Here are this week’s top headlines in crypto news.
- A ready-set Bitcoin ETF: Grayscale pressures the SEC to approve its spot Bitcoin ETF application as Australia prepares to list three cryptocurrency ETFs. Is a crypto market rally coming?
- Coinbase’s crypto race: America’s largest exchange plans a big buy as its NFT marketplace goes live. When could it take the top spot?
- Twitter Takeover: Tesla CEO Elon Musk ignores Twitter’s poison pill and pushes ahead with his plans to acquire the controversial social media company. How is he going to do it?
- Ethereum’s infrastructure is exposed after warning of a phishing attack, MetaMask and many other Ethereum applications temporarily go offline. Does this mean Ethereum is centralized?
- Crypto regulation: the SEC attempts to create a legal loophole to crack down on the crypto industry, what is it trying to do?
- The Fed’s inflation fight: Markets crash in anticipation of the Federal Reserve’s upcoming rate hikes. Everything you need to know.
- A closer look at last week’s top performing cryptos and where they’re headed next.
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Ready, Set, Bitcoin ETF
Last week, Greyscale sent yet another letter to the United States securities and Exchange Commission, or SEC, arguing that the regulator’s recent decisions mean it should approve its spot Bitcoin ETF application. For those who don’t know, a spot Bitcoin ETF is basically an exchange-traded collective investment that’s backed by physical Bitcoin. Conversely, the future Bitcoin ETF, which was approved last year, is basically backed by fiat. Now logically, this means a spot Bitcoin ETF would have a profound impact on Bitcoin’s spot price.
Grayscale’s spot Bitcoin ETF application is one of four that the SEC has yet to make a decision on, and the company has been pushing hard for it to be approved on or before the final deadline in early July.
What makes Greyscale’s spot Bitcoin ETF application different from the others is that it involves converting Grayscale’s existing Bitcoin trust into an ETF for context. Grayscale’s Bitcoin trust is how many institutional investors in the United States have been getting indirect access to physical Bitcoin since 2013. It currently holds over 25 billion dollars in BTCC. What makes Greyscale’s most recent attempt at pressuring the SEC different from its previous attempts is the SEC’s recent approval of a special Bitcoin futures ETF, which opens the door to a spot Bitcoin ETF approval according to the SEC’s own criteria. Given that Greyscale CEO Michael Sonnenstein noted earlier this year that they’re willing to sue the SEC if necessary, the fact that they now seem to have strong evidence for their case suggests that it’s possible, if not likely, that they will go down this route.
Some are also speculating that the recent announcement that asset manager Vanguard will be ending support for Grayscale’s Bitcoin trust by the end of April is a sign that the approval of Grayscale’s spot Bitcoin ETF is imminent.
Furthermore, Australia will be listing three cryptocurrency ETFs on Wednesday this week and some are likewise taking this as a sign that spot Bitcoin ETF approval is imminent in the United States, especially since Canada also has its own set of spot crypto ETFs. As for Australia’s upcoming ETFs, two of them will be physically banked.
According to Bloomberg, one of the Bitcoin ETFs will be backed by shares of Canada’s most popular spot, the Bitcoin ETF, and the second Bitcoin ETF, as well as the Ethereum ETF, will be physically backed by BTC and ETH, custodied by Coinbase. Make no mistake, these ETF approvals could be a catalyst for a massive crypto market rally.
Coinbase’s Crypto Race
Speaking of Coinbase, the exchange recently announced that it’s looking to purchase Turkey’s largest cryptocurrency exchange for no less than $3.2 billion. BTC Turk is believed to have more than 4.5 million registered users and is the 69th largest cryptocurrency exchange by trading volume according to the CoinMarketCap.
