stake (i.e. transitions to ethereum 2.0) could happen as early as August this year.

Out of the top 20 non-stablecoin cryptocurrencies, the top performers over the past two days include Avalanche’s AVAX (up 14% from Thursday’s lows), Solana’s SOL (up 10% from Thursday’s lows) and Ripple’s XRP (also up around 10% from Thursday’s lows).

Ripple on Friday announced a $100 million investment in climate-focused financial and carbon-reduction technology.

DeFi Update

The market cap of Decentralised Finance (DeFi) tokens remains broadly stable within recent $50-55 billion ranges, data on CoinGecko showed on Friday. Meanwhile, the trade value locked in DeFi smart contracts remains close to the $100 billion mark, around half of what it was at the start of April.

The collapse of the Terra, which had become one of the leading DeFi ecosystems in the space, has delt a severe blow to confidence across DeFi markets. Popular DeFi app Stablegains is reportedly being sued by its investors after it allegedly lost $42 million by investing in Terra’s UST without their knowledge.

Crypto Flows

Exchange wallets saw an inflow of bitcoin worth $470.7 million on Thursday, according to data from on-chain analytics firm Glassnode. Net flows between private and exchange wallets in ethereum, meanwhile, were near 0, whilst Tether’s stablecoin USDT continued to see flows into exchanges, this time of just above $200 million on Thursday.

When private wallets are moving a cryptocurrency to exchanges, this is often a bearish signal as it suggests intent to sell. USDT currently has a market cap of about $74 billion, according to CoinMarketCap data, down around $9 billion in the last two weeks, amid fears that it could be the next major stablecoin to collapse.

But according to the latest assurance report provided by accounting firm MHA Cayman, Tether’s USDT is fully backed. Nonetheless, many of the flows leaving USDT are going into Circle’s US dollar stablecoin USDC. According to CoinMarketCap, USDC now has a market cap of $52.78 billion, up from just under $48.50 billion just over two weeks ago.

Where there have been concerns in the past about whether or not Tether’s USDT is fully backed, USDC has never faced such worries.

Regulatory Landscape

G7 finance ministers and central bankers on Thursday called for the swift and comprehensive regulation of cryptocurrencies in wake of last week’s collapse of Terra’s UST stablecoin, according to a draft communique. “In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB (Financial Stability Board)…to advance the swift development and implementation of consistent and comprehensive regulation,” the draft document read.

US President Joe Biden’s pick for the role of Vice Chair for Supervision at the Federal Reserve Michael Barr on Thursday called for US lawmakers to regulate stablecoins amid rising risks to financial stability. In his confirmation hearing before the Senate Banking Committee on Thursday, Barr said that crypto poses “potential for upside in terms of economic benefit”, but also “significant risks”.

Former Fed Chair Ben Bernanke was critical of bitcoin in a recent interview on CNBC. He highlighted the risk that bitcoin might be subject to a lot more regulation in the future, and lambasted the cryptocurrency for its volatility, which makes it difficult to use as a medium of exchange. In that regard, Bernanke said he thinks bitcoin is unlikely to replace fiat currencies as a form of money, though he did add that “it will be around as long as people are believers and they want to speculate in it”.

Commonwealth Bank of Australia (CBA) announced on Friday that it had put on pause its plans to offer cryptocurrency services to clients, with the bank citing uncertainty regarding market conditions and uncertainty regarding regulation. The bank’s CEO Matt Comyn said plans to offer crypto-related services would be picked back up at a later date.

Daily Crypto Brew: Crypto Markets Reeling After Wall Street’s Worst Day Since 2020

Key Points

  • Crypto markets fell sharply on Wednesday as Wall Street experienced its worst day since June 2020.
  • Crypto sentiment has since stabilized, despite further downside in global equities on Thursday.
  • Bitcoin is currently around $29,000, having fallen back from the upper $30,000s on Wednesday.

State Of The Market

A series of grim earnings reports from US retailers, which most recently saw Target (TGT) drop over 20% on Wednesday, have put fears about US (and global) growth and inflation back in the limelight. As a result, Wednesday was the worst day for the US stock market since June 2020, with the S&P 500 dropping over 4.0% and the Nasdaq 100 dropping over 5.0%.

Given the close correlation to US stocks, Wednesday was also an ugly day for crypto, with the total market capitalization falling about 6.5% to around $1.21 trillion from above $1.30 trillion.

Stagflationary signals coming from major US retailers (Walmart and Home Depot also reported earnings this week) have negated this week’s stronger than anticipated US Retail Sales report for April and come against the backdrop of a Fed (and other major global central banks) that remains intent on continuing to tighten monetary policy aggressively.

Traders will recall remarks from Fed Chair Jerome Powell on Tuesday where he emphasized that the Fed’s top priority is inflation-fighting, even if that means slower growth, and, as a result, the Fed “will not hesitate” to take rates above the so-called “neutral” level (of around 2.5%) if required. Other Fed policymakers speaking that week have largely signaled the same message.

Expectations for slower growth (meaning weaker earnings) coupled with expectations for higher interest rates (meaning a higher discount rate) squeeze equity valuations from both directions. Many analysts are unsurprised that the bounce in US stocks earlier in the week proved to be short-lived.

In Thursday pre-market trade, US equity index futures are extending on Wednesday’s losses and look likely to break out to fresh annual lows before the week is out. Crypto is holding up a little better for now, with the total market cap for now consolidating around the $1.225 trillion mark and slightly in the green on the day.

Tier two US data in the form of the May Philadelphia Manufacturing survey, the weekly initial jobless claims report, and April Existing Home Sales probably won’t move markets much, with focus set to remain on the overarching themes of slowing growth, inflation, and central bank tightening.

Expect cryptocurrencies to continue taking their cue from stocks and, if that is the case, be prepared for further downside. A break below support at $1.20 trillion could see the crypto market cap drop back towards annual lows under $1.1 trillion.

Crypto Price Action

Bitcoin fell nearly 6.0% on Wednesday in tandem with the downside in equities, dropping from the upper $30,000s to the mid-$28,000s. However, despite continued US equity downside in pre-market trade, bitcoin has stabilized in the $29,000 area and remains a good 14% above last week’s sub-$26,000 lows (unlike S&P 500 futures, which are only a whisker above last week’s lows).

