The Australian Treasury recently shared its Regulating Digital Asset Platforms paper, which you can read here. It suggests that crypto exchanges with larger holdings should require a AFSL from the Australian Securities and Investment Commission (ASIC). Specifically, the Treasury’s proposal will affect those exchanges holding more than $3.2 million or those where an individual’s stake is more than $946.
This move aims to strike a balance: keep people using these platforms safe while not stifling the booming crypto industry in Australia. And with the rapid growth of cryptocurrency in recent years—it is estimated that around 25% of us own some form of cryptocurrency—such a balanced approach is crucial.
Coinbase, a leading exchange, weighed in on the topic. A spokesperson said:
“We are heartened by the Australian Treasury’s proactive steps in launching a crypto licensing framework, a move that simultaneously offers protection to consumers and fosters innovation. At Coinbase, we built our foundation on compliance, trust, and credibility. We see progress toward regulatory clarity as a reaffirmation of our commitment to Australia and to the expansion of the global crypto ecosystem.”
However, challenges remain. One thorny issue is banking. Many licensed crypto outfits in Australia find partnering with banks tricky. Some of Australia’s Big Four banks have imposed restrictions on crypto-related transactions and have even outright banned transacting with certain exchanges. And while the Treasury’s paper is a start, it doesn’t dive deep into this banking puzzle.
But it’s early days yet. The Treasury is welcoming feedback on their paper until December 1, 2023. This means there’s still a chance to refine things and ensure Australia’s crypto regulations are world-class.
Coinbase’s spokesperson expressed optimism about this dialogue, noting: “As the consultative phase commences, we are poised to continue to engage constructively with both the Treasury and our industry contemporaries. Recognising Australia’s legacy in technological advancements, particularly in fintech and cloud domains, we are optimistic that these forward-thinking crypto regulations will sculpt a pathway for Australia to emerge as a frontrunner in the crypto and web3 arenas.”
For Australians, especially those considering diving into crypto investments, understanding these regulatory changes is vital. Clear regulations can mean better protection for investors. Plus, it can help Australia carve a niche in the global crypto scene, attracting new businesses and fostering innovation.
In a world where the financial landscape is rapidly evolving, Australia’s proactive stance on crypto regulation stands out. It signals the nation’s commitment to merging modern financial solutions with traditional safeguards. Furthermore, with countries like the US, UK, and parts of the European Union undergoing crypto regulatory shifts, Australia’s move could serve as a benchmark for others.
As 2024 approaches, the nation’s crypto community and investors alike will watch closely, hoping for a regulatory framework that benefits all.
The investment world has been chaotic this week, with geopolitical unrest affecting prices across many markets. The crypto market wasn’t spared from the turmoil, but there was some promising news regarding blockchain adoption, which has been hidden among more pressing news matters.
Starting with the geopolitical scene, the Hamas attack in Israeli has undeniably cast its shadow on global financial markets. Bitcoin, generally a leading indicator for the crypto market, has dwindled, signalling broader uncertainty in the digital asset market. Its fall to around $US27,000 has been symptomatic of more significant shifts. More often than not, investors retreat to time-tested assets like gold and oil as geopolitical tensions swell. These commodities have experienced a surge this week, demonstrating how real-world conflicts can tip the scales in financial markets.
However, while geopolitical events have influenced the movement of investor funds, a significant portion of this week’s crypto spotlight is stolen by a momentous regulatory showdown in the US: the Coinbase saga.
Coinbase, a titan in the world of crypto exchanges, has been embroiled in a legal tussle with the US Securities and Exchange Commission (SEC) since June this year over allegations of operating as an unregistered exchange. This clash isn’t an isolated dispute—there are other ongoing lawsuits against multiple players in the industry—however, the Coinbase case has garnered most of the attention. The SEC move against Coinbase potentially indicates how digital assets might be regarded under US law in the future. Given its timing, the development underscores a pivotal moment in the ongoing quest to define and regulate the crypto industry.
This week, several legal experts and authorities have echoed the SEC’s perspective, suggesting that cryptocurrencies shouldn’t dodge traditional rules despite being a new asset class. This week, the North American Securities Administrators Association (NASAA) bolstered this view, emphasising that many digital assets might not hold intrinsic economic value beyond sheer speculation.
Countering this, Coinbase, has held firmly to the notion that the SEC might be overstepping its boundaries. They advocate for the uniqueness of cryptocurrencies and the need for a fresh regulatory lens to regulate this new asset class.
The significance of this week’s Coinbase story for Australian investors and the global community lies in its potential ripple effect. The outcome of this legal battle could have significant knock-on effects on the regulatory stance adopted by Australia and other countries worldwide.
Luckily, it’s not all doom and gloom for crypto investors; there is some positive news from the past week. JPMorgan, a leading financial services firm and US banking giant, made headlines by executing a successful live blockchain-based transaction. Partnering with financial behemoths like BlackRock and Barclays, the transaction involved tokenising shares in one of its money market funds. They’ve showcased the symbiotic potential between age-old banking and novel blockchain technology by tokenising a traditional financial asset.
And, of course, no week in crypto is complete without its share of personal opinions. Former hedge fund manager and host of CNBC’s Mad Money, Jim Cramer, continued his recent bearish stance on crypto, saying, “Mr. Bitcoin is about to go down big”. While some might take his view seriously, many crypto investors find themselves taking the opposite bet as historically, some of Cramer’s bearish calls have, in fact, been the best time to buy. However, this past week of global chaos suggests that investors should be wary of making any investment decisions amid such economic and geopolitical uncertainty.
For most investors, staying on top of the news and keeping emotions at bay when managing investments is the key to staying afloat during these tumultuous times.
It’s been a challenging week in the world of money markets, and if you’re wondering why your Bitcoin portfolio has taken a dip, you’re not alone. Understanding Bitcoin’s ties to broader market dynamics and specific events can offer clarity as investor money ebbs and flows between different markets. Delving into this week’s events, from surging bond yields to regulatory wins, provides a clearer picture for cryptocurrency enthusiasts and any Australian investor looking to keep an eye on their investments. Let’s break it down.
This week, Bitcoin experienced a noticeable pullback from its recent highs, retreating from the $US28,000 mark before stabilising around $US27,600. This downtrend wasn’t exclusive to Bitcoin; other prominent cryptocurrencies like Ethereum and Solana’s SOL faced similar, albeit minor, declines. In contrast, the Avalanche token, AVAX, bucked the trend. Prominent figures on the ‘X’ platform (formerly Twitter) spotlighting a new application on the Avalanche blockchain, AVAX, prompted a surge in interest and value.
XRP also witnessed an uptick in its valuation, primarily driven by two significant events. Firstly, the US SEC’s unsuccessful bid to appeal in the Ripple case instilled confidence among XRP investors. Secondly, Ripple’s Singapore arm obtaining clearance to extend its payment services in the Asian region further buoyed its associated token, XRP.
However, the broader crypto regulatory outlook is still marked by uncertainty. The SEC’s proactive stance is evident in their ongoing legal challenges against industry powerhouses Binance and Coinbase. These investigations, targeting pivotal players, underscore the crypto world’s volatile regulatory environment right now and emphasise the pressing need for well-defined frameworks.
Turning our attention to traditional financial markets, US Treasury bond yields have seen a significant increase. For those unfamiliar, these yields play a pivotal role in determining where investors put their money. When such yields surge, as they recently have to levels unprecedented in 16 years, traditional and more stable assets like US Treasury bonds become increasingly appealing.
This diverts investment away from riskier assets, including cryptocurrencies like Bitcoin. This redirection of capital and heightened caution in the market has a knock-on effect on the valuation of digital assets.
Crypto is not the only market affected either. Stocks are also feeling the pain, with the S&P 500 dropping to levels reminiscent of June’s dip, influenced by these surging bond yields. This traditional market instability can sway investor sentiment and decisions, further influencing crypto valuations.
In line with this, the ASX200, a key benchmark for Australian stocks, hasn’t been spared either, sinking nearly 2% over the past week. This dip in a significant index like the ASX200 is a testament to the broader volatility currently prevalent in the markets, impacting both traditional and digital assets alike.
For Australian investors, Bitcoin’s performance this week culminates in shifts seen in traditional markets. The rise in bond yields and their impact on the flow of investor money, combined with the overarching shadow of regulatory challenges, underscores the need for continuous vigilance in this dynamic investment environment.
Bitcoin has taken a tumble this week, and the prevailing theme in crypto news at the moment is the undeniable influence of developments in the US.
The US continues to cast a significant shadow, with Bitcoin’s price fluctuations and suspenseful regulatory decisions serving as a reminder to Australian investors that it’s as important as ever to stay on top of overseas developments.
This week, uncertainty surrounding the US Securities and Exchange Commission’s (SEC) approach to crypto regulation, coupled with Bitcoin’s unpredictable nature, has heightened interest and emphasised the US’s crucial role in determining the future of digital assets.
Bitcoin, which was set to retake the $US27,000 level just last week, slid back towards $US26,000 this week. The fluctuation was largely a result of a slide in the value of both the S&P 500 and Nasdaq, which are both down 0.6% this week after the US 10-year Treasury yield hit a 16-year high of 4.63%.
This is a big deal, as it hints at the expectation of increased inflation and a possible tightening of monetary policy.
The cost of oil has also hit a yearly high, fuelling inflationary concerns and driving the continued trend of rising interest rates. A 0.6% weekly dip for the S&P 500 and Nasdaq might not sound significant, but it forms part of a larger trend, with both markets falling around 10% since the start of August. In contrast, Australia’s ASX200, while not immune, has shown some resilience, experiencing a 6% decrease over the same period.
Despite the price drop, some argue that the conventional relationship between interest rates and the negative flow-on effect for Bitcoin is undergoing a transformation. The next Bitcoin halving event in April next year has many crypto commentators wondering whether Bitcoin’s four-year boom-and-bust cycles will continue independently of the US Fed’s monetary movements, even if interest rates remain high.
On the regulatory front, the SEC is keeping the crypto community on edge. The regulator has been notably tight-lipped about their stance on spot Bitcoin ETFs, adding a layer of uncertainty for potential investors. In a Congressional hearing this week, SEC Chair Gary Gensler continued his critical stance on crypto companies, emphasising his concerns over managing customer assets and accusing the industry of dangerous practices.
Gensler’s critique has sparked a dialogue in Congress, with discussions revealing a partisan divide between Republicans and Democrats on the SEC’s approach to digital assets. Amid this regulatory ambivalence, the SEC has begun consideration of a spot Bitcoin ETF application from Franklin Templeton and delayed decisions on spot Ether ETFs filings from ARK Invest and VanEck. Bitcoin ETF applications from BlackRock, Ark and WisdomTree remain pending.
With deadlines extended and decisions still looming, the wait for the green light continues. The looming government shutdown has further complicated matters, leading to anticipated delays in the SEC’s reviews and approvals.
This landscape of fluctuating crypto prices, rising interest rates, and regulatory uncertainty presents a complicated scenario for Australian investors to digest. It underscores the importance of staying informed and vigilant in the ever-changing crypto environment. Navigating these events requires a keen eye on global macroeconomic events and a clear understanding of the ongoing developments in the crypto and regulatory landscapes.
As Australia moves deeper into spring, a different season is setting in the United States—an autumnal chill. And just as these seasonal changes never occur in isolation, the global crypto market, including Australia’s, feels the effect of international movements.
For those who haven’t caught the latest, there’s a fresh chapter in the saga of Mt. Gox, once the dominant cryptocurrency exchange based out of Tokyo. The saga began in 2014 when the exchange was targeted by hackers, leading to a loss of 850,000 BTC valued at around $US23 billion. Fast-forward to today, the exchange, which had promised to pay back its creditors by the end of this month, has pushed this deadline out by another year to October 31, 2024.
While this delay prevented an immediate influx of Bitcoins into the market—something investors feared would lead to a price drop due to increased supply—the news of the delay did little to propel the price upwards. Instead, Bitcoin experienced a modest decline, hovering around $US27,000. It appears that investors had already factored in the possibility of the Mt. Gox delay, indicating the event was predicted by previous price actions.
However, it’s not just the ghosts of the crypto past that have influenced Bitcoin’s recent performance. On the global stage, the US Federal Reserve’s recent decisions have impacted financial markets far and wide. After deciding to hold interest rates steady, the US Federal Reserve announced a projected interest rate hike for next year, hinting at reduced liquidity. This news, alongside Chairman Jerome Powell’s suggestion that more rate hikes might be in the pipeline if the economy performs better than expected, impacted Bitcoin’s price, nudging it downwards.
So, what does this mean for Aussie investors? With higher interest rates, persistent inflation, and money slowly trickling out of riskier assets, it’s a complex landscape to navigate.
Global interest rates play a pivotal role in the movement of investor money. Higher interest rates can lead to stronger currencies and potentially reduced investment in assets like crypto, which are often perceived as riskier. For Bitcoin, it’s a double whammy—not only is there a lack of significant bullish catalysts like the launch of a (delayed) US-based spot exchange-traded fund, but there’s also the overarching shadow of the global macroeconomic situation.
Despite this seemingly gloomy scenario, it’s not all bad news. Some experts believe the crypto markets have shown resilience. Given the broad impact of the US Federal Reserve’s decisions, Bitcoin’s modest reaction might indicate underlying strength or, at the very least, stable buying support at its current levels.
It’s not just the finance world influencing the crypto landscape either. Politics, too, is playing its hand. At a recent crypto conference in New York, GOP presidential hopeful Vivek Ramaswamy outlined plans for a comprehensive “crypto policy framework”. Given Ramaswamy’s emerging influence in the Republican party, this commitment could signal an even stronger alignment of crypto with political agendas.
Ramaswamy, an advocate for the broader application of blockchain technology, expressed strong views on how the government should engage with cryptocurrency. Referring to regulators, he criticised the current regulatory system, particularly the “unconstitutional fourth branch of government”. It will be interesting to see if the (opposing) Democratic party responds to any of his comments.
If his perspective gains traction among either party, this could bring about significant changes in how the US deals with crypto, with potential global implications.
The power and influence that stem from US decisions—whether they originate from the Federal Reserve or the corridors of politics—are immense and cannot be downplayed.
The global impact of US crypto policies could potentially affect the entire digital currency ecosystem, influencing investments worldwide, including those in Australia. As cryptocurrencies continue to gain mainstream acceptance, their interplay with worldwide political agendas will inevitably guide their future path.
Just as surfers anticipate the next wave, investors in the crypto market are forever looking to the horizon for the next big event to rock the boat. From security breaches to economic news, this week has been one of seismic activity from all directions.
For Australian investors, it’s crucial to stay on top of the crypto landscape and to understand how current events affect digital asset investments. Here’s a breakdown of the week’s standout moments in the crypto space.
US Economic Indicators: CPI Takes a Leap
The US’s Consumer Price Index (CPI) data for August was released this week, exceeding predictions with a 3.7% increase. While soaring oil prices was the major driver behind the surge, it is important to understand what this means for the cryptocurrency market.
Economic markers like inflation, as represented by the CPI, have indirect impacts on investment markets globally. Recent history tells us that rising inflation has significantly bumped up living costs in Australia and around the world, prompting central banks like the Reserve Bank of Australia (RBA) to increase interest rates.
