Friday, 17 June 2022

Market Summary

Market Summary 17 June 2022

Bitcoin Price: US$ 20,401.31 (-9.66 %)
Ethereum Price: US$ 1,068.50 (-13.66 %) 


Three Arrows Capital has failed to meet margin calls: Report

  • Venture firm Three Arrows Capital (3AC) has reportedly failed to meet margin calls from its lenders, raising the spectre of insolvency after this week’s crypto market collapse triggered unforeseen liquidations for the Singapore-based company.
  • Crypto lender BlockFi was among the firms to liquidate at least some of 3AC’s positions, according to the Financial Times. Citing people familiar with the matter, FT reported that 3AC had borrowed Bitcoin (BTC) from the lender but was unable to meet a margin call after the market turned sour earlier this week.
  • The issues surrounding 3AC appear to have impacted Finblox, a Hong Kong-based platform that allows investors to earn yield on their digital assets. Finblox said it was forced to reduce its withdrawal limits on Thursday due to concerns surrounding the venture firm.
  • While estimates vary, 3AC likely incurred $400 million in liquidations across multiple positions. The company had significant exposure to Terra ( originally Luna, now LUNC) and also held large positions in projects such as Solana (SOL) and Avalanche (AVAX). As Cointelegraph reported, 3AC has spent the past few days moving assets to top up funds on various decentralized finance (DeFi) platforms, most notably Aave (AAVE).
  • However, this week’s mass liquidations were likely triggered by the collapse of Ether (ETH), which plunged toward $1,000 en route to its lowest level since December 2020. It has also been speculated that 3AC’s exposure to synthetic assets, such as the Grayscale Bitcoin Trust (GBTC) and Lido’s Staked ETH (stETH), was also responsible for the mass liquidation events.


Hester Peirce expresses strong support for crypto spot ETFs and regulatory structure

  • United States Securities and Exchange Commission (SEC) commissioner Hester Peirce, sometimes known as Crypto Mom for her ardent support of the industry, spoke Tuesday at a conference hosted by the conservative-libertarian Federalist Society titled “Regulating the New Crypto Ecosystem: Necessary Regulation or Crippling Future Innovation?” Her lengthy remarks — over 4,000 words in the prepared version, which was augmented extemporaneously as she presented it — contain some of the bluntest criticisms of SEC policy she has made yet.
  • Peirce characterized the SEC’s attitude toward the crypto market as a “refusal to engage” and suggested that the SEC’s refusal so far to approve a spot-traded Bitcoin (BTC) product showed the agency’s determination to hold everything related to Bitcoin to a higher standard than other products it regulates.
  • Peirce pointed to an ETP disapproval order issued last month as an example of the SEC’s “standard denial rationale,” demanding a higher level of resistance to fraud and manipulation than those to which traditional markets are held. It is difficult to see how approval can be gained, Peirce said, and the agency’s position becomes more entrenched with every disapproval. Peirce adds:
  • “Why does this matter? Investors might prefer a spot bitcoin ETP to other options, and we ought to care about what investors want.”


State securities regulators investigate Celsius over withdrawal suspension: Report

  • Securities regulators from five U.S. states have reportedly opened an investigation into crypto lending platform Celsius Network over its decision to suspend user withdrawals.
  • According to a Thursday report from Reuters, Texas State Securities Board director of enforcement division Joseph Rotunda said regulators in Alabama, Kentucky, New Jersey, Texas and Washington began investigating Celsius after the platform announced it would be “pausing all withdrawals, swaps and transfers between accounts.” Rotunda reportedly called the investigation a “priority” for the Texas regulator and confirmed to Cointelegraph the enforcement division was “looking at the issue involving the frozen accounts.”
  • “I am very concerned that clients — including many retail investors — may need to immediately access their assets yet are unable to withdraw from their accounts,” the enforcement director reportedly said. “The inability to access their investment may result in significant financial consequences.”
  • The report on a possible investigation into Celsius followed a Wall Street Journal report from Thursday that two firms that habacked the crypto lending platform during a November 2021 funding round did not plan to provide additional funds due to the potential risks, citing people with knowledge of the situation. WestCap Group and Canadian pension fund Caisse de dépôt et placement du Québec led a $750 million Series B funding round for Celsius, which helped the platform reach a $3.5 billion valuation.