The news comes shortly after it was revealed that Coinbase is also looking to acquire Brazil’s largest cryptocurrency exchange for an as yet undisclosed sum. The market for Bitcoin has around 3.5 million registered users. If my math is correct, the addition of the Bitcoin Turk user base would bring Coinbase’s total user base to around 100 million. Unfortunately, these announcements haven’t done much to move Coinbase’s stock, which has been in a steep decline since Coinbase went public with a profit to earnings ratio of nine and the relative absence of retail interest in cryptocurrency in general. I suppose that’s not all that surprising.
The good news is that the upcoming release of Coinbase’s highly anticipated NFT marketplace could help support Coinbase’s stock, and it finally launched in beta last week. As far as I understand, the use of Coinbase’s NFT marketplace is currently limited to the 8.4 million people who signed up for the wait list six months ago when the marketplace was first announced.
For what it’s worth, Coinbase has specified that the marketplace will soon be available to anyone 18 and over. Unlike other non-profit marketplaces, Coinbase’s NFT marketplace includes elements of social media that look eerily similar to Instagram. Coinbase’s blog post announcing the beta release specifies that it will be possible to create a profile using any Web3 wallet, though I suspect that it will require KYC to enforce the 18+ age restriction.
For what it’s worth, creating an account with the Coinbase exchange will not be required, and Coinbase will not charge any fees on NFT trades for a ‘limited time’. Coinbase also specified that NFT trading fees will be in line with ‘Web3 industry standards’, which hopefully means OpenSea and not Meta, if you catch my drift.
As you might have guessed, Coinbase’s NFT marketplace will exist on Ethereum and the exchange will be levering 0x protocol to make sure that Ethereum’s gas fees don’t gut NFT traders. This partnership came as a big surprise to the Polygon community, given that it was widely believed that Coinbase would be choosing Polygon’s POS-chain more about polygons in the description anyway.
Another publicly traded company that hasn’t been performing too well lately is Twitter, and the only reason it’s been rallying recently is because of Tesla CEO Elon Musk’s plans to take over and transform the company.
Twitter opted to take the so-called poison pill in response to Elon’s offer to buy the company for $43 billion, effectively making it possible for them to turn on the money printer to dilute Elon’s shares and the value of Twitter’s stock in the process. You might also recall that Elon saw this coming and he had a plan B going into it. So far, it looks like this plan B involves bringing other investors on board and so far it looks like he’s managed to rope in investment bank Morgan Stanley. As of now, Elon has managed to scrape together over $46 billion dollars for his Twitter takeover, and it’s believed that he’ll make his move by the end of this week. Even though Twitter is apparently intent on taking the poison pill, in response, it did admit that it’s considering acquisition offers. This means Elon could actually succeed in taking over the company if the price is right at that point. Elon will take Twitter private, meaning it will no longer have publicly traded stocks or be influenced by ESG-obsessed asset managers like Blackrock.
Elon intends on increasing free speech on Twitter, and many so-called experts claim that it will result in total anarchy since there’ll be presumably next to no content moderation. Elon’s fix for this is to expand the availability of the highly sought after blue checkmark to everyone who pays a monthly fee to erase scam and spam accounts and improve the quality of public discourse. This could run the risk of creating a dystopia if KYC is required as part of this verification process and someone else eventually takes control of Twitter when Elon retires.
The silver lining is that Elon also plans on making the entirety of Twitter’s code open source and increasing the transparency of moderation actions, meaning anyone will be able to see how their accounts are being treated. Maybe even what’s being done with their data.
Ethereum Infrastructure Exposed
As a cherry on top, Elon seems intent on making it possible to pay for Twitter’s future services in cryptocurrency, specifically Dogecoin, and this could go a long way towards increasing the adoption of cryptocurrency around the world. It’s Ethereum that’s leading the adoption charge, with its blockchain approaching 200 million unique wallet addresses, more than double the number of unique wallet addresses on Bitcoin. It should come as no surprise, then, that scammers and hackers are constantly targeting Ethereum users.