These rising interest rates, which in Australia have exceeded 4% and in places like the US have tipped over 5%, have a double-edged impact. They spell higher loan costs, pinching those in debt, while simultaneously luring investors with spare capital towards a secure 5% return. This dynamic drives money away from riskier investments, such as cryptocurrencies, and more towards these high-yield, low-risk alternatives.
And with the latest CPI data in view, the shift away from assets like crypto seems likely to persist. This is an indicator that investors should keep a close eye on into the future.
Vitalik Buterin’s X Account Hack
The unsettling breach of Ethereum’s co-founder, Vitalik Buterin’s X account, which led to a post containing a malicious phishing link, has once again brought the importance of security into the limelight for crypto investors. The hack resulted in a harrowing loss of over $US691,000, with almost three-quarters of these assets being non-fungible tokens (NFTs).
The incident reinforces the paramount importance of security in crypto. Investors should be prudent— not sending funds to unverified sources, even if they emerge from seemingly reputable accounts.
Equally, a heightened sense of caution is advised when encountering links, irrespective of their source. Ensuring robust cybersecurity measures and practising vigilance can safeguard one’s assets.
New Chain Launches
The crypto industry has played host to another blockchain launch this week, with the Binance-affiliated BNB Chain announcing its Layer 2 network, opBNB. Designed to alleviate transaction costs, the chain went through a significant testing phase, however, it is unclear exactly what unique features it is bringing to the table when compared to existing Layer 2 chains.
For clarity, a Layer 2 chain is essentially a secondary blockchain atop an existing one, aiming to increase transaction speeds and scalability. The introduction of opBNB offers an ecosystem ripe with opportunities for investors interested in emerging platforms.
Notably, the recent launch of ‘Base’, a Layer 2 network affiliated with Coinbase, garnered considerable traction in the past month. With Binance being a competitor of Coinbase, it will be interesting to see how this opBNB differentiates itself from Base and cements a position in the market.
US Senate Hearing on Crypto
This week’s Senate hearing in the US shed light on the intricate dance between cryptocurrency and regulation. Senate Banking Committee Chairman Sherrod Brown and Securities and Exchange Commission (SEC) Chair, Gary Gensler, displayed apprehension regarding the crypto sector.
The Senate perspective matters to the crypto industry because, at its core, the stances adopted by regulatory bodies can shape the growth trajectory, adoption rate, and mainstream acceptance of digital assets.
The US, being a significant global financial player, casts ripples that can impact markets worldwide, including in Australia. A clear regulatory framework, or the lack thereof, can sway investor confidence and, consequently, the overall stability of the crypto ecosystem.
In essence, the week provided a blend of challenges and progress. For Australian investors, such events underline the significance of staying informed and cautious. As the global landscape for cryptocurrency keeps evolving, being attuned to both crypto and economics news is extremely important.
In a significant turn of events, Australia’s Senate Economics Legislation Committee has rejected the Digital Assets (Market Regulation) Bill, presented by NSW opposition senator Andrew Bragg. The committee, echoing the views of the current Labor government, has called for more consultation with the crypto industry before implementing any definitive digital assets regulation in Australia.
Bragg has been candid in his disappointment, arguing that the present government’s approach is equivalent to placing cryptocurrency regulation on the back burner. But what led to this outcome?
At its heart, the committee argued that the bill didn’t present enough detail, lacked certainty, and differed significantly from the government’s stance. They pointed out the inconsistency of the bill in relation to international frameworks, which could raise concerns about regulatory discrepancies and potential negative consequences for the industry.
Earlier this year, Prime Minister Anthony Albanese had rolled out a token mapping consultation paper via the Treasury, designed to pave the way for another consultation paper. This second paper aims to propose a crypto asset service providers’ licensing and custody framework by mid-2023. However, as it stands, this follow-up paper is still on the drawing board.
Michael Bacina, Blockchain Australia Chair and a seasoned Digital Assets Lawyer, spoke of the crypto industry’s anticipation regarding these developments. Their hopes were set on the Treasury’s consultation on crypto-custody and licensing, which was expected to draw from the wealth of industry insights shared during the Senate Committee’s bill review.
The core proposition of Bragg’s Digital Assets (Market Regulation) Bill was the introduction of robust disclosure norms for banks, positioning them to handle the introduction of China’s digital yuan in Australia. The bill, specifically naming seven Chinese banks with Australian branches, would necessitate these banks to reveal the number of local businesses accepting payments via the digital yuan and the total quantum of this currency held in Australian customer wallets. Non-compliance would result in penalties.
The goal was to ensure that the digital yuan doesn’t go unnoticed in Australia, which could lead to China gaining unknown reach and economic power over Australia. The bill aimed to prepare Australia for the widespread use of a digital yuan in cross-border payments because its usage would give the “Chinese state enormous power, economic and strategic power that it doesn’t have today,” Bragg said during an interview back in 2022.
Furthermore, the bill aimed at instituting licensing systems for crypto exchanges, custody services, and stablecoin issuers. Stablecoins, for the uninitiated, are digital currencies tied to the value of other tangible assets, such as gold or the US dollar.
Bragg’s intentions were clear: preparing Australia for the proliferation of China’s digital yuan. The underlying concern is that the widespread use of the digital yuan could bestow upon China a significant economic and strategic edge over Australia.
Moreover, Bragg’s insistence on such a bill underscored what he perceives as inertia from the current government. In his eyes, the government’s sceptical stance on cryptocurrency, coupled with their resetting of prior progress in crypto regulation, is a grave concern.
In a rapidly evolving digital world, the question remains: Will Australia stay ahead of the curve, or will regulatory indecision cause it to fall behind? Only time will tell.
Bitcoin has been on a rollercoaster ride this week, and not in the way crypto enthusiasts had hoped. After riding a wave of optimism inspired by the US Securities and Exchange Commission’s (SEC) court loss over Grayscale Bitcoin Trust (GBTC), the digital currency faced a downturn today following the SEC’s decision to delay a ruling on spot Bitcoin exchange-traded fund (ETF) applications from several applicants, including BlackRock and Fidelity.
The decision sent Bitcoin (BTC) tumbling, with its price dropping by 4.1% over 24 hours to $US26,100. This delay comes despite a court ruling earlier in the week that ordered the SEC to “vacate” its rejection of Grayscale’s attempt to convert its GBTC into an ETF. The court termed the SEC’s denial as “arbitrary and capricious,” which had initially sent BTC soaring to nearly$US28,000. However, as is often the case with such rallies, the cryptocurrency quickly gave back a significant portion of those gains.
Grayscale’s legal victory had sparked hopes that the door would finally be opened for a spot Bitcoin ETF in the US, something that advocates have argued would allow for more significant retail investment in Bitcoin. This is because investors could own the digital asset without the need to worry about the potential issues involved with self-custody. However, the SEC’s decision to delay its ruling has dampened these hopes, at least for the time being.
The SEC’s move to hold off on any firm decision, instead extending existing comment periods and allowing for greater public feedback on the applications, means that new deadlines have been set for October. This is in line with the regulator’s standard approach of using every comment and review period to delay making final decisions until the 240 days it has from the start of its review of the applications have elapsed.
While the delay is disappointing for those eager to see a spot Bitcoin ETF in the US, it is not entirely surprising given the SEC’s history of rejecting every ETF application it has reviewed. Despite this, a new swath of applicants are hoping for success, buoyed by the court ruling that deemed the SEC’s denial of Grayscale’s application.
The crazy week for Bitcoin comes amid other significant developments in the cryptocurrency space. One important development that has been met with a chorus of disapproval from the crypto world is the US Treasury Department’s recently released proposal for taxing crypto gains, which refers to decentralised applications as “brokers” which would require significant changes to remain compliant if the proposal is accepted.
Almost immediately after the proposal was made public, objections began pouring in from crypto investors and those in the industry. The backlash from the crypto industry indicates that the Treasury Department’s new approach to handling digital assets taxes will likely face a challenging journey through a months-long period of public comments and hearings.
The crypto market continues to live up to its name as an extremely volatile market. Despite the challenges faced by the industry, the appetite for Bitcoin and other cryptocurrencies remains strong, as evidenced by the busy trading session for GBTC following the court ruling. As the SEC’s new deadlines in October approach, all eyes will be on the regulator to see if it gives the green light for a spot Bitcoin ETF in the US.
It’s been a roller-coaster week for Bitcoin and the rest of the crypto market, with a sudden drop across almost all assets late last week. A significant factor that triggered the market’s decline was the indication by the Federal Reserve of a potential need to raise interest rates further. Since March 2022, there have been 11 interest rate hikes in the US, as part of an effort to combat inflation.
A rising interest rate environment generally discourages speculative investments, such as cryptocurrencies, because it increases borrowing costs and offers better returns on safer investments, such as government bonds.
Adding fuel to the fire, Evergrande, a major Chinese property development company, declared bankruptcy under Chapter 15 in New York. The default of such a significant player sparked concerns about the broader repercussions for the global economy and, consequently, the cryptocurrency market. Investors are concerned that disruptions in China’s real estate sector might flow into other international markets.
The decline in Bitcoin’s price created a chain reaction among big-money holders with leveraged positions in the cryptocurrency market. Essentially, as the crypto prices went down, many options became unprofitable, and futures were liquidated. This scenario further increased the downward pressure on prices. Over $1 billion in crypto futures and options contracts faced liquidation due to this chain reaction.
Bitcoin wasn’t alone in its descent. Altcoins, the alternative cryptocurrencies to Bitcoin, experienced significant drops, too. Tokens like XRP, Dogecoin, Polygon, Solana, and Avalanche tumbled in value between 10% to 20%.
XRP, which had recently experienced a boost due to its win in the SEC case, dropped from $0.59 to $0.49 within a single day. Similarly, Shiba Inu declined by 23%, further aggravated by technical issues in the rollout of its new network, which trapped a significant amount of users’ Ethereum for hours.
Despite the broad decline, Ethereum managed to claw back some of its losses. This recovery was driven by reports suggesting the US Securities and Exchange Commission (SEC) might approve several applications for exchange-traded funds (ETFs) based on Ethereum futures contracts by October. Such ETFs allow traditional investors to gain exposure to cryptocurrencies without buying the digital assets directly.
The big question remains: is this a temporary market correction, or are we seeing the beginning of another volatile phase for cryptocurrencies as we move into the latter part of the year?
The weeks ahead are likely to be crucial in determining the trajectory of the cryptocurrency market.
Central Bank Digital Currency Is Years Away: RBA
In other news, the RBA, Australia’s central bank announced that it would not be making any immediate decisions on introducing a central bank digital currency (CBDC) due to several challenges that emerged at the end of its pilot project. Although the project wasn’t aiming for a comprehensive assessment of the pros and cons of a CBDC, it sought to understand how such a currency could refine the payment system in the country.
The RBA collaborated with the Digital Finance Cooperative Research Centre (DFCRC) as part of this initiative. Funded by industry partners, academic institutions, and the Australian Government, the DFCRC is a formidable $180 million dollar program set up to explore the intricacies of asset digitisation and CBDC use cases.
One of the more technical challenges was the need for cryptographic keys on the CBDC platform, as well as the challenge of providing affordable and secure solutions for key management. Integrating the CBDC platform with the industry’s use case applications wasn’t straightforward, leading to questions about potential deployment models.
And much like the rest of the world, Australia grapples with the privacy implications of CBDCs.
The report noted: “The design decisions required to effectively support the variety of needs for privacy and data sharing are challenging, and the technologies to implement those requirements on a single CBDC platform are also complex, warranting further research.”
This latest news will be welcomed by privacy-conscious Australians. However, the report did not say that a CBDC was entirely off the table and so it could still be implemented in the future.
Crypto has seen another significant stride towards mainstream adoption this week with the announcement of PayPal USD (PYUSD), a US-dollar-pegged stablecoin. Coming from global payments giant PayPal, this is a landmark moment for the industry as it’s the first instance of a significant financial institution issuing its own stablecoin.
This Ethereum-based token will soon be available to US users, revolutionising the way they transact and interact on PayPal’s platform.Stablecoins are digital assets pegged to the value of traditional fiat currencies or other stable assets, such as gold. Users can use PYUSD for transactions such as transferring between PayPal and other digital wallets, purchasing goods and services, or converting between PYUSD and other supported cryptocurrencies like Bitcoin and Ethereum.
PYUSD will be issued in collaboration with the New York-based Paxos Trust and is guaranteed to be fully backed by US dollar deposits, short-term Treasuries, and similar cash equivalents. In addressing concerns of potential unbacked tokens, PayPal has committed to providing monthly Reserve Reports from September 2023 onward. These reports, coupled with third-party attestations from an independent accounting firm, will outline the value of assets backing the stablecoin, thereby upholding transparency.
The decision to release a stablecoin is well-timed, given the growing interest in cryptocurrencies in our increasingly digital financial landscape. As PayPal CEO Dan Schulman explained, the shift towards digital currencies necessitates a stable, digitally native counterpart that seamlessly connects with fiat currencies, such as the US dollar.
While this is a significant move by PayPal, it’s also a strategic one. The company has seen some volatile stock performance this year. With its shares down considerably, the announcement of PYUSD has provided some much-needed buoyancy, resulting in a 1.6% rise.
On the other side of the spectrum, new project Worldcoin, co-founded by OpenAI CEO Sam Altman, is facing legal challenges in Kenya. The project has caused a stir in recent weeks after its launch in July, as there are concerns about data privacy and security, as well as the projects’ backing, which has come from some dubious characters in the industry.
The Worldcoin venture has created a unique approach to internet user verification using iris scans that ties an individual’s identity to the blockchain. Users can acquire Worldcoin tokens by scanning their eyes, and developers are encouraged to create digital applications on top of this identification project.
Recent events suggest the journey may not be smooth sailing for Worldcoin in Kenya, further adding to existing concerns about the project.
Over the weekend, Kenyan police, backed by multi-agency officials, stormed the Nairobi warehouse of Worldcoin, seizing documents and machinery. Immaculate Kassait, the commissioner of Kenya’s Office of Data Protection, claims Worldcoin’s parent company, Tools for Humanity, concealed its true intentions during registration. The Ministry of the Interior suspended the project’s operations in the country.
Interestingly, despite the official stance, Eliud Owalo, Kenya’s minister for the digital economy, indicated that Worldcoin had been in ongoing communication with the Office of Data Protection Commissioner (ODPC) and was in alignment with Kenya’s data protection laws. However, the subsequent statement from the ODPC highlighted “legitimate regulatory concerns” about the project.
Unsurprisingly, this investigative action has not been restricted to Kenya. Authorities in other nations, including the UK, France, and Germany, have turned their gaze towards Worldcoin. As the digital world continues on its upward trajectory of mainstream adoption, such events underscore the importance of clarity in intentions, robust regulatory frameworks, and the perpetual balance between innovation and compliance.
The big news in crypto this week was the launch of Worldcoin, a daring project co-founded by OpenAI’s CEO Sam Altman, which seeks to ascertain ‘proof of personhood’ in the face of AI’s relentless advance. The project has raised eyebrows and has been a significant point of contention for the crypto community.