If bitcoin can continue to consolidate around the $30,000 level as has been the case over the past six or so sessions despite a breakout to fresh annual lows in US equities, that would be impressive. But the aforementioned negative themes of growth and central bank tightening fears suggest that it remains too soon to bet on a substantial bitcoin rebound.

At current levels, bitcoin has a market cap of around $550 billion, giving it a market dominance of around 45% (up from under 44.5% on Wednesday). In times of market turmoil, bitcoin’s market dominance tends to expand given its status as the largest/most durable cryptocurrency (many think).

Ethereum, meanwhile, dropped closer to 9.0% on Wednesday from around $2,100 per token to around $1,900. At present, the second-largest cryptocurrency by market cap is trading a tad higher on the day in the low $1900s but also remains vulnerable to further US equity market downside.

At current levels, ethereum has a market cap of around $230 billion, giving it a crypto market dominance of around 19% (down from 19.4% on Wednesday).

Non-stablecoin altcoins unsurprisingly underperformed versus bitcoin on Wednesday.

Of the majors, Ripple’s XRP dropped around 7.5% on Wednesday and is a further more than 1.0% lower on Thursday. Solana’s SOL dropped 12.5% on Wednesday and is down nearly 2.0% more on Thursday.

Binance’s BNB was down 6.0% on Wednesday, though has since bounced about 2.5% on Thursday. Cardano’s ADA lost about 12.5% on Wednesday and is flat on Thursday.

DeFi

The total value locked (TVL) of the entire Decentralised Finance space dropped by about $4.0 billion on Wednesday to around $98 billion, which is unsurprising really given the resoundingly risk-off broader market conditions.

Even though various DeFi protocols offer attractive yields on various stablecoins which are supposed to be immune to broader market conditions, investing in DeFi is still seen as highly speculative. This is even more so the case in wake of last week’s UST (and LUNA) crash.

At the start of 2022, the TVL of the total DeFi space was well above $200 billion. Amid the broader risk-off conditions in crypto and financial markets, it is difficult to imagine flows returning anytime soon.

In other notable DeFi news, early voting indicates majority support within the Terra community/validators for founder Do Kwon’s proposed fork. The fork, which could happen as soon as 27 May, would see the creation of a new Terra blockchain alongside the original one.

The new blockchain will scrap the UST stablecoin. The old Terra blockchain will be called Terra Classic and governed by the native token LUNA classic. LUNA’s market cap has fallen back under $1.0 billion as voting proceeds. UST/USD, meanwhile, continues to trade below the $0.10 level.

Crypto Flows

Exchange wallets saw net inflows of about $223 million worth of bitcoin on Wednesday, data from Glassnode showed, in fitting with the bearish market conditions. Crypto investors tend to move their investments back to exchange wallets where they can then be sold during difficult market conditions. During the same time period, ethereum exchange wallets saw a net inflow of just $7.1 million.

Elsewhere, there has been some hype across the crypto media landscape about the recent accumulation of more bitcoin by the richest non-exchange bitcoin wallet. The wallet has seemingly been using the recent downturn as an opportunity to buy the dip, having bought about 3,015 bitcoins over the last three weeks on net. That means the wallet now holds 127,067 bitcoins, worth about $3.685 billion based on Thursday prices.

Regulatory Landscape

US Securities and Exchange Commission (SEC) Chair Gary Gensler said in a Congressional hearing on Wednesday that a majority of initial coin offerings come under the SEC’s securities law, and that these tokens will be brought into the regulatory framework with the deployment of the SEC’s existing securities laws. A very small number of tokens, including bitcoin, are considered commodity tokens, he added, and would therefore fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Russian Industry and Trade Minister Denis Manturov said on Thursday that, “sooner or later”, Russia will legalize cryptocurrencies as a means of payment. Speaking at a forum, Manturov was questioned on the matter of crypto legalization as a means of payment. “The question is, when this occurs, how it will be regulated, given that the central bank and government are actively working on it,” he stated. “The general consensus is that… sooner or later, this will be implemented in some form,” he said.

Crypto Winter Ending Says Veteran Trader

Key Points

  • After calling the top last November, Yves Lamoureux sees the “crypto winter” ending.
  • “I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” he said.
  • At current levels just under $30,000, bitcoin is down over 56% from last year’s record peaks.

Bear Market

Just over six months ago, and just days after bitcoin had hit its highest levels on record around the $69,000 mark, Yves Lamoureux made the now-famous call that cryptocurrencies were headed into a bear market.

Lamoureux, who is president of macroeconomic research company Lamoureux & Co and sometimes referred to as the “Canadian Whale”, got his call last November spot on. Since the record peaks in November, bitcoin has crumbled more than 56% to current levels just below the $30,000 mark.

Over the same time period, the broader market cap of cryptocurrencies has tanked from record highs just above $3.0 trillion to current levels around $1.28 trillion, a drawdown of around 58%.

Cryptocurrencies have been hit hard by a sharp rise in both short- and long-term US yields (which raises the opportunity cost of holding non-yielding assets like precious metals and crypto), as well as a sharp pullback in US tech stock valuations (crypto has become increasingly correlated to US tech in recent months).

Sparking these unfavorable macro trends has been a rapid hawkish shift from the US Federal Reserve. Where last November the central bank was holding onto the belief that inflation would prove “transitory” and no rate hikes would be needed into 2023, the bank has realized the error of its ways.

The bank kicked off a hiking cycle with a 25 bps move back in March followed by a 50 bps hike earlier this month and officials are vowing to press ahead with further rate hikes in order to tackle inflation that is currently running at an annual rate more than four times higher than the bank’s 2.0% target (according to last week’s CPI data for April).

Crypto Winter Set To End?

Despite the ongoing threat of further/faster monetary tightening from the Fed, which many strategists think could result in further pain in crypto and equity markets and further moves higher in US yields, Lamoureux this week called for an end to the so-called “crypto winter”, Yahoo Finance reported on Wednesday.

“I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” Lamoureux reportedly said, adding that the 80% drawdowns seen in bitcoin’s past are no longer now required to shake out weak hands.