The latest loophole they found involves Ethereum’s most popular Web3 wallet MetaMask. This is because whenever you create a MetaMask wallet in a browser, a special file is stored on your computer. The data in this file can be used to recover your MetaMask wallet without a seed phrase using a MetaMask tool called the Vault Decryptor. Now this is very good news if the Vault file is on the device you’re using. It’s very bad news if the Vault file is on a device you no longer have, or worse, a centralized cloud storage solution of some kind. As it so happens, it’s common for apple users to automatically upload their data to iCloud to optimize storage on the devices they use.
Last weekend, an Apple user reportedly lost over $650,000 of crypto when a hacker managed to access his iCloud via his Apple ID, which is just an email and a password that should probably be more secure than it is right now.
Shortly after, MetaMask started a Twitter thread explaining how Apple users can ensure their MetaMask wallets haven’t been unknowingly compromised and how to disable iCloud for MetaMask data.
Anyhow, if all the press that ensued wasn’t bad enough, MetaMask actually went down less than a week after the Apple fishing incident. This was because Infura, one of Ethereum’s primary infrastructure providers, experienced an outage which impacted MetaMask, all Ethereum’s leading Layer 2 scaling solutions and a handful of decentralized applications. Without getting too technical, Infura is a tool that Ethereum developers use to interact with the Ethereum blockchain. This means that the point of failure isn’t coming from the Ethereum blockchain itself, as it’s decentralized, but the layer of services that’s being used to interact with it, which are centralized. That said, Infura is just one of many Ethereum infrastructure providers, and Ethereum’s ecosystem has made a conscious effort to diversify its infrastructure providers ever since Infura’s infamous outage in November 2020. I reckon that’s why Infura’s most recent outage didn’t seem to have as much of an impact as its previous outage, but it’s clear that there’s still work to be done when it comes to decentralizing Ethereum’s infrastructure layer.
The real question is whether Infura’s outage will be interpreted by the SEC as a sign that Ethereum is centralized because SEC chairman Gary Gensler has refused to clarify whether eth is a security despite the obvious evidence that. It isn’t and that means he’s considering it It’s safe to say that Gary’s rhetoric has been relentlessly anti-crypto ever since he became chairman of the SEC in April of last year and the worst part is that his comments have been consistently inconsistent.
The SEC in general has been engaged in Olympic level mental gymnastics when it comes to crypto regulations and you’ll be hearing all about that when I give you an important update about the SEC’s case against ripple later this week. I digress.
If you’ve been keeping up with my coverage of the SEC, you’ll know that Gary gets giddy when it comes to the prospect of cracking down on centralized cryptocurrency exchanges like Coinbase. This insane obsession seems to be the inspiration behind a proposed change to the definition of an exchange in the United States, floated in February by the SEC, which would essentially make the operations of cryptocurrency exchanges like Coinbase illegal in the country.
If that wasn’t bad enough, the SEC recently proposed to change the definition of an exchange again. This time it’s worded so broadly that it could potentially be applied to anyone who handles cryptocurrency, be it an exchange wallet, defy protocol, possibly even individual crypto holders. The crypto lobby is pushing back as best it can when it comes to these proposed definitions, but it’s not currently clear whether these initiatives are having their desired outcome.
What is clear is that pro-crypto politicians have started to put pressure on the SEC to drop its anti-crypto shenanigans, and that’s certainly a good start. The most bizarre aspect of all of this is that the SEC appears to be burying these new definition changes in dense legal documents that they assume no one will read in the hopes that they will be passed passively. One of the few people who has been reading them is the head of policy at the Blockchain Association, Jake Chervinsky. He’s been explaining what it all means in plain English on his twitter profile and I suggest you follow him there.
Fed’s Inflation Fight
While the SEC fights cryptocurrency, the Federal Reserve is fighting inflation with its hawkish interest rate rhetoric. For anyone wondering, As I’ve mentioned many times before, hawkish is a term used to describe a fed official or policy that involves increasing interest rates, whereas dovish is a term used to describe a fed official or policy that involves decreasing interest rates.