As the barrier between the digital world and reality dissolves, the Worldcoin team has sought to create a globally unified financial and identity framework grounded in proof of personhood. The project’s mission is to construct this network by verifying human identity via iris scans, which birth secure personal identification codes. These codes are then housed on a decentralised blockchain, reinforcing their security. Even in its beta stage, Worldcoin has amassed a user base of more than two million verified individuals.
The unique identifier device, named the Orb, is the cornerstone of Worldcoin’s project. It acts as a personal, secure identification code produced by scanning a user’s iris. This proof of personhood aims to confirm that a genuine human being exists behind each digital interaction, not an artificial intelligence entity.
After a much-anticipated launch, the Worldcoin token, known as WLD, experienced significant volatility. It surged on crypto exchanges, only to slump soon after, reflecting the crypto community’s concerns surrounding the project’s ambitious premise. However, despite these hurdles, Worldcoin’s commitment to bridging the human-AI gap remains unswayed.
The project plans to take its Orb scanning operation facilities to dozens of cities across 20 countries. However, Australian citizens interested in the project will have to wait. Worldcoin’s Orb facilities haven’t reached any Australian cities. The company encourages keen individuals to subscribe to their newsletter for updates on pop-up Orb facilities.
Despite Worldcoin’s ambitious blueprint, the journey has been punctuated by some sharp criticism. The project’s promotional drive, especially in developing countries, was flagged by the vigilant crypto watchdog, ZacXBT.
ZacXBT carries significant weight in the web3 community, acting as a crucial watchdog who exposes scams and fraudulent activities. His keen investigative sense has brought added layers of security and consciousness to the crypto community—a necessity in a landscape often marred by sophisticated scams leading to severe financial losses for unwitting investors.
His warnings about Worldcoin resonate with sentiments from several corners, not least among them Ethereum’s co-founder, Vitalik Buterin, further amplifying the concerns of potential exploitation of vulnerable individuals.
These leading voices have questioned whether Worldcoin is doing the right thing by promoting its technology heavily in developing regions like Asia and Africa. These critics have warned that Worldcoin may be collecting more personal data than necessary, sparking an investigation by the UK’s data protection authority.
The controversy has been further amplified by Worldcoin’s association with contentious figures, such as Sam Bankman-Fried, founder and CEO of the now-bankrupt FTX crypto exchange, and Kyle Davies, the co-founder of a bankrupt Singaporean hedge fund, Three Arrows Capital.
The project’s tokenomics have also drawn criticism, with only a small percentage of the total supply initially available. Supposedly, this is a strategy aimed at encouraging more people to join the network. Critics argue this could lead to reckless trading and let early investors cash out as soon as possible.
Despite the hiccups, Worldcoin is forging ahead with its ambitious plan. With the firm’s objective to incorporate proof of personhood in an increasingly AI-integrated society, its unique approach to identity verification continues to draw attention. As the week comes to a close, one thing is certain: Worldcoin’s journey is far from over and will continue to be a point of debate in the crypto world.
Over the past 24 hours, a significant ruling has reverberated through the crypto world, as a US federal judge decreed that the sale of Ripple’s XRP tokens via exchanges does not breach US federal securities laws. This green light sparked a rally in crypto markets and influenced a surge in stocks related to the digital asset space.
(It’s worth noting that an SEC spokesperson said they were please the judge found that Ripple had violated federal securities law by selling XRP directly to sophisticated investors, a small victory for the agency).
Bitcoin, the leading light of the crypto market, broke resistance at $US31,000 and has pushed to a new high not seen in more than a year. Other cryptocurrencies are also performing well. Blockchain tokens such as Solana, Polygon, and Cardano, which had previous run-ins with the SEC, rose by roughly 15%. Ripple’s XRP registered an impressive ascent, catapulting more than 70% to $US0.80.
Coinbase, a giant in the crypto exchange space and previously in the cross-hairs of the SEC, has seen its share price rally 24% to its highest value since August 2022. Bitcoin mining stocks, such as Riot Platforms, also had a memorable day, shooting up more than 10%.
The after effects of the XRP case ruling have been felt far and wide within the crypto sector, instigating a resurgence in the industry. The apprehension that had previously held investors at bay, stemming from the SEC’s stern stance on cryptocurrencies, appears to be receding. This breakthrough has reignited optimism and invited an influx of capital back into the market, marking a significant shift in investor sentiment and behaviour.
While this early ruling suggests some respite for entities like Coinbase, the crypto landscape remains complex and fraught with regulatory uncertainty. The SEC’s scrutiny continues, with charges against the bankrupt crypto lender Celsius and ongoing trials against exchanges like Binance and FTX.
This week’s seismic events, however, were not limited to crypto. This morning, the Reserve Bank of Australia (RBA) announced an historic change, with the news that Michele Bullock will take the role of governor come September. Bullock’s appointment marks her as the first woman to hold this position in the bank’s 63-year history.
The decision not to extend Lowe’s seven-year term represents a divergence from the pattern set by his predecessors, whose terms were extended by three years. Bullock’s appointment comes at a critical juncture for Australia. As the incoming Reserve Bank governor, she will play a key role in navigating Australia’s monetary policies in an era marked by global economic challenges and a growing digital asset sector.
The confluence of these events serves as a stark reminder of the dynamic and unpredictable nature of the crypto industry and the broader economic landscape. Amid new legal rulings, market rallies, and a changing pilot at the helm of Australia’s central bank, the pace of change in the world of finance shows no signs of slowing. This interplay will undoubtedly continue to shape the economy in Australia and beyond.
The crypto world is no longer made up of regular currencies like Bitcoin and Ether—there is also a wide array of more colourful digital collectables.
Non-fungible tokens, known as NFTs, differ from traditional cryptocurrencies in that they are unique: representing art, music or some other item that has been tokenised and put on the blockchain. NFTs were all the rage during the bull run of 2021. However, many of these digital collectibles have fallen from previous highs—just like the rest of the market.
Bored Ape Yacht Club, one of the most notable NFT collections, has suffered a significant dip in market value. From a soaring high of more than 100 ETH in April 2022, worth several hundred thousand dollars at the time, the floor price has plummeted to a mere 28 ETH, worth around $US55,000 as of the start of July 2023. This plunge of more than 70% signifies a drastic depreciation in the value of individual Bored Apes and highlights that the NFT sector is in no way immune to the volatility of the crypto markets.
The pop star Justin Bieber is the proud owner of an Ape NFT, once estimated at a staggering $US1.3 million. However, the highest bid for his Ape stands a touch over $US58,000: a shocking devaluation of 95%. Despite this substantial downturn, it’s worth mentioning that early holders of the Bored Apes still maintain a degree of financial footing as they bought in for less than 0.08 ETH. Bored Apes, although battered, continue to command considerable value and trading activity compared to other NFT collections.
However, while the NFT sector is hard hit, traditional cryptocurrencies like Bitcoin and Ether have performed well this year. Bitcoin especially has made waves in the past few weeks, with a new wave of institutional interest coming from the largest asset manager in the world, BlackRock.
This week, BlackRock CEO Larry Fink further highlighted his positive stance on cryptocurrency in an interview with Fox Business in the US. Fink, once sceptical of crypto, voiced his opinion that Bitcoin could serve as a hedge against inflation and currency devaluation. It transcends boundaries, he stated, by existing independently of any single currency. He projected a future where tokenising assets and securities, primarily through Bitcoin, could redefine finance.
This sentiment followed BlackRock’s iShares unit filing for a spot Bitcoin exchange-traded fund with the US Securities and Exchange Commission. While Fink did not predict when the filing would be approved, his optimism suggested a future relationship between the regulators and asset managers like BlackRock concerning cryptocurrency.
However, the crypto community saw no immediate impact of Fink’s remarks on Bitcoin’s value, with its price largely stagnant at around $US30,500. Even the release of the US Federal Reserve’s minutes shed light on the central bank’s perspective on monetary policy, which pointed towards slower rate hikes than the rapid-fire movements of the last year.
For now, it appears the crypto market may be at the whim of regulators and the global macroeconomic outlook. Only time will tell if BlackRock’s BTC ETF will be approved or if inflation will ease enough to loosen monetary policy, both of which could ignite another bull run in the crypto markets.
This week’s crypto story begins in Australia, where there has been a prominent and proactive response from the Treasury addressing an industry-wide issue and setting a positive tone for the outlook of crypto in the country. This, coupled with further news from the race towards the launch of the first Bitcoin ETF in the United States and a show of resilience in Bitcoin prices, captures the spirit of a week filled with significant developments in the crypto ecosystem.
In Australia, significant strides are being made to address the issues faced by crypto entities related to de-banking. Following an increasing number of instances where banking partners have severed ties with crypto platforms, such as the recent de-banking event faced by Binance Australia, the Australian Treasury has responded by endorsing the majority of the Council of Financial Regulators’ (CFR) recommendations on de-banking.
The Australian government has backed data collection initiatives and has urged banks to implement policies to improve transparency and fairness regarding the de-banking of businesses in the crypto industry. Moreover, they’ve pushed for the country’s four major banks to provide guidance that would apply to digital currency exchanges. These actions reflect Australia’s commitment to fostering a supportive banking environment for crypto entities and promoting fairness within the industry.
Meanwhile, ARK Investment Management’s amendments to its Bitcoin Exchange-Traded Fund (ETF) application in the United States have stirred interest following BlackRock’s recent ETF filing. The changes, which include a surveillance sharing agreement with the Chicago Mercantile Exchange (CME) futures markets and likely with a crypto exchange such as Coinbase, have brought ARK’s application in line with the US Securities and Exchange Commission (SEC) demands. A decision from the SEC is expected by August 13, 2023.
Despite these advancements, challenges persist. Ark must also find a crypto custodian they can partner with to launch the spot ETF. Although Coinbase might seem an ideal partner for ARK, complications could arise, given that Coinbase is already partnered with BlackRock, another hopeful in the race for launching a Bitcoin ETF.
The question remains whether BlackRock would permit Coinbase to enter into a similar agreement with ARK, thereby assisting a competitor in getting to market before BlackRock. However, there is always the chance that BlockRock or another competitor gets the green light from the SEC before Ark does. The scenario is heating up as firms such as Valkyrie, WisdomTree, and Invesco have also entered the race by applying for spot Bitcoin ETFs.
Amid the institutional interest, the price of Bitcoin has seen notable volatility this week. Following a brief dip below $US30,000 on Wednesday afternoon, Bitcoin rebounded, reinstating investor optimism. Despite the fluctuating prices, Bitcoin has managed a rise of more than 10% during June.
From Australia’s proactive stance on de-banking and progress in Bitcoin ETF approvals in the US to Bitcoin’s price resilience, this week’s events highlight the evolving nature of the global crypto landscape and its potential for further development.
If the past week were a movie in the cryptocurrency world, it would likely be titled ‘Return of the Bitcoin Bull’. Bitcoin pushed past the $US30,000 mark this week—a threshold it hadn’t crossed since April. The driving force behind this sudden resurgence? Institutional interest, with BlackRock, the world’s biggest asset manager, leading the charge.
Related: Bitcoin Price Prediction
Earlier this month, the storm clouds gathered for the crypto industry after a series of lawsuits launched by the Securities and Exchange Commission (SEC) against Binance and Coinbase. This regulatory crackdown triggered a dip in Bitcoin’s value by 5% in just two days, pushing the market lower than it had been in months. But it appears every storm passes, and behind these particular clouds was a silver lining: BlackRock’s filing for a Bitcoin ETF (Exchange-Traded Fund).
An ETF is an investment fund and exchange-traded product with tradeable shares on a stock exchange. BlackRock wanting to create one specifically for Bitcoin is a big deal, and the market reaction confirms it. Since BlackRock’s filing, Bitcoin hasn’t just stopped its downward trend – it’s done an impressive U-turn.
So, why is the crypto market throwing a party over BlackRock’s interest? Well, three main reasons stand out.
If the BlackRock Bitcoin ETF gets the green light, it will bring a new, heavyweight buyer to the comparatively minuscule digital asset market. And this wouldn’t just be any heavyweight; this would be the largest asset manager in the world. For the ETF to give investors exposure to Bitcoin, BlackRock would need to acquire huge amounts of BTC before they could offer this product.
BlackRock’s acknowledgement of Bitcoin and the filing for a Bitcoin ETF has brought validity to the largest crypto asset from a very reputable player in traditional markets. It’s like having the school principal vouch for you when you’ve been telling everyone you’re the next Einstein. BlackRock’s interest provides a substantial reputational boost to Bitcoin. If the world’s largest asset manager sees potential, it’s a powerful counter to naysayers.
It’s a sentiment echoed in the recent announcements from Fidelity and Schwab about their plans for crypto exchanges and Deutsche Bank’s intentions for crypto custodianship.
The most recent surge in Bitcoin’s value has been driven by a wave of positivity sweeping across the market. BlackRock isn’t the only one showing interest, either. Subsequent filings have been made by Invesco and WisdomTree, showing that institutional investors’ interest in the crypto space is growing.
Despite the ups and downs, the twists and turns, this week has highlighted a critical moment for the digital asset markets. Institutional interest in cryptocurrencies is no passing fad. BlackRock’s Bitcoin ETF and its potential approval could be the starting gun for a race towards increased mainstream acceptance of cryptocurrencies.
The past month has really highlighted the rollercoaster ride that is crypto. Filled with highs, lows, loop-the-loops, and the occasional screaming (usually when checking the wallet balance), this market never fails to surprise. Yet, it seems to be on a resilient and ever-evolving track, with each passing week offering the potential for further development and opportunities—from those with a passing curiosity in crypto to hardened enthusiasts.
The past week in cryptocurrency has been another rollercoaster ride. Bitcoin traders nervously watched the Federal Open Market Committee (FOMC) meeting, Binance rumours rattled the market, and the ongoing saga between Coinbase and the US Securities and Exchange Commission (SEC) continued.
In anticipation of the FOMC meeting, Bitcoin traders were poised for volatility. The US Federal Reserve’s decision to hold interest rates and hints of future increases created a climate of uncertainty. Few were surprised then when Bitcoin fell to approximately $US24,990 late Wednesday. Major altcoins also experienced a late afternoon dive, sinking into negative territory.
The largest cryptocurrency by market capitalisation was down 3.2% over the past 24 hours, reaching its lowest level since mid-March. Before this fall, Bitcoin had been treading water near the $US26,000 mark as investors assessed the early impact of the SEC lawsuits against Binance and Coinbase, and awaited Fed monetary policy signals, and other macroeconomic movements.
Meanwhile, rumours circulated that Binance, the world’s largest crypto exchange, was selling Bitcoin to support its BNB coin. CEO Changpeng “CZ” Zhao refuted these claims, emphasising the importance of transparency and speedy communication in the crypto world.
Legal hurdles involving Binance.US and the SEC continued to evolve. A US federal judge declined the SEC’s request for a temporary restraining order on Binance.US’s assets, allowing the company to maintain operations amid the regulatory drama.
The confrontation between Coinbase and the SEC advanced further, with the SEC stating it has not yet decided how to respond to Coinbase’s petition for rule-making. The outcome of this decision holds significant implications for the future regulatory landscape, as well as Coinbase’s operations.
