Fed Delivers 25bps Rate Hike, SEC Continues Warpath Against Crypto

Weekly News Wrap Up

The Federal Reserve raised the federal funds rate by 25bps to a range of 4.75% to 5% — the highest since September 2007, when rates were at their peak on the eve of the financial crisis — and indicated there may be more hikes to come. It is a clear sign the Fed is confident that its bid to quell inflation won’t deepen a nascent banking crisis.

In crypto, the U.S. Securities and Exchange Commission (SEC) continued its warpath of “regulation by enforcement”, targeting Tron’s Justin Sun, Coinbase and SushiSwap’s Decentralized Autonomous Organization (DAO). ICYMI Do Kwon has finally been arrested in Montenegro, and U.S. prosecutors charged him with fraud.

I would be remiss not to mention the highly anticipated $ARB token airdrop – the project’s landing page and Arbiscan platform crashed on its debut leaving many users waiting for about 1-2 hours. So far, 85% of the airdrop has been claimed across 500K wallets (Dune dashboard here). The ARB prices on exchanges varied greatly after the airdrop, with a high of $14 on Bybit before dropping to about $1.3-$1.4 as more users claimed their respective airdrop.

U.S. equities ended in the green last week:  SPX+1.39%, DJIA +1.18% and NASDAQ +1.66% despite initial negative knee-jerk reaction from FOMC. Cryptocurrency majors were largely flat for the week: BTC -0.32% and ETH -0.60%, following the move of traditional risk assets lower from FOMC but recovering later in the week. 

Cryptocurrency News

  • The U.S. Securities and Exchange Commission (SEC) continues its warpath of “regulation by enforcement”:
    • SEC charged Tron’s Justin Sun for the unregistered offer and sale of crypto asset securities $TRX and $BTT, as well as for fraudulently manipulating the secondary market for $TRX through wash trading. He is also accused of paying celebrities to promote $TRX and $BTT without disclosing they were paid to do so. The SEC has also charged those eight celebrities.
    • SEC issued Coinbase a Wells notice alleging a violation of securities law in the running of its exchange and staking services, but few details were offered. 
    • SEC subpoenaed SushiSwap and founder Jared Grey, requesting documents and information about the team’s operations. This could lead to regulatory action against the DAO. In response, SushiSwap has established a legal defense fund of $3 million to cover legal costs.

Our View: the SEC has been on-fire this year – starting with the krakdown on Kraken, legislation against Paxos’ BUSD, the swift seizure of Signature Bank into FDIC receivership (although U.S. regulators deny any connection to crypto), and now a case against the largest U.S.-based exchange. We are unlikely near the end of their warpath, and regulatory uncertainty will remain a headwind in markets.

  • The European Union’s Markets in Crypto Assets Regulation (MiCA) crypto-law debate scheduled for 18 Apr. A final vote, which brings in a new licensing regime, is due 19 Apr.
    Our View: this will be a key regulatory event to watch – given the recent tightening we’ve seen from the U.S., it will be critical to see if the EU follows with stricter regulation, or pivots towards more accommodative policies like Hong Kong.
  • Mastercard partners with Australian stablecoin platform Stables to launch a stablecoin digital wallet. The wallet, which comes with a payment card supported by Mastercard, allows users to spend their USD Coin (USDc) stablecoin anywhere Mastercard is accepted. The wallet will eventually expand to Europe, the United States, the United Kingdom, and most of the Asia-Pacific region. The wallet accepts deposits in a number of stablecoins, including Tether and Binance USD, but all deposits will be automatically converted into USDc at no cost.
    Our View: we’ve seen a series of crypto-investments from the two payment giants Mastercard and Visa over the last couple of months. Providing a real-world channel for cryptocurrencies is great for promoting adoption and acceptance as a store-of-value and means-of-payment, as opposed to just a speculative investment.
  • Telegram users can now transfer USDT through chats. USDT has been added to the @wallet bot on Telegram, adding to Bitcoin (BTC) and TonCoin (TON) that have been available since Apr 2022.
    Our View: similar to above, integrating cryptocurrency payment/transfer channels into daily lives is positive for mainstream adoption.
  • Do Kwon was arrested in Montenegro and charged with fraud by U.S. prosecutors in connection with last year’s collapse of the terraUSD stablecoin. The co-founder of Terraform Labs was detained along with Hon Chang Joon while attempting to fly to Dubai using falsified Costa Rican traveling documents Kwon faces an arrest warrant in South Korea on securities-law violations and is on Interpol’s wanted list. The Department of Justice plans to seek his extradition to the US.
  • Immutable and Polygon Labs team up to expand the Web3 gaming ecosystem. The strategic partnership is aimed at simplifying the process of onboarding game studios and developers into Web3. Immutable zkEVM, a new Ethereum scaling network that will utilize Polygon’s zkEVM technology, is set to launch in beta on 27 Mar.
    Our View: Immutable zkEVM aims to provide game developers infrastructure to offer excellent UX to players while allowing for flexibility through Ethereum-like smart contract UX and the ability to migrate games from Ethereum, or any other EVM network, without code changes. Considering the teams involved, Immutable zkEVM could potentially emerge as not only the dominant gaming L2 within the Polygon ecosystem, but also the leading gaming L2 in the broader cryptoeconomy for the foreseeable future.
  • DefiLlama forked as the team split over the future of its DeFi analytics dashboard. On March 19, 0xngmi, a pseudonymous developer at DefiLlama, said that the platform was “undergoing a hostile takeover,” as the person with control of DefiLlama’s web domain and Twitter had decided to launch a DefiLlama token despite objections from certain team members. This led to the creation of a new website, llama.fi, and a corresponding Twitter account.
    UPDATE: the drama was eventually resolved, and the team publicly apologized via a tweet stating that there is no token currently planned
  • Microsoft tests non-custodial crypto wallet in its web browser Edge, the Bleeping Computer reports. The wallet is embedded in Edge, making it easy-to-use without installing any extension (like Metamask). Microsoft is also reportedly partnering with Ethereum development studio Consensys to offer a built-in crypto swap feature between ether (ETH), Uniswap (UNI), the dai stablecoin (DAI), and the USD coin (USDC) and Tether (USDT) stablecoins.
    Our View: while it is great to see a big-brand name like Microsoft developing crypto application services, it is unlikely to have a huge impact given that Edge is not a widely used browser vs. rivals like Chrome or Firefox.

Investment Consideration

Our best strategy for medium to long term investment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking because we still have potential return in DCD and Staking especially in BTC.

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