Describing the stages of the recent bear market, Lamoureux said “instead of one big swoon down, bitcoin broke that in two parts — creating less downside than a traditional drawdown”.

Much of bitcoin’s drawdown since last November had taken place by mid/late January, with the cryptocurrency only recently breaking below these lows and under $30,000 in wake of the collapse of TerraUST and LUNA.

“It looks complete in terms of a bear market,” Lamoureux stated.

Given the tight correlation between the beleaguered US tech sector and cryptocurrencies, some respite in the Nasdaq 100 index will likely be needed if bitcoin and other cryptocurrencies are to mount a meaningful recovery.

But Lamoureux is bullish on US tech. “It’s not often I am fully invested… (but) I am now,” he said, before adding that “as inflation drops, techs will reflate hard… Watch the FOMO”.

Lamoureux recently called for a three-year equity bull market.

Daily Crypto Brew: Bitcoin Consolidates, Pivots $30K As Traders Digest Hawkish Powell Commentary

Key Points

  • Crypto markets are a tad weaker on Wednesday but within recent ranges, as markets digest Fed Chair Powell’s hawkish commentary.
  • The Fed won’t hesitate to take rates above neutral, said Powell, deterring crypto bulls from chasing prices higher.
  • Total crypto market cap was last around $1.27 trillion with bitcoin last trading just under $30,000.

State Of The Market

While constructive updates out of China regarding a potential easing of Shanghai lockdowns and of the ongoing big tech crackdown got a rally in US and global equities started on Tuesday, the gains accelerated in US trade following robust US Retail Sales and Industrial Production data. In the end, the S&P 500 and Nasdaq 100 indices ended the day higher by 2.0% and 2.6% respectively, with traders shrugging off the hawkish tone to US Federal Reserve Chair Jerome Powell’s remarks towards the end of the day.

This unsurprisingly helped give risk-sensitive cryptocurrency markets a boost at the time, with the total crypto market capitalization rising to close Tuesday trade higher by about 2.5% and back above the $1.3 trillion mark.

However, as US equity index futures hand back some gains in pre-market trade, crypto markets have also come under some modest pressure. Total market cap has now more or less already given up all of Tuesday’s gains and is back to trading just above $1.27 trillion.

The more time markets have had to digest Powell’s remarks, the more the crypto bulls seem deterred from chasing prices higher. To recap, the main message from the Fed Chair was that the central bank remains hyper-focused on tackling sky-high inflation and will not hesitate to move rates above so-called neutral (i.e. the 2.5% area) if required.

For now, markets do not seem to be betting on interest rates moving well beyond neutral, which has facilitated stabilization in equities and crypto, and explains why bonds are consolidating below recent highs (10-year yields are still below 3.0%). Hence, the total crypto market cap continues to trade within the $1.25-35 trillion range established over the past four sessions.

But should the inflation figures fail to moderate as much as hoped for in the next few months, recent trends (weaker equities and crypto plus higher yields) could return as markets up their Fed tightening bets. In this bearish scenario, a break lower to annual sub-$1.1 trillion lows and perhaps below $1.0 trillion would very likely be on the table.

Looking ahead, it should be a quiet day on the economic calendar with no notable US data aside from some US housing data, which shouldn’t impact crypto. Any further Fed speak would be notable, as ever.

Price Action

In fitting with the broader stabilization of crypto markets, bitcoin continues to pivot on either side of the $30,000 per token mark, with its market cap near $570 billion, giving it a market dominance of still close to 44.5%. BTC/USD was last down about 1.5% on Wednesday.

Ethereum, meanwhile, continues to consolidate just above the $2,000 per token mark, giving it a market cap of around $250 billion and a dominance of around 19.2%. ETH/USD was last down about 2.6% on Wednesday.

In terms of some of the other major altcoins, Ripple’s XRP was last down around 2.0% but remained within recent ranges in the low-$0.40s per token. Likewise, Binance’s BNB was down about 1.4% but stable within recent intra-day ranges in the $300 per token area.

Solana’s SOL was last down closer to 5.0% on the day, but also within recent ranges around the mid-$50s per token, while Cardano’s ADA was last down about 2.5% in the mid-$0.50s, also within recent ranges.

DeFi, NFT Update

The chilling impact of the collapse of Terra’s ecosystem remains apparent across the Decentralised Finance (DeFi) space. Trade value locked (TVL) across all major chains was around $170 billion at the start of the month, but is now at around $100 billion, where it has remained for the last few days.

Prior to that, attractive yields on many assets including stablecoins across the DeFi space had supported TVL despite a broader downturn in cryptocurrency prices since the start of the year. But UST’s woes have hit confidence badly. A sustained upturn in crypto prices is likely going to be required for TVL to recover back to $200 billion once again, a prospect that doesn’t seem likely any time soon.

In tandem with the recent stabilization of the TVL across DeFi, the market cap of major DeFi governance and stablecoin tokens has remained stable in the mid-$50 billions area on Wednesday, according to CoinGecko data.

In terms of DeFi news, the Terra community has rejected a proposal from founder Do Kwon to revive the ecosystem with a blockchain fork. The community instead seems to favor an aggressive burn mechanism to address the flood of LUNA supply. As of Wednesday, LUNA’s market cap was just above $1.1 billion, making it the 12th largest of the major DeFi tokens.

Meanwhile, the UST token was last trading just under 10 cents on the dollar and had a market cap of around $1.4 billion.

Turning to the non-fungible token (NFT) market, in fitting with the broader crypto theme this week, the price floor of major NFT collections have been stabilizing. The price floor to bag one of Yuga Labs’ Bored Ape Yacht Club NFTs, having reached above $400,000 in late April, has stabilized around the $200,000 mark in recent days.

Meanwhile, after trading around $200,000 for most of 2022 but then falling towards $100,000 in early May, the price floor to own a Crypto Punk NFT has stabilized near the $110,000 mark in recent days.

In terms of NFT news, Spotify is reportedly testing the addition of NFT galleries on artist profiles, as the company explores ways to “improve artist and fan experiences”. Meanwhile, Robinhood is reportedly on the cusp of launching a new self-custody crypto wallet that will support NFTs, a move hailed as a significant stride in the right direction by Web3 advocates.

