weekly roundup – Market Rundown | Russian Banks Cutoff From Swift | South Korea to Invest in Metaverse Project
Here’s our roundup of the top stories from the past seven days in crypto.
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MARKET RUNDOWN FROM OUR TEAM
A raft of news over the weekend has stalled the risk rally we saw at the end of last week. Truth be told, it is still rather surprising to see markets where they are considering what’s happening in Europe.
The West has responded with more aggressive sanctions than expected. The expulsion of some Russian banks from SWIFT and the freezing of the Bank of Russia’s foreign currency reserves has all served to see the Russian Rouble collapse by 30% over the weekend (Russia has since doubled its interest rate to combat this). In other news Germany said it would sharply increase its spending on defence to more than 2% of its economic output. Let’s also not forget Putin put the country’s nuclear forces on special alert. Talks between Russia and Ukraine on the Belarussian border are giving the market some hope but unless we get some concrete positive news risk should remain heavy.
We were taken aback by the extent to which markets rallied on Friday and are actually surprised this morning to not see risk lower than it is. What is noteworthy is that the rally in both equities and crypto stopped exactly where it should have done. It still feels too early to say whether we have seen the bottom and with more aggressive than expected sanctions being announced and Russia’s economy paying the price for Putin’s invasion, we still find it tough to be long of risk and prefer to be selling risk rallies.
On Friday, we mentioned we were flipping short crypto – very short term – and we still hold that position. The stop losses are clearly defined for both BTC and ETH – $40k and $2850 respectively. Over the weekend both pairs ran out of steam exactly where they should have – the levels seen just prior to the news of the invasion. As long as we remain underneath there is a chance the market drifts off. We would look to take profit anywhere toward $36k and $2450 and look to flip long. It certainly feels like there are two opposing narratives in crypto markets currently. The first is it behaves as a risk asset would – as such with risk sentiment on shaky ground then crypto markets will come under pressure. However the second narrative is that of the disruption to formal finance we are seeing happening in the world right now. With the new sanctions being announced, crypto makes the perfect hedge for such disruptions. It will be interesting to see how these two stories play out over the coming weeks.
Equities, as mentioned above, had a nice bounce on Friday with Europe’s STOXX 600 having its best session for over 3 months by vaulting 6%, Dow having its best day since late 2020 and S&P up over 2%. Important to note that the bounce wasn’t just limited to equities with oil lower and yields higher.
In FX, the large mover has been the Ruble which was 30% lower this morning. The central bank doubling its interest rate has done little to the exchange rate. The USD is higher across the board as the market digested the weekend news but perhaps not as high as it should be. The market seems reluctant to really sell risk at the moment but in the absence of good news it may not have much of a choice. We favour selling risk rallies and as such selling GBP/USD and EUR/USD rallies is our preference.
RUSSIAN BANKS CUTOFF FROM SWIFT AND UKRAINE RECEIVES OUTPOURING OF CRYPTO SUPPORT
Unprecedented steps were taken over the weekend as the US and Allies proposed restricting Russian banks from the SWIFT system, a move aimed to paralyse Russia’s ability to finance its war efforts.
Meanwhile, Ukrainian officials have leveraged Twitter to solicit support via crypto donations, which has seen a huge show of support.
AS UKRAINE CRISIS UNDERSCORES BITCOIN AS RISK ASSET, VOLATILITY MAY BE HERE TO STAY
Recent shocks, such as the crisis in Ukraine, have hindered the premise of bitcoin and other cryptocurrencies as a bellwether investment in times of turmoil in the eyes of institutional traders.
Bitcoin, ether, and other cryptocurrencies, plunged more than 10% last week as Russia moved into Ukraine, before bouncing back to book modest gains. Assets continued to rise last Friday as traders seemed to shake off the impact of medium and longer term implications of the invasion.
“Overall, [crypto] moved with the way the US market moved. Some of it came back, just like the market came back, but the big players aren’t jumping in or bailing out” stated Rance Masheck, CEO of trading platform iVest Plus.
