Binance and Mastercard to Launch Prepaid Card in Inflation Battered Argentina

Key Insights:

  • Binance users can store crypto on their cards and pay at Mastercard merchants.
  • Argentina has one of the world’s highest inflation rates at 64%.
  • Dollar-pegged stablecoins are in high demand in the country.

On August 4, Binance announced a partnership with Mastercard (MA) to launch the ‘Binance Card’ in economically embattled Argentina.

The prepaid card aims to bridge the gap between cryptocurrencies and everyday purchases, according to the announcement. It added that Argentina was the first Latin American (LATAM) country to get the product.

Binance Card is still in a beta phase, but it is the firm’s latest effort to boost cryptocurrency adoption and digital payments.

Crypto Card For Global Payments

The card issued by Credencial Payments will allow new and existing Binance users in the country with a valid national ID to make purchases and pay bills with cryptocurrencies. More than 90 million physical and online Mastercard merchants across the globe will accept the card.

Crypto stored on the card will be converted to fiat in real-time, which is then sent to the merchant. Additionally, cardholders can earn as much as 8% in crypto cashback on eligible purchases and get zero fees on ATM withdrawals. Transactions and payments can be viewed and managed on the Binance website and mobile app.

Executive Vice President of Products and Innovation at Mastercard Latin America, Walter Pimenta, said that the firm’s “work with digital currencies builds on our strong foundation to enable choice and peace of mind when people shop and pay.”

Maximiliano Hinz, general director of Binance in Latin America, added, “Payments is one of the first and most obvious use cases for crypto, yet adoption has a lot of room to grow.”

The move comes at a time when Argentinians are suffering a cost of living crisis due to epic inflation. The country has one of the highest inflation rates in the world at a whopping 64% for June, according to Trading Economics. It is expected to reach 90% by the end of the year.

Many people have already turned to holding dollar-pegged stablecoins such as Tether (USDT) and Circle’s USDC to hedge against a rapidly devaluing Peso. Since the same time last year, the Peso has lost more than a third of its value against the greenback. As a result, there is a premium for stablecoins on Argentine exchanges due to the demand.

Argentina’s President has just sworn in the third new economy minister in a month. Sergio Massa has pledged to stop printing money that helps fuel runaway inflation.

Crypto Markets Consolidate

Crypto markets have remained flat over the past 24 hours, with a marginal dip in total capitalization to $1.1 trillion. Around $50 billion has left the space since their weekend and seven-week high.

Binance’s BNB token has reacted well to the news bucking the daily downtrend with a gain of 2.5% on the day, pushing prices above $300 again. BNB has weathered the crypto storm a little better than its brethren since it has ‘only’ lost 55% since its May 2021 all-time high.

Over $2B Lost in 13 Separate Crypto Bridge Hacks This Year

Key Insights:

  • Chainalysis reports that bridges have become the top crypto security risk.
  • North Korean-linked hackers have been highly active in bridge exploits.
  • More than $2 billion has been lost from bridge attacks this year.

In a report released this week, blockchain analytics firm Chainalysis stated that vulnerabilities in cross-chain bridge protocols have emerged as the top security risk.

The firm estimates that $2 billion in crypto assets has been stolen from bridges in 13 separate exploits this year. “Attacks on cross-chain bridges account for 69% of total funds stolen so far this year,” it added.

A bridge is software usually consisting of smart contracts that enable tokens to be transferred from one network, such as Ethereum (ETH), to another, such as Avalanche (AVAX). Each blockchain ecosystem has its own token standard though Ethereum’s ERC-20 has emerged as the industry standard.

A Bridge Too Far

The report follows the hack of the Nomad bridge this week, which resulted in the loss of the protocol’s entire collateral of $190 million.

As more value flows across these bridges, they become more attractive to hackers, the report added. It also stated that hacking groups with ties to North Korea have been responsible for half the amount lost so far this year by targeting bridges and decentralized finance (DeFi) protocols.

Bridges are lucrative targets for cyber criminals because they often store funds that back the bridged tokens on the destination chain. The funds could be held in a smart contract or centralized custodian, but they become a central storage point which is the target.

Additionally, bridges are mainly experimental, and the technology hasn’t had time to mature, meaning vulnerabilities and novel attack vectors can be discovered.

The largest bridge hack to date was the Ronin bridge which was exploited for $615 million in March. Ronin allows users to transfer assets from the Axie Infinity (AXS) Metaverse game between various blockchains. In February, the Solana (SOL) Wormhole bridge was exploited for $325 million.

To protect themselves, crypto platforms have been urged to undergo rigorous auditing processes. However, even audited smart contracts can be exploited, as was the case with Web3 music streaming platform Audius which lost $6 million in a hack in July.

Although not a bridge attack, the Solana ecosystem suffered another setback this week when as many as 8,000 wallets were exploited for more than $8 million.

Crypto Market Unfazed

In previous years, multi-million dollar hacks and exploits would send crypto markets tumbling. However, they appear to be unfazed this week.

Total market capitalization has gained 2% on the day to reach $1.12 trillion. Markets remain range bound, however, with resistance proving too strong to overcome.

Bitcoin (BTC) has inched up 1.5% to $23,146, while Ethereum was trading 2.7% higher this morning at $1,654 at the time of writing.

Network Activity Reveals Bears Are Still in Control of Crypto Markets

Key Insights:

  • Transactions, address activity, and network fees are still in bear market territory.
  • Bitcoin is trading at crucial support levels, and demand appears to be limited.
  • News of an attack on Solana has sent SOL prices plummeting.

Bitcoin and crypto markets have been in retreat since their seven-week high over the weekend, and on-chain activity indicates that bears still have a lot more energy.

Around $50 billion has left the crypto asset space since the weekend. Markets have been in retreat this week, with total capitalization falling below $1.1 trillion yesterday.

Since the big slump in mid-June, crypto markets have been range-bound, with resistance proving too strong to overcome. On-chain analytics provider Glassnode has reported that the bears are still firmly in control of the market.

Bear Relief Rally

According to Glassnode, which delved into Bitcoin (BTC) network data in its weekly report, “current network activity suggests that there remains little influx of new demand as yet.”

The firm analyzed network transactions, address activity, and fees which are usually a good indicator of demand for Bitcoin and its brethren.

It noted that, despite the recent rally to $24K, these trends have been in decline, which indicates that we are “firmly within bear market territory.” Bitcoin is currently trading at $22,880, which is right on the 200-week moving average. This indicator has been the market bottom and solid support in the previous two bear markets though prices have dipped below it.

