Here are this week’s top crypto news headlines:
- The crash continues: BTC sees its biggest quarterly drop in over a decade while tech stocks take a dive. When will we finally see a recovery?
- Another pause in withdrawal: Voyager Digital becomes the latest crypto platform to pause withdrawals for users as FTX’s CEO warns that many exchanges are secretly insolvent. Here’s how to protect your crypto.
- The SEC rejects a Bitcoin ETF: Greyscale sues crypto’s most infamous regulator after it rejects its request to convert its established Bitcoin trust into a spot Bitcoin ETF. Will this help or hurt the crypto market?
- Cardano upgrade imminent: After a one-month delay, Cardano developers launch the test net for one of Cardano’s most significant upgrades to date. What could it mean for ADA?
- Changes at Cosmos: Core developers confirm that Interchange Security is coming soon while the CEO of the company that created the crypto project steps down. What’s next for ATOM?
- Upcoming crypto regulations: The EU passed a controversial bill which will see stablecoin use limited and cryptocurrencies delisted, with personal crypto wallets soon to be tracked. What you need to know.
- Top performing cryptos: A closer look at las week’s top performing cryptos and where they’re headed next.
- And the most important news is that Jet-Bot platform for Binance copy trading may allow you to earn a 200% to 2,000% APY. Copy the top traders and automatically follow all of their trades to become one of the best traders. Start earning right now.
The Crash Continues
Last week, the crypto market resumed its downward trend towards multi-year lows for most coins and tokens. This resulted in the second worst quarter for cryptocurrency since 2011, with BTC having lost 56% over the last three months. To put this in context, the worst quarter for cryptocurrency was Q3 of 2011, when BTC fell by 66%. Given that most altcoins trail BTC with much greater volatility, it should come as no surprise that most of them fell by 80% or more during the same period. BTC tends to follow tech stocks.
In addition, tech stocks had their worst quarter in years, with the NASDAQ index falling by 22%. This is all because of another macro factor that’s slowly taking center stage in the eyes of investors, and that’s the possibility of a recession. For reference, the official definition of a recession is two consecutive quarters of negative gross domestic product or GDP growth, something that is now being forecasted by the Federal Reserve Bank of Atlanta’s GDP Now model. It’s something that will be confirmed when these GDP figures come out at the end of July.
Anyhow, the reason why the markets are reacting already is because they can see the writing on the walls, specifically the collapse in commodity prices that we saw last week. Oil, copper, wheat, and even natural gas saw double-digit declines in prices or similar indicators such as deliveries and orders. A sharp contraction in commodities is considered to be concrete evidence that the global economy is starting to slow down. The worst part is that these double-digit declines aren’t likely to put a dent in consumer prices anytime soon as commodities related to energy remain at or above record highs.
Many investors are wondering when stocks will bottom out. Bot crypto trading will finally see a convincing recovery. This is also referred to as a “dead cap bounce.” This is because it’s rare for stocks, and even cryptocurrencies, to see so many consecutive weeks of losses without some sort of short-term reversal. Some are saying the catalyst required for a short-term reversal in the crypto market is for the current crypto contagion caused by Terra and Three Arrows Capital to finally finish, but unfortunately, the crypto plague continues to claim new victims.
Another Withdrawal Pause
Last week, Voyager Digital became the second popular crypto platform to pause withdrawals for its more than 3.5 million users, the first being Celsius, which paused withdrawals in mid-June, leaving more than 1 million users in crypto loss limbo.
You might recall that it had mostly to do with the mismanagement of user funds that was going on behind the scenes. It looks like it’s a similar story for Voyager Digital as it had lent out $670 million of crypto to defunct crypto hedge fund 3AC. To Voyager Digital’s credit, apparently with zero collateral. That’s right, a 670 million dollar unsecured loan.
To Voyager Digital’s credit, the company acknowledged that it had significant exposure to three hours’ capital and immediately sought relief, which it received from crypto trading firm Alameda research in the form of a 500 million dollar loan. It seems though that this only accelerated the run on the bank by its users, which the crypto platform tried to slow by limiting withdrawal amounts.
It seems that didn’t work either because on the 1st of July, Voyager digital announced it would be temporarily shutting its doors. All the while, Voyager digital stock continued to collapse. The only reason it didn’t go to zero on Friday was because its stock is trading on the Toronto Stock Exchange, which was closed on the 1st of July due to Canada Day.
What many are wondering now is whether FTX will offer to acquire Voyager Digital in the same way it offered to acquire BlockFi, namely by increasing the loan it had given to Voyager Digital on the condition that it can buy the crypto platform for pennies on the dollar if it fails to meet its debt obligations to FTX. This is unlikely given that Voyager Digital seems to be in a lot more trouble than BlockFi. FTX CEO Sam Bankmanfried said himself that there are many crypto companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues or that there’s not much of a business left to be saved.
Sam also said that there are some third-tier exchanges that are already secretly insolvent, which begs the question of what third tier means, especially since Sam didn’t provide any names. I can say with some certainty that the top five regulated exchanges are safe from insolvency, but the fact of the matter is that none of us can see what’s going on behind the scenes. The best thing to do in situations like this is to play it safe and withdraw some or even all your crypto from centralized crypto platforms of all kinds, be they exchanges or otherwise.