Crypto Flows

Glassnode data showed that, as of Wednesday morning, there had been modest outflows of $38.7 million worth of bitcoin and $64.5 million worth of ethereum from exchange wallets to private wallets over the last 24 hours, in fitting with the broader theme of continued stabilization.

According to blockchain transaction tracker Whale Alerts, a massive 2,447 bitcoins worth over $70 million at the time were transferred into a private wallet from a Coinbase wallet on Wednesday, indicative of Whale dip-buying.

Data from Glassnode on Wednesday also highlighted a shift in flows in the stablecoin market, with money leaving USDT (USDT tokens being redeemed for their cash equivalent) and going into the likes of USDC and BUSD. Since the collapse of algorithmic stablecoin TerraUST, around $7.5 billion in USDT tokens have been redeemed, taking the coin’s market capitalization to around $74 billion.

Meanwhile, close to $4.0 billion in USDC has been issued, taking the second largest stablecoin to a market cap of around $52 billion, making it the fourth-largest cryptocurrency by market cap. Similarly, BUSD’s market cap has risen from under $17 billion to around $18.2 billion over the same time period.

“What we are potentially watching is a changing preference for which stablecoins the market prefers,” said James Check, an analyst at Glassnode. Check speculated that a large trader or group of traders attempted to utilize heightened concerns after UST’s collapse to exert pressure on the USDT and perhaps trigger a similar de-pegging event last week.

Traders will recall that USDT did briefly come under pressure, though has maintained its peg well. Nonetheless, amid the heightened focus on USDT losing its peg, investors have been redeeming their USDT tokens and allocating towards other potentially “safer” stablecoins.

Regulatory Landscape

South Korea has reportedly launched an emergency investigation into the collapse of the Terra ecosystem and the downfall of its native governance token LUNA and algorithmic stablecoin UST. The country is reportedly considering implementing a licensing system for coin issuers and crypto exchanges, which it thinks might be able to mitigate investor losses from bad actors.

Meanwhile, the South Korean government reportedly wants to summon Terra founder Do Kwon to a hearing before parliament over Terra’s recent crash. Yoon Chang-Hyeon, a representative of the ruling People Power Party, said that “we should bring related exchange officials, including CEO Do Kwon of Terra, which has become a recent problem, to the national assembly to hold a hearing on the cause of the situation and measures to protect investors”.

Ahead of the meeting of G7 finance ministers later this week, Bank of France head and European Central Bank governing council member Francois Villeroy de Galhau has issued fresh calls for more crypto regulation. “What happened in the recent past is a wake-up call for the urgent need for global regulation… Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably… discuss these issues among many others at the G7 meeting in Germany this week”, he said on Tuesday.

Meanwhile, over in the US, the Congressional Research Service, a legislative research agency that supports Congress, described the recent downfall of UST and the broader LUNA ecosystem as like a bank run.

Daily Crypto Brew: Global Equity Rebound Lifts Crypto Ahead Of US Retail Data, Fed Speak

Key Points

  • A rebound in global equity markets is helping lift crypto markets from Monday’s lows.
  • But cryptocurrencies are still mostly lower on the week as focus shifts to US retail data and Fed speak.
  • Bitcoin has rebounded to the mid-$30,000s from Monday’s lows around $29,000.

State Of The Market

Global equities are on the front foot following a strong Asia Pacific session, where sentiment was boosted amid positive reporting on a decline in Covid-19 cases and easing restrictions in Shanghai and on the possibility that China might soon ease its crackdown on big tech, thus (modestly) easing fears about the current slowdown in global growth.

S&P 500 index futures are currently trading about 1.75% higher in pre-market trade, while Nasdaq 100 futures are more than 2.0% higher. This is giving a lift to cryptocurrency markets, which have shown to be tightly correlated to US equities in particular as of late.

The total market capitalization of cryptocurrencies was last up about 2.5% in the $1.3 trillion area, up around 5.0% from Monday’s dip to $1.24 trillion. But that still leaves total market capitalization lower by around 2.5% on the week and around 56% below last November’s record highs above $3.0 trillion.

Concerns about aggressive monetary policy tightening from major central banks (most notably from the US Federal Reserve) continue to dampen the prospect of a more meaningful crypto (and equity) market rebound.

NY Fed President and influential FOMC member John Williams gave no indications that the Fed is looking to slow the pace of monetary tightening in the month ahead, instead emphasizing the Fed’s stance that controlling rampant inflation remains its number 1 priority.

Plenty more Fed policymakers will be speaking on Tuesday, most notable of which is remarks from Fed Chair Jerome Powell from 1800GMT. Markets currently expect the Fed to hike rates by 50 bps at its next three meetings in a bid to get interest rates to around 2.5% by the end of the year.

While there is room for more of a relief rally in crypto if equities continue recent positive momentum, traders should be cautious about assuming the bottom is in. For the bottom to truly be in, we will likely need to see inflation in the US (and elsewhere) moderate, the Fed soften its rhetoric on the need for tightening and global growth fears abate somewhat.

US retail giant Walmart will both be posting their Q1 earnings results, whilst US Retail Sales data for April is also out at 1230GMT, meaning there will be a lot of focus on the underlying strength of the US consumer. Given consumption is the major growth engine of the US economy, this data could impact broader macro and crypto market sentiment, so will be worth monitoring.

Bitcoin, Ethereum, Altcoins

In tandem with the broader improvement in macro and crypto risk appetite, bitcoin is trading higher by about 2.5% on Tuesday just above the $30,500 level per token, taking its gains versus Monday’s lows around $29,000 to around 5.0%.

That gives the cryptocurrency a market cap of around $580 billion, while its crypto market dominance is stable at around 45%. Nonetheless, BTC/USD is still trading lower on the week by about 2.0%, meaning it is currently on course for a record eighth successive weekly decline.

Eight weeks ago (i.e. the end of March/the start of April), bitcoin went as high as $48,000, and so has dropped by more than 35% during this time.

Ethereum, meanwhile, is trading higher by about 3.5% near the $2,100 level, up around 6.0% versus Monday’s sub-$2,000 per token lows, but still down by about 2.2% on the week. That puts ethereum on course for a seventh successive weekly loss, during which time it has dropped roughly 40% back from the $3,500 area.