Another market bottom indicator is the Realized Price, which is a measure of Bitcoin the value of all coins in circulation at the price they last moved, or an approximation of what the entire market paid for their coins. BTC Realized Price is currently $21,807, according to charting website Woo Charts.

Observing the past month of consolidation, Glassnode stated that only a “stable base of higher conviction traders and investors remain.” These have been slowly accumulating, but there has been no new demand to drive prices higher.

Considering the current state of the global economy, this scenario is likely to remain for some time. Only when inflation is under control, and retail traders and investors have more cash for high-risk assets will demand for crypto increase.

Crypto Cool Down

Markets have been in retreat since the seven-week high over the weekend. Bitcoin is flat on the day though Ethereum (ETH) has made marginal gains of 2.6% to top $1,600 during the Wednesday morning Asian trading session.

Solana (SOL) has seen the biggest drop of 4% as news of an ecosystem attack is currently breaking.

 

 

 

 

Crypto Lender Vauld Granted Three-month Protection From 147,000 Creditors

Key Insights:

  • Vauld will get three months for restructuring and a potential sale to Nexo.
  • The company suspended withdrawals in July after the Terra collapse.
  • It has around 147,000 creditors that can’t access funds.

On August 1, Singapore High Court awarded Vauld’s parent company, Defi Payments Ltd., a moratorium that would last until November 7, half the company requested. The company is attempting to sell itself to rival crypto insurer Nexo.

Justice Aedit Abdullah expressed concern that “a six-month moratorium won’t get adequate supervision and monitoring.”

Earlier this month, FXEmpire reported that the Coinbase and Peter Thiel-backed cryptocurrency lending and borrowing platform had suspended withdrawals as it faced liquidity issues.

During the three months, Vauld’s 147,000 creditors will not be able to take action against it, according to Bloomberg.

$400M in Liabilities

The court stated that Vauld should provide details such as cash flow and valuation of assets to its creditors. The judge said that this needs to be completed within two weeks and management of its accounts needs to follow within eight weeks. He also asked the company to form a creditors committee to address these issues.

Singapore-based Vauld was launched in 2018, offering digital asset trading, custody, and crypto credit. The firm raised $25 million in a Series A funding round in 2021. According to a letter from Vauld CEO Darshan Bhatija to creditors in July, the firm had $330 million in assets and $400 million in liabilities at the group level.

Lawyers representing the firm wanted six months to restructure, reconcile company accounts, and perform due diligence by Nexo. The judge said that an extension to the three months would be considered.

Co-founder and managing partner of Nexo, Antoni Trenchev, commented that the company was optimistic, “but we have to understand the liabilities, the receivables, who the counterparties are, what are the prospects of getting those receivables.”

Vauld was among the crypto companies offering unrealistic yields – 13% in its case. This sparked leveraged borrowing and overextended positions, which all came crashing down with the Terra stablecoin ecosystem in May.

On its website, Vauld explained that one of its methods for generating cash was by converting fiat-backed stablecoins (such as USDT and USDC) into higher-yield stablecoins such as Terra’s now defunct UST.

“As Defi Payments had staked a significant amount in UST of an estimated ~US$28m, the collapse of the price of UST caused Defi Payments’ net asset position to decrease sharply.”

The cascade of events caused similar problems for Voyager Digital, Celsius, Three Arrows Capital, BlockFi, and a number of crypto lending firms.

Crypto Markets in Retreat

Cryptocurrency markets have fallen for the second day this week, dropping 3.5% over the past 24 hours. As a result, total capitalization has fallen back to $1.1 trillion.

Bitcoin (BTC) was down 2.3% to $22,901 at the time of writing, whereas Ethereum (ETH) had lost 6.4% in a fall to $1,585.

The July rally appears to have run out of steam in August, and a breakdown of key support levels could see an accelerated sell-off.

Metaverse and Gaming Survive Crypto Contagion Fallout: Research

Key Insights:

  • DeFi total value locked has been growing for the past month.
  • Metaverse and blockchain gaming were the least affected. 
  • Metaverse-based NFT projects continue to attract global interest.

Crypto analytics platform DappRadar released a report on July 29 detailing how blockchain and crypto projects dealt with the crypto contagion following the collapse of the Terra ecosystem in May.

Following the catastrophic collapse of Terra’s UST stablecoin, $40 billion in retail and venture capital money was wiped out, according to the report.

The spillover effect, known as the crypto contagion, impacted lending firms such as Celsius and brokerages such as Voyager, Three Arrows Capital, and BlockFi. Mass liquidations of leveraged positions and loans caused a run on several platforms, which were forced to suspend withdrawals.

The decentralized finance sector was heavily impacted because Terra’s UST was integral to many lending and borrowing protocols. The total value locked in DeFi has slumped 64% from more than $250 billion in December 2021 to just $90 billion today, according to DefiLlama.

DeFi Hit Hardest

It is no surprise that DeFi suffered the most since a lot of it was based on leveraged lending and borrowing, unrealistic yields, and a lot of exposure to Terra. Now that all this leveraged speculation has been flushed out, a clearer picture of the ecosystem is emerging.

DeFi TVL has been increasing since mid-June, when it fell below $70 billion. Gains have been slow and steady, but the entire ecosystem did not collapse, and there have been many survivors.

MakerDAO (MKR) is back on top as the leading DeFi protocol with a market share of around 9.5%. Its collateral-backed stablecoin, DAI, did not falter during the collapse of UST as it maintained its dollar peg throughout.

The crypto contagion also impacted nonfungible token (NFT) projects, with transaction and sales volumes falling over the first half of the year. Markets are slowly stabilizing, however, and even showing signs of recovery.

Metaverse and Gaming Survive

Two sectors that were not impacted that badly in the Terra aftermath were Metaverse and blockchain gaming. “Blockchain games have been the least affected by the turmoil,” the report noted.

Blockchain gaming, or GameFi, uses tokenized items and in-game currencies to power virtual worlds. A minor dip in activity suggests that users interacted with blockchain games at a similar rate regardless of the crypto contagion.

Metaverses such as Axie Infinity (AXS), Decentraland (MANA), and Splinterlands (SPS) have continued to attract participants this year. The researchers concluded that Metaverse related NFT projects have grown year-on-year and global interest remains strong:

“Metaverse-related NFT projects are a beacon of hope as they reported an overall increase in trade volume and transaction count up by 97% and 27%, respectively.”

