June 2023
U.S. debt ceiling negotiations dominated the market’s attention in May as Democrats and Republicans scrambled to reach a deal and prevent a potential U.S. default. Both sides have agreed to a compromise to suspend the debt ceiling until January 1, 2025, with additional concessions on federal spending caps. The proposal is currently under review by Congress, as of the time of writing. This event, along with the U.S. regional banking crisis in March, has highlighted the pitfalls of a centralized banking system and monetary policy, further reinforcing the case for a decentralized alternative store of value.
Aside from the macroeconomic noise, I am monitoring the following developments in cryptocurrencies related to the events above:
Changing Landscape in the Stablecoin Market: USDT has emerged as the preferred stablecoin after BUSD received an effective expiry date of 2024 from the U.S. Securities and Exchange Commission (SEC). The banking crisis in March hit USDC and DAI hard, while Binance bolstered TUSD by offering zero-fee BTC trading (see chart below). This has important ramifications for trading and liquidity given that traders prefer using stablecoins over FIAT to trade – stablecoin’s share of volumes has risen from 60% in 2022 to 76% now. Read more from Kaiko here.
U.S. based services are increasingly looking to offshore operations: The collapse of crypto-friendly banks like Silvergate Bank and Signature Bank has disrupted FIAT payment rails, prompting U.S.-based exchanges to offshore certain operations. Coinbase and Gemini launched their derivatives platform offshore, and large market-makers Jane Street and Jump Trading announced their exit from U.S. trading. This trend indicates that stifling U.S. regulations are pushing crypto activities offshore, and this shift is expected to continue, especially with Hong Kong emerging as a potential Asian crypto hub. This could lead to a change in market structure towards improved liquidity and trading during Asian hours.
As we move forward, it’s crucial to stay informed about regulatory developments, market dynamics, and emerging trends in the cryptocurrency industry. By remaining vigilant, we can navigate the evolving landscape and seize opportunities in this exciting and transformative space. Thanks for reading, we wish you all the best in your cryptocurrency endeavors!
Kenny Chiang
Senior Research Analyst
- The EU’s landmark Markets in Crypto Assets (MiCA) legislation received the green light from 27 member state Finance Ministers on the Economic and Financial Affairs Council (EcoFin) in a unanimous vote. When it comes into force in 2024, MiCA will bring digital assets, issuers, and service providers under a broad regulatory framework and license mandates. MiCA will provide new classifications for different digital assets, proof-of-funds requirements for stablecoin issuers, and the requirement for any company seeking to issue digital assets/coins to publish a white paper containing information about the project, including possible risks.
- Coinbase International Exchange launches amid SEC crypto crackdown in the US. The cryptocurrency exchange launched its global derivatives platform that will be available only to institutional clients in eligible, non-U.S. jurisdictions. It will start by listing BTC and ETH perpetual futures, and all trading will be settled in USDc, requiring no FIAT on-ramps.
- Bloomberg: Jane Street and Jump Trading retreating from U.S. crypto trading. The report said that the market makers are looking to exit as a regulatory crackdown on the industry has intensified.
- Ledger delays key-recovery service after community uproar. After criticism from the crypto community, the firm pledged to open-source the Ledger Recover code before releasing the controversial update.
- White House pushes for a punitive tax on crypto mining. The Biden administration is campaigning for a tax first sought in a recent federal budget proposal, advocating that crypto miners pay an amount equal to 30% of their energy costs.
- U.S. Securities and Exchange Commission (SEC) revises a $22 million penalty against LBRY to $111,614. The SEC first filed a civil lawsuit against LBRY in March 2021, alleging that the firm’s LBC token sales were unregistered securities offerings. The regulator won the case in November 2022, with the presiding judge ruling that LBC is a security. Citing LBRY’s “lack of funds and near-defunct status”, the SEC requested the court to impose a fine of $111,614 instead.
- Cryptoverse: digital coins lure inflation-weary Argentines and Turks. Ownership of digital currencies in Turkey was the highest in the world at 27.1% followed by Argentina at 23.5% – well above the global crypto ownership rate estimated at 11.9% – according to data from research firm GWI. What is common to Turkey and Argentina is high inflation, which has led to crumbling currencies and capital controls to deter local residents from taking money out. Turkey’s annual inflation was 50.51% in March, and Argentina’s was even higher at 104%.
- Beijing released a white paper aimed at promoting innovation and development of the web3 industry. Dubbed the “Web3 Innovation and Development White Paper (2023),” the paper was released by the Beijing Municipal Science & Technology Commission, also known as the Administrative Commission of Zhongguancun Science Park. The document states that web3 technology is an “inevitable trend for future Internet industry development.”
- Cryptocurrency exchange Bittrex Inc filed for bankruptcy protection on May 8, 2023, three weeks after the U.S. Securities and Exchange Commission (SEC) accused it of operating an unregistered securities exchange. The Seattle-based Bittrex ceased operations in the United States on April 30, and it said the bankruptcy filing would not impact Bittrex Global, which serves customers outside the United States. The company’s non-U.S. operations are based in Liechtenstein.
- Bankrupt crypto company Celsius got a new life from Wall Street. Crypto consortium Fahrenheit, a consortium of buyers that includes venture capital firm Arrington Capital and miner US Bitcoin Corp, has won a bid to acquire insolvent lender Celsius Network, whose assets were previously valued at around $2 billion. The group will acquire Celsius’s institutional loan portfolio, staked cryptocurrencies, mining unit, and additional alternative investments, according to the court filings. Apollo Global Management and Fortress Investment Group were among the competing groups looking to revive bankrupt cryptocurrency lender Celsius Network.
- 90% of family offices say clients include crypto and digital assets in their investment strategies. According to a survey from Corian, a global investment and compliance platform with more than 130 family office professionals responsible for around $62.425 billion assets under management, found nine in ten (90%) said they are seeing their clients looking to include crypto and digital assets within their investment strategies. Goldman Sachs also released a family office investment report indicating 32% of family offices currently invest in digital assets.
- The Bitcoin mining debate is ignoring the people most affected. Snowballing misinformation has painted an inaccurate and incomplete portrait of a complicated industry – and that is having a real impact on policy. CoinDesk journalists did an in-depth analysis of a crypto mining facility called Greenidge Generation in upstate New York to debunk misinformation in the debate over whether mining should be permitted or not on environmental grounds.
- DefiLlama: Liquid Staking solutions now have more Total Value Locked (TVL) than Decentralized Exchanges (DEXs). According to data from the crypto analytics platform, Liquid Staking solutions such as Lido and Rocket Pool now have more TVL than decentralized exchanges, making them the top category of DeFi protocols. TVL is a metric that measures the dollar value of all cryptocurrencies locked within a protocol’s smart contracts. This highlights the growing popularity of liquid staking derivatives and the success of Ethereum’s recent Shapella upgrade, where despite withdrawals being enabled for staked ETH, we are still seeing staking inflows.
- Crypto’s macro drivers – It’s not just about Bitcoin. The macro outlook and why it matters for Bitcoin and other crypto assets. An analysis by Noelle Acheson, CoinDesk’s former head of research.
- A deep dive into the inner working of the crypto industry. A must-read from Bloomberg Opinions, Tales from the crypto winter, by Christopher Beam
- Winning the long game by owning gold and Bitcoin, the Denominator, Crypto Trader’s Digest, by Arthur Hayes
- The risks around stablecoins, Without Warning, by Steven Kelly
- What is Ledger Recover service and why it presents a concern? Boxmining explains the details in this article.
- Crypto equities as long-term investments: Key Lessons from the 2022 Bear Market, a thoughtful research report from Bitwise Asset Management
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