SEC Rejects Bitcoin ETF
Anyway, if news of the crypto contagion spreading wasn’t bad enough, the SEC officially rejected Grayscale’s spot Bitcoin ETF application, which was considered by many to be one of, if not the most promising, spot Bitcoin ETF proposal. That’s because it involved converting Greyscale’s Bitcoin trust, which already holds over 12 billion dollars of BTC, into an ETF that would be accessible to a broader spectrum of institutional investors.
The SEC cited crypto market manipulation and fraud as their reasons for rejecting the Greyscale spot Bitcoin ETF, something that had actually been expected by many crypto analysts given that SEC chairman Gary Gensler has been adamant about wanting to crack down on crypto exchanges before approving an ETF. It also doesn’t help that 3AC was one of the biggest investors in Greyscale’s Bitcoin trust, having held more than 6% of all outstanding GBTC shares, totaling 37,000 BTC at the start of 2021.
The news of Grayscale’s spot Bitcoin ETF rejection combined with its exposure to Three Arrows Capital has pushed Grayscale’s GBTC discount to more than 31%. It’s at its lowest point ever. The crypto bear market is definitely playing a role here as well. Some would say that Grayscale’s decision to sue the SEC less than an hour after it rejected the company’s spot Bitcoin ETF application isn’t helping to reduce the discount as it could cause issues for Grayscale and could inspire the SEC to be even heavier-handed with the crypto industry. But then again, Grayscale’s current lawsuit is only asking the United States Court of Appeals for Washington, DC to review the SEC’s decision to deny the application.
Whether this could result in a spot Bitcoin ETF approval further down the line remains to be seen, but the fact that Grayscale is willing to go this far suggests they’re willing to exhaust every option. This is basically because Grayscale’s Bitcoin trust has some serious competition from spot Bitcoin ETFs that have already been approved in Canada. These have attracted billions of dollars in institutional capital from inside and outside of the country.
It’s arguably inevitable that a spot Bitcoin ETF will be approved at some point. I have a feeling that it’s unlikely to happen during a bear market. In a worst-case scenario, we might have to wait until SEC chairman Gary Gensler leaves his post, which could be another four years. Make no mistake. However, when a spot Bitcoin ETF is inevitably approved, BTC will likely fall along with the rest of the crypto market.
Cardano Upgrade Imminent
Many believe that ADA could be headed to the moon much sooner because of an upcoming upgrade to Cardano full disclosure. I hold ADA as part of my portfolio now. The Vasil hard fork will significantly increase Cardano’s scalability, which has been put under stress by all its smart contracts.
The Vasil hard fork was initially scheduled for June but was delayed due to the discovery of a handful of minor bugs. Cardano’s core developers stressed that they wanted to take extra time to review the code because the Vassil hard fork will be one of Cardano’s most complex upgrades to date.
As with Cardano’s previous hard forks, Vasil will begin as a test net that will run for one month to give time for Cardano’s core developers and Cardano projects to discover and fix any additional bugs that may arise, assuming all goes smoothly. Vasil’s upgrades could be live on the mainnet as soon as late July. As it so happens, the Vasil testnet actually began late last night, but it should be noted that this could be a bearish event should any serious issues be discovered. This was the case after the launch of the Alonso test net in September last year, which introduced Cardano’s smart contract functionality. Cardano’s smart contract functionality was initially fairly simple, to put it mildly. This meant that it was very difficult for decentralized applications to actually deploy.
The good news is that in this case, the expectations around the Vasil hard fork seem to be a bit tame, which could potentially make the testnet, and especially the mainnet, an extremely bullish event if the improved scalability it is expected to bring exceeds the expectations of both users and developers.
Still, the sad reality is that we are in a crypto bear market with so little attention going to altcoins these days, ADA is unlikely to see a meteoric rise anytime soon. In fact, CoinTelegraph analysts predict that ADA will fall by another 60% later this year. This happens to be consistent with when the bottom of the crypto bear market could be.
Changes At Cosmos
Anyhow, another couple of altcoin related headlines that caught my eye last week were about Cosmos, a cryptocurrency whose ecosystem is known for its unparalleled interoperability.
The first headline had to do with interchange security, an extremely important feature that Cosmos will be getting in a few months’ time, as per a document by Cosmos’s core developers. Interchange security will allow other Cosmos-based blockchains to benefit as well. This is important because cosmos-based blockchains use proof of stake as their consensus mechanism. As we enter a crypto bear market, it will become easier for a bad actor to come in and buy up the stake they need to corrupt smaller Cosmos-based blockchains, which is obviously not ideal.
The risk of corruption is especially great among many Cosmos-based blockchains that feature decentralized exchanges such as Osmosis, because of the total value of the other coins and tokens they hold in their protocols. As pointed out by the Block, once Cosmo’s interchange security is introduced, it will make the project even more similar to Polka dot.