Crypto Broker Voyager Ordered to ‘Cease and Desist’ Misleading Customers

Key Insights:

  • The company has been claiming that it is covered by FDIC insurance.
  • Only individual accounts at the Metropolitan Commercial Bank are protected. 
  • Voyager has been ordered to remove any misleading statements.

Bankrupt crypto brokerage Voyager Digital has been sent a joint cease and desist letter from the Board of Governors at the Federal Reserve and Federal Deposit Insurance Corp. (FDIC).

The letter sent on July 28 warned that the firm’s statements “likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”

It stated that Voyager made false claims about its insurance status, misleading clients over the protection of their assets. It explained that Voyager uses accounts at the Metropolitan Commercial Bank (MCB) in New York for customers who make USD deposits. The bank itself is insured by the FDIC, but Voyager is not.

Misleading Statements

The regulators accused the firm of making representations online, including its website, mobile app, and social media accounts, that it is insured by the FDIC. The firm also claimed that Voyager customers would receive FDIC coverage for their assets, and the insurance agency would cover clients against the failure of Voyager itself.

In 2019, Voyager wrote, “In the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000).”

This week, the Voyager website still claimed “the cash you hold with Voyager is protected,” however, it does warn that crypto assets held on the platform are not protected by FDIC insurance.

Metropolitan Commercial confirmed that individual accounts are insured but only for the bank’s failure, not Voyager Digital.

The letter demands that Voyager removes all misleading statements regarding its insurance status and report back within two days that it has complied.

Earlier this month, Voyager Digital filed for Chapter 11 bankruptcy a week after suspending withdrawals, trading, and deposits. It has frozen all activity, including withdrawals for around $350 million it holds in customer deposits at MCB.

Earlier this week, Sam Bankman-Fried’s FTX exchange made an early liquidity offer to Voyager customers. However, the firm’s lawyers labeled it as a “low-ball bid dressed up as a white knight rescue” that only benefits FTX.

Markets Rally on Rate Hike

Crypto markets are back in the green today in a move opposite to previous reactions to Federal Reserve rate hikes and negative GDP news.

Crypto markets usually slump after Fed rate hikes and recession reports, but total capitalization is up 3.6% on the day, reaching $1.14 trillion.

Bitcoin (BTC) has gained 2.9% on the day to trade at $23,842 at the time of writing. It is the highest price the asset has reached since mid-June. Ethereum (ETH) is performing even better, with a 3.8% rise to $1,719 during the Friday morning Asian trading session.

FTC Seeks to Quash Meta’s Metaverse Monopoly as Income Slumps

Key Insights:

  • The Federal Trade Commission alleges Meta is breaking antitrust laws.
  • Zuckerberg and co. are trying to buy out another virtual reality company. 
  • Meta profits have declined for the first time in company history.

On July 27, the FTC alleged that Meta, formerly Facebook, and CEO Mark Zuckerberg are attempting an Illegal acquisition to expand its Metaverse empire.

The social media giant is aiming to buy virtual reality firm Within, including its popular VR fitness app, Supernatural.

The complaint was filed in the Northern District of California, accusing Meta of already having a monopoly in the virtual reality sector with the top-selling device (Oculus), a leading app store, seven of the most successful developers, and one of the best-selling apps of all time.

The agency alleged that Meta (META) is trying to illegally buy the fitness app to “prove the value of virtual reality to users.”

Meta Monopoly

FTC Bureau of Competition Deputy Director John Newman said, “Instead of competing on the merits, Meta is trying to buy its way to the top.”

Meta is already the largest provider of virtual reality devices and apps in the United States. In 2014, Zuckerberg and the company bought VR hardware startup Oculus for $2 billion. It has since expanded that empire to include the leading app marketplace, Quest Store, with 400 apps.

The Meta CEO said the company needed to be “completely ubiquitous in killer apps” in an email to executives. The firm has also gobbled up seven of the largest virtual reality studios, including Beat Games studio giving it control of the wildly popular app Beat Saber, a VR rhythm game.

The complaint hinges on the premise that Meta would instead buy out its competition rather than develop its own product to compete with them and offer greater choice for consumers.

“If consummated, the acquisition would substantially lessen competition or tend to create a monopoly,” read the complaint, which stated that it would violate antitrust laws.

Meta has displayed similar tendencies in the past with its acquisition of social media giants Instagram, where it is already testing NFTs and WhatsApp.

The company rejected the allegations claiming in a statement that “The FTC’s case is based on ideology and speculation, not evidence,” before adding, “by attacking this deal … the FTC is sending a chilling message to anyone who wishes to innovate in VR.”

Meta Q2 Losses

The bad news for Zuckerberg and co. has continued this week with the disclosure that its Metaverse division Reality Labs suffered losses of $2.8 billion in the second quarter.

For the first time in its history, company profits have declined in a quarter. Total revenue of $28.8 billion was down just 1% compared to the same period last year, but net income dropped 36% to $6.7 billion.

Meta stock slumped 4.7% in after-hours trading, falling to $161.70. Company shares are currently down 57% from their all-time high in August 2021.

FTX Eyes Asia as Bankman-Fried Crypto Acquisition Spree Continues

Key Insights:

  • The U.S. crypto exchange has been in discussions with South Korea’s largest exchange, Bithumb.
  • Vidente stock surged 30% as news broke that it may sell its stake.
  • Sam Bankman-Fried has bucked the bear tread spending $1 billion on crypto acquisitions and loans.

According to reports on July 26, the owner of South Korea’s largest crypto exchange Bithumb is in discussions with Sam Bankman-Fried’s FTX (FTT) over a potential buyout.

Vidente, Bithumb’s parent company, is considering selling its stake in the crypto exchange, according to reports. Full acquisition of Bithumb or joint management of the exchange is also on the table. Vidente is a globally recognized manufacturer of high-performance broadcasting equipment.

The company owns a 10.2% stake in Bithumb Korea and a 34.2% stake in Bithumb Holdings. Following the news, its stock surged almost 30% on the Korean Kosdaq exchange.

SBF $1B Acquisition Spree

Crypto billionaire Sam Bankman-Fried (SBF) has aggressively approached the digital asset downturn by snapping up distressed companies and issuing loans.

Industry researcher Colin Wu posted a graphic of SBF’s moves and crypto acquisitions this year, and he certainly isn’t bothered by the bear market.

His latest move would give SBF and his umbrella of companies a stronghold in Asia.

According to a Bloomberg report last week, SBF has committed $1 billion in recent months for crypto acquisitions.

In late June, his FTX exchange agreed to provide crypto lender BlockFi a $400 million credit facility with a potential acquisition on the table. Earlier this year, FTX acquired the Japanese crypto exchange Liquid Group.