The challenges cryptocurrency businesses like Coinbase and Binance face are not dissimilar to the battle Nike faced in 1977 due to outdated tariff legislation. At the time, Nike was confronted with a whopping $US25 million tariff bill, which exceeded the company’s annual revenue. This financial blow was not a simple matter of regulation but an attempt by competitors to cripple the expanding company.
Nike’s response was an innovative “undercut” method. They created a new line of shoes in the US, selling them at a minimal profit to reduce the average price of shoes made in the country. This creative approach allowed Nike to negotiate a reduction in the tariff, demonstrating that regulatory challenges can sometimes stimulate innovation.
Nike’s case lasted for more than three years, and eventually, they settled on paying a $US9 million tariff. By this time, the company’s total revenue had exceeded $US140 million, and Nike brushed off the tariff payment and then managed to have the tariff legislation updated to reflect the new age. This raises the question: Can the crypto industry fight back against the SEC’s regulatory attack and have the outdated securities laws updated to reflect the digital age?
It remains to be seen what their equivalent of Nike’s “undercut” method will be, but the spirit of innovation that fuels the industry in some quarters could potentially lay the groundwork for novel legal and regulatory strategies.
This week’s events underscore the numerous factors influencing the cryptocurrency market. The interplay between regulatory decisions, market rumours, economic events, and trader sentiment continues to shape the space. The ongoing challenges reinforce the rollercoaster nature of the crypto market and the crucial importance for Australian investors to stay informed in the face of constant change.
Storm clouds have gathered over the crypto world this week as two giants of the exchange landscape—Binance and Coinbase—defend themselves against allegations of violating federal securities laws. Binance, a household name among crypto investors, was in the eye of the storm earlier this week. The US Securities and Exchange Commission (SEC) threw a barrage of allegations against the exchange, its US counterpart Binance.US, and the founder Changpeng “CZ” Zhao. The lawsuit claims the accused entities offered unregistered securities to the public through the BNB token and Binance-linked BUSD stablecoin.
While the market was still digesting the accusations around Binance, the SEC launched a similar attack against Coinbase. This second round from the SEC accused Coinbase of operating as an unregistered broker, exchange, and clearing agency. In a financial world where the lines are clearly delineated, the SEC alleges that Coinbase was overstepping these boundaries.
Interestingly, the crypto market has shown signs of steadfastness amid the regulatory scrutiny. Despite this, a surge of outflows from Binance took place, with a staggering $US700 million in assets moving out of the exchange in the 24 hours following the lawsuit’s announcement. Coinbase didn’t escape unscathed, either. The legal drama saw traders withdraw approximately $600 million in assets from the platform.
As the legal pressure on Coinbase mounts, the company’s Founder and CEO, Brian Armstrong, has stood his ground. In a recent Twitter thread, he countered the SEC’s allegations, expressing his pride in representing the industry in court to clarify crypto rules.
Armstrong cited a series of key points to back up his confidence in the face of regulatory headwinds. He pointed out that the SEC had reviewed Coinbase’s operations and permitted it to become a public company in 2021. Despite the SEC’s allegations, Armstrong alleged that Coinbase has always strived to comply with the law. He noted, “There is no path to ‘come in and register’—we tried, repeatedly—so we don’t list securities. We reject the vast majority of assets we review.”
Coinbase also tweeted, “The numbers don’t lie”, followed by a video titled “Coinbase by the numbers”, highlighting that Coinbase tried to meet with the SEC for guidance over 30 times in 2022. The video also highlights the potential for more than one million tech jobs to be driven offshore by the SEC’s hawkish stance on crypto.
Yet, not all news in the crypto-verse this week was terrible. Bitcoin shrugged off the regulatory whirlwind and found its way back above $US27,000. Similarly, Ether has also taken the news in its stride, heading back to the high $US1,800-mark.
In this climate of lawsuits, allegations, and regulatory action, it’s evident that the crypto industry is under a magnifying glass. Some investors interpret SEC’s stance towards crypto as a sign that US lawmakers are against the use of decentralised currencies and do not care if excessive regulation drives web3 companies and talent overseas. No matter the interpretation, the increased scrutiny is a clear testament to the significance of the crypto market as a key player on the global financial stage.
As these regulatory thunderstorms rumble, they are a stark reminder of the fast-paced and ever-changing environment that crypto investors must constantly face to stay on top of their investments.
It was a week of significant developments in the world of cryptocurrency, with hawkish commentary, inflationary concerns, and less-than-encouraging Chinese manufacturing data all influencing digital assets.
Bitcoin, having silenced crypto sceptics with an impressive surge of over 60% during the first quarter of 2023, slipped into a losing streak by the end of May. Trading near $US27,100, it experienced a decline of almost 3%, partly due to remarks made by a US Federal Reserve official indicating a possible continuity of liquidity tightening measures. The loss in momentum for Bitcoin appeared to ignite a sense of uncertainty among crypto investors and market watchers.
Simultaneously, the downturn was also influenced by disheartening data from China’s manufacturing sector. As Australia’s biggest trade partner, this news could put a damper on the Australian economy at an already tough time.
Feeding into this bearish mood was Fed Cleveland Bank President, Loretta Mester. In an interview that sent chills through investors, she hinted at a lack of convincing reasons to hit the brakes on the Fed’s streak of rate increases. This statement and the ongoing tension regarding the US government’s ability to raise the debt limit created a perfect storm for crypto markets, with Bitcoin, Ether, and other major cryptocurrencies caught in the downpour.
Meanwhile, the US political arena provided another plot twist. After much anticipation, a bill to lift the colossal $US 31.4 trillion debt ceiling finally got the green light in the House of Representatives. This move caused the CEO of Blackrock, Laurence Fink, to comment on the potential diminishing global trust in the US dollar. While a US default would spell disaster for Australia and the rest of the world, the sentiment of Fink can be felt worldwide. As some analysts predict, this could potentially provide positive momentum for Bitcoin as a financial refuge.
The debt ceiling saga underscored Bitcoin’s appeal as a potential hedge against inflation and debt fears. The finite supply of Bitcoin, coupled with the current issues faced by the US government, could again place the cryptocurrency in the spotlight as investors seek safe-haven assets. With Bitcoin’s halving scheduled for April 2024, the biggest digital asset has an even stronger case when compared with traditional fiat currencies like the USD.
However, caution is advised for those expecting these events to trigger a massive surge in Bitcoin value. Investors should note that due to the uncertainty and potential liquidity problems these issues could cause, the outlook for digital asset markets is leaning bearish for the next few months unless conditions improve. Investors, therefore, may need to touch the brakes and keep their expectations in check.
Analysts and investors are closely following the impacts of these developments. If the US Fed proceeds with more rate hikes as expected, the price of Bitcoin might face further decline.
Conversely, Bitcoin may experience some positive price action if the rate-hiking cycle is paused.
Turmoil and innovation often go hand in hand, and the world of Web 3 is no exception.
Notably, Florida Governor Ron DeSantis, currently a candidate for the Republican Party leadership, is bringing bitcoin into the political arena with a robust stance that has garnered attention and sparked conversations across the United States and the rest of the world.
Simultaneously, an emerging feature from the hardware wallet provider, Ledger, is a current source of controversy and fuelling debates about security and ease of use in the crypto realm
On the political front, discussions around central bank digital currencies (CBDCs) continue to shape and define the larger narrative of cryptocurrencies.
Florida Governor Ron DeSantis, a candidate for the Republican Party leadership, has voiced a robust stance on cryptocurrencies during a conversation with Elon Musk and venture capitalist David Sacks. Taking a strong position against CBDCs, DeSantis made it clear that his advocacy for bitcoin springs from a place of safeguarding civil liberties.
According to DeSantis, the “current regime” holds a negative view towards bitcoin and, given the chance, may cause harm to the future of the cryptocurrency. DeSantis depicts bitcoin as a “threat to the current regime” and notes its possible attempts to “regulate it out of existence”.
Within his jurisdiction as Florida’s governor, DeSantis has already set a precedent by signing legislation prohibiting CBDCs within the state, questioning the potential misuse of a CBDC to manipulate politically unfavourable purchases. Despite some legal debates over the law’s effectiveness, DeSantis has stood his ground, suggesting his approach to crypto as a federal leader may follow a similar path.
As this debate rages on in the US, it also echoes in Australia. The RBA has shown an active interest in CBDCs, launching research projects and pilots to explore the feasibility and implications of a potential digital Australian dollar. The developments in Florida and the RBA’s efforts highlight how conversations around CBDCs are not confined to one corner of the globe, but are part of a worldwide dialogue on the future of cryptocurrencies and the larger financial ecosystem.
Digital asset markets are no stranger to controversy, and Ledger’s recent attempt to pioneer the crypto user experience with its “Ledger Recover” service is no exception. This novel feature, intended to store users’ encrypted seed phrases with third-party custodians, has provoked an intense backlash from some quarters of the crypto community.
Historically recognised for its commitment to privacy and security, the Paris-based crypto wallet maker seems to have stirred the hornet’s nest. Some argue that the service is nothing short of an affront to the principles that Ledger has always upheld. Detractors of the move point to the possibility of the encrypted key being exposed to potential threats once split amongst third parties. This concern over security vulnerabilities has led some to question the wisdom of Ledger’s decision.
But perhaps what has struck a deeper chord of discontentment is the requirement for the Ledger Recover service users to provide a government-issued ID. Some view this mandate as a gross violation of the privacy tenets around crypto, almost sacred in the eyes of many enthusiasts. To them, this perceived breach is tantamount to betrayal.
Ledger’s controversial past, particularly the infamous 2020 data breach that exposed customer emails, has only fueled the fire. This incident has left a lingering taste of distrust among some users, which has resurfaced in the wake of the Ledger Recover announcement. The announcement has been criticised by some community members, who warn of potential security risks.
Ledger CEO Pascal Gauthier’s defence of the service as a response to future customer demands and an essential step to onboard new crypto users has done little to quell the uproar. Critics argue that in its quest to attract more users, Ledger is compromising the very ideals that drew many to cryptocurrency in the first place. While Ledger’s leadership continues to defend the service and reassure its user base, there’s no denying the depth of the backlash.
Cryptocurrencies, once a niche market, have rapidly grown into a formidable financial sector that never sleeps nor slows down. Week after week, new developments arise, reshaping the landscape and setting new paradigms.
Tether’s bold bitcoin strategy, President Biden’s calm amidst the US debt ceiling storm, and the recent federal court ruling on SEC document secrecy are all such turning points that have made headlines this week. Each could significantly impact the short and long term future of cryptocurrencies.
This week, amidst a cloud of controversy, Tether—the world’s largest stablecoin issuer—made an audacious move: it doubled down on bitcoin reserves. Although under scrutiny for its opaque reserve disclosures, Tether has shown resilience by upping its bitcoin holdings. Tether, a trailblazer in the realm of stablecoins (cryptocurrencies tied to a reserve of traditional currency to stabilise their value), appears to be banking on Bitcoin like never before.
While Tether has always held a part of its reserves in non-fiat assets, this leaning into Bitcoin suggests an unprecedented faith in the leading cryptocurrency. Whether viewed as a colossal vote of confidence in Bitcoin’s sustained dominance or as a gamble considering Bitcoin’s renowned volatility, Tether’s move could send shockwaves across the crypto market, impacting other stablecoins and possibly propelling further institutional Bitcoin adoption.
However, Tether’s resilience and ability to adapt shouldn’t come as a surprise. The company demonstrated its strength earlier this year when a US regional banking crisis hit Circle’s USDC, the second-largest stablecoin. The sudden downfall of Silicon Valley Bank (SVB) left part of Circle’s cash reserves frozen over a weekend, resulting in a ripple effect that temporarily knocked several stablecoins off their dollar peg. However, Tether, being incorporated in the British Virgin Islands and Hong Kong, emerged as a clear winner by maintaining its price stability due to its perceived disconnection from U.S.-based banks.
Since then, USDT’s circulation has grown 24% this year, while most rivals have experienced significant outflows.
As the US grapples with a looming debt ceiling crisis, President Joe Biden exudes an air of optimism. This week, he assured the nation his confidence in avoiding a potentially disastrous default. His negotiations with congressional Republicans seem promising, and Biden expresses hope for a solid agreement soon.
Despite the impending crisis, the cryptocurrency market has remained relatively stable, with leading currencies like Bitcoin and Ether holding their own. Interestingly, raising the US debt ceiling could be a boon for the crypto market. Typically, such moves can lead to inflationary pressures, prompting investors to seek alternative stores of value, like cryptocurrencies, to protect their assets.
The fundamental properties of scarce stores of value can perform well when dollar liquidity rises, and their adoption could spike as a hedge against inflation and as an investment. The market’s current stability implies that investors may already be factoring in some of this potential uplift.
In a recent twist in the ongoing legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC), a federal judge granted Ripple access to SEC’s internal communications. At the heart of this case is Ripple’s cryptocurrency, XRP, and whether it should be classified as a security.
The ruling provides Ripple a peek into the SEC’s internal deliberations. One particular point of interest? A landmark statement made in 2018 by William Hinman, then-director of corporation finance at the SEC. At a Yahoo Markets Summit, Hinman announced that Ether, another prominent cryptocurrency, was not considered a security. This announcement was a game-changer in the crypto world, setting precedents in cryptocurrency regulation.
But how did Hinman reach this conclusion? The SEC has previously resisted sharing related email threads, claiming these were preparations for Hinman’s personal opinion, not official guidance. However, Ripple’s victory may reveal whether Hinman’s statement was indeed personal or reflected a broader SEC consensus.
This case could shed light on the SEC’s decision-making process for cryptocurrencies, potentially influencing regulations and offering crucial guidance to the rapidly evolving crypto industry.
In a week filled with unexpected twists and turns, the world of cryptocurrency has been impacted by inflation rate surprises, market fluctuations, and unprecedented gains in meme coins, which are cryptocurrencies inspired by internet memes.
Investors have been on a roller coaster ride of uncertainties and profit surges, with the initial optimism surrounding the lower-than-expected US inflation rate quickly followed by a market slump. As the digital asset landscape evolves, investors should explore and understand the factors driving these market movements to help make better investment decisions in the face of volatility.
The US annual inflation rate cooled to 4.9% in April, catching economists off guard as they had forecasted a 5% rate. This led to a temporary boost in the bitcoin (BTC) price, which rose more than 1% to just above $US28,000. Despite this short-lived positive reaction, the markets have since fallen, reflecting investors’ cautious sentiment.
The lower inflation rate news and internet rumours of the US government selling bitcoin contributed to this week’s market volatility. Prices for Bitcoin and Ether fluctuated but both currencies were resilient as they regained lost ground and stabilised. As investors remain cautious, the market appears susceptible to smaller events and minor swings in sentiment.
In the midst of this volatility, traders are keeping a close eye on upcoming economic data, including US jobs data and the producer price index (PPI), which measures the average change in selling prices received by domestic producers for their output. These reports will play a crucial role in the US central bank’s decision in June on interest rate adjustments, which will significantly impact crypto and other asset markets.
Meawnhile, Elon Musk’s tweet featuring a Milady NFT sent the floor price, the lowest price at which an NFT is available for sale, soaring. The Twitter CEO shared a meme containing the instantly recognisable image of one of the avatar NFTs overlaid with the words, “There is no meme, I love you.”