According to Bloomberg commodity strategist Mike McGlone, bitcoin and ethereum will outperform equities in the future as their volatility continues to decline. Referring to bitcoin in an interview with Yahoo Finance, McGlone said “asset that went up the most in the last 5-10 years is going to come back as the Fed hammers down.”

Elsewhere, traders in Brazil will be able to trade bitcoin and ethereum futures in the next three to six months on the B3 stock exchange.

Brazilian Stock Exchange B3 will offer Bitcoin and Ethereum futures in three to six months. The exchange is also planning to offer studies for asset tokenization and crypto trading, among others.

In other news, China was still the second-largest bitcoin hash rate providing country in the world in January despite banning cryptocurrency mining last year, according to data released by the Cambridge Bitcoin Electricity Consumption Index (CBECI) on Tuesday. Bitcoin miners in China still accounted for about 21.1% of the network’s global hash rate, while the US accounted for 37.8% of the global hash rate.

An index of the top ten altcoins was up more than 3.0% on Tuesday in tandem with the broader uptick in crypto market sentiment. Top ten non-stablecoin cryptocurrencies including Solana’s SOL (+5.3%) and Cardano’s ADA (+5.5%) for the most part outperformed the likes of bitcoin.

DeFi Markets

The market cap of the major DeFi tokens fell to around $53.7 billion as of the early hours of Tuesday trade, CoinGecko data showed. It has been relatively stable in the $50-60 billion area over the past few days after dropping back from above $100 billion at the start of the month following the collapse of Terra’s LUNA and UST tokens.

As of Tuesday, the total value locked in the entire DeFi space remained close to $100 billion, data from DeFi Llama showed. It has been stable at around $100 billion in recent days after collapsing lower from above $180 billion in wake of Terra’s downfall.

There has been a lot of focus on the outperformance of MakerDAO’s governance token MKR as of late. MakerDAO is the creator of US dollar-pegged stablecoin DAI which has held up well despite turbulence across stablecoin markets.

MKR/USD is up more than 75% from a brief dip below $1,000 per token in the immediate aftermath of TerraUST’s initial de-pegging from the US dollar.

The token currently trades in the upper $1600s, giving it a market cap of around $1.64 billion, making it the seventh-largest of the major DeFi tokens. MKR’s recent strong performance comes despite investors pulling money out of DAI in recent weeks.

At the start of May and prior to UST’s crash, DAI had a market cap of around $8.7 billion, compared to now being around $6.5 billion. DAI still has the second-largest market cap of the major DeFi tokens.

In terms of notable news stories related to the DeFi space, Coinbase is reportedly testing a new in-app browser that will allow users to access ethereum-based decentralized Apps (or dApps).  Users will be able to exchange funds into these dApps through a new co-custodial hot wallet.

Terra Founder Do Kwon proposed on Monday proposed forking Terra onto a new chain that gets rid of its failed UST algorithmic stablecoin, with the new chain to instead be focused on the development of DeFi applications.

Kwon said the current chain would continue and be called Terra “Classic”. LUNA holders on the current and soon-to-be “Classic” Terra chain will receive a token airdrop on the new chain. The proposal is at the moment just that, but Kwon said that, if approved by Terra’s network validators and community, the fork could take place as soon as 27 May.

Exchange Flows

As of 0500GMT on Tuesday, exchanges had seen a net outflow of $326.5 worth of bitcoin in the last 24 hours, a sign of improving investor confidence, Glassnode data showed. Ethereum, meanwhile, saw an even heftier net outflow from exchange wallets worth around $977.7 million. USDT saw a net inflow to exchange wallets of around $430 million, a sign confidence in stablecoins is yet to fully recover.

Regulatory Landscape

US Securities and Exchange Commission Chair Gary Gensler took aim at cryptocurrency markets once again on Monday, saying that investors need to be provided with more protections. According to Gensler, those who invest in cryptocurrencies don’t normally get the same disclosures about their investment that come with investments in other asset classes.

Elsewhere, the US launched its first case involving the use of bitcoin to evade sanctions. The defendant in the case stands accused of creating a payments platform that moved approximately $10 million worth of bitcoin through it, with the defendant allegedly boasting that the service could be used to evade sanctions.

Meanwhile, European Central Bank officials are calling for regulation in wake of Terra’s collapse last week. According to Bank of France Governor Francois Villeroy de Galhau, “crypto-assets could disrupt the international financial system if they are not regulated, overseen and inter-operable in a consistent and appropriate manner across jurisdictions”. Separately, ECB executive board member Fabio Panettarecently warned that “stablecoins are vulnerable to runs”.

Portuguese Finance Minister Fernando Medina stated that Portugal is building a framework that tees up the taxation of cryptocurrency income gains. Portugal has up until now been seen as something of a European crypto tax haven given its lack of crypto-related taxation.

Meanwhile, over in Australia, the Australian Taxation Office (ATO) has warned cryptocurrency investors that they must report capital gains/losses from digital assets, including non-fungible tokens (NFTs), in an announcement on Sunday. Australia’s next tax season begins on 1 July.

Your Crypto Brew: Bitcoin Dips Back Under $30,000 Amid China Growth Fears

Key Takeaways

  • After a positive weekend, cryptocurrency markets are giving back some gains on Monday, with BTC/USD back under $30,000. 
  • Weak Chinese data over the weekend have put fears about slowing global growth in the limelight.
  • US Retail Sales data and Fed Chair Powell’s speech, both Tuesday, will be key events for crypto markets this week.

State Of The Market

Cryptocurrency markets are seeing broad weakness at the start of the week following a weekend of stabilization. The total market capitalization of cryptocurrencies rallied to as much as $1.344 trillion on Sunday, up nearly 25% at the time from last Thursday’s multi-month lows under $1.1 trillion.

After closing out Sunday trade in the green for a third successive session, the longest positive run since March, the total market capitalization of cryptocurrencies has fallen a little more than 5.0% on Monday to around $1.26 trillion.