In May, Bankman-Fried’s company purchased a 7.6% stake in the stock trading platform Robinhood. It also bought out the popular crypto portfolio app Blockfolio in 2020 for $150 million.

Alameda Research, a quantitative research firm also owned by SBF, provided the embattled crypto broker Voyager Digital with a $485 million loan. On Monday, Voyager rejected an FTX buy-out proposal, calling it “a low-ball bid.”

Alameda has been highly active in the crypto venture capital sector recently. According to CrunchBase, the Hong Kong-based firm has made 173 investments, and it’s most recent was on July 17, when Empiric Network raised $7 million.

FTX has a daily spot trade volume of $1.7 billion, and Bithumb handles around $668 million daily at the moment, according to Coinmarketcap.

Crypto Markets Retreat

SBF is the most aggressive player in the crypto sector at the moment. When the likes of Coinbase, Gemini, OpenSea, Blockchain.com, Huobi Global, BitMEX, and Crypto.com, have been axing staff in recent months, Bankman-Fried’s firms have been scooping up companies.

This is all unfolding as crypto markets continue to show bearish sentiment. There has been little movement over the past 24 hours, with total market capitalization hovering just above $1 trillion, almost 70% down from its all-time high.

Bitcoin (BTC) was changing hands for $21,080, dropping half a percent on the day, while Ethereum (ETH) had fallen 0.7% to $1,425 at the time of writing.

Investment Bank Moelis Ventures into Blockchain Despite Crypto Bear Market

Key Insights:

  • The billionaire-founded firm will act as an advisory to crypto and blockchain companies.
  • Executives do not fear market volatility and see it as an opportunity.
  • Moelis was hired as an advisory by the embattled crypto broker Voyager Digital.

The New York-based investment bank founded by billionaire Ken Moelis is setting up a division to focus on deals with global blockchain and crypto companies.

The new venture will be headed by global head of media investment banking and Moelis (MC) co-founder John Momtazee. Moelis joins several prominent venture funding firms that continue to pour millions into the fledgling industry despite a 70% crash in digital asset markets this year.

According to the announcement on July 25, longtime venture investor Lou Kerner is joining the firm as a senior adviser to the new division.

No Fear of Crypto Bears

John Momtazee, who previously headed Broadcasting Investment Banking at UBS Investment Bank, said, “We love the timing. We think that to pile in on good days and say, ‘Here we are, ready to help,’ feels less genuine than when there’s a challenge,” before adding “any disruptive technology is going to have volatility.”

Moelis is no stranger to the crypto industry. The firm was hired as an advisory to embattled crypto broker Voyager Digital which suspended withdrawals and filed for bankruptcy earlier this month. The investment bank has also worked with San Francisco-based fintech firm Ripple Labs and blockchain security and intelligence company CipherTrace.

Momtazee added that with more than 50 unicorns and nearly $20 billion of capital raised for crypto and blockchain firms last year, “blockchain technology is poised to be as transformative to the global business landscape as the Internet was in the late 90s.” He added that the company saw strong long-term prospects for its application despite current market volatility.

He said there was substantial interest from within the firm as more than 30% of managing directors already had crypto wallets. “I suspect that the junior bankers and mid-level bankers actually are more active,” he added, “This is a young person’s world.”

Ken Moelis is also bullish on digital assets, likening the crypto sector to the “gold rush of 1848” in an interview with Bloomberg last year. The billionaire also invested in stablecoin issuer Paxos in 2020.

Moelis & Co. assists its clients in achieving strategic goals by offering comprehensive, integrated financial advisory services. It operates from 21 locations across the globe and has advised on more than $3.5 trillion of transactions since inception.

Crypto Markets in Retreat

As expected, a volatile week for crypto markets is unraveling, with a 5.1% decline in total market capitalization over the past 24 hours. The total cap is now back at $1 trillion, having lost $100 billion since the end of last week.

Bitcoin (BTC) has dropped 4.6% in a fall to $21,097, while Ethereum (ETH) has dumped 7.1% to $1,422 at the time of writing.

A Federal Reserve rate hike on Thursday followed by gloomy GDP news in the U.S. could send markets tumbling even further by the end of the week.

How Ethereum Could Surpass Bitcoin After The Merge

Key Insights:

  • Ethereum issuance changes could remove any natural selling pressure after the Merge.
  • The network will use 99% less energy which is good for policymakers and ESG-focused corporations.
  • ETH prices are down 2.4% as a tumultuous week in macroeconomics begins.

Crypto markets are in retreat again during this Monday morning’s Asian trading session, but they have been rallying for the past fortnight, primarily driven by Ethereum.

The network will enter its final testing phase for the Merge on August 11, and the date for the mainnet launch is September 19.

The Merge will dock the current Ethereum proof-of-work chain with the new proof-of-stake chain, which will become the primary blockchain. The consensus mechanism for the network will transition to staking instead of mining.

There has been a lot of analysis and discussion recently on why this is such a bullish event for Ethereum. Some even believe it could eventually surpass or “flip” Bitcoin, becoming the industry’s largest digital asset.

Why The Merge is Such a Big Deal

On July 24, Ethereum analyst and researcher Vivek Raman tweeted why he thought ETH would flip BTC.

The first argument was based on supply as there are 900 BTC mined daily. This means that there is always some selling pressure on Bitcoin from miners taking profits. Without any new buying pressure, its price would fall, he added.

If the selling pressure disappears, prices should naturally drift higher, which will be the case for Ethereum after the Merge.

Ethereum is currently mined with 14,250 ETH issued per day; however after the Merge, issuance is likely to become deflationary due to the fee-burning mechanism introduced in August 2021. Over the past week, 13,249 ETH has been destroyed via this mechanism.

“This means that there could be *net daily buy pressure* on ETH (without a dollar of external capital entering),” he added.

“ETH will transform into an economically (and environmentally and game theoretically) sustainable asset – arguably more so than BTC.”

Another bullish factor he didn’t mention was that Ethereum’s energy consumption would be reduced by more than 99% after the Merge. This will make the network more acceptable to environmentalists, regulators, and policymakers, and more attractive to investors and corporations. Bitcoin will always be proof-of-work and will always demand more energy as adoption grows, and mining competition increases.

ETH Price Outlook

Ethereum prices have rallied 30% over the past fortnight, with the asset reaching a six-week high of $1,639 on Friday. It appears to have formed a range-bound channel over the past week; however, failing to break through resistance.