The collection shot to the top trending spot on NFT marketplace OpenSea, with the floor price briefly hitting an all-time high of 7.3 ETH (approximately $US13,700), before dipping back down. This instance highlights the influence that high-profile individuals can have on the crypto and NFT markets. The associated NFT collection called ‘Redacted Remilio Babies’ has also increased in value drastically due to the association.
A pseudonymous crypto trader turned a $263 investment into an almost $13 million, an astounding 5,000,000% return, with Pepecoin, a meme coin based on the “Pepe the Frog” meme. This coin has surpassed $1 billion in market capitalisation but is raising concerns about over-concentrated ownership due to a small number of individuals holding a large portion of the coin’s total supply, and the sustainability of its skyrocketing value.
The breakneck rally of Pepecoin, launched in April, exemplifies the potential for life-changing gains in the world of crypto but also serves as a cautionary tale regarding the risks associated with speculative investments in meme coins. Too often, the rare stories of success drown out the many stories of losses that other, less fortunate, investors have suffered trying to speculate on meme coins.
In the ever-evolving landscape of crypto, this week has brought a series of notable events that have piqued the interest of investors and generated a buzz within the industry. Bitcoin experienced a fall from $US30,000, Nike launched its first digital sneaker collection, SEC Chair Gary Gensler made headlines with his ambiguous stance on Ether, and Tesla’s earnings release shows no change in Bitcoin holdings for the third quarter in a row.
Bitcoin’s value took a hit, dropping below $US29,000—suffering a 3% decrease in just 15 minutes before sinking lower into the high $US 28,000 mark. A combination of factors contributed to this decline, including a massive sell-order on Binance and a higher-than-expected UK inflation rate. The sell-off rippled through the crypto market, affecting other cryptocurrencies such as Ether (ETH), Polygon (MATIC), and Dogecoin (DOGE), which all fell by about 5%. Solana (SOL) experienced a nearly 9% drop.
Nike is set to release its first non-fungible token (NFT) sneaker collection on the recently-launched .Swoosh platform. The virtual sneaker, Our Force 1 (OF1), is based on the iconic Air Force 1 design. This move by the sportswear giant highlights the growing interest in digital fashion and the adoption of blockchain technology within the fashion industry.
Starting April 18, Nike will airdrop “posters” to select .Swoosh users, granting them early access to the sale on May 8. On May 10, the entire .Swoosh community can purchase the digital goods. Nike aims to explore new ways to tell stories and create relationships while removing physical product limitations.The market’s reaction to Nike’s digital collection remains to be seen, but this development could encourage other major brands to follow suit.
During a marathon hearing before the House Financial Services Committee, SEC Chair Gary Gensler avoided questions about whether Ether (ETH) should be classified as a security. His reluctance to provide a clear answer leaves the industry uncertain about the future of Ether and other cryptocurrencies. Gensler’s ambiguity might offer the industry some breathing room, but it also underscores the ongoing challenges posed by the lack of clear regulations.
In the same hearing, Gensler stated that DeFi platforms fall under securities rules, which could have significant implications for the industry. Lawmakers expressed concerns that the SEC’s approach to regulation might stifle innovation and argued that clear rules are necessary to foster growth in the digital asset ecosystem. Chairman Patrick McHenry asserted that “Regulation by enforcement is not sufficient nor sustainable. Your approach is driving innovation overseas and endangering American competitiveness.”
Tesla reported that it neither bought nor sold any Bitcoin in Q1 2023, with the value of the company’s digital assets remaining flat at $US184 million. This marks the third consecutive quarter with no changes to Tesla’s Bitcoin holdings. While the company’s Q1 earnings met analyst expectations, its revenue of $23.33 billion was slightly below the anticipated $23.6 billion.
The company’s decision to hold onto its Bitcoin assets may be indicative of a long-term investment strategy or a reflection of its belief in the potential growth of the cryptocurrency. As the market continues to evolve, investors and enthusiasts will likely keep a close eye on Tesla’s future involvement in the crypto space and its potential impact on the industry.
After almost a year, Bitcoin (BTC) has surged past the $US30,000 mark, bringing a wave of excitement to the crypto community. Meanwhile, Ethereum’s much-anticipated Shanghai hard fork, also known as the “Shapella” upgrade, has been finalised. The upgrade, which enables users to withdraw staked Ether (ETH), went live during the morning of April 13 in Australia. Shortly after, 285 withdrawals were processed, totalling around 5,413 ETH (approximately $US10 million), with a total of 18 million ETH still staked.
Approaching the upgrade, and subsequent unlocking of staked Ether, investors had some concerns that a significant proportion would be sold off and cause the value of their portfolio to slide. However, Ether’s price remained reasonably flat prior, during, and after, the upgrade went live, despite withdrawals being processed.
Additional selling pressure on ETH might arise from entities under financial strain. The bankrupt crypto lender Celsius Network may need to sell its staked ETH balance of almost 160,000 ETH to recover funds for creditors. Similarly, Kraken, a prominent US-based crypto exchange, has agreed to shut down its staking operations in order to settle SEC charges. Consequently, Kraken may have to unstake its entire 1.2 million ETH. These circumstances could increase the ETH supply in the market, potentially affecting its price and contributing to overall selling pressure .
Now that Ethereum validators can withdraw their stake whenever they wish, there is speculation that more and more investors will become validators and stake their ETH. This not only allows them to earn a reliable, passive income from their assets but it removes ETH from the immediate circulating supply, potentially creating upwards pressure on price as the asset becomes increasingly scarce on the open market.
Validators who stake at least 32 ETH can participate in the block validation process directly but by running their own hardware. However, not everyone can afford to stake that amount, leading to the rise of liquid staking providers such as Lido and RocketPool, or with centralised providers like Coinbase.
Ethereum’s co-founder, Vitalik Buterin, shared his optimism during a Shapella Mainnet Watch Party, stating that the hardest parts of Ethereum’s transition are now over. The Shanghai hard fork also includes four Ethereum Improvement Proposals (EIPs) aimed at improving gas fees for developers. These EIPs address various aspects such as lowering gas costs and capping gas expenses for specific functions. Scaling, which involves making transactions faster and cheaper, is the next challenge for Ethereum after the Shanghai upgrade.
Meanwhile, the latest US inflation data has led crypto investors to monitor the Federal Reserve’s next move, as the consumer price index (CPI) could affect the US central bank’s interest rate decisions. The Reserve Bank of Australia opted to hold the current interest rate steady this month, however, if the US continues to hike, the RBA could be forced to follow or risk affecting the AUD/USD exchange rate, among other things.
With the Ethereum Shapella upgrade and Bitcoin’s price rally, this week has been an exciting time for the crypto community. Investors and enthusiasts alike should keep an eye on these developments, especially in regards to the movement of staked ETH, as they could significantly impact the cryptocurrency market and their investments alike.
Elon Musk, the entrepreneur who acquired Twitter last year in a $44 billion deal, caused a stir by changing the iconic Twitter bird logo above the home button on the social network’s web version to the “doge” of the Dogecoin cryptocurrency.
Dogecoin is a cryptocurrency that features the likeness of the Shiba Inu dog from the popular internet meme as its logo. Created as a joke in 2013, Dogecoin has gained attention due to its lighthearted nature and the support of high-profile individuals like Musk.
Musk is a well-known supporter of the Doge meme and has promoted Dogecoin on various occasions, including during his appearance hosting “Saturday Night Live” last year. Following the logo change, the value of Dogecoin rose more than 20%. This event underscores how the involvement of influential figures, such as Musk, can sway the value of cryptocurrencies, even those initially created as jokes.
The cryptocurrency market is an ever-evolving rollercoaster ride where fortunes can change in an instant, and this week has been no exception.
The spotlight now shines on Ethereum’s native token, Ether, as it outpaces Bitcoin, the long-standing king of the crypto world. But that’s not all—the market is buzzing with a contentious governance proposal surrounding the Arbitrum blockchain and the antics of billionaire Elon Musk, who’s recent Dogecoin stunt pumped the value of the meme-coin over 20%.
Ethereum’s native token, Ether (ETH), reached an eight-month high of $1,900 this week, a 3% increase, while Bitcoin rose to $28,400. The outperformance of ETH and the shift in the ETH-BTC ratio has sparked curiosity about the significance of Ether outperforming Bitcoin. The forthcoming Shanghai upgrade, scheduled to occur in less than two weeks, could be partly responsible for this change. This surge in Ether’s value signals growing confidence in Ethereum’s ability to address scalability and efficiency challenges, further solidifying its role as a leading platform for de0centralised applications and smart contracts.
The Shanghai upgrade will enable withdrawals of Ether staked in the Beacon Chain since December 2020, currently sitting at over 16 million ETH worth $US30 billion. This upgrade is widely considered a long-term bullish catalyst for Ether and could lead to a massive increase in staked ETH through liquid staking providers, such as Lido and RocketPool.
In essence, the upgrade allows stakers more flexibility to stake or unstake as they please, which could attract more investors and increase Ether’s value.
The Arbitrum blockchain, an Ethereum layer 2 solution designed to improve scalability and reduce transaction fees, has been the subject of recent controversy. After completing one of the largest airdrops in crypto history, its first governance attempt has been a shambles. The improvement proposal involves granting the Arbitrum Foundation control of 750 million ARB tokens worth nearly $1 billion. The controversy began when it became clear that the tokens had already been moved to the foundation’s treasury and were already being used to fund expenditures, despite the vote against the proposal.
This move sparked concerns from the community that their vote was meaningless and essentially threw the value of the governance token, ARB, out the window. The tickets in question are intended to fund a “special grants” program to foster growth on Arbitrum. However, ARB holders would not have a say in how or to whom the Arbitrum Foundation allocates the funds, according to the proposal (AIP-1). This centralised approach to grant allocation has alarmed community members who are concerned that it could be misused.
From feedback raised by the DAO, AIP-1 will likely be split into smaller sections so that each component can be voted on, rather than compiling them into a single, multifaceted proposal. The Arbitrum token (ARB) fell about 7% in response to the controversy but has since rebounded following some clarification about the ARB tokens which have been spent already and how the proposal will be handled moving forward.
The US Commodity Futures Trading Commission (CFTC) has again thrust the crypto world into the spotlight by filing a lawsuit against Binance and its founder, Changpeng Zhao (CZ). The charges stem from allegations that Binance knowingly offered unregistered crypto derivatives products in the US, violating federal law. As one of the world’s largest cryptocurrency exchanges, this news shocked the market, affecting Bitcoin, Binance’s native token BNB, and the broader digital asset market.
According to the lawsuit, Binance operated a derivatives trading operation in the US, offering trades for cryptocurrencies like Bitcoin, Ether, Litecoin, Tether, and BUSD. The CFTC claims that under CZ’s leadership, Binance directed its employees to use virtual private networks (VPNs) to spoof their locations, enabling them to bypass restrictions on customers based in America. The lawsuit depicts a complex web of corporate entities deliberately designed to obscure Binance’s actual ownership, control, and location.
The CFTC has charged Binance with multiple violations, including offering illegal futures transactions and off-exchange commodity options, failing to register as a futures commissions merchant, designated contract market or swap execution facility, and implementing inadequate know-your-customer (KYC) and anti-money laundering (AML) processes.
Binance has responded to the lawsuit by highlighting its significant investments in compliance over the past two years, including expanding its compliance team and spending $80 million on KYC and other compliance tools. Binance maintains that it now blocks US residents and citizens from accessing its platform and blocking US cell phone providers, IP addresses, and bank accounts. A Binance spokesperson expressed disappointment at the CFTC’s actions, considering the company’s ongoing collaborative efforts with the regulatory body.
The announcement led to over $US500 million in Binance-pegged USD (BUSD) outflows within 24 hours. Although this outflow is significant, it is notably smaller than the $2 billion in BUSD outflows following the crackdown on New York-based BUSD issuer Paxos in February. Analysts attribute the relatively softer impact on BUSD to Binance’s shift towards other stablecoins, such as trueUSD (TUSD). Additionally, the exchange has ended zero-fee trading for BUSD-listed trading pairs and moved them to TUSD-listed pairs.
When first announced, the digital asset markets took a slight tumble, with Bitcoin retracing some of its move upward from last week. As investors continue to assess the potential impact of the CFTC lawsuit, Bitcoin has consolidated at around $US27,000, reflecting its remarkable resilience to the situation. While the CFTC-Binance-triggered price drop may not seem particularly significant, the increasing regulatory scrutiny on the cryptocurrency industry could lead to further restrictions and selling pressure from panicked investors as the situation continues to unfold.
This legal battle could have far-reaching implications for the crypto industry, as it calls into question the regulatory jurisdiction of the CFTC and the SEC. By identifying major tokens like Litecoin, Tether, and BUSD as commodities, the CFTC may be staking out new ground in the ongoing debate over who should oversee crypto trading in the United States.
As the US regional banking system teeters, Bitcoin has risen from the ashes, reaching a nine-month high and surprising many by outperforming the more traditionally reliable investing sectors.
With turmoil in the banking sector and expectations of central banks slowing the pace of interest rate hikes, Bitcoin has surged to $US28,500 this week, its highest value since mid-June.
Amid the chaos, Bitcoin boasted a 26% increase last week—its best weekly gain since April 2019. Investors seeking refuge from the dramatic fall in equities markets have turned their attention towards digital assets. Bitcoin’s performance wasn’t an isolated event, as Ethereum and the rest of the market followed suit. The US two-year yields and the Cboe Volatility Index (VIX) experienced wild fluctuations, but Bitcoin surged upward.
This rise in Bitcoin’s value comes in the wake of several banking sector disasters, such as the collapse of Silicon Valley Bank and regulators’ takeover of Signature Bank. As a result, the Federal Reserve has joined forces with other major central banks to maintain a steady flow of the US dollar in the global financial system. In the midst of these challenges to the traditional banking sector some traders now view Bitcoin as a hedge against the conventional system. As the dollar value locked in Bitcoin futures contracts rises, it is evident that the crypto market is experiencing increased speculative interest and potential for further price volatility.
Some speculators view Bitcoin’s recent rally as a testament to its resilience in the face of global financial turmoil, and believe it could decouple from traditional markets and become a hedge against economic uncertainty. With other digital assets following suit, it’s unclear how the situation will continue to unfold but the initial signs of the rally have been promising for digital assets.
The Ethereum Layer 2 scaling giant, Arbitrum, has announced its new token, ARB, set to be airdropped to community members on Thursday, March 23. The Arbitrum Foundation unveiled that the token’s introduction marks the official transition of Arbitrum into a decentralised autonomous organisation (DAO). ARB holders will now have the power to vote on key decisions governing Arbitrum One and Arbitrum Nova, Layer 2 networks that enable faster and more affordable transactions while being secured by the Ethereum blockchain.
The Arbitrum Foundation aims to make the Arbitrum ecosystem more decentralised than alternative scaling chains by sharing tokens to users of the Arbitrum One and Nova chains, putting voting power in the hands of the community. Offchain Labs, the creator of Arbitrum, will no longer control the chain’s future, focusing on being a service provider as per the DAO’s requirements. The airdrop will allocate 11.5% of the total ARB supply to eligible Arbitrum users, with 1.1% going to DAOs operating within the Arbitrum ecosystem. Some 44% of the token supply will go to investors and the off-chain labs team, with a four-year vesting period. The remaining tokens will be controlled by the new Arbitrum DAO’s treasury, allowing ARB holders to vote on fund disbursement.
