- The cryptocurrency market crashed. Most coins and tokens see double-digit losses as the stock market gets slaughtered. When will the selling end?
- Countries bullish on crypto: in the Central African Republic, Cuba. Brazil, Panama, Switzerland, and India have all made significant crypto-related announcements. What do they mean for the crypto market?
- ApeCoin antics: After a record-shattering NFT sale, the Bored Ape Yacht Club community is left asking questions as the APE token crashes. Here’s what went down.
- Bitcoin mining metrics: The hush rate continues to hit new highs despite a moratorium on crypto mining in New York state and declining minor revenues. How could this affect BTC’s price?
- Crypto borrowing, better than selling. Goldman Sachs issues better crypto borrowing than selling. Its first Bitcoin backed loan as a DeFi protocol on Polygon issues is the first decentralized mortgage. Is this the future or just a fad?
- Stablecoins in the spotlight: U.S. regulators and politicians quarrel over who gets to control crypto’s digital dollars. Why this is more important than you think.
- A closer look at last week’s top performing cryptos and where they’re headed next reveals.
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Crypto Market Crash
Last week we saw what can only be described as a bloodbath for crypto stocks, bonds and gold. Almost every asset has been absolutely wrecked and many of them continue to decline. If you’re wondering why, the short answer is the DXY. That’s the US dollar index for anyone wondering, and it’s at the highest level it’s been in almost 20 years.
This is a sign that investors across the board are selling off the assets they have and flocking to the US dollar as a safe haven despite the historically high levels of inflation in the United States. As to why investors are flocking to the USD despite these conditions, the short answer is uncertainty about everything that’s going on in the world at the moment. Besides record levels of inflation in many regions, we’re still technically in a pandemic. At the same time, there are serious supply chain shortages and issues and there’s a war in Ukraine that only seems to be escalating.
As a cherry on top, the Federal Reserve will be announcing how much it plans to raise interest rates by in a press conference this Wednesday and investors aren’t sure how much the Fed will hike. This seems to be because of a statistic that was released on Friday called the personal consumption expenditures index, or PCE. PCE is the indicator the Fed pays the most attention to in terms of inflation. Not surprisingly, the PCE came in at a 40-year high of over 6.6%, and this has investors wondering whether the Fed will increase interest rates more aggressively at the last minute than they had bargained for.
The only problem there is that the United States could be headed for a recession. One of the primary indicators for this is growth, and it looks like the U.S. economy shrank by 1.4% in the first quarter of this year. For context, investors were expecting a 1% gain. Because the United States is the largest economy in the world, a U.S. recession basically guarantees a global recession and that’s something the Federal Reserve would probably rather not accelerate or even cause with aggressive interest rate increases. To be blunt, this week could decide whether the crypto market continues to recover or enters a bear market, so prepare yourselves accordingly.
Countries Bullish On Crypto
Despite the unreliably bearish investor sentiment in the crypto market, it looks like countries are as bullish on crypto as ever. For starters, there’s the Central African Republic, which is the second country to make bitcoin legal tender after El Salvador.
It’s crazy that this news seems to have fallen on deaf ears in the crypto community, but that might have something to do with the fact that it wasn’t entirely clear whether it was true when it was announced. Now we’re finding out that the Central African Republic’s own Central Bank had no idea that its president had passed a bill making bitcoin legal tender in the country.
As reported by Decrypt, this has mostly to do with the fact that the Central African Republic isn’t the most stable country in the world. In fact, it’s one of the least stable. What’s interesting is that this instability seems to be a common characteristic of all the African countries that use the Central African franc, which is pegged to the euro. The Central African franc is effectively controlled by the French central bank and this has done serious damage to the African countries that use this currency. This suggests other African countries in the region could soon follow suit in making bitcoin legal tender.
Another country that’s been embracing crypto is Cuba, which made cryptocurrencies a legal method of payment in September last year. Cuba’s central bank has now announced that it will begin offering virtual asset service provider licenses starting this month. This should lead to the broader adoption of cryptocurrency in the country.
Next, there’s Brazil, which is on the cusp of passing a bill that would bring regulatory clarity to the rapidly growing crypto industry in the country. A similar bill was just passed in Panama and it included a capital gains exemption for cryptocurrencies in a bid to make Panama the most crypto-friendly country in the region.
Across the pond, Switzerland’s central bank noted that it was open to the idea of holding bitcoin on its balance sheet but not just yet. In India, the government is scrambling to clarify a component of its controversial crypto tax law, specifically the portion that requires one percent of every fiat to crypto transaction to be taxed. The so-called tax deducted at source law is supposed to come into effect on July the first and, with some luck, will be removed entirely as many crypto companies claim it violates India’s own laws and they have the legal precedent to prove it.
All in all, it looks like every country is finding its own way of adopting cryptocurrency and although these announcements may seem insignificant today, they’re putting the fundamentals for new all-time highs across the board.
