Friday, 13 May 2022

Market Summary

Market Summary 13 May 2022

Bitcoin Price: US$ 29,029.75 (-0.25%)
Ethereum Price: US$ 1960.22 (-5.98%)


USDT Depegs, ATEM Car Club, & ETH Earnings

  • USDT and USDC are the top two collateralized stablecoins by Tether and Circle.
  • During Asia hours today, USDT saw a depeg from $1 to $0.945 at its lowest point on FTX. This did not last long and has since repegged back at $1. USDT was being sold off and USDC was being bought, causing the USDC to rise to a peak of $1.06. USDC/USDT was trading at ~1.1 at the peak of the depeg.
  • Institutions were taking advantage of this and arbitraging USDT as its redemptions were still being honored at a 1:1 ratio. This would have been a fairly risk-free trade for institutions, earning them 5.5% considering USDT’s lowest price today.
  • Curve’s 3Pool took a hit as its pool weightage started skewing heavily towards USDT as users sold off their USDT for USDC or DAI. This led to the pool skewing towards USDT, holding ~89% weightage of the 3pool.
  • Why did USDT take a hit and not USDC? On the surface level, USDT and USDC might look the same, but their risk profiles are vastly different. USDC is 100% backed by cash and short-term U.S. Government debt, ensuring that 1 USDC is always backed by 1 USD. USDT, on the other hand, has ~36% in commercial papers, a form of unsecured debt, that has a higher risk profile. This means that if those commercial papers default, USDT is likely to be undercollateralized and backed by less than 1 USD. This could be a potential attack point if redemption of USDT completely drains their liquid cash and T-bills part of their reserves as Tether will be forced to liquidate their commercial papers (whether at a profit/loss) to cover redemptions.
  • Ethereum has firmly led the pack in P/S, except for a brief period where Fantom activity spiked. BNB Chain and Fantom have otherwise come next, though at respectable levels compared to most others. The other notable contender here is Avalanche, chugging along capturing more and more revenue lately.  
  • P/S is a helpful barometer of real demand today, but reading too much into this in isolation would provide a very incomplete picture. Growth is the other half. For example, Fantom and BNB Chain can trade at “cheap” multiples because they currently lack innovative catalysts relative to other chains here. AVAX trades higher because they have stronger growth prospects in our view, and so on. These multiples aren’t to be religiously adhered to and compared as they are in tradfi, but they’re helpful in forming a picture. 


Shanghai court affirms that Bitcoin is virtual property, subject to property rights

  • The Shanghai High People’s Court has issued a document in which it states that Bitcoin is subject to property rights laws and regulations. That finding was made in relation to a lawsuit filed in a district court in October 2020 involving the recovery of a loan of 1 Bitcoin (BTC). The lower court recognized Bitcoin as having value, scarcity and disposability, and therefore being subject to property rights and meeting the definition of virtual property.
  • According to the Sina website, the Shanghai Baoshan District People’s Court ruled in favor of plaintiff Cheng Mou, ordering defendant Shi Moumou to return the Bitcoin. When the defendant failed to do so, the case was returned to the court, which held a mediation in May 2021. Since the defendant no longer had possession of the Bitcoin, the parties agreed that the defendant would provide compensation at a discount from the value of the Bitcoin at the time of the loan.
  • No current value could be established for the loaned Bitcoin since its trading is banned in China. The case was also complicated by the limitations of court investigative and enforcement authorities, which cannot make enquiries about virtual property, according to the publication.


Nasdaq partners with XP to launch cryptocurrency exchange in Brazil

  • XP informed Cointelegraph that XTAGE will launch in Q2 2022 and will be fully integrated into the XP Inc ecosystem — the largest investment brokerage in Brazil with more than 3.5 million clients and $168 billion assets under custody.
  • XP stated that the exchange will initially offer the purchase and sale of cryptocurrencies, but the intention is that the platform will also support other digital assets and investment products based on crypto assets.
  • “The creation of XTAGE represents an important milestone in advancing the digital asset market and our ability to offer investors greater access to the digital asset ecosystem. Through the technology partnership with Nasdaq, we are confident that XP will operate on an innovative and robust infrastructure,” said Lucas Rabechini, director of financial products at XP.