With $3.69 billion total value locked on Arbitrum One, the platform holds a 55% market share in the Ethereum Layer 2 landscape. The introduction of the ARB token coincides with the launch of Arbitrum Obit, which enables third-party apps and protocols to create new “layer 3” blockchains based on Arbitrum’s low-fee infrastructure. This development marks an important milestone for Arbitrum as it continues to dominate the Ethereum scaling space, solidifying its position as a leader in the Layer 2 market.
The stability of the cryptocurrency industry is once again in question as the recent collapse of Silicon Valley Bank (SVB) has spooked crypto investors holding stablecoins, leading to the one of the largest stablecoin de-peg events in history. SVB, which was a major player in the startup industry, provided banking services to numerous cryptocurrency companies and exchanges, including USDC stablecoin issuer, Circle.
Following the bank’s sudden announcement that it needed to raise $2.25 billion to shore up its balance sheet, there was a run on the bank as depositors attempted to withdraw more than $42 billion, resulting in the second-largest bank failure in US history.
While the Federal Deposit Insurance Corporation (FDIC) has pledged to cover up to $250,000 per depositor, the vast majority of SVB’s customers were businesses that kept far greater uninsured amounts at the bank, sparking concerns about how people will be able to retrieve the rest of their funds.
The collapse of SVB has had far-reaching effects on the stablecoin and crypto markets. USDC lost its peg after Circle announced that roughly $3.3 billion of its cash reserves were held at collapsed Silicon Valley Bank. This sparked unprecedented redemptions as investors began exchanging USDC for other stablecoins and cryptocurrencies. As USDC was long seen as one of the safest stablecoins, investors began to lose confidence in others, resulting in nine out of the top 10 stablecoins losing their peg. Investors flocked to trade other stablecoins for USDT, despite long standing concerns about its reserves, driving its price above the $US1 peg with unprecedented demand.
The de-peg of USDC has caused widespread panic among investors, who have been traumatised by multiple meltdowns in 2022, such as the UST-Terra collapse. Circle has tried to assuage fears around a total collapse and said it remains resilient despite its exposure to SVB. It has continued to honour 1:1 redemptions so far. The majority sentiment points to a swift resolution of the matter within weeks based on previous cases of FDIC coverage and the nature of Circle’s deposits, with the selloff attributed to panic rather than rational decision making.
In response to the crisis, U.S. Treasury Secretary Janet Yellen has stated that a major government bailout is not on the table, citing the reforms that have been put in place since the financial crisis. However, Yellen has emphasised that regulators are working to address the situation in a timely way and are focused on meeting the needs of depositors. Regulators are reportedly considering a wide range of options for SVB, including acquisitions, and former FDIC Chair Sheila Bair has suggested that finding a buyer for the bank is the best outcome.
Despite these efforts, there are concerns that the collapse of SVB could have broader implications for the stablecoin and crypto markets. The lack of guard rails in the industry has long been a concern for regulators, and the collapse of a major player in the space may lead to increased scrutiny and calls for greater oversight. The stability of stablecoins, which are designed to maintain a stable value relative to a traditional currency, may also come into question, particularly if the collapse of SVB has any knock-on effects.
In the short term, the collapse of SVB is likely to cause significant volatility in the crypto market, and there is potential for further stablecoin de-peg events as the situation continues to unfold. Many companies that relied on SVB for banking services could lose a percentage of their deposits depending on the outcome of the catastrophe.
The event has created further unease for investors in relation to the crypto industry as a whole, which may create even tougher conditions in the market. However, the long-term implications of the collapse are less clear, and will likely depend on how regulators and industry participants respond to the crisis.
Binance Australia Derivatives is facing scrutiny from regulators in Australia after wrongly classifying some users as “wholesale clients” and abruptly closing their accounts, causing a flurry of responses from affected users on social media.
Affected users must submit the necessary evidence to meet the requirements to be classified as wholesale investors if they want to continue using the platform. Users who do not meet the criteria to be classified as wholesale investors were informed that all their positions would be closed, and they would no longer be able to access the Binance Australia Derivatives platform.
The day following the account closures, a spokesperson from the Australian Securities and Investments Commission (ASIC) announced in an email to Decrypt that it would conduct a targeted review of Binance’s local derivatives operations and the criteria used to classify both retail and wholesale clients. Binance Australia Derivatives, the official trading name of Oztures Trading Pty Ltd, published an official overview in July of 2022 clearly stating that derivatives products are only offered for Australian wholesale clients.
Binance addressed the issue on social media, stating that it had closed derivatives positions and accounts for some users incorrectly classified as wholesale clients. According to the announcement, 500 accounts were affected by the incorrect classification.
Changpeng “CZ” Zhao, the co-founder and CEO of Binance, tweeted that all affected users would be compensated for any losses and to ignore the ‘FUD’ (fear, uncertainty, and doubt)—a common crypto acronym. He continued, saying that he hoped to explore the potential for Binance to reopen derivatives trading for retail users in Australia in the future.
This incident occurred shortly after Australia bolstered its watchdogs for the crypto space as part of its “multi-stage” plan to fight scams. The country’s regulators are taking a more active role in policing the cryptocurrency industry, focusing on protecting investors and preventing financial crimes.
The past week saw Bitcoin (BTC), and Ethereum (ETH) struggle as both cryptocurrencies posted declines of around 5%, with inflation concerns and hawkish monetary policies weighing heavily on investors’ minds.
On Friday, things took a turn for the worse when the US Commerce Department reported that the PCE price index had risen by 0.6% in January, or 5.4% year-on-year, indicating that inflation is still a significant issue. This news caused BTC to dip to $23,000 at one point, its lowest level in nine days, while ETH was recently off about 2.5% over the past 24 hours. With investors growing increasingly worried about inflation and market uncertainty, how the crypto market will fare in the weeks ahead remains to be seen.
Related: Best Investments to Beat Inflation
Another day, another twist in the volatile world of cryptocurrencies—today, the crypto market is down, leaving investors scrambling to make sense of the Federal Reserve’s latest minutes, which suggest that interest rate hikes could continue longer than anticipated. It has been a volatile week for bitcoin, edging to a six-month high of $US25,000 earlier in the week, before falling to under $US23,500.
This comes after the recent release of the February 14 consumer price index (CPI), which showed higher-than-expected inflation, and the United States Securities and Exchange Commission’s (SEC) increased regulatory enforcement.
Investors are concerned about the SEC’s recent crackdown on Paxos and Binance, which has led to an outflow of over $US 32 million of digital assets. The SEC started this enforcement action by targeting Kraken’s earn program, charging the company with failing to register the offer and sale of their crypto-asset staking-as-a-service program, which they claim qualifies as a sale of securities. Kraken agreed to a $30 million settlement and will cease to offer the staking program to users.
Nexo has also recently ended its centralised staking program, while Coinbase CEO Brian Armstrong vows to fight the action if it goes to court. On Feb. 13, the SEC issued a notice to Paxos, claiming that BUSD is an unregistered security, leading New York regulators to order Paxos to stop issuing BUSD, the third-largest stablecoin in the crypto market. Binance intends to continue supporting BUSD, despite the order against Paxos.
There needs to be more clarity and transparency in the crypto industry, without which growth and innovation will be weighed down.
Many analysts believe cryptocurrencies cannot become mainstream until a more universally agreed-upon set of laws is enacted.
In the US, the SEC Chair, Gary Gensler, has issued a warning, stating that if the field has any chance of survival and success, it needs time-tested rules and laws to protect public investors. The Financial Stability Board believes many stablecoins will fall short of meeting forthcoming regulations, while the Commodity Futures Trading Commission has called for more precise regulation. How laws will change and be enforced moving forward is yet to be seen.
Closer to home, the Australian Government has just released its own token mapping paper on the cryptocurrency ecosystem with a view to regulating the sector at some stage this year.
Amidst the increased regulatory scrutiny on stablecoins, the decentralised finance stablecoin protocol Frax Finance’s community has voted in favour of fully collateralising its native stablecoin Frax (FRAX).
The FIP-188 governance proposal, which aims to change the collateralisation model of FRAX, has received 98% of votes in favour as per a snapshot taken today. The proposal marks an end to the algorithmic backing of the protocol’s stablecoin, which included a variable collateral ratio adjusted based on the market demand of the stablecoin.
Frax’s hybrid model had previously been stabilised using a complex algorithm while being 80% backed by crypto asset collateral. The protocol’s governance token, FXS, surged 12% in the past 12 hours following the news. With a market capitalisation of just over $1 billion, FRAX is currently the industry’s fifth-largest stablecoin.
This move follows a wider crackdown on stablecoins after the Terra/Luna collapse last year, with the Canadian Securities Administrators publishing new requirements that include strict rules for stablecoin trading and a ban on algorithmic or non-fiat-backed stablecoins.
Time will tell if any other stablecoin issuers change their backing mechanism in the wake of this regulatory blitz.
On Thursday, the US Securities and Exchange Commission (SEC) announced charges against crypto exchange Kraken, accusing it of offering unregistered securities products in the US through its crypto-staking-as-a-service program. To resolve the charges, Kraken has agreed to pay a $30 million fine and cease all its staking services in the United States.
Kraken’s staking service, which has been available since 2019, had advertised a yield of up to 20% on its website. The news confirms speculation that the SEC would focus on staking as part of its increased enforcement efforts in the crypto industry.
In the days before the announcement, there were rumours of the SEC’s impending crackdown. Speculation intensified after Brian Armstrong, the CEO of Coinbase, tweeted late Wednesday that he had heard the SEC wanted to stop crypto staking services for retail customers in the US. In a series of tweets, he expressed his concerns, outlining the reasons why such a move would be a “terrible path.” Coinbase also offers crypto-staking-as-a-service to its users and has amassed over $US 1.6 billion in staked ETH alone since releasing the product to retail customers last year.
In August, Coinbase revealed that it was being investigated by the SEC regarding its staking programs. In a recent tweet, Armstrong also accused the SEC of “regulation by enforcement.” Crypto advocates use this phrase to criticise the SEC for imposing penalties to formulate rules rather than establish a clear set of guidelines for companies to follow.
Following the SEC announcement, Coinbase shares have fallen over 15% to $US57.
If broader enforcement action against centralised staking services takes place, the market share of stakers will be taken over by decentralised platforms like Lido, Rocket Pool, and others. These on-chain staking platforms are open-source software that anyone can interact with and use to stake their crypto, making it difficult for the SEC to intervene or regulate.
Lido, the largest liquid staking provider, has a TVL of over $US8.5 billion. Although the platform did not immediately witness an increase in usage following the SEC’s decision, it may see substantial inflows in the future as users search for new staking destinations for their ETH. After the SEC’s announcement, Rocket Pool experienced a brief surge, reaching $US1 billion in total value locked (TVL). The associated tokens for these two staking providers surged over 20% on the news of the crackdown on their centralised counterparts.
For decentralised finance enthusiasts, the decision to crack down on centralised staking providers could be seen as a win as staked assets on exchanges will likely move to on-chain, decentralised staking providers. This could create more decentralised proof-of-stake blockchains, such as Ethereum, by distributing staked assets across a more significant number of validators, helping them to become more robust and secure against malicious attacks.
According to the Treasury paper, the events of the past year have made it necessary to become more serious about evaluating the crypto ecosystem against current regulations.
“Token mapping is the process of identifying the key activities and functions of products in the crypto ecosystem and mapping them against existing regulatory frameworks,” the paper stated.
The token mapping paper revealed some of the Australian Government’s plans around crypto regulation and was described as “the first of its kind by a national government” by Angela Ang, senior policy advisor at blockchain intelligence firm TRM Labs and former regulator at the Monetary Authority of Singapore.
“As the crypto ecosystem grows and attracts more investment, crypto assets become more intertwined with traditional financial markets,” the report noted, while highlighting that more than one million Australians are expected to include crypto assets on their tax returns this year.
Under a section labelled ‘opportunities’, the federal government outlined the potential for crypto to enable innovation and create jobs. However, it added: “To capitalise on these opportunities and ensure consumer and business trust and confidence in the crypto ecosystem, regulation is required.
“This includes both clarifying where existing regulation applies, as well as ensuring that any additional regulation is appropriately robust, fit-for-purpose, and can keep pace with the rapidly evolving ecosystem.”
In December, the Australian Government announced plans to establish a framework for the licensing and regulation of crypto service providers in 2023 to improve safety in the crypto industry. The current consultation paper aims to assist the government in determining the appropriate obligations and operational standards for crypto asset service providers, specifically focusing on safeguarding customer assets.
They will seek feedback on the role of the government in regulating the crypto ecosystem, potential protections for investors, and measures to prevent scams. In mid 2023, the Government will release another consultation paper “proposing a licensing and custody framework for crypto asset service providers… to allow for sufficient consultation prior to the introduction of legislation”.
FTX Group’s call for the return of tens of millions of dollars in campaign contributions has sparked a political firestorm, as the bankrupt crypto exchange seeks to recover funds from donations made by its now infamous former CEO Sam Bankman-Fried.
The erstwhile exchange has sent confidential letters to politicians and political beneficiaries asking for repayments by the end of the month. The debtors have stated that they reserve the right to seek repayment through court action.
FTX’s newly appointed CEO, John John Jay Ray III, has reinforced the company’s stance on the return of political donations linked to the exchange. In a statement on Sunday, the company requested the return of “contributions or other payments” by the end of February 28th. The statement echoed a previous warning that FTX may pursue legal action to recover the funds, along with interest accruing from the date of initiation. This marks a firm stance from FTX as it navigates through its Chapter 11 bankruptcy proceedings following its collapse in November.
The political donations, estimated to be as much as $93 million, were made to various U.S. lawmakers and causes across the political spectrum, influencing nearly one-third of the current U.S. congress. Some of the recipients have tried to distance themselves from the scandal by making charity donations, but the debtors warn that this does not prevent them from seeking recovery.
The defunct firm had already recovered $5 billion in cash and liquid cryptocurrencies by January 11th, according to FTX attorney Andy Dietderich. Total liabilities, however, are estimated to be nearly $9 billion.
The e-commerce giant Amazon is set to shake up the NFT market with its rumoured launch of a digital assets enterprise. This spring, the company is expected to launch the initiative, focusing on non-fungible tokens and Web3 gaming, as reported by Blockworks, citing four anonymous sources. The company’s plans are in the early stages, with an official announcement expected in April. This announcement has come as a surprise to the NFT industry after a tough year in 2022.
Amazon is not well known for its involvement in the crypto or blockchain space, although Amazon Web Services has posted several job openings for Web3 developers and engineers since 2021. The company operates an Amazon Coins program, which functions as a loyalty program rather than a crypto initiative. Despite this, CEO Andy Jassy has previously expressed openness to selling NFTs and not ruling out the possibility of Amazon accepting cryptocurrencies in the future.
The exact scope and objectives of Amazon’s Web3 plans are unclear, including if the company intends to rival platforms like OpenSea and Rarible. According to Dune Analytics, OpenSea, the top NFT marketplace by trading volume, has seen interaction from over 2.5 million users. On the other hand, Amazon has almost 300 million active users, with nearly 200 million visits every month and over 150 million Prime subscribers. If Amazon were to rival the likes of Opensea, it would be miles ahead of the competition if it leveraged even a tiny percentage of its existing user base.