ETH is currently trading at $1,518, having lost 2.4% over the past 24 hours. The asset is still down 69% from its November 2021 all-time high, so the recent rally may have been short-lived.

This week’s market direction is likely to be driven by macroeconomic news from the United States as the Federal Reserve raises rates again and the GDP figures for the second quarter are announced.

Ethereum Development 55% Complete After Merge: Vitalik Buterin

Key Insights:

  • The Ethereum co-founder said there was still a lot of development work to do.
  • The network will process 100,000 transactions per second when complete.
  • Major scaling upgrades and monetary policy changes are in the roadmap.

Speaking at the annual Ethereum Community Conference (EthCC) in Paris on July 21, Ethereum co-founder Vitalik Buterin talked about the network’s long-term future.

The highly-anticipated Merge was a hot topic with just two months until Ethereum (ETH) transitions from energy-intensive proof-of-work mining to proof-of-stake consensus.

“After the merge, you will be able to build an Ethereum client that does not even know the proof-of-work phase even happened,” Buterin told a developer-oriented audience.

He added that developers had much more work ahead as the overall network will be “55% complete once we finish the Merge.” The Merge, which docks the existing Ethereum chain with the new Beacon Chain, has been slated for September 19, though delays are possible.

Massive Ethereum Scaling Planned

One of the biggest complaints about Ethereum is the transaction fees which skyrocket when the network is under heavy load. The Merge will not solve this issue as it is a consensus shift, so transaction fees will still fluctuate and be expensive when demand for block space peaks.

Upgrades planned for next year will address this issue as the network scales. Buterin said that “at the end of this road map, Ethereum will be a much more scalable system,” adding that it “will be able to process 100,000 transactions per second” by the end. Currently, the network can only manage 15-20 transactions per second which is not practical for widespread adoption.

Buterin mentioned more upgrades rhyming with the current one called “surge,” “verge,” “purge,” and “splurge.” These are part of the network’s scaling evolution and a cleanup phase, which are expected to be rolled out in the coming years.

He added that there would be deep changes, including updates to Ethereum monetary policy, token issuance, and security model. Currently, Ethereum is still being issued at a rate of around 5.5 million ETH per year. Once the Merge happens, the transaction fee burning process introduced with the EIP-1559 upgrade last year will make issuance deflationary so that the supply will decrease over time.

Since the upgrade was launched in August 2021, more than 2.5 million ETH have been burnt or destroyed. At current prices, this is worth around $4 billion.

Merge Momentum Continues

These monetary properties (which are the complete opposite of inflationary fiat currencies) are continuing to drive momentum for asset prices. ETH has made 33% over the past week as Merge anticipation grows.

At the time of writing, ETH was trading up 2.5% on the day at $1,578, following a monthly gain of 40%. It is leading the current crypto market rally, but things could turn south very quickly on recession concerns and macroeconomic news out of the U.S. next week.

US Recession Fears Could Quash Crypto Rally

Key Insights:

  • Crypto markets have rallied 22% over the past week.
  • The Atlanta Fed has revised its Q2 GDP prediction to -1.6%.
  • Two quarters of negative GDP spells a technical recession.

Crypto asset markets have rallied 22% over the past seven days as total market capitalization gained $200 billion. The upswing in momentum has pushed the figure back to $1.1 trillion, the highest it has been for five weeks.

Markets are far from bull territory yet, however, and remain down 64% from their peak levels of more than $3 trillion in November 2021.

The momentum could be reversed very quickly as several macroeconomic factors come into play this month. Similar factors were responsible for the massive market crashes that have impacted stocks and cryptocurrencies this year.

U.S. Recession Looms

The U.S. Bureau of Economic Analysis (BEA) is set to release its advance estimate of second-quarter GDP (gross domestic product) growth on July 28.

GDP measures the market value of all the final goods and services produced in a specific period by a country.

This is significant because two consecutive quarters of negative GDP means that the country could be in a technical recession. The U.S. figure for Q1 was -1.6%.

The Atlanta Fed revised its GDP prediction on July 19 to the same as that for Q1 at -1.6%. Crypto critic Peter Schiff observed that most of 2022 has already been in a recession:

A recession would be very bad news for high-risk assets such as cryptocurrencies and tech stocks. So the bad news next week could effectively quash the current market sentiment and put an end to the crypto market rally.

Furthermore, the Federal Reserve is expected to increase rates by 75 basis points again next week. Interest rate rises are also bad news for crypto as they increase the cost of borrowing and encourage saving. This makes traditional bank accounts slightly more attractive and much safer than volatile cryptos for your average retail investor.

Bear Market Blues

These two factors alone could see the bears return in force, pushing crypto asset prices back to a new cycle bottom.

Earlier this week, on-chain analytics provider Glassnode reported that current market conditions have all the signals of having bottomed … apart from duration.

Using the Bitcoin (BTC) realized price metric, it calculated the average time the asset has spent below this in previous bear markets and compared it to the current. Bitcoin realized price is the value of all BTC in circulation at the price they last moved, or an approximation of what the entire market paid for their coins.

The average time spent below the realized price in a bear market is 197 days; this cycle has only seen 35 days below that level. Bitcoin was trading a little above its $21,934 realized price at $23,363 at the time of press.

There could be much more pain ahead if history rhymes and the macroeconomic storm strengthens.

 

 

Stablecoin Issuer Circle Highlights Principles for New Crypto Regulations

Key Insights:

  • Circle wants lawmakers to regulate stablecoins without stifling innovation.
  • The firm advocates for full transparency and privacy protection.
  • Circle’s USDC has a 36% market share of all stablecoins.

With anti-crypto U.S. politicians back on the warpath, industry leaders are laying out their visions in the hope of an innovative future and progress from any regulatory framework.

The issuer of the USDC stablecoin, Circle, published its “Payment Stablecoin Policy Principles” on July 18 hoping they won’t fall on deaf ears.

Chief strategy office and head of global policy at Circle, Dante Disparte, said that the time to act is now, amid a market correction but with continued rapid growth. He added that crypto regulation needs to balance stablecoin risks with “establishing clear rules of the road such that the USD continues to be the leading digital currency of the internet can advance U.S. leadership and economic competitiveness.”

Overregulation Warnings

The company stated that the broader market downturn had vindicated policymakers that have been sounding alarm bells about excessive risks in the sector. The primary triggers for this 70% market correction were over-leveraged positions, excessive lending and borrowing, and the collapse of the Terra stablecoin ecosystem.