Some cryptocurrencies have managed to hit all-time highs irrespective of current market conditions. One of these is ApeCoin. APE rallied late last week as Bored Ape Yacht Club’s enthusiasts rushed in to claim land NFTs for the Bored Ape Yacht Club’s upcoming metaverse called “other side.” Naturally, the ApeCoin was used to purchase these so-called other deeds, which were sold for over $6,000 a pop.
As is often the case with such events, the other side of land sales were less than optimal as thousands of APEs pushed Ethereum to its limit while trying to get a cut of its virtual territory. Yuga Labs, the creator of Bored Ape Yacht Club, responded with a lengthy Twitter thread that included the following tweet:
As you might expect, this resulted in an array of comments from users demanding that ApeCoin migrate to their favorite Ethereum alternative and comments coming from critics who claim that the sale smart contract was poorly coded, resulting in five-figure gas fees for some would-be buyers in the middle of this gas fee madness. As a result, over 55,000 in deed NFTs were sold, bringing in over $300 million for Yuga Labs.
Although APE has since crashed by more than 30%, Bored Ape Yacht Club and Mutant Ape Yacht Club NFTs are still sitting close to their all-time highs. It’ll be interesting to see whether they follow suit, but as a holder of the latter, I hope this doesn’t happen.
Bitcoin Mining Metrics
Speaking of all-time highs, Bitcoin’s hush rate recently hit another all-time high despite Bitcoin’s poor price action. This is actually somewhat surprising given that Bitcoin’s hush rate tends to correlate with Bitcoin’s price. Clearly, this correlation is nowhere to be found at the moment. What’s even more surprising is that Bitcoin’s hush rate continues to climb regardless of the recent proposal to ban crypto mining in New York State, which is coming close to being passed. While the bill doesn’t ban crypto mining outright, it would make it impossible for crypto mining companies using fossil fuels of any kind or quantity to get a permit from the state. It would also make it impossible for any existing crypto mining companies to renew their permits if they’re using carbon fuels. Bitcoin mining only accounts for 0.08% of global carbon emissions, which amounts to nothing more than a rounding error in the grand scheme of things.
A recent report by the Bitcoin Mining Council also found that 60% of BTC is now being created with renewable energy, which makes sense given that Bitcoin miners have a tendency to use the cheapest energy sources, which are often renewables. Unfortunately, these facts seem to have fallen on deaf ears in some U.S. states, but the good news is that the states who are aware of these facts are welcoming cryptominers with open arms and have noted that they will happily take any cryptominers who are forced to leave New York state.
The bad news is that cryptominers seem to be having bigger problems than climate FUD campaigns. According to CoinDesk, many crypto miners are having to sell company shares and debt to continue financing operations. To be clear, crypto miners are still very much in the green, but competition between crypto mining companies is fierce, so fierce in fact that if Bitcoin drops below $34k, we could start seeing some crypto mining companies capitulate by selling off significant amounts of BTC reserves or even go bust.
The silver lining is that crypto mining companies are reporting having an easier time finding financing, which suggests that institutions are convinced that crypto mining is not only here to stay but will become even more profitable as time goes on. This means that institutions are betting on Bitcoin going up in the long term, and there’s no question that bitcoin miners are betting the same way. Zooming out on BTC’s price certainly suggests that they’re onto something here.
Crypto Borrowing, Better Than Selling
BTC’s long-term uptrend is a big reason why many bitcoin whales try to borrow against their BTC rather than sell it. Borrowing against assets also doesn’t result in any capital gains, at least in the United States. For many bitcoin whales, the only problem with this master plan was the absence of a middleman who’d be willing to lend them millions or even billions of dollars using BTC as collateral.
A recent report by Bloomberg has revealed that Goldman Sachs is the first big bank to step up to the plate and offer bitcoin-backed loans to its clients. Though the spokesperson for the bank did not mention who or how much was borrowed, all they said was that a bitcoin-backed loan is interesting for the bank because it requires them to keep an eye on the crypto market 24/7. I bet that’s a job many of us could do very well.
With jokes aside, the basic concept of borrowing against your crypto is evolving to become something more elaborate with a DeFi protocol on polygon called Teller issuing the first under collateralized mortgage loan using crypto to a resident of Austin, Texas. According to a twitter thread by Teller, usdc.homes is the first of its kind. According to the usdc.homes website, you can borrow up to 5 million USD for a 30-year mortgage with a down payment of 20% and an interest rate as low as 5.5%. All using crypto. Not only that, but you can stake your down payment to offset some or potentially all your loan interest depending on market conditions. Alternatively, you can become a lender and earn interest on USDC.