In addition, Amazon has reportedly partnered with over a dozen heavy hitters in the web3 space, including layer-1 blockchains, blockchain gaming startups and developers, and digital asset exchanges. Amazon recently formed a partnership with Ava Labs, the creator of the Avalanche blockchain. These partnerships will help them gain traction and influence within this niche industry, and put them in a strong position ahead of the rumoured digital asset enterprise launch.
On Monday, Bitcoin experienced its largest single-day percentage loss since November, falling below $US22,600. BTC was trading at around $US22,900 at the time of writing, down 4% from its recent peak of $US23,900 on Sunday. Ether also declined almost 5%, trading at approximately $1570. The last time Bitcoin saw such a significant drop was on November 9th, when it plummeted 14% FTX collapsed.
According to Coinglass data, almost $US50 million worth of Bitcoin long positions were liquidated in the past 24 hours as part of the broader crypto market decline on Monday. Crypto-linked stocks also dropped, reflecting investor uncertainty in the crypto market. Leading exchange, Coinbase, saw a drop of over 8%, while bitcoin miner, Marathon Digital Holdings, fell by around 10%.
Traders anticipate a 25 basis point increase in interest rates at the Federal Open Market Committee meeting starting on Tuesday in the US; however, some analysts believe a 50 basis point hike remains possible due to ongoing inflation concerns. Despite a spectacular month for digital assets, the overall macroeconomic situation still weighs heavily on the conscience of investors, and the scars left behind from last year’s bear market won’t heal quickly. The result of the FED’s meeting will likely have a substantial impact on the market if the outcome is better or worse than traders expect.
Genesis, a cryptocurrency lending and trading conglomerate of more than 200 businesses, has filed for Chapter 11 bankruptcy protection in the US, becoming the latest company affected by the global crypto market downturn. The company, which is part of the Digital Currency Group (DCG), had previously suspended withdrawals in November and laid off 30% of its staff earlier this month. The company filed alongside two subsidiaries, Genesis Global Holdco and Genesis Asia Pacific.
According to a court filing, Genesis has assets and liabilities ranging from $US1 billion to $US10 billion and has more than 100,000 creditors. The company’s CEO stated that an in-court restructuring presents the most effective avenue to preserve assets and create the best possible outcome for all Genesis stakeholders. The bankruptcy follows months of uncertainty and reports that Genesis was trying to raise over $US1 billion from investors. Genesis has over $US150 million in cash to fund its operations and restructuring.
Genesis Global Capital has also emerged as the top unsecured creditor of FTX.com and its affiliated companies. A court filing on Thursday revealed that Genesis Global Capital leads the revised “Top 50 List” of major creditors for FTX and its affiliates, with a debt of $US226.3 million. Despite over two months since the FTX implosion, the effects of the fallout are still felt by the crypto industry.
Genesis is just another victim of the 2022 catastrophes laid to rest.
Bitcoin has risen more than 35% since the beginning of the year, kicking off 2023 with a bang and boosting investor confidence in the digital asset markets. Ethereum has also had a strong month; however, Bitcoin has outpaced it substantially, causing the ETH-BTC pair to fall since the 12th of January. The trend has continued into this week, with Bitcoin hitting a high of $US23,000 on Monday, whilst Ethereum tumbled from $US1,635 to $US1,550. Whether Ethereum will catch up with Bitcoin is yet to be seen.
The strong start to the year for crypto has surprised many digital asset investors. Many have stated that they believe the bear market has finally ended and that 2023 could be the beginning of a renewed bull market. Venture capitalist and crypto optimist, Tim Draper, has revised his 2022 BTC prediction of $US250,000, believing it will reach a quarter million dollars by mid-2023. However, there are some concerns that the rally may not last after a 14-month bear market and several crypto setbacks that have damaged public trust in the industry.
The macroeconomic situation is still having a major impact on the markets, with rising living costs and high-interest rates affecting people and, subsequently, asset markets worldwide. Recent economic data has shown a potential slowing of the US inflation rate, which could mean the end of interest rate rises from the US Federal Reserve. While this could be the case, the inflation rate in the US remains at the highest levels seen in decades, indicating that the return of low interest rates may not happen for a while.
Related: Bitcoin vs Ethereum
Last year’s slew of job cuts throughout the crypto industry came in response to a year of strong headwinds for the space. Despite Bitcoin posting its largest weekly gain in nine months, exchanges are still cutting faster than ever. Coinbase Global, the largest digital-asset exchange in the US, is cutting 20% of its workforce, or around 950 employees, as the crypto market slump continues. The company’s CEO, Brian Armstrong, announced the layoffs in a blog post, stating that the measures are necessary to survive the industry downturn.
This is not the first time Coinbase has had to lay off employees, as it already cut 18% of its workforce, about 1200 employees, in June and an additional 60 positions in November. The company will also shut down several projects deemed less likely to be successful. Armstrong acknowledged that this is the first time the crypto market is facing a downturn while the broader economy is also struggling and expressed regret that larger cuts weren’t made earlier.
Coinbase is just one of several exchanges cutting jobs this month. Crypto.com, a leading company in the cryptocurrency exchange, has also announced layoffs due to ongoing economic challenges and unexpected industry events. The exchange will be cutting around 800 staff, equating to about 20% of their workforce, despite previously making cuts in the middle of 2022 in response to the struggling crypto markets. According to the company’s co-founder and CEO, Kris Marszalek, these previous measures did not account for the recent collapse of the FTX exchange, which has further impacted the industry and affected trust in crypto businesses in general.
Luckily for web3, it is not all doom and gloom. Some groups in The Middle East are making moves to put it on the map as a web3 and crypto hotspot. The Venom Foundation, a blockchain platform based in Abu Dhabi, and investment manager Iceberg Capital have teamed up to establish a US$1 billion venture fund for crypto and Web3 companies. The Venom Ventures Fund (VVF) aims to invest in the people, projects and ideas moving the world toward adopting a fairer financial system.
The fund will focus on blockchain technology in payments, Decentralized Finance (DeFi), asset management, and GameFi (a term for blockchain-based games). The VVF plans to use Iceberg Capital’s resources to provide incubation programs and all-encompassing support for selected projects. The fund will reportedly support companies and projects from around the world, not just those based in the Middle East.
The crypto market has recently surged, reaching levels not seen in months after a week-long winning streak. Bitcoin has posted its best week in over nine months, rising almost 13% in the past seven days. It is currently worth $US21,00, according to CoinMarketCap. However, the latest inflation reading in the US suggests that the Federal Reserve’s monetary tightening, a factor that negatively impacted BTC’s price last year, may continue. The US consumer price index (CPI) for December shows a 6.5% increase from 12 months earlier, declining from a pace of 7.1% in November, marking the sixth consecutive month of declining inflation.
Although it is positive news that CPI data shows inflation is slowing, the decline in US inflation is primarily concentrated in the energy sector, with isolated drops in energy services and fuel. At the same time, prices for food, clothing, and housing have continued to rise substantially month-over-month. This data shows that the apparent slowing of inflation could be skewed by the large drops in energy, suggesting that the Fed’s approach is unlikely to change.
BTC and ETH responded positively to the data. Still, traders should exercise caution as the Fed’s interest rate hike is tipped to be highly likely in February and could continue until the inflation rate drops to more manageable levels.
Since the beginning of the year, the crypto markets have been on a steady grind upwards, starting 2023 with some green on the board for crypto investors. On Sunday, Bitcoin (BTC) broke out of its recent price range and reached a three-week high by convincingly pushing above US$17,000.
Ethereum (ETH) joined in on the break-out, cracking $US1300 for the first time in almost a month. The positive start to the year has created a feeling of cautious enthusiasm among crypto investors, stoking speculation that the bottom is in.
BTC had briefly surpassed $US17,000, however, it took a couple more days for Bitcoin to firmly establish itself above the $17k mark. A primary catalyst for the rally appears to be the reports of a reduction in quality jobs available to Americans and slower wage growth in the US labour market throughout December, despite a stronger than forecasted labour market. This news was seen by traders in both digital asset and traditional markets as a sign that the Federal Reserve may be less aggressive in their attempts to hike interest rates if the economy is showing signs of weakness.
The stock market is showing strong gains, with the Dow Jones Industrial Average and the S&P 500 having their best weeks since November 2022. Investors are buying equities, pushing prices higher on the expectation that the weaker economic data points to the end of the series of aggressive interest rate increases and, hopefully, a loosening of monetary policy by the US Federal Reserve. Investors across both digital asset and traditional markets are awaiting the US Consumer Price Index (CPI) data to be released on January 12 to gauge whether inflation has begun to slow, which would signal the end, or the beginning of the end, of interest rate hikes.
Meanwhile, Investors are closely monitoring the financial situation of the Digital Currency Group (DCG), with concerns that if the company experiences further financial difficulties, it could have a significant negative impact on the cryptocurrency markets. DCG is a prominent player in the cryptocurrency landscape and is the parent company of the Grayscale Bitcoin Trust, which holds 653,633 bitcoins. The US-based venture capital firm, DCG, specialises in the digital currency market, and has several subsidiaries such as CoinDesk, Genesis Trading, and Grayscale Investments (GBTC).
The U.S. Department of Justice’s (DOJ) Eastern District of New York and the U.S. Securities and Exchange Commission (SEC) is reported to be investigating the crypto conglomerate. The agencies are said to be looking into financial transactions between DCG and its subsidiary, Genesis Trading. The prosecutors from the DOJ’s Eastern District of New York office have reportedly requested interviews and documents from both DCG and Genesis, while the SEC is also said to be at an early stage of its own inquiry. Neither company has yet been accused of any illegal activities, but investors remain concerned about the situation.
The past year was a rollercoaster for the cryptocurrency markets, with some significant highs and several devastating lows. The economic conditions leading up to 2022 set the stage for impressive growth in both price and adoption within the cryptocurrency market.
However, challenging macroeconomic conditions put pressure on many projects, leading to catastrophic collapses impacting the entire industry.Since the beginning of the new year, the crypto markets have been on a steady grind upwards, starting 2023 with some green on the board for crypto investors. On Sunday, Bitcoin (BTC) broke out of its recent price range and reached a three-week high by convincingly pushing above US$17,000.
The crypto mania of 2022, largely fuelled by low-interest rates and generous COVID-19 stimulus by governments around the world, has drawn a huge amount of attention to the digital asset market. New cryptocurrency projects were popping up almost daily at the time, and for many, it was hard to determine what was a legitimate investment or not.
The Terra ecosystem was one such project that gained significant traction throughout 2021 and blazed its way into 2022 with a valuation of over US$60 billion. The project’s USD-pegged stablecoin UST was one of the first examples of an algorithmically pegged stablecoin that had gained significant traction. However, worsening macroeconomic conditions put a strain on the project as prices began to fall in crypto assets, and at the beginning of May, the project collapsed.
The Terra collapse sent shockwaves through the crypto industry, wiping out over US$60 billion overnight. While the project tried to relaunch and return to its former glory, it has been unsuccessful. The founder, Do Kwon, is currently hiding from authorities in relation to the incident. Centralised finance institutions that had lent large sums to hedge funds, such as Three Arrows Capital, found themselves overextended and were hit hard by the sell-off that followed the failure of Terra. Three Arrows Capital and other leveraged hedge funds defaulted on loans from these CeFi companies, which were then forced to file for bankruptcy protection.
User funds held on CeFi platforms were frozen, and retail investors could not withdraw their funds. Companies like Celsius Network and Voyager Digital, which had promised high returns to users, also collapsed, resulting in the loss of user funds. By the end of the second quarter of 2022, the total market capitalisation of cryptocurrencies had fallen by over $1 trillion. The sell-off was exacerbated as leveraged positions were unwound.
By September, the cryptocurrency market appeared to stabilise as investor confidence started to return. Ethereum’s successful transition to proof-of-stake consensus, known as “The Merge”, further boosted confidence levels. This confidence in the cryptocurrency market persisted until November when a CoinDesk article revealed disturbing information about FTX and its sister company Alameda Research.
A frenzy ensued as users rushed to withdraw funds from the exchange, and investors sold off any tokens related to FTX. It was later discovered that FTX was insolvent, having improperly combined customer deposits and funds. The company filed for bankruptcy protection in November, leaving hundreds of thousands of users with deposits locked on the platform, possibly never to be returned.
It’s important to note that the failures experienced in 2022 were not caused by problems with the underlying blockchain technology. There has been significant technical development in the space this year, and many blockchains have made significant progress. Ethereum successfully underwent its largest-ever upgrade, transitioning from proof-of-work to proof-of-stake, drastically reducing the network’s energy consumption and unlocking a path to further upgrades in the future.
As we move into 2023, investors should be aware that the current macro environment and the uncertainty of looming regulation from governments globally will present a challenge to the industry. However, the growth of blockchain innovation and the increasing adoption of digital currencies and decentralised finance (DeFi) for various use cases looks promising and should not be overlooked.
2023 will undoubtedly be a challenging year for investors, but those who plan ahead and regularly review their portfolios may be rewarded for their efforts.
Concerns about Binance are growing, with many investors fearing the world’s largest cryptocurrency exchange will soon face the same fate as FTX.
Binance, the world’s biggest cryptocurrency exchange, is under the spotlight after temporarily halting withdrawals of the stablecoin USD Coin (USDC).
Concern about Binance are growing, and customers are withdrawing funds from the exchange at a high rate. In the 24-hour period leading up to Tuesday, $3 billion in net withdrawals flowed out of Binance, according to blockchain analytics firm Nansen.
On December 12, there were reports that US prosecutors could move aggressively against Binance and file criminal charges against several individual executives, including Zhao.
This relates to a long-running case on Binance’s compliance with anti-money laundering laws. The investigation was launched in 2018, and is public knowledge. Then came the suspension of USDC withdrawals on Tuesday.
Given the painful memories of Bankman-Fried’s deception, it is easy to understand the fear—despite nothing of substance suggesting that funds are not safe with Binance.
Related: Is Binance In Trouble?
As FTX’s dodgy dealings continue to unravel overseas and fears loom that Binance is heading towards the same fate, those on Australian shores are becoming increasingly wary—and the Australian government is no exception.
In a media release on Wednesday, Australian Treasurer Jim Chalmers announced the Albanese Government’s 2023 plans to reform and modernise Australia’s financial systems. Included in such plans is to “establish a framework for the licensing and regulation of crypto service providers”.
“The next steps in the Government’s ongoing ‘token mapping’ work will include the release of a consultation paper in early 2023 to inform what digital assets should be regulated by financial services laws, and the development of appropriate custody and licensing settings to safeguard consumers,” Chalmers said in the statement.
Following token mapping and a licensing framework, the Albanese Government will then introduce legislation for the cryptocurrency industry.
The timing of Chalmers’ statement isn’t surprising, as more and more Australians worry about the safety of cryptocurrency investments following recent events of global exchanges such as FTX. And, despite over a month passing since the FTX implosion, there continues to be more to the story.