Data released out of China over the weekend showed steep declines in the YoY growth rates of both the nation’s Industrial Output and Retail Sales in April. Recent economic weakness in China comes as the country implements harsh lockdowns across major cities including financial hub Shanghai and the capital Beijing in order to contain the spread of Covid-19.

The latest data out of China, the world’s second-largest economy, highlights increased concerns investors have been having about slowing global growth as of late. These concerns, alongside concerns about central bank tightening, have weighed heavily on risk-sensitive assets such as equities and crypto in recent weeks.

Growth worries and central bank tightening fears will remain in focus this week with the release of April US Retail Sales figures followed by remarks from US Federal Reserve Chair Jerome Powell on Tuesday.

Markets expect the Fed to implement further 50 bps rate hikes at its next few meetings as it seeks to bring rates to a more neutral level amid persistently elevated US inflation. Against the backdrop of concerns about growth and tighter monetary policy, rallies in cryptocurrency markets may remain subject to being sold.

Bitcoin, Ethereum, Altcoins

In tandem with the recent swing in cryptocurrency market sentiment, bitcoin is back to trading just below $30,000 on Monday, down nearly 5.0% on the day, having rallied as high as $31,400 on Sunday. At current levels of around $29,000 per token, bitcoin’s market cap is around $570 billion, and its crypto market dominance is around 44.5%.

Similarly, ethereum is back to trading near the $2,000 per token level having gone as high as the upper $2,100s over the weekend. At current levels, its market cap is around $245 billion, and its crypto market dominance is around 19.3%.

Price action across most of the rest of the other non-stable coin cryptocurrencies in the top ten has been similar to that of bitcoin and ethereum over the past few days. On Monday, Ripple’s XRP was last trading lower by about 6.0% around $0.40 per token, and Binance’s BNB was last down around 5% and back to just below $300 per token.

Cardano’s ADA was last down about 4.5% to around $0.57 per token and Solana’s SOL was down just under 8.0% to around $54 per token. Popular meme coin DOGE was last down about 6.0% to just under $0.09 per token.

DeFi, NFTs

After last week’s LUNA-led rout that saw the market of major DeFi tokens collapse from near $100 billion to lows around $50 billion, sentiment has stabilized since the weekend. The market cap of major DeFi tokens is currently around $56 billion, little changed since Sunday.

In terms of the latest news regarding Terra’s LUNA, the market cap of the token native to Terra’s blockchain went as high as $3.0 billion over the weekend but has since dropped back to around $1.4 billion.

Ethereum founder Vitalik Buterin said he strongly supports a plan that would deliver “coordinated sympathy and relief for the average UST smallholder who got told something dumb about “20% interest rates on the US dollar” by an influencer, personal responsibility and SFYL for the wealthy”.

Meanwhile, questions have been rising about what happened to the Luna Foundation Guard’s (LFG) bitcoin reserves, with $1.2 billion reportedly still unaccounted for. The LFG is a non-profit set up to support the development of the Terra ecosystem and had been building a large bitcoin reserve to help back UST.

Separately, over the weekend a Bored Ape Yacht Club non-fungible token (NFT) worth over $200,000 was mistakenly sold for $200. Some speculated the sale could actually have been for tax evasion/avoidance.

Exchange Flows

According to Glassnode data, last week saw $19.4 billion worth of bitcoin flow into cryptocurrency exchange wallets versus $17.9 billion flow out. The net inflow to exchanges was thus around $1.5 billion worth of bitcoin, which isn’t too surprising given last week’s volatile/bearish conditions.

In times of crypto market stress, it’s not unusual to see investors moving their crypto into their exchange wallets so they can sell.

Last week also saw a net inflow of around $979.5 million ethereum and $3.8 billion USDT (Tether USD) into exchange wallets.

In terms of exchange flows on Sunday, bitcoin saw a net outflow of just under $70 million, ethereum saw a net inflow of just under $50 million and USDT saw a net inflow of just over $70 million.

Crypto Adoption

Major global investment banks Goldman Sachs and Barclays invested in a $70 million funding round for Elwood Technologies, a crypto trading/portfolio management software company, marking a new bet on the longevity of the crypto space.

Meanwhile, reports over the weekend suggest that Japanese bank SIB Holdings will buy a 51% stake in crypto trading platform BITpoint Japan.

Grayscale Investments just listed its first exchange-traded fund (ETF) in Europe. The Future of Finance UCITS ETF will list on the London Stock Exchange, German Börse, and Italian Borsa Italiana and will offer investors exposure to companies including PayPal, Coinbase Global, Block, Robinhood Markets, and Argo Blockchain.

Finally, the CEO of major crypto exchange FTX Sam Bankman-Fried said that he doesn’t think bitcoin has a future as a payments system, but that it does have potential as a store of value.

Regulatory Landscape

The UK government on Monday confirmed that they will regulate stablecoins following the LUNA and UST collapse. They reportedly do not have any problem with stablecoins, so long as they aren’t algorithmic (like UST was).

Reports over the weekend suggest that South Korea is to launch an emergency review of cryptocurrencies in wake of the LUNA and UST crashes.

“32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the #Bitcoin rollout and its benefits in our country”, El Salvador President Nayib Bukele tweeted on Monday. The meeting will take place on Tuesday.

Officials at India’s central bank warned a key parliamentary finance panel that the adoption of crypto in the country could result in the “dollarization” of the Indian economy and reiterated their recommendation for a complete ban. India may also soon ban crypto celebrity endorsements.

Finally, the Securities and Exchange Commission of Nigeria said in a new rulebook published over the weekend that all digital assets represent either an asset such as a debt or equity claim on the issuer, thus by default fall under their regulatory purview.

Goldman and Barclays’ Investment in Elwood a Win for Crypto Adoption

Key Insights:

  • Goldman Sachs and Barclays invested in a $70 million funding round for Elwood Technologies.
  • The crypto trading platform’s CEO said the investment marks “another validation of the longevity of crypto.”
  • The success of the funding round comes despite the recent crypto market turmoil.

Two of the world’s major investment banks just made a big investment in cryptocurrency trading platform Elwood Technologies, The Financial Times reported on Sunday.

US banking giant Goldman Sachs and British powerhouse Barclays participated in a $70 million funding round alongside venture capitalist (VC) Dawn Capital and the VC divisions of Germany’s Commerzbank and US crypto billionaire Mike Novogratz’s Galaxy Digital.

