weekly roundup – Market Rundown | Ukraine Passes Law Legalising Crypto | UAE to Issue Crypto Licenses
Here’s our roundup of the top stories from the past seven days in crypto.
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MARKET RUNDOWN FROM OUR TEAM
For the large part the weekend risk has remained on the backfoot. Frequent reports of explosions and fighting in contested territories in the East of Ukraine as well as comments from high level UK and US politicians stating their belief that Putin has firmly decided to invade has seen risk markets get hit. This was the story leading into the Asia open, however, risk found some support as news of a Macron proposed summit being accepted by both Biden and Putin fed through to the markets.
Crypto markets have, as expected, come under pressure following the rising geopolitical tensions. News of a possible exploit of Opensea has also weighed on sentiment in the crypto space. BTC broke back below its $40k support level while ETH broke back through $2800. Having put in lows of $38k and $2600 respectively, both BTC and ETH rebounded in the early hours of the morning on news of the summit. However, both remain below the support levels they had broken below. Whilst $35k will be the initial level of support for BTC the 2021 lows of around $30k will be crucial support now. It’s inability to break the $45k-$47k resistance level means that now is a very important level of resistance. SOL has bounced over 10% overnight to be one of the big movers today, however, it did sell off 20% over the previous few days so we aren’t reading too much into that.
As an aside, if Putin was to invade, here are some stats on how markets have reacted and recovered in ‘recent’ times. When North Korea invaded the South, in 1950, the stock market dropped by 12.9% but recovered the losses in just 82 days. Following Iraq’s invasion of Kuwait in 1990 the 17% drop in equities was recovered in 6 months. The Japanese attack on Pearl Harbour saw a 20% fall in stocks but was clawed back within a year and then stock markets resumed its uptrend. There is no reason to think it will be any different this time.
As with crypto, traditional markets didn’t have the best few days. S&P ended last week with another down day whilst also clocking up a second straight weekly loss. However, following the news of the proposed summit being accepted (contingent on Putin not invading) we did see a nice bounce. Asia stocks bounced but it was gold that reacted the most, dropping $15 from its highs rather quickly. The S&P is now back below its 200 DMA and with headlines continuing to drive this market, we are expecting a choppy start to the week.
The risk rallies are getting shallower on good headlines and until we get something more concrete we are looking to sell risk rallies. We may never get anything concrete out of Putin around not invading but until the market becomes used to that fact, risk seems unable to hold onto gains. EUR/USD above 1.1400 provides the initial sellzone. USD/JPY continues to trade under pressure as demand for the JPY grows so we will be looking to sell any rallies toward 115.20/30. It currently flirts with its 50 DMA, a break below which could lead to another leg lower targeting 113.50 then 112.50.
UKRAINE PASSES LAW LEGALISING CRYPTO AS THREAT OF WAR LOOMS
Ukraine’s Parliament, the Verkhovna Rada, has passed amendments to its law “On Virtual Assets,” ratifying the eventual creation of a legal market for cryptocurrencies.
The bill was passed with majority support from 272 of the 450 members, and will see the National Commission on Securities and Stock Market installed as the primary regulator for crypto.
“The new law is an additional opportunity for business development in our country,” said Ukraine’s Deputy Prime Minister and Minister of Digital Transformaiton, Mykhailo Fedorov. “Foreign and Ukrainian crypto companies will be able to operate legally, while Ukrainians will have convenient and secure access to the global market for virtual assets.”
UAE TO ISSUE CRYPTO LICENSES IN BID TO BECOME INDUSTRY HUB
The United Arab Emirates is preparing to issue federal licenses for virtual assets service providers by the end of this quarter in a bid to attract crypto companies to the country, according to a government official.
The UAE has considered the approaches of countries such as the U.S., U.K., and Singapore, and is going to take a hybrid approach: the Securities and Commodities Authority and central bank will be in charge of regulation with regional financial centres determining their day-to-day procedures on licenses.
COLORADO GOVERNOR POLIS SAYS THE STATE WILL ACCEPT CRYPTO FOR TAXES BY THIS SUMMER
The Governor of Colorado (D), Jared Polis, stated that Colorado will accept state taxes and fees in cryptocurrency by summer 2022.
“We won’t be holding those assets in that form, but we will have a layer that accepts payment in those forms and then conversion into the units that we use, which is dollars, for budgeting and payments,” stated Polis.
Polis has stated increased user convenience and faster payment speeds as the reasoning behind his decision.
OPENSEA CEO DEVIN FINZER RESPONDS TO $1.7 MILLION PHISHING ATTACK
Over the weekend, OpenSea confirmed they were subject to a phishing attack, which saw over $1.7 million assets shifted to the malicious wallet.
A few hours after the news broke, OpenSea CEO Devin Finzer said: “We have confidence that this was a phishing attack. We don’t know where the phishing occurred.” But the company believes that the attack didn’t come from OpenSea’s domain and that no legitimate OpenSea emails, nor the OpenSea site banner, led to the attack.
Seasoned prosecutor Eun Young Choi has been tapped to serve as the first director of the Department of Justice’s National Cryptocurrency Enforcement Team (NCET), which will work with the new Virtual Asset Exploitation Unit, a specialised team of cryptocurrency experts dedicated to providing analysis, support, and training.
“The NCET will play a pivotal role in ensuring that as the technology surrounding digital assets grows and evolves, the department in turn accelerates and expands its efforts to combat their illicit abuse by criminals of all kinds,” stated Choi.