Sam Bankman-Fried (SBF), FTX’s disgraced ex-CEO was arrested Monday evening after prosecutors in the U.S. alerted the Royal Bahamas Police Force of a sealed indictment. He has been denied bail by Bahamas magistrate judge Joyann Ferguson-Pratt, despite claiming that he needed to take medication such as Zyrtec and Adderall and maintain his vegan diet. The judge also scheduled an extradition hearing on Feb 8th of next year. On Tuesday, the U.S. Attorney’s Office for the Southern District of New York announced the unsealing of the indictment against the former CEO.
The charges include wire fraud, conspiracy to commit money laundering and campaign violation allegations.
It had recently come to light that SBF had been financially backing several media outlets in an alleged attempt to gain favourable coverage of the exchange using a different entity. This revelation has caused many in the industry to question the integrity of these outlets and the validity of their reporting on the exchange. Some are even asking if they should be held partially responsible for users who lost it all.
SBF used a philanthropic entity, “Building a Stronger Future Foundation”, to fund over half a dozen media outlets. While some media outlets disclosed the funding, others did not. Crypto news site “The Block” received over US$27m from FTX’s sister company, Alameda Research, with The Block’s CEO, Michael McCaffery, receiving an additional US$16m loan to assist in buying a property in the Bahamas. Coincidentally, this is also where the headquarters of FTX is located.
The Block’s chief revenue officer, Bobby Moran, took to medium to announce McCaffery’s move to step down from CEO, stating, “I am stepping into that role immediately”. Moran continued, saying that McCaffery’s decision to take the loan from SBF and not disclose the details shows a “serious lack of judgement” and that “it undermines The Block’s reputation and credibility”.
Similar conversations are being had at other publications funded by the tainted exchange and ex-CEO following recent events.
SBF’s arrest in the Bahamas and the subsequent unsealing of the indictment against him have seemingly had a calming effect on the crypto markets. The total market capitalisation broke above US$900 billion for the first time since the beginning of December. Bitcoin and Ethereum posted modest gains of around 3-4%, finishing the week in the green. Bitcoin has reached US$17,400, the highest price since the FTX implosion began to unfold. Crypto markets are also rising as traders and investors expect the US Federal Reserve to slow down on interest rate increases aimed at fighting inflation.
Over a month after the initial panic, the FTX situation continues to unfold, and it is unknown if the aftermath of the catastrophe has begun to settle. Regulatory pressures still loom, which may lower the markets in the future. The global macroeconomic outlook still appears to have a strong influence on the market; however, for the first time in a month, some life could be coming back into the crypto space.
Swyftx, one of Australia’s leading cryptocurrency exchanges, has recently announced it will lay off 35% of its employees amid a restructuring process. The exchange, launched in 2019, made waves in the Australian exchange industry for its fast and easy-to-use platform. It had quickly become one of the most popular exchanges in the country, with more than 200,000 users and over $60 million in deposits. This large user base was not enough to save it from recent events.
Upon announcing the restructuring, Swyftx co-founder Alex Harper, said in a media release:“Swyftx has no direct exposure to FTX, but we are not immune to the fallout it has caused in the crypto markets”.
However, due to the current crypto bear market and recent FTX implosion rocking the industry, Swyftx has been forced to reduce its staff to ensure its financial security. The firm has said that the cuts are across all departments and that it is working closely with those affected to ensure they are supported.
Swyftx is one of the many centralised crypto exchanges affected by the crypto bear market over the past year. Another popular Australian exchange, Digital Surge, announced it would halt customer deposits and withdrawals following the FTX news. Digital Surge’s co-founders have announced they will put $1 million of their own money towards repaying users rather than taking bankruptcy as the way out.
It appears the trend of troubled exchanges in the wake of recent events is continuing. The massive reduction in crypto trading activity throughout 2022, coupled with the recent catastrophe involving crypto titans FTX and Alameda Research, has strained many businesses in the crypto space.
Maple Finance, an on-chain under-collateralised crypto lender, has recently issued a default notice to a borrower affected by the FTX situation. Orthogonal Finance had taken out multiple under-collateralised loans from Maple, totalling US$36 million and was also an underwriter of one of the liquidity pools on the platform. However, it recently came to light that Orthogonal had lost a substantial amount of funds to FTX, which was not disclosed to Maple, violating their borrower terms and conditions.
Maple’s bad debt is just another example of the fallout from November continuing to haunt the crypto industry. It is yet to be seen whether further businesses announce they are directly or indirectly affected, but bad news may continue a while longer.
The future of the centralised exchange industry is not certain at this point. The cryptocurrency industry as a whole has faced many challenges over the past year, and many exchanges have struggled with insolvency as a result of the tough conditions. However, as the gateway to crypto for most investors, exchanges remain a key component of the industry and a fresh wave of investors could breathe some life into the crypto space.
The crypto industry is constantly evolving, and those exchanges willing to adapt and innovate while correctly managing customer funds, should sit in good stead going into the future. Although 2022 has seen a marked decrease in the number of new investors entering the crypto space, the potential for further adoption of cryptocurrencies in the future could lead to a thriving industry.
The once vibrant Solana ecosystem is getting crushed by the FTX and Alameda Implosion. The fall of these crypto titans has sent shockwaves through the crypto industry since the beginning of the month, with victims of the liquidity crisis continuing to surface weeks after the incident. While the entire crypto market has not fared well in the wake of the catastrophe, Solana and Solana-based projects have been affected drastically.
The Solana and FTX Relationship
Since Solana’s inception in 2020, FTX and Alameda Research have been tightly intertwined with the project. The pair were staunch supporters of the Solana blockchain and were instrumental in helping the project gain traction in the crypto space. The native token SOL was one of Alameda’s largest holdings, so the ecosystem’s success would have directly impacted Alameda’s portfolio value, explaining the support.
This connection between the fallen giants and Solana explains why the ecosystem has suffered so badly these past few weeks. Over the course of the FTX and Alameda saga, the price of Solana’s native token, SOL, dropped almost 70%. Large entities like Tether have been moving crypto from the Solana chain onto other chains to reduce their exposure if anything happens to the project. The total value of all assets on the chain has dropped over 70%, falling from just under $US1 billion to just $US280 million in just 20 days.
On the same day FTX stopped processing withdrawals, Solana processed almost 10 times the usual daily volume. NFT volume also exploded as investors rushed to sell off their digital pictures stored on Solana. This spike in activity was due to investors trying to sell any Solana-based tokens and move their assets onto other chains they deemed to be less risky.
Is Now A Good Time To Buy Solana?
Investing in any cryptocurrency comes with risks, and Solana is no exception. While the low price may seem like a bargain, multiple important factors must be considered before thinking about parting with your hard-earned cash. Alameda’s remaining portfolio balances are a major unknown catalyst for further price falls. There is speculation that Alameda’s holdings of SOL are still valued in the hundreds of millions of dollars. If forced to liquidate their assets, the selling pressure could tank the SOL token’s price even further.
It is also worth considering the long-lasting impact of the situation on Solana users and investors. The fallout from FTX has sparked fear in the hearts of Solana supporters, hence the drastic price drop, total value and activity of the ecosystem. The extent of the damage to investor confidence in Solana over the long term still remains largely unknown. As time goes on, investors may regain confidence and return to the ecosystem, but evidence for this has yet to be seen.
The Outlook For Solana
Before the FTX implosion, the future was looking bright for Solana. The blockchain offered fast and cheap transactions, which was especially appealing to smaller investors, as well as gaming and metaverse projects which required high volumes of transactions. The volume of crypto traded on Solana had also been growing steadily throughout the year despite the overall market downturn, showing that the project had found a product-market fit with certain users.
Although the future currently looks uncertain for Solana, there is the possibility for the project to rebound if it can get through the FTX implosion. Depending on the outcome, some unknown factors could affect the SOL token price negatively, so investors should consider all the risks before investing. It is never a good idea to dive into a project just because it is “cheap” because, after all, the price has usually fallen for a reason.
The turmoil following the FTX and Alameda implosion has been reflected in the poor performance of crypto markets this past week. Investor confidence is at extremely low levels, with the “Crypto Fear and Greed Index” hovering around the “Extreme Fear” level for the past month. Bitcoin and Ethereum started the week with a fall of 8% and 12%, respectively.
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The FTX and Alameda contagion is still continuing to spread, with several other crypto exchanges and projects facing a liquidity crunch. More exchanges and platforms have now been added to the list of casualties, with Liquid, SALT, Genesis Trading and Gemini all halting trading or withdrawals for some or all accounts. Genesis Trading, a subsidiary of Digital Currency Group, has hinted that bankruptcy could be a possibility if they did not receive help from creditors to resolve their liquidity crisis.
Sister company to Genesis Trading, Grayscale, which manages GBTC, has reported that they are unaffected by the situation. However, the shaky market and the lack of clarity has still put fear into the heart of some investors. The fearful sentiment reflects the level of uncertainty for the future as more and more businesses appear to have been affected. The precarious feeling of the crypto market sheds light on the past week’s poor price performance and gives reason for the lack of demand from crypto investors.
To make matters worse, the FTX “hacker” who allegedly hacked the FTX platform for around $400 million in users’ cryptocurrency deposits has been selling off huge amounts of stolen coins. Most of the crypto was withdrawn in ETH, with the hacker selling off 50,000 ETH for Bitcoin, worth $60 million. Following this, blockchain data shows the hacker moving 15,000 ETH blocks, worth around $18 million, to different wallets. This has sparked further fears the account will dump even more ETH, driving the price down further. In total, the hacker has 180,000 split across 12 different addresses, and is in the top 40 largest ETH holders.
Despite the market turmoil, many die-hard crypto investors think this could be a great opportunity to purchase digital assets at a discount. However, seasoned investors know that it is never a good idea to try and catch a “falling knife”, and entering the market now comes with extreme risks. It is advisable to think twice before throwing any hard-earned cash at these volatile assets at present.
The state of the crypto market indicates that there could be further downside as more exchanges and businesses in the industry announce their losses from the FTX and Alameda meltdown. Regulators have indicated that regulation is coming to the crypto industry, potentially driving the markets even lower if it is seen as overly harsh. These two unknown factors make “buying the dip” a risky business presently, and the global economic situation does not appear to be helping to drive demand either.
The catastrophic meltdown of crypto titans FTX and Alameda Research has rocked the cryptocurrency world over the past fortnight. The rumour that the pair had blurred the lines between user deposits and their investments soon became a cascade of events that sent shockwaves through the industry. Bitcoin and other cryptocurrencies have been sent into a downward spiral following the implosion, earning November 2022 a place in the history books as one of the worst months in crypto’s history.
But, what really caused the downfall of FTX, what has the impact been and why is Bitcoin falling?
The final quarter of 2021 proved to be the beginning of what has turned out to be a savage downtrend for Bitcoin and crypto markets ever since. Despite reaching an eye-watering US$69,000 almost precisely one year ago, Bitcoin sits nearly 75% down from its record high. The entire cryptocurrency market peaked at a total value of $US3 trillion at around the same time in November of last year but has shed almost $US2.2 billion in value over the past year.
2022 has proven to be a challenging year for investors globally, with both Russia’s invasion of Ukraine and massive fiscal stimulus by governments during Covid-19 lockdowns, causing high inflation for countries worldwide. To drive down the inflation rate to acceptable levels, central banks have raised interest rates, negatively impacting investment markets, such as stocks and crypto.
Since the start of the year, cryptocurrencies across the board have generally trended downward in value, exposing vulnerabilities for some players in the industry. The Terra Luna collapse in May caused significant fallout for the entire crypto space, wiping out almost $US60 billion from the crypto markets in a matter of days. Numerous companies were directly affected; most notably, Celsius, Voyager and 3 Arrows Capital filed for bankruptcy following the incident.
By October, the crypto markets had finally begun to shake the dust off from the Terra collapse, and the space seemed to be moving in a positive direction. However, on November 2nd 2022, CoinDesk ended the brief moment of tranquillity by revealing that giants FTX and Alameda Research appeared to have put themselves in a risky position. A cascade of events soon followed, creating mass hysteria in the world of crypto and tanking the price of Bitcoin as investors panic-sold their assets to rescue any money they had left.
Sam Bankman-Fried, more commonly known as SBF, is a crypto mogul known for founding exchange giant FTX and quantitative trading firm, Alameda Research. CoinDesk revealed that while Alameda Research and FTX were supposedly separate companies, the balance sheets of these companies had become intertwined. The holdings of Alameda Research were dominated by FTX’s token, denoted by the ticker symbol FTT.
Several days after this information surfaced, a rival exchange and investor in FTX, Binance, announced they would sell all remaining FTT holdings, amounting to $US580 million. Naturally, the price of the FTT token plummeted following the news. This price drop caused immediate panic among FTX users, and a ‘bank run’ on the exchange ensued. After only $US4.5 billion in crypto assets had been removed from the FTX platform, withdrawals stopped being processed without warning.
This situation left $US10 billion of user funds trapped on the exchange, potentially affecting millions of users. Fearing the worst, some affected crypto investors began selling whatever assets they had remaining to get out of the market, causing a rapid fall in Bitcoin and cryptocurrencies across the board. Rival exchange Binance briefly stepped in, offering to buy out FTX and fulfil their liabilities; however, after less than a day of due diligence, they announced the issues were beyond their “ability to help”.
After this, Chinese crypto-mogul and founder of TRON, Justin Sun, offered to back any FTX deposits of TRON-based tokens. Seeing a way out, users instantly flocked to buy the Sun-backed tokens and withdraw, pushing the price up on the platform by almost 50 times the original. Of course, when withdrawn, this meant taking an immediate loss of up to 99%. Many FTX users decided that taking this loss was better than leaving assets on the exchange.
FTX has since filed for bankruptcy, both in Australia and overseas, suffered an alleged hack for almost $US1 billion in user funds, and is now being investigated by the Bahamian Government for criminal misconduct. Quite the downfall indeed.
The collapse of SBF’s empire has widespread consequences for the crypto industry. FTX and Alameda Research were seen as industry powerhouses and had investments or liabilities with many companies in the space. Other companies affected by the FTX collapse have already started coming forward, pausing user withdrawals from the platform while they determine the extent of the damage.
Aside from the direct impact of FTX’s dealings with other companies, there has also been a degree of mass hysteria and panic. Some crypto investors have all but lost faith in centralised platforms and exchanges, and are frantically withdrawing every penny they can from their accounts. Massive outflows from exchanges show the extent of this loss of trust, with over $US3.7 billion worth of Bitcoin being removed from exchanges, along with billions of dollars in other currencies.
Some users may have been so shaken by the disaster that they may decide to sell their assets and leave the crypto space entirely. The plunge in prices across many crypto assets suggests this could be a distinct possibility and could be one of the reasons why Bitcoin is falling. However, despite the negative impacts of the past week, there are some positive takeaways.
A key takeaway will be the need for improved regulation for centralised crypto exchanges to ensure the proper management of users’ funds. SBF was presenting the case to regulators that proposed a light touch, benefitting FTX and most severely affecting rivals and decentralised financial applications.
Another critical realisation for crypto investors is that centralised platforms are not necessarily the safest places to store crypto: those who chose to keep their crypto assets in their wallets were unaffected by the past week’s events and still have access to their cryptocurrencies. Some may be so scarred by FTX’s collapse that they opt for this storage method in the future. In any case, watch this space.
This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.