The funding round valued Elwood at around $500 million and marked the first time that Elwood Technologies has sourced outside financing.

Similar to Bloomberg’s terminal

Elwood Technologies was founded by British hedge fund billionaire Alan Howard with the initial aim of managing his personal fortune of digital assets.

Since 2020, Elwood has pivoted from being asset management focused to selling market data, trading infrastructure and asset management software to clients who want to invest in digital assets.

According to The Financial Times, the company’s CEO Strickland said that they provide a tech platform similar to Bloomberg’s widely used terminal and BlackRock’s portfolio management system “Aladdin.”

A bullish sign for crypto

Elwood Technologies CEO James Strickland told the Financial Times that the success of the latest funding round, which comes despite the recent turmoil in crypto markets, is “another validation of the longevity of crypto.”

“We’re getting investment from financial institutions that aren’t expecting to get massive returns in 15 minutes,” he continued, adding that “I think it’s a reassurance message.”

Meanwhile, “as institutional demand for cryptocurrency rises, we have been actively broadening our market presence and capabilities to cater for client demand,” noted Goldman Sachs’ global head of digital assets Mathew McDermott. He said the latest investment in Elwood demonstrated the bank’s “continued commitment” to the digital asset space.

Crypto analysts framed the latest news as another bullish sign for the long-term mainstream adoption of crypto and digital assets.

Cryptocurrency markets have been volatile in recent weeks. Since the start of April, the total market capitalization of cryptocurrencies has fallen from over $2.1 trillion to under $1.3 trillion, a nearly 40% decline, with almost 20% of that coming just this week, at the time of writing.

Earlier in the week, the global crypto market cap at one point even fell below $1.1 trillion for the first time since early February 2021.

Fears about slowing global growth at a time when major global central banks are intent on aggressively lifting interest rates to tame rampant inflation have been cited as the main cause for the recent tumble.

Cryptocurrencies are still primarily viewed as risk-sensitive and speculative assets, hence their susceptibility to risk-off flows, and are also (like precious metals) allergic to rising interest rates, given that this marks an increase in the opportunity cost of holding non-yielding assets like crypto or gold.

Whilst it might be too soon to call the bottom of the recent tumble given the ongoing risk that the Fed might turn even more hawkish, analysts say that longer-term institutional investors are being attracted into the space now that crypto valuations are more favorable.

Goldman and Barclays’ move to invest in Elwood comes amid a broad trend of major financial institutions moving to satiate the growing demand for crypto trading and investment services from their clients.

US asset management giant Fidelity recently announced plans to let 401(k) pension account savers allocate as much as 20% of their portfolio to bitcoin (BTC) and soon expand to other digital assets. All the while, cryptocurrency user metrics continue to trend higher globally.

Your Crypto Brew: Bitcoin rebounds above $30,000 amid broad recovery

Key Points

  • Cryptocurrency market sentiment saw a strong rebound on Friday, with total market cap nearly 20% up versus Thursday’s lows.
  • Bitcoin is back above $30,000, though remains on course for steep weekly losses.
  • GAM Holdings might invest $2-3 billion to help Terra save its UST peg.

State Of The Market

Cryptocurrency markets have seen an overdue rebound on Friday. This is in tandem with a modest recovery in US (and global) equity market sentiment, amid widespread dip-buying following recent selling pressure.

According to TradingView, the total cryptocurrency market cap stands at just under $x trillion at the time of writing.  This is around 4.5% higher versus Thursday’s close and nearly 20% higher versus Thursday’s sub-$1.1 trillion lows.

However, the total cryptocurrency market cap is still lower by about 17% or over $260 billion on the week. This would mark the worst weekly performance since January.

Some market commentators cited remarks from the chairman of the US Federal Reserve Jerome Powell as supportive of equity and crypto market sentiment late on Thursday. Powell, speaking at the Senate (who on Thursday approved his second term as Fed chair), reiterated that 50 bps rate hikes would be appropriate at the next two FOMC meetings.

His remarks were interpreted as pushback against a potential 75 bps rate hike. This came after some traders upped their bets for even faster rate hikes in wake of this week’s hotter than expected US CPI and PPI data for April.

Some cited USDT’s recovery back to its 1:1 peg with the US dollar. Along with Swiss asset manager GAM Holding’s interest in making an investment to revive Terra’s UST as potentially supporting sentiment in cryptocurrency markets.

Though analysts warn that it likely remains too early to bet with conviction that the crypto market bottom is in.

The Fed

Fed Chair Powell warned on Thursday that the Fed may choose to quicken or slow the pace of monetary tightening in the coming quarters depending on how the economic data pans out.

Thus, there remains a risk that if inflation fails to abate, as the Fed is hoping in the second half of this year, they may yet quicken the pace of monetary tightening.

This could yet send US stocks lower (weighing on crypto via the close correlation) and US bond yields surging once again (which would weigh on non-yielding crypto and commodity assets as it represents a higher “opportunity cost”).

However, with the lack of key macro risk events on Friday, along side the impressive the recovery from Thursday’s lows, stabilization might be the name of the game for crypto markets this Friday.

Traders should keep an eye on the preliminary release of the US University of Michigan Consumer Sentiment survey for May at 1500BST. The release will include for insights as to how US consumers are holding up in the face of still sky-high inflation. In addition to any commentary from Fed speakers that might move the needle regarding tightening expectations.

Bitcoin, Ethereum

After coming within a whisker of the $31,000 level in earlier Friday morning trade, bitcoin has backed off to trade around the $30,200s. It is there where it still clings on to on-the-day gains of about 4.5%.

That marks a rebound of about 19% from Thursday’s lows in the mid-$25,000s. At current levels, bitcoin’s market cap is around $575 billion. This means the cryptocurrency is still on course to close out the week more than 10% lower. Around $72.5 billion in market cap wiped out.

That would mark a second week running where bitcoin has dropped over 10%.

Turning to the world’s second-largest cryptocurrency by market cap ethereum. ETH/USD was last changing hands in the mid-$2,000s per token. It had gains of about 5.0% on the day. The cryptocurrency/fiat pair is up more than 20% versus Thursday’s lows around $1,700 per token.

