Thursday, 7 July 2022

Market Summary

Market Summary 7 July 2022

Bitcoin Price: US$  20,564.51 (+1.93%)
Ethereum Price: US$ 1,186.57 (+4.77%) 


Voyager Files for Bankruptcy, Axie Infinity Land Staking, State of the NFT Market

  • Crypto lender and broker Voyager Digital has filed for Chapter 11 bankruptcy, estimating that it has more than 100k creditors. The single largest creditor is Alameda Research with unsecured loans of $75 million.
  • Alameda’s history with Voyager dates back to Oct-2021, when the company raised $75 million in strategic investment. The company raised a further $60 million in May-2022 during a private placement led by Alameda. Currently, Alameda owns approximately 9.49% of Voyager’s equity, after surrendering approximately 2.29% of the equity for no compensation.
  • Voyager Digital is a publicly-traded company listed on the Toronto Stock Exchange as VOYG. The company has also issued the VGX token, allowing users to earn boosted rewards, higher referral bonuses, and better pricing for trades.
  • On 22nd June, the company announced that its exposure to Three Arrows Capital (3AC) consists of 15,250 BTC and $350 million USDC. Since then, the VGX token has traded at a higher market cap than the company’s VOYG equity shares.
  • On the same day, the company also announced that it had agreed to a $500 million credit facility from Alameda Research to cover the exposure. Despite this measure, the company restricted customer withdrawals from $25k to $10k and issued a notice of default to 3AC within the next 7 days.
  • On 2nd July, Singapore-based 3AC filed for Chapter 15 bankruptcy, which allows the company to shield US assets and block creditors like Voyager Digital from filing lawsuits.
  • Axie Infinity is a game universe filled with fascinating creatures (“Axies”) that players can collect as pets. Players aim to battle, breed, collect, raise and build kingdoms for their Axies. The universe has a true player-owned economy where users can buy, own, sell and trade the resources they earn through skilled gameplay and contributions to the ecosystem.
  • Once any type of gameplay for Land is released that can support token rewards, these Land Staking rewards will transition to be rewarded through active gameplay
  • Rewards are 11,194.62 AXS daily and differ based on the rarity-level of the staked land
  • The State of the NFT Market w/ Andy Chorlian


Belgian regulator reviews crypto asset classifications while awaiting harmonization

  • The Financial Services and Markets Authority (FSMA), the Belgian regulator, is seeking comments on its communication on the classification of crypto assets as securities, investment instruments or financial instruments. Aimed at issuers, offerors and service providers, the agency’s communication will serve as guidance to the existing order until European regulatory harmonization is achieved. 
  • The communication is meant to address frequently asked questions and is not exhaustive. It is accompanied by a stepwise chart to help its readers determine the classification of an asset.
  • Crypto assets that are incorporated into an instrument, as is generally the case for assets that are exchangeable or fungible, may be classified as securities under the European Union (EU) Prospectus Regulation or as investment instruments under the EU Prospectus Law. In those cases, MiFID (Markets in Financial Instruments Directive) rules of conduct apply.
  • If an asset has no issuer, as in the case of Bitcoin (BTC) or Ether (ETH), where the instruments are created by a computer code that does not give rise to a legal relationship, then in principle the Prospectus Regulation, Prospectus Law and MiFID rules do not apply. When the European Union Regulation on Markets in Crypto Assets (MiCA) takes effect, trading platforms will be required to issue white papers for issuer-less tokens.


Exodus of pro-crypto financial regulators in UK amid allegations of misconduct in PM’s government

  • Many officials responsible for regulating the United Kingdom’s financial system have resigned following allegations Prime Minister Boris Johnson exercised “poor judgement” in appointing a member of the government. 
  • In a letter to Johnson posted to Twitter on Wednesday, Economic Secretary to the Treasury John Glen said his decision to resign was prompted by “recent events concerning the handling of the appointment of the former deputy chief whip” as well as the Prime Minister’s “poor judgment” in addressing the incident. Glen added that “vital reforms” to the country’s financial services were ready to be presented to Parliament.
  • Glen’s resignation followed that of Rishi Sunak — chancellor of the Exchequer for the U.K. — who on Tuesday announced he would also be leaving Johnson’s government for similar reasons. Sunak said he would be stepping down amid “serious challenges” for the global economy, including the effects of the pandemic and war in Ukraine:
  • “The public rightly expect government to be conducted properly, competently and seriously. I recognise this may be my last ministerial job, but I believe these standards are worth fighting for and that is why I am resigning.”