For now it’s not entirely clear whether usdc.homes is available outside of Texas for the time being. It’s likely only a matter of time before it’s made available in other states and eventually other countries. This begs the question of whether regulators will allow these sorts of financial instruments to exist. The answer seems to be ‘no’. This is simply because decentralized finance solutions like crypto mortgages affect the bottom lines of the big banks as far as regulators are concerned. As I mentioned earlier, that’s something that’s not allowed. However, each country will have its own approach to cryptocurrency regulation, and countries that embrace crypto mortgages and the like will benefit the most.
Stablecoins In The Spotlight
The only thing getting in the way of reasonable crypto regulation seems to be the regulators themselves, with regulators in the United States arguing over who gets to control what element of the crypto industry. The crypto niche that US regulators care about the most seems to be stable coins, which makes sense given that they’re de facto digital US dollars that are backed primarily by US government debt and centrally controlled by entities with very close connections to the biggest names on Wall Street.
At the same time, acting comptroller of the currency, Michael Su, issued a statement calling for stablecoin standards to ‘be set with representatives not just from crypto Web 3 firms but also including academics and government’. It’s safe to say that Michael is none of the above because he’s pushing for stablecoin standards on the grounds that ‘stablecoins lack shared standards and are not interoperable’, which couldn’t be further from the truth. Stablecoins exist on more than a dozen blockchains, which are themselves interoperable. Heck, even the largest decentralized exchange in cryptocurrency is specifically focused on stablecoins. That means it’s easy to switch between them on the same chain.
At the same time, a U.S politician is pushing a poorly worded stablecoin bill that seems to target decentralized stable coins such as Terra’s UST proposing to put them under the purview of the securities exchange commission or sec, which is literally in the middle of suing Terra. This is in stark contrast to a more reasonable stable coin bill that’s been tabled by politicians from both sides of the aisle. This bill would task the commodity futures trading commission, or CFTC, with stablecoin regulations. This is significant because sec chairman Gary Gensler has been itching to go after centralized stablecoins on the grounds that they are securities, which makes zero sense.
By signing this authority over to the CFTC, it would definitely classify stable coins as not being securities, which means Gary and the SEC can’t crack down on them. The CFTC seems to be more crypto-friendly in general too. This news once again underscores that we are at a pivotal point when it comes to crypto regulation and though it’s currently adding to the uncertainty in the crypto market, once the dust has settled, we will hopefully have reasonable crypto regulations that will bring the bulls back to town.
Top Performing Cryptos
Turning to the charts, we can see that Bitcoin is still holding strong at around $38k, but this zone of support is being strained.
You might recall me mentioning that it’s been about two years since we’d seen so many red weeks on Bitcoin. Well, after yet another red week, I can now say that it’s been over three and a half years since we’ve seen so many red weeks on Bitcoin. The last time was at the end of 2018 when the bottom completely fell out of the crypto market. Let’s hope the same thing doesn’t happen again.
Last week top performing cryptocurrencies were XDC Network, TRON, STEPN, Nexo, and Neutrino USD. Starting with XDC Network, aka XinFin, the XTC coin is apparently pumping on the news that Panama will be promoting its adoption as part of the aforementioned crypto bill, in addition to a whole bunch of other altcoins, including ETH, XRP, and ALGO. While the XDC coin is still in something of a long-term uptrend, I would exercise caution here as exchange support is currently limited. Never mind the fact that it probably won’t be able to pump against the dump for long.
Next up, there’s TRON, whose TRX coin is rallying on the upcoming release of the USDD stablecoin, which will have a similar mint and burn mechanism to Terra UST. TRX is also in a long term uptrend and though this trend looks stronger than most other cryptocurrencies at first glance, TRX hasn’t moved all that much in percentage terms over the last couple of years, so keep that in mind before you get too excited.
As for STEPN, the GMT token is continuing its upward trajectory thanks to listings on Coinbase and Gemini, which have made it accessible to more investors. The exponential adoption of the STEPN app is certainly contributing too. GMT seems to be building a solid zone of support around current levels, which will help when it tries to reach new all-time highs. Just bear in mind that if we break down below this zone, GMT could crash by more than 30%, and some would argue that it’s only a matter of time the way the market is looking.
When it comes to Nexo, the Nexo token is reaching for the sky on the back of a Binance listing last week as well as the recent release of Nexo’s crypto card, which I definitely need to get my hands on for research purposes. What’s nice is that Nexo is in a very strong long-term uptrend, but I wonder how much more it can grow given the crackdowns, we’re starting to see it on apps that let you earn interest on your idle crypto.
Finally, we have Neutrino USD, which is, of course, a decentralized stablecoin that should be pegged to the US dollar but is having a hard time doing so. USDN’s gradual return to its pegged value doesn’t count as a pump in my book.
And that is all for today’s weekly crypto review.
[This article is a transcription of a video made by Coin Bureau]
Original video: https://youtu.be/v2VLrX7rj-k ]