Further downside is expected, but multiple data points suggest Bitcoin is undervalued

  • The outlook across the cryptocurrency ecosystem continues to dim as the sharp downtrend that was initially sparked by the collapse of Terra (LUNA, now LUNC) appears to have claimed the Singapore-based crypto venture capital firm Three Arrows Capital (3AC) as its next victim. 
  • As large crypto projects and investment firms begin to collapse on a weekly basis, the prospect of a long, drawn out bear market is a reality investors are beginning to accept. 
  • Based on a recent Twitter poll conducted by market analyst and pseudonymous Twitter user Plan C,  41.6% of respondents indicated that they thought the Bitcoin (BTC) bottom will fall between the $17,000 to $20,000 range.
  • Data shows that the number of Bitcoin addresses that hold at least 1BTC has now hit a new all-time high and it appears that it will increase in the near future if sub-$20,000 BTC continues to attract buyers.


SOL price trending toward yearly low as Solana TVL drops $870M in three days

  • Solana (SOL) tumbled on June 16 amid a broader retreat across the top cryptocurrencies, led by the Federal Reserve’s 0.75% interest rate hike a day before.
  • The latest declines come as an extension to SOL’s broader correction, where it dropped by more than 90% after peaking out near $267 in November 2021. SOL also fell to its lowest level since July 2021 near $25.
  • In addition, a higher interest rate environment and the collapse of high-profile crypto projects like Terra have strengthened SOL’s downside prospects. 
  • The total value locked (TVL) inside Solana smart contracts dropped to 74.65 million SOL (~$2.25 billion) on June 16, down 27% in the last three days, according to data tracked by DeFi Llama. That amounts to nearly $840 million of withdrawals from the ninth-largest blockchain ecosystem by market cap.
  • Solend, a lending platform functioning atop the Solana ledger, witnessed a 26.5% decline in its TVL in the last three days and was holding 9.66 million SOL (~$290 million) as of June 16. Nevertheless, it remains the leading platform by TVL within the Solana ecosystem.


Accepting Bitcoin for your business just like Tesla: Report

  • Tesla temporarily embracing Bitcoin (BTC) as a method of payment for its products was conceivably one of the catalysts that pushed asset prices to record highs last year and put the spotlight on crypto legitimacy — particularly in the realm of payments. Moreover, crypto enthusiasts had lauded the fact that Tesla even set up its own node to accept BTC and stated that it wouldn’t swap its holdings for fiat, implying high confidence in the crypto’s long-term prospects.
  • But despite having backtracked and ceased its Bitcoin acceptance a few months after due to climate concerns, Tesla was only a cog in the adoption machine of 2021. Starbucks, Whole Foods and AMC Entertainment were just some of the other juggernauts that made their foray into crypto last year. However, what’s apparent is that headlines play favorites to household names. For other businesses that want to hop on the trend, it’s a question of how to start.


Banking uses 56 times more energy than Bitcoin: Valuechain report

  • Fresh figures on Bitcoin’s (BTC) energy consumption, efficiency and scalability serve to expose the banking sector while bathing the world’s largest cryptocurrency in a new light. 
  • A research report published by Michel Khazzaka, an IT engineer, cryptographer and consultant, calculates that Bitcoin payments are a “million times more efficient” than the legacy financial system. Plus, the banking sector “uses 56 times more energy than Bitcoin.”
  • The report compiles almost four years of research and suggests a new calculation for estimating Bitcoin’s proof-of-work energy consumption. In an interview, Khazzaka told Cointelegraph:
  • “Bitcoin Lightning, and Bitcoin, in general, are really great and very efficient technological solutions that deserve to be adopted on a large scale. This invention is brilliant enough, efficient enough, and powerful enough to get mass adoption.”


Kazakhstan to let crypto exchanges open bank accounts

  • In addition to its swift advances toward regulating crypto mining, Kazakhstan will launch a pilot project for crypto exchanges in the special economic zone of the Astana International Finance Centre. 
  • The Ministry of Digital Development, Innovations and Aerospace Industry of the Kazakhstan Republic announced on Thursday a pilot project of cooperation between the crypto exchanges and some of the local banks.
  • The working group formulated the guidelines for that cooperation, consisting of the representatives of the Ministry of Digital Development, the National Bank, the Financial Monitoring Agency, the Association of Financiers, Astana International Finance Centre and the finance and crypto market stakeholders. 
  • The pilot project will be functioning until the end of 2022 and include the exchanges that have gained a license from the freshly-formed Astana Financial Service Authority (AFSA). It will make a blueprint for the subsequent development of Kazakhstan as a regional crypto hub. Close guidelines should soon be published on the AIFC webpage.