Disparte outlined 19 principles that reflect Circle’s experience operating a regulated global stablecoin.

The use of money should be free regardless of its form factor, he stated before adding that a stablecoin is a “digital bearer instrument” entitling the holder to the redemption of $1.

He stated that preserving privacy should be a stablecoin design issue, but it is doubtful that banks will agree with that one. “Transparency, accountability, and harmonized risk disclosures” are essential preconditions of market trust and consumer protection, according to Circle, which the regulators are likely to support.

Stablecoins are not supposed to compete with bank-issued currencies but complement them by offering more transaction options and flexibility. They can also co-exist with central bank digital currencies (CBDCs).

As with traditional banking, Circle advocates for applying anti-money laundering (AML), countering terrorism financing, sanctions requirements, and know your customer (KYC) standards.

Additionally, stablecoins should have assured cash and dollar-backed asset compositions and liquidity. Circle also promoted direct custody of such assets at the Federal Reserve.

In light of Europe’s Markets in Crypto-Assets Framework (MiCA), “U.S. leadership is needed to avoid trans-Atlantic or global misalignment while harmonizing standards for stablecoins,” it stated.

Finally, it stated that regulated stablecoins should be treated as cash or cash equivalents in the United States to promote clarity and consistency so that households and companies alike can use them with confidence.

These were some of the principles outlined by the company, and most of them should be in line with any federal legislation when it is finally rolled out.

Stablecoin Ecosystem Outlook

Circle currently has the second largest stablecoin on the market, with 54 billion USDC in circulation. Its market share is around 36% of the total $153 billion in stablecoins.

Tether’s USDT remains dominant but only just with a shrinking share of 42.8% or 65.8 billion USDT circulating. Circle has been slowly eating away at Tether’s market share over the past year and is expected to flip it soon.

Bitcoin Mining Debate Heats up as US Lawmakers Push For More Reporting

Key Insights:

  • Six Senators wrote to the EPA and DOE asking them to demand crypto miners report their energy consumption.
  • Bitcoin mining operations can be used to balance energy grids.
  • A large number of U.S. mining firms use renewable energy.

Late last week, U.S. Congressman Jared Huffman, Senator Elizabeth Warren, and four others sent a letter to the Environmental Protection Agency (EPA) and the Department of Energy (DOE).

In it, they offered “new information” from their own study of cryptocurrency mining. The data was simply a rehash of the same old figures from Cambridge University comparing Bitcoin’s power consumption to a Scandinavian country.

“Our investigation suggests that the overall U.S. cryptomining industry is likely to be problematic for energy and emissions,” they stated.

They demanded that the EPA and DOE enforce company reporting on energy usage and environmental impacts by August 15.

Is Bitcoin Mining Really That Bad?

In reality, the demand for energy by the Bitcoin (BTC) network has actually fallen 41% since February as miners have been powering down due to bear market profitability concerns. However, the long-term consumption trend is going up as competition increases to mine the remaining few BTC.

Additionally, many mining operations in the U.S. also use predominantly renewable energy sources, especially those based in Texas. Some even buy carbon credits to offset their impact and emissions.

The policymakers also claimed that mining operations were putting pressure on energy grids. This may be the case in some instances, but it has also been refuted by industry experts that are more knowledgeable on the subject than politicians.

On July 17, an industry researcher posted findings that support the concept that Bitcoin mining actually helps to balance a grid, especially on heavy on renewable sources.

They noted that excess energy and redundancies always need to be available for power authorities to provide electricity reliably. Deviations in system frequency (60Hz in the U.S.) can occur when energy supply and demand are mismatched, he added. This can damage equipment and cause cascading issues.

Fossil fuel-powered grids were more predictable and easier to balance, but this is not the case for renewables which can be unpredictable if based on natural elements such as solar or wind. Bitcoin mining can act as a controllable load for (PFR) Primary Frequency Response, he added.

Additionally, Bitcoin miners can be powered off and on almost instantly in reaction to demand, which is not the case with other large-scale energy consumers.

“Bitcoin’s usefulness, as a technology to monetize energy, merges perfectly with Demand Response on modern smart grids. Price signals from grid operators are instantly sensed by Bitcoin miners, making them like noise-canceling technology for energy grids.”

Innovative applications

The Bitcoin mining process has clear advantages and can be adapted to support existing infrastructure. So despite the venting of anti-crypto politicians, it is not all bad news.

Former Facebook and PayPal executive David Marcus suggested a different agenda was afoot among U.S. politicians.

 

 

 

 

SEC Chair Mulls Waiving Some Crypto Regulation Rules

Key Insights:

  • Gary Gensler said that crypto firms may be exempt from some securities laws.
  • The SEC chair still considers most digital assets to be securities.
  • Uncle Sam continues to drag its feet with crypto regulations.

Securities and Exchange Commission (SEC) chair Gary Gensler said that crypto companies might be exempt from certain securities laws in order to help them come into regulatory compliance.

His comments came during an interview on July 14 when he said, “We do have robust authorities from Congress to use our exemptive authorities that we can tailor.”

The staunchly anti-crypto SEC chair added that such an approach is used for asset-backed securities and equity offerings, according to Bloomberg. However, he repeated prior warnings that many companies are non-compliant and offering unregistered securities.

Security or Commodity?

Gensler considers most crypto assets to be securities. However, they have yet to be officially classified as such in the U.S. He has been in a tussle with the other major financial regulator, the Commodity Futures Trading Commission (CFTC), over control of the asset class.

A security is akin to a stock that involves a corporation and an investment contract, whereas a commodity is an asset without a company in control, such as gold. Cryptocurrencies are a grey area, but many are more closely aligned with the latter’s properties.

The SEC chair has invited crypto companies to reach out to the agency, saying that “there’s a potential path forward.” However, industry leaders have repeatedly complained that the SEC has not provided clear guidance for them to register.

The regulator has recently gone after several crypto companies, accusing them of conducting unregistered securities sales. The most high-profile case is with fintech firm Ripple over its XRP token, which is drawing to a conclusion. A win for the SEC could set a precedent and be devastating for the crypto industry.

America’s leading financial regulators and policymakers have procrastinated over crypto regulation. In March, the Biden administration issued an executive order on digital assets urging federal agencies to “play a leading role in international engagement and global governance of digital assets consistent with democratic values and U.S. global competitiveness.”

However, very little progress has been made since, and it is unlikely that there will be any crypto legislation this year. There is a fine line between a heavy-handed crypto crackdown, which several politicians and bankers are calling for, and fostering the innovation that could make the country a fintech hub, which is what the industry advocates want.

