Wednesday, 6 July 2022

Market Summary

Market Summary 6 July 2022

Bitcoin Price: US$  20,175.83 (-0.30%)
Ethereum Price: US$ 1,132.50 (-1.61%) 

 

ENS Registrations Spike, DAO Banking, Resource Extraction In The Metaverse

  • Ethereum Name Service (ENS) is a decentralized domain name protocol on Ethereum. Users typically register an ENS to their crypto addresses, making it easily readable compared to the default string of alphanumeric characters.
  • As every ENS address is unique, it is common for ENS holders to partake in squatting. Squatting is where a user purchases a domain and makes no use of it, instead hoping for it to gain value so they can flip it for a profit later.
  • Daily ENS registrations have spiked recently, reaching over 30k new addresses on July 4th.
  • The spike in registrations could likely be due to the ENS address 000.eth being bought for a record-breaking 300 ETH on OpenSea, setting off a 3-digit mania as traders try to capitalize on the hype. Additionally, ENS tops OpenSea in trading volume over the last 24 hours for the first time ever.
  • DAO Banking
    • The first major instance of a DAO financing attempt came a year ago in July 2021 when SUSHI was looking to do a strategic raise. To set the stage, SUSHI is a “community fork” of Uniswap v2. All the tokens were earned & owned by the community or from funds buying off secondary markets. In July 2021 there was a proposal SUSHI Phantom Troupe, a plan to get some VCs on board to promote & become long-term partners to SUSHI and diversify the treasury into stable assets, blue chips, and seed liquidity in markets for SUSHI’s new Kashi product. At that time, SUSHI had a treasury of ~$214M in SUSHI tokens and a protocol that was making ~$30-40M/month in swap fees. Like most protocols, however, the SUSHI emissions were far greater than income earned, and all of this income went to holders of xSUSHI, not the DAO treasury. This would be like Uber giving users Uber equity for riding with them and then paying out all the income to drivers and holders of Uber shares. You can see how this is circular and not a sustainable long-term strategy.The first major instance of a DAO financing attempt came a year ago in July 2021 when SUSHI was looking to do a strategic raise. To set the stage, SUSHI is a “community fork” of Uniswap v2. All the tokens were earned & owned by the community or from funds buying off secondary markets. In July 2021 there was a proposal SUSHI Phantom Troupe, a plan to get some VCs on board to promote & become long-term partners to SUSHI and diversify the treasury into stable assets, blue chips, and seed liquidity in markets for SUSHI’s new Kashi product. At that time, SUSHI had a treasury of ~$214M in SUSHI tokens and a protocol that was making ~$30-40M/month in swap fees. Like most protocols, however, the SUSHI emissions were far greater than income earned, and all of this income went to holders of xSUSHI, not the DAO treasury. This would be like Uber giving users Uber equity for riding with them and then paying out all the income to drivers and holders of Uber shares. You can see how this is circular and not a sustainable long-term strategy.
  • BreederDAO: Resource Extraction In The Metaverse
    • BREED is the native token of BreederDAO. It will have several functions, including governance, potential rights to BreederDAO revenue in the future, staking rewards, and weighted preferential access to BreederDAO IBO’s (more on these below).
    • BreederDAO can be seen as a long term play on the growth of play-to-earn gaming. In our previous report Dawn Of The Guilds, we framed Yield Guild Games as an index bet on play-to-earn gaming. This is based on guilds like YGG being diversified across a multitude of games. In a way, DAOs that service guilds such as YGG are akin to an index bet on guilds. Betting on an individual game means trying to pick the winning game. Betting on a guild is effectively a bet on the basket of games the guild participates in. Betting on BreederDAO is an additional layer of abstraction away from picking the winning game and instead becomes a bet on a basket of guilds that the DAO partners with. With $512M raised by guilds last year, there is substantial opportunity for specialized DAOs like BreederDAO.