Breaking: Terra blockchain officially halted following LUNA price collapse

  • Validators for the Terra blockchain have decided to officially halt network activity on Thursday in a move designed to prevent governance attacks following the severe devaluation of the network’s LUNA token. 
  • Terraform Labs’ official Twitter handle confirmed that the blockchain network was halted at a block height of 7,603,700. The move follows a series of dramatic events that triggered an unprecedented decline in the price of LUNA and its associated TerraUSD (UST) stablecoin. The stablecoin, which was designed to maintain algorithmic parity with the United States dollar, lost its peg earlier this week before plunging below $0.30.
  • With LUNA’s price collapsing more than 99%, Terraform Labs is no longer confident that it can prevent governance attacks. In other words, the price decline “significantly reduced [the] cost of attack,” the ecosystem operator tweeted Thursday. 


Tether to move over 1B USDT from Tron to Ethereum and Avalanche

  • Following recent developments in the sphere of stablecoins, Tether (USDT) has announced that it’s coordinating a chain swap to transfer USDT assets from Tron’s TRC-20 to Ethereum and Avalanche’s blockchain. 
  • In a tweet, Tether said that 1 billion USDT will be moved from Tron’s blockchain to Ethereum. On the other hand, an additional 20 million USDT will be converted to Avalanche. According to Tether, this will not change the total supply of the stablecoin.
  • The announcement came amid fears of a stablecoin meltdown after the recent TerraUSD (UST) and Terra (LUNA) debacle. Apart from this, USDT also showed price fluctuations, slipping below $0.99 on many exchange platforms on Thursday. As a result, many expressed concerns over the most-traded stablecoin showing signs of struggle.


Coinbase CEO says funds are safe amid bankruptcy protection fears

  • Following the Coinbase report where the company declared its losses, a disclosure that suggests that users are not protected in the case of bankruptcy has been gaining traction on social media. However, Coinbase CEO Brian Armstrong explained that funds are safe “as they’ve always been.” 
  • In the company’s first-quarter report for 2022, Coinbase reported its first loss amounting to $430 million. Apart from this, the firm also reported the number of users transacting in the exchange has also dropped from 11.4 million to 9.2 million.
  • After the loss was posted, concerns over bankruptcy protection were brought up on Twitter, quoting lines from the disclosure that said, “In the event of a bankruptcy, the crypto assets we hold on behalf of our customers may be subject to bankruptcy proceedings.”
  • Additionally, the disclosure mentioned that the users will be treated as “unsecured creditors” when this happens. This led to speculation that if Coinbase went bankrupt, the coins that they hold will be company property.


USDT-dollar peg wobbles as markets continue to struggle: Tether CTO weighs-in

  • Cryptocurrencies markets continue to suffer major losses following the depegging of Terra ecosystem’s stablecoin TerraUSD (UST), causing discrepancies between stablecoin pegs and the value of Bitcoin (BTC).
  • Stablecoin Tether (USDT) showed signs of stress, as USDT/USD traded under $0.99 on major exchanges. Tether and Bitfinex chief technology officer Paulo Ardoino took to Twitter to assure USDT holders that over 300 million UDST tokens had been redeemed at their $1 peg over the past 24 hours.
  • Cointelegraph reached out to Ardoino to ascertain if there is cause for concern in USDT’s ability to maintain its $1.00 peg in light of recent events. Ardoino stressed that USDT has maintained its stability through multiple black swan events and highly volatile market conditions and has never refused redemptions:
  • “Tether continues to process redemptions normally amid some expected market panic following yesterday’s market. In spite of that, Tether has not and will not refuse redemptions to any of its customers, which has always been its practice.”
  • “Unlike these algorithmic stablecoins, Tether holds a strong, conservative and liquid portfolio that consists of cash & cash equivalents, such as short-term treasury bills, money market funds and commercial paper holdings from A-2 and above rated issuers.”


Aussie crypto ETFs see $1.3M volume so far on difficult launch day

  • With crypto markets tanking, three crypto-focused exchange-traded funds (ETFs) picked a difficult day to commence trading on local exchange Cboe Australia today.
  • The trio’s launch marks the first crypto ETFs to go live in Australia, with two of them focused on offering exposure to Bitcoin (BTC), and the other focused on Ether (ETH).
  • So far, the three ETFs have generated more than $1.3 million between them, and it has been estimated that they could see around $1 billion worth of inflows moving forward.


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