Crypto Market Consolidation

Crypto markets have made marginal gains as the week draws to a close, but they remain range bound. Total market capitalization has gained 3.2% on the day to reach $970 billion, but further upward momentum is limited.

Bitcoin (BTC) has gained 1.5% on the day to reach $20,707, while Ethereum (ETH) has fared better with an 8.1% increase to trade at $1,209 at the time of writing.

CEL Token Price Plunges 50% as Celsius Files for Bankruptcy

Key Insights:

  • Celsius files for Chapter 11 bankruptcy to allow for restructuring.
  • The crypto lending firm has repaid some of its debts but still won’t reopen withdrawals.
  • CEL token prices tanked 58% in a few hours following the announcement.

After a month of liquidity turmoil, the beleaguered crypto company Celsius has joined the ranks of several other prominent firms in filing for bankruptcy.

Late on July 13, the company announced that it had filed for Chapter 11 bankruptcy in New York while initiating a financial restructuring plan. Celsius claims to have $167 million in cash on hand, which will be used to provide liquidity to “support certain operations during the restructuring process.”

A Chapter 11 allows companies to continue operations while bankruptcy proceedings take place. On July 6, crypto brokerage Voyager Digital filed for a Chapter 11 as it conducts its restructuring.

The “Right Decision”

Alex Mashinsky, co-founder and CEO of Celsius, said it was the “right decision for our community and company.” He added:

“I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”

However, the words come as little consolation to CEL token holders as prices have collapsed around 50% over the past 8 hours since the announcement.

Members of the Special Committee of the Board of Directors explained that the suspension of withdrawals was carried out to protect customers with longer-term investments.

Celsius filed “first-day” motions which included requests to pay employees and continue their benefits without disruption. However, this is down to a court decision. It did not request permission to allow customers to withdraw their funds at the time. The reaction on crypto Twitter was vehement, as expected.

According to the bankruptcy documents, Celsius has more than 100,000 creditors, with its largest unsecured claim of $81 million from the Caymans Island-based Pharos Fund.

The company stated that “existing loans originated by Celsius affiliates will continue to be serviced,” but it would not be issuing new loans at this time.

Celsius has made efforts to repay some of its debts to decentralized crypto lending platforms such as Maker. It had paid all of its Maker debt positions off between June 14 and July 7, freeing up its collateral in wrapped Bitcoin (WBTC). It has also started paying off debts to decentralized finance platforms, with $20 million USDC sent to Aave on July 11.

The moves come too little too late, however, as token holders are suffering again.

CEL Token Price Plunges

CEL token prices have tanked 58% over the past few hours from an intraday high of $0.96 to bottom out at $0.40 during the Thursday morning Asian trading session.

At the time of writing, CEL was trading at $0.53, having collapsed 95% from its June 2021 all-time high of $8.05.

Multicoin Capital Unveils Latest $430M Crypto and Web3 Startup Fund

Key Insights:

  • The massive investment fund is the company’s third in five years.
  • Venture Fund III will invest in Web3 infrastructure, DataDAOs, and the creator economy.
  • Venture firms are confident about the crypto sector despite a deepening bear market.

With the announcement of its latest fund, Crypto venture firm Multicoin Capital has shown no fear of the bears. Multicoin’s third fund, Venture Fund III, is a $430 million fund that invests in crypto, blockchain, and Web3 startups.

According to the July 12 announcement, the fund will invest $500,000 to $25 million in early-stage projects, with as much as $100 million allocated to later-stage, more established projects.

The U.S. company was founded in 2017 when it began investing in the crypto ecosystem. It manages a hedge fund and a venture fund, investing across both public and private markets. Managing Partner, Kyle Samani, posted the news on July 13.

Focus on DeFi, DAOs, and Web3

The fund will focus on crypto projects that “create incentive structures that allow anyone in the world to permissionlessly contribute to a set of shared objectives,” which it calls Proof of Physical Work. This is not the same as the energy-intensive proof-of-work consensus mechanism that Bitcoin (BTC) uses.

The concept incentivizes people to do verifiable work that builds real-world infrastructure, it explained. It used AirBnB and Uber as examples of Web2 firms already doing this.

The fund would also concentrate on DataDAOs, which are similar to the proof of physical work concept but for data instead of infrastructure. Data cannot be aggregated at the moment due to privacy and security issues, but blockchain technology solves this with decentralized, permissionless, trust-minimized data intermediaries.

Multicoin recently led a $60 million investment round in a DataDAO called Delphia.

The firm is also interested in creator monetization, which puts control back into the hands of content creators rather than huge social media platforms. By using nonfungible tokens (NFTs) and marketplaces, creators can be in control of their own content and its monetization.

Consumer-facing Web3 decentralized applications built on top of an existing structure, such as Ethereum (ETH), were also an area of interest for the new fund. It would also look at Web3 infrastructure, decentralized finance (DeFi), and DAO (decentralized autonomous organization) tooling.

Web3 refers to the next iteration of the internet, which is decentralized and controlled by its users, as opposed to Web2, which is dominated by multinational profit-driven data harvesting social media and tech giants.

Retail in Pain as VCs Soldier on

Retail traders are suffering at the moment as crypto markets, which are the underlying monetary base for many of these Web3 concepts, continue to bleed.

Crypto markets have declined a further 1.9% on the day as total capitalization fell to $909 billion. Major cryptocurrencies are still within a range-bound channel; however, negative macroeconomic news from the U.S. later today regarding CPI (consumer price index/inflation) could send markets south again.

G20 Finance Regulator to Propose ‘Robust’ Crypto Framework by October

Key Insights:

  • The FSB highlighted crypto market turmoil, volatility, and structural vulnerabilities.
  • The G20 financial regulator is particularly concerned with unregulated stablecoins.
  • Regulatory recommendations will be proposed to G20 members by October.

On July 11, the Financial Stability Board (FSB) made a statement on the international regulation and supervision of crypto asset activities.

The regulator highlighted the recent market turmoil, intrinsic volatility, and structural vulnerabilities as an impetus to push through a framework. It also acknowledged that cryptocurrencies had an “increasing interconnectedness with the traditional financial system.”

The FSB is a body of regulators, treasury officials, and central bankers from G20 countries.

It added that it is working to ensure that “crypto-assets are subject to robust regulation and supervision.” The regulatory body will report to the G20 finance ministers and central bank governors in October.