Circle launches euro-backed stablecoin EUROC

  • USD Coin (USDC) issuer Circle Internet Financial is launching a fully-reserved stablecoin pegged to the euro, signaling to the market that demand for crypto foreign exchange services remains high despite recent industry turmoil. 
  • Euro Coin, or EUROC, will be available for trading on June 30, Circle said Thursday in a statement that was shared with Cointelegraph. Like USDC, Euro Coin is a regulated stablecoin that is fully backed by reserves — in this case, the euro. That means every EUROC token in circulation will have an equivalent euro-denominated reserve held in custody at financial institutions regulated by the United States. 
  • Silvergate Bank, a crypto-friendly financial institution, was listed as the initial custodian for the euro-pegged stablecoin.
  • EUROC stablecoin gives businesses wider access to euro liquidity, which can be used for payments, trading, lending and borrowing. The stablecoin will initially launch on the Ethereum blockchain as an ERC-20 standard token.


Bank of Russia backs cross-border crypto payments vs. domestic trade

  • Russia’s central bank governor Elvira Nabiullina is the latest official to confirm that the country is warming to the idea of cryptocurrency payments, but not domestic ones.
  • According to Nabiullina, cryptocurrencies can be used in cross-border or international payments only if they don’t get into Russia’s domestic financial system.
  • The digital currency should not be used as payment on platforms inside Russia, the Bank of Russia governor said in an interview with the local news agency RBC. That is why cryptocurrency prices are too unstable or volatile, thus risky for retail investors, Nabiullina argued, stating:
  • “Cryptocurrencies should not be traded on organized marketplaces because these assets are too volatile, too risky for potential investors.”
  • Nabiullina went on to say that digital assets must comply with all requirements and policies created to protect investors. As such, all assets that are listed on an exchange must have an emission prospectus and a responsible person as well as comply with information disclosure requirements.


Liquidity provider asks platforms to freeze 3AC funds to recover assets after litigation

  • Danny Yuan, the CEO of trading firm 8 Blocks Capital, called out to platforms that are holding funds owned by 3AC to freeze the assets, as rumors of 3AC’s insolvency stay afloat. 
  • In a Twitter thread, Yuan explained their company’s involvement with 3AC, noting that they are paying the company to use the trading accounts that they own. The agreement included the ability to withdraw funds at any given time. He explained that:
  • “We had known them since 2018, thought they were competent and didn’t think they were degen enough to lose billions and not employ basic risk management.”
  • According to Yuan, there were no problems until June 13, when 8 Blocks Capital requested a big withdrawal because of the market’s conditions. The trading firm’s CEO said that there was no response from 3AC. “After a while, the market stabilized so we no longer needed the funds. We thought maybe they were just busy,” he wrote.
  • However, things started to turn sour when 8 Blocks Capital detected through a script that $1 million was missing from their accounts with 3AC. Yuan said that reached out to 3AC’s co-founder Kyle Davies and their team to inquire about the missing funds. However, they did not get a response.


These 3 metrics suggest the Bitcoin price crash is not over

  • Bitcoin (BTC) near $20,000 is worrying the market, but after narrowly avoiding breaking support, is the worst really over?
  • According to multiple on-chain indicators, it seems that max pain has yet to arrive this cycle.
  • With targets ranging as low as $11,000, Cointelegraph takes a look at how much further the market technically needs to drop to match historical bottom zones.
  • Essentially, once RHODL’s green zone is it, it suggests that capitulation is at its peak and that a price floor is imminent or already being set. So far, RHODL has yet to enter its green zone, data from on-chain analytics firm Glassnode shows.
  • Fellow on-chain analytics platform CryptoQuant reveals that as of June 16, just 46% of the total BTC supply is being held at a loss.
  • According to CryptoQuant data, at least 60% of the supply needs to generate unrealized losses before it can be called capitulation — as was the case in March 2020, late 2018 and earlier.
  • Hash Ribbons use the 30-day and 60-day moving average of hash rate to determine when miner capitulation is occurring. Once the rising 30-day crosses above the 60-day, it can be assumed that the “worst” is over as miners return to work.
  • So far, that crossover is yet to happen, and historically, this means that max pain could lie ahead.

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