However, ethereum remains on course to have shed about 18% of its value this week. Its current market cap is around $250 billion.

Notable News

The UAE’s largest airline, Emirates, announced plans to accept bitcoin as a payment method. This marks another step towards mass crypto adoption.

Elsewhere, Japanese banking giant Nomura will now be offering bitcoin derivative trading to its clients. Traders will now be able to trade on the futures and options markets.

Tim Albers, Nomura’s head of FX Structuring in Asia excluding Japan, said that while recent volatility has been significant, “once the dust settles, valuations will become more attractive for institutional clients”. “We’re pretty excited to get this off the ground” he added, with the launch marking “the start of our journey into the (crypto) space”.

Meanwhile, in wake of the recent market drop, El Salvador’s bitcoin investments over the last few months are deep in the red. Having spent $103 million building up a bitcoin treasury (according to DeCrypt), the country’s holding’s are worth just over $70 million at current prices.

Terra Update

In the early hours of Friday (during Asia Pacific trade), Terra announced that its validators had decided to halt the blockchain at block height 7607789, the second such halt in less than 12 hours, as Terra’s developers hatch a plan to revive UST.

Swiss asset manager GAM Holdings offer hope to those still clinging to their USTs on Friday,. GAM says it is negotiating with Terraform Labs to potentially invest between $2-3 billion in order to burn excess UST supply. This is with the intention of getting the algorithmic stablecoin back to its $1.0 peg.

Terra founder Do Kwon also hinted that he might consider making UST a traditionally collaterized stablecoin similar to Tether’s USDT and USD Coin. Both of which are backed 1:1 by actual US dollars or highly liquid equivalents (i.e short-term US government debt).

For reference, UST/USD was last trading around $0.20.

The native token of Terra’s now halted blockchain, LUNA, has now been delisted on the world’s largest crypto exchange Binance. The exchange also now closed all of its LUNA liquidity pools. Meanwhile, Crypto.com has temporarily suspended LUNA trading and withdrawals.

Despite the halting of Terra’s blockchain, LUNA and UST are both still available to trade on FTX and a few other exchanges. Though nothing can be settled until the blockchain restarts again, so no trades will be seen as final just yet.

LUNA/USD was last changing hands on Betfinix for under $0.005.

Altcoins

The rebound in crypto sentiment that has seen altcoins unsurprisingly outperform on Friday. Though much like bitcoin and ethereum, most still remain on course to post ugly weekly losses.

Binance’s BNB is up over 10% on Friday and 40% versus Thursday’s lows. Though it is set to end the week around 15% lower. Ripple’s XRP is up close to 15% on the day but still down over 20% on the week. Cardano’s ADA is up over 20% on the day, but on course for weekly losses of about 23%. Meanwhile, Solana’s SOL is up about 15% on Friday, but still down over 30% this week.

Finally, popular Shiba Inu-inspired memecoin DOGE is up about 8% on Friday but is still down about 28% on the week.

DOGE got another Elon Musk-related pump via Twitter late on Thursday. The Tesla and SpaceX CEO Elon Musk, who ranks as the world’s wealthiest man according to a Bloomberg Billionaire index, said that “Dogecoin has potential as a currency”.

However, DOGE tumbled in wake of news this Friday that Musk’s bid to buy Twitter has been put on hold. Musk hinted in the past that Dogecoin could be a payment option on Twitter.

Stablecoins

Tether’s USDT has recovered its peg to the US dollar. Tether says its USDT tokens are backed 1:1 by US dollars/liquid proxies. Confidence that the tokens are fully collateralized seems to have shielded USDT from the kind of “bank run” seen on UST earlier in the week.

Flows, Deals & Transactions

According to Glassnode, there was a net outflow of around $190 million worth of bitcoin from cryptocurrency exchanges on Thursday. This aligns with the context of the recent rebound. Traders seem to have taken advantage of the dip into the mid-$20,000s to buy bitcoin on exchanges and then transfer the bitcoin to their wallets for storage.

Regardless of the recent rebound, the seven-day moving average number of bitcoin wallet addresses in profit reached a 21-month low of 24,306,444.720 on Friday, according to Glassnode.

Despite rebounding in tandem with bitcoin and the rest of the cryptocurrency market, ethereum still saw a net inflow to exchanges of around $80 million on Thursday, Glassnode data showed. Meanwhile, the seven-day moving average number of addresses in profit reached a 9-month low of 50,905,707.762 on Friday.

Meanwhile, USDT flows have also been in focus amid recent fears of a de-peg event. Glassnode data showed that there was a massive net inflow to exchanges of around $1.5 billion on Thursday.

On Friday the blockchain tracker Whale Alert, revealed that a total of 3 billion USDT tokens in the Tether Treasury’s wallet had been burned. “Burn burn burn,” Tether chief technology officer Paolo Ardoino tweeted.

Having hit all-time highs above $83 billion in Market cap last week, USDT market cap is now around $79.3 billion. This is in light of investors withdrawing from stablecoins in wake of UST’s demise.

Regulatory Landscape

Germany announced earlier in the week that capital gains on bitcoin and ethereum will not be subject to tax. This is so long as the owner has sold after holding the cryptocurrencies for at least one year, even if they are used for staking.

Meanwhile, recently elected South Korean President Yoon Suk-yeol said on Thursday his government aims to establish a new regulatory framework that will facilitate the institutionalization of crypto by 2024. The legislation is to be proposed in 2023.

Elsewhere, US Securities & Exchange Commission official Hester Peirce said on Thursday that “we might see some movement” around stablecoin regulation soon. Her remarks come after this week’s collapse of Terra’s UST from its 1:1 peg to the US dollar.

Peirce, sometimes referred to as “crypto’s mom” within the SEC, is a supporter of a regulatory framework that would allow “room for there to be failure” when it comes to stablecoins. She has argued that the market needs to be able to experiment with what works best regarding crypto and stablecoins.

Her remarks come after US Treasury Secretary Janet Yellen said earlier in the week that the risk of stablecoin de-pegging was not yet a threat to the country’s financial stability. Stablecoins are not yet at a scale where a price drop would present a risk, she said.