Cleaning up Crypto

The move comes in the wake of several big meltdowns in what has been dubbed a crypto contagion. Following the collapse of the Terra ecosystem, several high-profile crypto lending companies, including Celsius, Voyager Digital, Three Arrows Capital, and BlockFi, have all faced their own liquidity issues. However, the FSB did not name them directly.

The FSB published a risk assessment on cryptocurrencies in February, outlining its concerns over the rapid growth of the asset class.

It stated that a practical regulatory framework must ensure that “crypto-asset activities posing risks similar to traditional financial activities are subject to the same regulatory outcomes.” This implies that it will regulate crypto exchanges, brokers, and issuers similarly to banks. It could also attempt to shoehorn crypto into existing regulations G20 members have for traditional finance.

However, it did add that the “novel features” of crypto assets will be taken into account to harness the potential benefits of their underlying technology.

Stablecoins were specifically mentioned with the FSB stating that it would collaborate with the Financial Action Task Force (FATF) to regulate and supervise “unbacked” crypto assets and stablecoins. It said that stablecoins pose significant financial risks if they remain unregulated, adding, “such a stablecoin needs to be held to high regulatory and transparency standards, maintain at all times the reserves that preserve stability of value and meet relevant international standards.”

The FSB would also study the “financial stability” of decentralized finance (DeFi).

The move follows the European Union’s push to regulate the asset class through its Markets in Crypto-Assets (MiCA) legal framework, introduced earlier this month.

Crypto Markets in Retreat (Again)

Crypto markets have continued their relentless march downwards today with another slump of 4.4%. As a result, total market capitalization has fallen to $925 billion, down 70% from its $3 trillion peak in November.

Bitcoin (BTC) dropped 3.2% on the day in a fall to $19,900, while Ethereum (ETH) slumped 5.4% to $1,091 at the time of writing.

Bitcoin More Likely to Crash to $10K Than Hit $30K: Market Survey

Key Insights:

  • 60% of investors surveyed think Bitcoin will hit $10K before it reaches $30K.
  • Retail investors are more fearful than institutional investors.
  • BTC has lost a further 4% on the day, falling back to the $20K level.

Bloomberg has gauged investors’ sentiment in its latest Markets Live (MLIV Pulse) weekly survey. As reported on July 11, the survey polled 950 investors last week to ask whether they thought Bitcoin would go back up or continue down first.

The results were clear, with 60% responding that the asset was more likely to crash further and drop to $10,000 than make a recovery to $30,000.

“The lopsided prediction underscores how bearish investors have become,” the outlet stated.

While surveying a handful of investors isn’t conclusive in either direction, it does provide a snapshot of sentiment which is still overwhelmingly bearish.

Just 40% thought BTC would reach $30,000 before it hit $10,000. The asset has fallen back again over the weekend as it slid towards support at $20,000 during the Monday morning Asian trading session.

Retail Investors Fearful

The report added that retail investors were more apprehensive than their institutional counterparts. Almost a quarter of those surveyed thought digital assets were just “garbage,” but a similar number said they were the future of finance.

Almost a third of institutional investors responded that they were skeptical but remained open-minded, and 26% were confident about the asset class despite current market conditions.

Partner at venture firm Tribe Capital, Jared Madfes, told the outlet that it wasn’t just fear in the crypto markets. “It’s very easy to be fearful right now, not only in crypto but generally in the world,” he said before adding that “people’s inherent fear in the market” has been reflected by the survey results and predictions of further losses.

The Bitcoin sentiment “fear and greed” index reported a state of “extreme fear” or 22 out of 100 on Monday morning. It has been in this state for more than a month now.

Bitcoin prices have lost around 70% since their peak at around $69,000 in November. However, things appear to have stabilized around current price levels, where the asset has been consolidating for about three weeks.

Bitcoin Price Outlook

At the time of writing, BTC was trading at $20,564, having lost 4.1% over the past 24 hours. It reached a weekend high of $21,871 on Saturday but has failed to hold on to those gains.

There is support just above $19,000 should the asset fail to hold the $20K level, which is likely at the moment. If history rhymes, previous bear markets resulted in a drawdown of more than 82%, which could send prices back to the $12K level, validating those survey predictions.

DeFi Platform Aave Unveils Another Decentralized Stablecoin

Key Insights:

  • Aave’s dollar-pegged GHO will be backed by user collateral.
  • It offers a similar decentralized stablecoin to Maker’s DAI.
  • Stablecoins represent more than 15% of the total crypto market.

On July 7, the Aave DeFi network unveiled its latest offering, another stablecoin entering an already crowded market.

Aave (AAVE) founder, Stani Kulechov, tweeted that the team has submitted a request for comments on the launch of a new over-collateralized stablecoin which will be backed by assets on the platform.

The proposal is now in the hands of Aave’s decentralized autonomous organization (DAO), which will vote on it.

A Crowded Stablecoin Market

On the surface, it sounds similar to the failed Terra ecosystem in which the LUNA token was used to mint UST stablecoins. However, GHO will not be an algorithmic stablecoin making it more akin to that offered by the Maker platform, which allows users to supply crypto assets as collateral to mint the DAI stablecoin.

Aave users will be able to use their collateral on the platform to mint GHO dollar-pegged stablecoins. The stablecoin would be backed by these diversified crypto assets, which are selected at the user’s discretion, the proposal explained.

The introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive. It would also “provide more optionality for stablecoin users and generate additional revenue for the Aave DAO by sending 100% of interest payments on GHO borrows to the DAO,” it explained.

Aave added that “significant risk mitigation features” will be included to prevent too much of the stablecoin from being minted and avoid a potential collapse.

Aave automates digital asset lending and borrowing by eliminating the centralized intermediary. The platform is the DeFi industry’s second-largest, with a total value locked of $6.8 billion, according to DefiLlama.

Tron (TRX) is another crypto network having recently launched a stablecoin. Its USDD coin was spawned after the collapse of Terra, essentially doing the same thing. The asset has never gained traction and is still trading below its peg at $0.991 at the time of writing.

Stablecoins, or those pegged to a fiat currency, currently comprise more than 15% of the total crypto asset market, with a market capitalization of $154 billion. Tether (USDT) and Circle (USDC) make up the lion’s share of this, with a combined market share of almost 80%. The difference is that these two are centralized and issued by corporations, whereas Aave’s offering will be decentralized and similar to Dai.

AAVE Price Outlook

The native token for the network, which has the same name, has surged 16.4% on the day to reach $73.11 at the time of writing, according to CoinGecko.

AAVE prices are up 29% over the past week, but they have dumped a painful 89% since their May 2021 all-time high of $662.