 

Core Scientific sold $167M worth of Bitcoin holdings in June

  • United States-based cryptocurrency mining firm Core Scientific sold more than 7,000 Bitcoin in June to pay for servers, increase its data capacity, and settle debts.
  • In a Tuesday announcement, Core Scientific said it had sold roughly $167 million worth of Bitcoin (BTC) in June at an average price of $23,000 — 7,202 BTC. The sale left the firm with ​​1,959 BTC — roughly 21% of its holdings — and $132 million in cash as of June 30, a more than 75% drop when compared with its reported 8,058 BTC holdings as of May 31.
  • According to the firm, it used proceeds from the crypto sale to pay for ASIC servers, schedule debt repayments, and invest in additional data center capacity. The company reported it had produced 1,106 BTC in June, with self-mining accounting for 57% of its data center capacity and crypto mining operations as of June 30 — more than 180,000 servers.
  • “Our industry is enduring tremendous stress as capital markets have weakened, interest rates are rising and the economy deals with historic inflation,” said CEO Mike Levitt. “Our company has successfully endured downturns in the past, and we are confident in our ability to navigate the current market turmoil.”

 

Bitcoin exchange outflows surge as ‘not your keys, not your crypto’ comes back into fashion

  • June saw the worst monthly performance for Bitcoin since 2011, but several metrics indicate that its underlying support base continues to grow stronger.
  • Bear markets in cryptocurrency are known to be painful, but the month of June was especially trying for the crypto faithful as a confluence of factors resulted in the price of Bitcoin (BTC) falling 37.9%, its worst monthly performance since 2011.
  • As a result of the continued widespread weakness, a majority of the so-called Bitcoin “tourists” have now exited the space, leaving only the most dedicated holders remaining, according to blockchain analytics firm Glassnode.
  • Despite Bitcoin’s ongoing struggles and the fact that crypto traders are currently experiencing the worst bear market in the sector’s history, several metrics suggest that the outlook isn’t as dire as some are predicting and that the hodler base of the crypto market remains strong.
  • The ethos of “not your keys, not your crypto” is once again gaining traction in the crypto community as traders have been withdrawing their tokens from exchanges at a frantic pace. The collapse of the Terra ecosystem, potential insolvency of Celsius and the implosion of Three Arrows Capital have all served as a stark reminder that crypto is intended to be stored in cold storage. 
  • Since March 2020, the number of Bitcoin held on exchanges has declined from 3.15 million to 2.4 million. That’s a total outflow of 750,00 BTC with 142,500 of that total occurring in the past three months.
  • With platforms like Celsius halting withdrawals and smaller exchanges beginning to put limits on the amount that users can remove, the desire to regain personal control of crypto assets has become a top concern for holders.

 

Italian government will provide $46 million in subsidies for blockchain projects

  • The Ministry of Economic Development of Italy has announced that certain blockchain projects will qualify to apply for up to $46 million in government subsidies starting from September.
  • In a Tuesday announcement, the Ministry said companies and public or private research firms will be able to apply for funding from the government for the development of projects related to artificial intelligence, the Internet of Things and blockchain technology. The fund will have an initial budget of 45 million euros — roughly $46 million at the time of publication — for expenses and costs from 500 thousand (worth $512,150) to 2 million euros ($2,048,600) as part of the Italian government’s goals for investments in technology, research and innovation.
  • “We support companies’ investments in cutting-edge technologies with the aim of encouraging the modernization of production systems through management models that are increasingly interconnected, efficient, secure and fast,” said Minister of Economic Development Giancarlo Giorgetti. “The goal of competitiveness requires the manufacturing industry to constantly innovate and use the potential of new technologies.”