Circle looks to reaffirm commitment to transparency as USDC market share soars

  • The cryptocurrency market has experienced a turbulent period as of late, with several firms filing for bankruptcy or shutting down. Voyager Digital announced its bankruptcy on Wednesday, becoming the second crypto lender to default following Three Arrows Capital.
  • In the light of present market circumstances, Circle has sought to reaffirm its commitment to openness and user security in a blog post published on Tuesday. Jeremy Fox, the chief financial officer of Circle, said that his firm’s priority is to preserve the financial integrity of the system — robust, trustworthy and safe. He added that other financial institutions offer fraudulent promises of preserving user money, only to abandon them when the going gets tough.
  • The chief financial officer said that Circle’s business model is to minimize risk, not “taking and managing risk.” He also explained how the firm protects its USD Coin (USDC) reserves, emphasizing that Circle does not own these assets and that they are 100%t owned by USDC holders in segregated accounts labeled “for the benefit of USDC holders.” Fox wrote:
  • “Circle is not allowed to use the USDC reserves for any other purpose. Unlike a bank or an exchange or an unregulated institution, we cannot lend them out, we cannot borrow against them, and we cannot use them to pay our bills.”


World’s first short Bitcoin ETF sees exposure explode 300% in days

  • Bitcoin (BTC) remains a popular institutional investment target in July, but the money is not betting on a bright future.
  • According to data from research firm Arcane Research published July 6, institutional flows focused on products offering exposure to shorting BTC in the first week of the month.
  • Since launching in the United States in late June, the ProShares Short Bitcoin Strategy ETF (BITI), the first exchange-traded fund (ETF) to be “short” BTC, has proved a hit.
  • That trend has only accelerated in July, with short exposure jumping over 300% in days, data confirms.
  • “BITI, the first inverse BTC ETF, grew further last week,” Arcane summarized in Twitter comments.
  • “After becoming the second-largest bitcoin-related BTC ETF in the U.S. after only four days of trading, the net short exposure has grown further and increased by more than 300% last week.”


Bitcoin mining stocks rebound sharply despite a 70% drop in BTC miners’ revenue

  • Bitcoin (BTC) mining companies have suffered in 2022 due to the crypto bear market. Nonetheless, their stocks collectively saw a sharp rebound on July 6, raising hopes that investors have started to buy the dips.
  • One of the intraday winners was Bitfarms (TSE: BITF), which surged by over 24% to close at $1.29.
  • Similarly, Marathon Digital Asset Holdings (NASDAQ: MARA), Core Scientific (NASDAQ: CORZ), and Cathedra Bitcoin (CVE: CBIT) rose by over/around 12.5%, 16.22%, and 15%, respectively.
  • The rallies come as a breather in what has been a bad year for mining stocks. A nearly 60% year-to-date plunge in the BTC price and a rise in “mining difficulty” have pushed the miners’ daily revenues lower by over 70% from their November 2021 peak of $62 million.


85% of merchants see crypto payments as a way to reach new customers: Survey

  • While the market goes steady, the crypto ecosystem continues to grow as merchants innovate and adopt cryptocurrency payments in their quest to gain new customers. 
  • Data platform PYMNTS collaborated with Bitpay to survey merchants, in an attempt to understand the trends on what participants expect from digital currencies and their effect on payments and businesses. 
  • In the report titled “Paying With Cryptocurrency,” the researchers found that among businesses with an annual income of $1 billion, 85% are adopting crypto payments to find and gain new customers. On the other hand, 82% of all the merchants who participated in the survey cited crypto’s elimination of middlemen as their reason for accepting it as a payment method.
  • Apart from these, the results also showed that 77% of the surveyed merchants are also drawn to accepting crypto because of lower transaction fees. According to the report, the fees for processing crypto transactions are around 1%. This is much lower than the usual fees from 1.5% to 3.5% charged by other payment options like credit cards.


Fed conference hears stablecoins may boost USD as global reserve currency

  • A note published by the United States Federal Reserve at a recently held conference found a majority of exports believe a U.S. dollar central bank digital currency (CBDC) would not drastically change the global currency ecosystem.
  • Panelists at the conference also agreed that CBDC development outside of the U.S. doesn’t threaten the status of the dollar, but the development of cryptocurrencies could alter the role of the dollar globally, with some saying stablecoins could even boost the U.S. dollar’s role as the global dominant reserve currency.
  • The assessments came from expert panelists at a June 16 and 17 conference hosted by the Federal Reserve on the “International Roles of the U.S. dollar” collated into a note and published by The Fed on Tuesday. The conference was used to gain insight from policymakers, researchers and market experts to understand “potential factors that may alter the dominance of the U.S. dollar in the future,” including new technologies and payment systems.
  • A discussion on a panel addressing digital assets and if CBDCs would provide advantages for the dollar had panelists agree that the underpinning technology alone wouldn’t “lead to drastic changes in the global currency ecosystem”.

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