FEDERAL RESERVE OFFICIALS BANNED FROM OWNING CRYPTOCURRENCIES, STOCKS AFTER PUBLIC OUTCRY
On the heels of public pressure to reign in trading practices, senior Federal Reserve officials will no longer be allowed to trade individual cryptocurrencies.
The new rules, first broached by the Fed in October, ban the purchasing of individual stocks or sector funds, and the holding of cryptocurrencies, commodities, and foreign currencies by senior officials.
The rules “aim to support public confidence in the impartiality and integrity of the Committee’s work by guarding against even the appearance of any conflict of interest,” the Fed said in a statement last week.
KB BANK TO LAUNCH SOUTH KOREA’S FIRST CRYPTO INVESTMENT FUND
Kookmin Bank has announced that it is formed a Digital Asset Management Preparatory Committee, in preparation for becoming the first bank in South Korea to offer crypto investment products to retail investors.
The plans were confirmed by Honggun Kim, KB Head of Index Quant Management, in an official release. Kim stated: “we will launch a virtual asset-themed equity fund, etc. We plan to publish periodicals as well.”
In launching a new investment fund for its customers, KB is responding to a market that has become increasingly receptive to crypto and non-fungible token (NFT) investments. Close competitor Shinhan Bank has dedicated an entire section of its mobile banking app to help customers manage their NFT collections on Klaytn, the country’s leading blockchain.
CANADA SANCTIONS 34 CRYPTO WALLETS TIED TO TRUCKER ‘FREEDOM CONVOY’
The Ontario Provincial Police and Royal Canadian Mounted Police ordered all regulated financial firms to cease facilitating any transactions from 34 crypto wallets tied to funding trucker-led protests in the country.
The federal agencies are investigating cryptocurrency donations that have supported the enduring protest again Canada’s vaccine mandate, a protest which is now deemed illegal under the Emergencies Act invoked by PM Justin Trudeau.
The list consists of 29 Bitcoin addresses, one Ethereum address, one Cardano address, one Ethereum Classic address, one Litecoin address and one Monero address. Donors have sent more than 20 BTC to the addresses, worth over $870,000 (CA$1.1 million), turning to cryptocurrencies after the GoFundMe account that previously received more than $9 million was suspended.
WILL CIRCLE AND TETHER REGIN SUPREME? FEDERAL RESERVE PREDICTS STABLECOIN ISSUER DUPOLY
Last week, Federal Reserve Governor Lael Brainard issued a warning about the rapid growth of stablecoins: “if the current trends continue, the stablecoin market in the future could come to be dominated by just one or two issuers”.
Regarding the potential for one or two stablecoin issuers to dominate the market, results from Messari, a leading crypto market intelligence firm, shows the two leading stablecoin issuers as Tether (USDT) and Circle (USDC), which are #3 and #4 in total market cap that are combined $407 billion in size.
“…As of January 2022, the largest stablecoin by market capitalisation made up almost half of the market, and the four largest stablecoins together made up almost 90 percent,” stated Brainard.
MORGAN STANLEY WARNS ETHEREUM COULD LOSE GROUND TO BINANCE, SOLANA, AND CARDANO, MAKING SHIFT TO ‘PROOF OF STAKE’ EVEN MORE URGENT
In a January report titled ‘Cryptocurrency 201: What Is Ethereum?’, Morgan Stanley warned that the blockchain tech underlying most of the world’s defi systems could lose dominance to rising competitors, owing to Ethereum’s “high transaction fees” and volatility.
The Ethereum blockchain is used as the foundation tech for building defi platforms, storing and trading NFTs, and building metaverse spaces such as Decentraland.
“Over time, Ethereum’s storage demand, unless changed, will likely outstrip its resources,” states the report.
BITCOIN INACTIVE SUPPLY NEARS RECORD AS OVER 60% OF BTC STAYS UNSPENT FOR AT LEAST 1 YEAR
Datafrom on-chain analytics firm Glassnode shows that despite price volatility, over 60% of the BTC supply has not left its wallet in a year or more.
This stubborn ‘hodling’ by long-term investors is a differentiating characteristic of the Bitcoin market. Long-term investors are rejecting any cold feet and instead are adding to their positions or staying put on their BTC exposure.
According to Glassnode’s HODL Waves indicator, as of Feb. 18, 60.61% of the BTC supply has not been used in a transaction for a year or more. The figure is significant — only twice before in Bitcoin’s history has the one-year-or-more value reached that level.
BCB GROUP LAUNCHES BCB YIELD FOR RETURNS ON FIAT AND CRYPTO FUNDS
Last week we announced the launch of BCB Yield, a product that lets customers earn a return on both fiat or crypto funds.
This latest development in BCB’s growth strategy builds on opportunities that exist in fiat lending for crypto market participants. The cryptocurrency market has grown to over $2 trillion and is driving huge demand for short term borrowing to fund trading operations or short term treasury requirements. This comes at a time when low yielding traditional finance vehicles are experiencing poor or even negative returns.
BCB Group Founder and CEO, Oliver von Landsberg-Sadie commented: “This is a hugely exciting development for BCB customers who can now access a brand new set of features designed to earn a return on their balance while offering a genuine alternative to low yielding traditional finance vehicles. The crypto markets are generating phenomenal innovation and as a multi-regulated institution, serving both the traditional finance and crypto industry, we are uniquely positioned to leverage both markets to generate sustainable market risk-neutral returns.”
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