As I’m sure you’ve all noticed by now, increasing interest rates makes borrowing more expensive as well as any existing debt. As I’m sure you’ve all noticed by now, individuals and institutions across the board have taken on record levels of debt over the last decade thanks to low interest rates. This massive increase in debt has also led to a massive spike in inflation, which is approaching double digits in most developed economies and is approaching triple digits in some developing economies. The scariest inflation statistic that comes to mind is Germany’s producer inflation, which spiked to over 30% in March, the highest since the end of the II World War. The image you see says it all now.
Although the European Central Bank is somehow not at all in a rush to raise interest rates, which have been negative since the start of the pandemic, the Fed seems ready to raise rates as high as required to make sure that the United States doesn’t end up like Germany. So far, the Fed has only raised interest rates by 0.25% from 0%, and it’s expected to announce an additional 0.5% rate hike for a total of 0.75% during its press conference early next month. I wasn’t sure why markets crashed when Federal Reserve chairman Jerome Powell repeated this last week, since investors had already priced it in upon closer examination.
It appears that the prospect of the Fed raising interest rates much faster than expected spooked the markets rather than the rate of interest rate increases. If the market’s assessment is correct, then the crypto market could continue to struggle for the next few months as investors sell off assets to pay back debts and allocate capital to safer interest-bearing alternatives like government bonds. Rest assured, I’ll be keeping you up to date every step of the way.
Top Performing Cryptos
Turning to the charts, we can see that Bitcoin tried and failed to push past the $42k level last week. On the bright side, it’s found some solid support around current levels and it continues to set higher lows on the daily. At least not yet.
It’s anyone’s guess as to what comes next, but it’s been four straight weeks of price decline, which is the longest consecutive drawdown we’ve seen in almost two years. As such, I reckon it’s only a matter of time before we see a real relief rally, but there’s no guarantee it’ll be this week.
Last week’s top performing cryptos were ApeCoin, STEPN, Kava, the Curve DAO Token, and PancakeSwap. Starting with ApeCoin, the Bored Ape Yacht Club brand is on the cusp of releasing its own metaverse. They recently confirmed that they’ll be doing the initial land sale and airdrop at the end of this month.
This hype has made it possible for Ape to continue to ascend despite its massive market cap, and the daily chart suggests it could reclaim or even surpass its recent high of $18 if that peculiar bull flag plays out.
As for STEPN, GMT seems to be rallying on the rapid adoption of its play to earn app as well as a recently announced fan art competition. GMT has found some solid support around the $3.20 range, but as I mentioned last week, it could still fall as low as $2.50 unless STEPN adoption keeps up, in which case it should at least support GMT’s price for the near future.
Next up is Kava, whose Kava coin is curving upwards in anticipation of a series of major milestones including EVM support, an Ethereum bridge, and a fresh network upgrade. Kava is facing a lot of resistance around the $5 level. But its price continues to be in a long-term uptrend and it’s not far from its all-time highs, two very good signs.
Curve DAO’s CRV token is a curious case because I couldn’t seem to find any specific thing that was causing its impressive price action. My best guess is ongoing development in integrations with other popular DeFi protocols like Maker DAO. Unfortunately, CRV’s tokenomics aren’t the best for short-term price action, but it’s been in a long-term uptrend since December 2020, so it looks like its vote escrow element of governance seems to be working.
Finally, we have PancakeSwap, whose Cake token seems to be posting short-term gains for a similar reason, and that’s the upcoming introduction of locked Cake staking, which will presumably yield a higher APY than unlocked cake staking. This will hopefully help with Cake’s longer term price action, which is the direct result of the PancakeSwap’s insanely inflationary tokenomics.
[This article is a transcription of a video made by Coin Bureau]
Original video: https://youtu.be/_wnU2Ca6LhA ]