The second Cosmos-related headline that caught my eye was that decentralized exchange dYdX would be creating its own Cosmos-based blockchain, thereby leaving Ethereum’s ecosystem to join that of Cosmos. This is quite significant given that dYdX is currently the second largest deck by trading volume based on Coin Market Cap and has over 600 million dollars in total value locked according to DeFi Lama. The fact that the dYdX token currently has a market cap of less than 100 million dollars means that the project might opt to take advantage of Cosmos’s interchange security. I suspect there’s a higher chance of the project keeping its new blockchain permissioned for the time being.
It was pointed out by Coindesk that dYdX’s move to Cosmos is evidence that Ethereum isn’t evolving quickly enough to meet the demands of crypto projects and that even the development of its layer two is lagging in comparison to other smart contract cryptocurrencies. The idea that every crypto project will eventually require its own blockchain is central to Cosmos, and dYdX may be one of the early movers in this regard.
This is why is odd that Peng Zhong, the CEO of the company that created Cosmos, abruptly announced his resignation after seven years. Coin Telegraph seems to imply that it has something to do with the fact that Ignite, formerly known as Tendermint, split into two companies in May when Cosmos co-founder Jae Kwon decided to come back and reclaim the tenement brand. Reporting by CoinDesk seems to confirm this, as two ignite employees explained, Peng’s departure was basically part of a broader plan by Jae to cut the company’s workforce by more than 50%.
Whatever the case, it’s sad to see that Cosmos continues to have some issues behind the scenes. As for what all this means for ATOM, it should ultimately be bullish assuming any issues at Cosmos HQ are resolved, and I imagine they will be resolved in due course.
Upcoming Crypto Regulations
Meanwhile, in Europe, the European Union passed a bill that will see a series of regulations imposed on the crypto industry. The bill was or is known as the Markets in Crypto Assets Act, or Mica. While the bill claims to do things like protect investors and all that pretty stuff, it’s clear to the trained eye that the European Union is desperate to defend the integrity of the euro as its value slides against the US dollar in the face of exponential inflation caused by ridiculously negative interest rates. This is why stable coins were front and center in the bill.
In addition to requiring all stablecoin issuers to register in Europe and back their stable coins with quality collateral, the bill also imposes a daily transaction limit of 200 million euros on stablecoin transactions.
The USDC issuer Circle seems to be intent on becoming the first to get regulatory approval within Europe given that it released its Euro stable coin on the same day the bill was passed. Given that USDC is a de facto digital dollar, it’ll be interesting to see if EuroC becomes a de facto digital Euro.
The second set of regulations in the bill are a bit more problematic as they relate to altcoins. For starters, the EU will give oversight of the crypto industry to its own SEC, which will get to decide which cryptocurrencies exchanges will be allowed to list and de-list any cryptocurrencies they don’t like. Also, ‘four tokens without issuers’, such as Bitcoin trading platforms, will provide a white paper and be liable for any misleading information. Something tells me that this could be used as an excuse to crack down on BTC, something some European politicians want to do over proof of work.
As a cherry on top, these same European politicians are currently working on finalizing regulations that will see users complete KYC every time they withdraw or deposit an amount of crypto worth more than one thousand euros, with other vague wording that could make the KYC requirement even more frequent.
This is all a part of the financial action task force, or FATF,’s so-called cryptocurrency recommendations, whose end game is to make it impossible for people to have their own personal crypto wallets by labeling all such transactions as high risk for crypto trading.
For what it’s worth, these crypto regulations aren’t nearly as bad as the ones that were initially proposed.They also won’t be coming into force for another year or two. This means there’s time to prepare accordingly, whatever that may mean for you.
Top Performing Cryptos
Turning to the charts, we can see that the bear flag I identified on BTC’s daily price action seems to be playing out, albeit in slow motion. This suggests there’s lots of support around the $18K to $19K range, which is consistent with the visible range volume profile indicator I talked about a couple of weeks back. If we lose this level of support, the next stop is somewhere between $15k and $16k. Be aware there isn’t much support at those levels either.
For last week’s top performing cryptos were NEM XEM, USDD, Binance USD, Pax Dollar USPD, and Dai DAI. Starting with NEM, its stable coin appears to be rallying on the rumor that it will be partnering with another crypto project called Stabily to introduce a stablecoin pegged to the Japanese Yen, which is odd given that the Yen has been taking a beating against the USD over the last year. It’s also odd that this was the only tweet NEM has made since mid-May, but then you check the price charts and remember that it’s one of the altcoins of old that has managed to stick around, but only barely. You literally can’t see its recent pump on its price chart.
When it comes to all those stable coins, there’s really not all that much to say. USDD and DAI are decentralized stable coins, so their fluctuations are just a result of their peg stabilization mechanisms. The only interesting thing about USDP and BUSD is that their market caps have been moving sideways for months.
This actually seems to be the case with almost every other stable coin, with the exception of USDT, whose market cap has been on the decline, and USDC, whose market cap has increased slightly. This confirms that crypto investors are not even turning to stable coins for safety; they’re cashing out of the market completely, and it looks like that panic selling isn’t over just yet.
[This article is a transcription of a video made by Coin Bureau]
Original video: https://youtu.be/mD5xHB6ZKCw]