 

Bitcoin faces fresh pressure as US dollar crushes gold, risk assets

  • Data from Cointelegraph Markets Pro and TradingView showed BTC/USD retreating to $19,281 on Bitstamp as the Independence Day long weekend concluded with a bump.
  • The pair had seen last-minute gains the day prior, these fizzling as the return of Wall Street trading was accompanied by USD strength laying waste to gains across risk assets and safe havens.
  • Bitcoin traded down $1,000 on the day, while spot gold shed over 2% and U.S. equities markets also fell. The S&P 500 was down 2.2% at the time of writing, while the Nasdaq Composite Index lost 1.7%.
  • The U.S. dollar index (DXY), on the contrary, hit 106.59, a level not seen since December 2002 and above previous breakouts from Q2 this year.
  • Bitcoin analysts thus waited for signs of a trend reversal to provide some relief to crypto markets.
  • “Euro hitting record levels, $1.033 at this point. Last seen in the years 2002–2003 and DXY, of course, shooting up like a rocket,” Cointelegraph contributor Michaël van de Poppe commented, noting that the euro was heading towards USD parity.
  • “Over the past week, yields are falling but the dollar keeps rising. This dynamic proves that investors are rushing to safety, with heightened fears of recession,” part of a tweet read.

 

Russians banned from accessing Bitmex within European Union

  • Major cryptocurrency exchange BitMEX is working to increase compliance with the European sanctions against Russia by preparing to enforce major restrictions for its Russian users.
  • BitMEX is changing its restricted jurisdictions policy to be compliant with various restrictive measures of the European Union, Cointelegraph has learned.
  • The BitMEX crypto exchange notified a group of potentially affected users about the upcoming changes via email on Monday.
  • According to an email seen by Cointelegraph, Russian citizens or residents will no longer be able to access BitMEX services from the European Union after July 11, 2022. That means that such users will not be able to log into their account or access any services from the European Union, unless an “exception applies.”
  • The new restrictions do not apply to Russian citizens or residents accessing BitMEX services from the EU who are also residents in the EU or Switzerland. Dual citizens of the EU or Switzerland who reside outside Russia will also not be affected, the email notes.
  • “If you are a resident in the EU or Switzerland or a dual citizen of the EU or Switzerland and reside outside Russia, you may submit additional information to apply for an exemption and continue to access our Services from the EU,” the statement said.

 

Circle’s USDC on track to topple Tether USDT as the top stablecoin in 2022

  • The growth of Circle’s native stablecoin USD Coin (USDC) in the last two months compared to its $66-billion rival giant Tether (USDT) is nothing short of spectacular.
  • Notably, USDC’s market capitalization has grown by 8.27% since May, reaching its highest level of $55.9 billion on July 2. In contrast, USDT has suffered an over 19% drop in its market valuation, currently treading around $66.14 billion.
  • This is the closest USDC has come to challenging USDT’s supremacy in the stablecoin sector based on the diminishing gap between their market caps.
  • Crypto investors have turned cautious since the collapse of Terra’s $40 billion “algorithmic stablecoin” project in May, fearing that the same could happen to USDT. That is primarily due to speculations that Tether’s USDT tokens are not 100% backed by cash and other traditional assets as it claims.
  • As a result, short-sellers have boosted their bets on the possibility that USDT would soon fall below its $1-peg, with the Wall Street Journal reporting that these bearish positions could be worth “hundreds of millions” of dollars.

 

ARK Invest ‘neutral to positive’ on Bitcoin price as analysts await capitulation

  • Bitcoin (BTC) has a “neutral to positive” outlook despite staying below $20,000, according to ARK Investment Management.
  • In its latest “Bitcoin Monthly” report, the American asset management giant flagged signs that BTC price action is close to bottoming.
  • “Down 70% from its all-time high, bitcoin is trading at or below some of its most important levels: its 200-week moving average, the general cost basis of the market (realized price), the cost bases of long-term (LTH) and short-term holders (STH), and its 2017 peak,” the report reads.
  • “Trading below these levels is atypical and suggests extremely oversold conditions. Only four times in history has bitcoin traded below price levels relative to these means.”
  • As such, most of the losses should have already come, if history is a guide. Among indicators yet to see absolute lows are the MVRV ratio — the ratio of realized cap and the cost basis of entities hodling for different lengths of time.
  • “Historically, global bottoms occur when the MVRV of short term holders exceeds the MVRV of long term holders,” ARK explained.
  • “That condition has not been met, suggesting the potential for more downside.”

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