RUSSIA BANKS RAISE KEY RATES BY 20% IN DESPERATE MEASURE TO SAVE RUBLE
The Russian central bank raised its key interest rate to 20%, up from 9.5%, in an emergency move to save the ruble, which opened 40% lower against the U.S. dollar, as major countries cut off support to Moscow amid its invasion of Ukraine.
Russia also ordered companies to sell 80% of their foreign currency revenues, according to the central bank and the finance ministry.
SOUTH KOREA TO INVEST $187M IN NATIONAL METAVERSE PROJECT
South Korea’s Ministry of ICT, Science, and Future Planning have pledged 223.7 billion Korean won to create a broad metaverse ecosystem to support the expansion of digital content within the country, according to a statement by the ministry.
The funds will be spent on creating an all-encompassing ecosystem titled “Expanded Virtual World”, which will be used as a platform for expanding the virtual industrial growth of cities, education, and media.
“It is important to create a world-class metaverse ecosystem as the starting point to intensively foster a new hyper-connected industry” stated Park Yungyu, head of communication and policy department at the ministry.
BITCONNECT FOUNDER INDICTED FOR ALLEGED $2.4 BILLION PONZI SCHEME
BitConnect founder Satish Kumbhani has been indicted by a federal grand jury for allegedly defrauding $2.4 billion through a crypto Ponzi scheme.
Last week, the US Department of Justice stated that Kumbhani had been charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business and conspiracy to commit international money laundering.
“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space,” stated Special Agent in Charge Eric Smith from the FBI’s Cleveland Field Office.
JACK DORSEY’S BLOCK JUMPS 42% ON POSITIVE CRYPTO QUARTERLY EARNINGS
Following a strong posting of Q4 profits, shares of Block Inc., formerly Square, rose more than 40% last week, partly bolstered by its crypto earnings.
According to aletter to its shareholders, the company had generated gross profit of $1.18 billion for Q4, 2021 – a year-over-year increase of 47%.
Block offers businesses point-of-sales payment registers aimed at accepting credit card payments. Over the years, it has edged its way into a sector typically dominated by large banks and financial institutions.
BLOCKCHAIN-BASED STORAGE APP ARDRIVE RAISES $17.2 MILLION
Blockchain-based permanent storage application, ArDrive, raised $17.2 million in a seed round of investors led by Arweave Team, Blockchain Capital, and Sino Global Capital.
ArDrive currently houses over 6 million files across the globe, and allows users to maintain ownership and control of their data on the Arweave blockchain. The app gained attention last year when activists in Hong Kong used it to circumvent heavy censorship by the Chinese government.
Last week, China’s Supreme Court ruled that virtual asset transactions constitute “illegal fundraising”, designating them as a crime. Suspects will be prosecuted under Article 176 of China’s criminal law and face between 3-10 years in prison, plus fines ranging from RMB 20,000 to RMB 500,000.
The ruling is another example of Chinese provincial authorities cracking down on the industry. In September 2021, the People’s Bank of China and a host of other top-level agencies declared crypto transactions to be illegal fundraising, which this court ruling formally enforces. A number of provinces, including Zhejiang, Hainan, and Inner Mongolia have also increased electricity tariffs on crypto mining.
The amendment will come into effect on 1st March 2022.
LLOYDS OUTLINES £1 BILLION, THREE YEAR DIGITISATION STRATEGY
New Chief Executive of Lloyds Banking Group, Charlie Nunn, has laid out a long-term strategy to spend £1 billion over the next three years to overhaul its technology infrastructure and self-service capabilities. The strategy involves porting 20% of its applications to the cloud by 2024 and decommissioning over 15% of legacy applications.
The strategy comes after a video surfaces last year of a senior Lloyds executive complaining about their on-site technology, calling it “not fit for purpose”.
INDIE FEATURE FILM ‘CALLADITA’ TO RAISE FUNDS USING NFTs
The last year has seen the explosion of NFTs into the mainstream, and in particular into Hollywood. Now, filmmakers are seizing the opportunity to break into the industry by using NFTs to fund their projects.
“The first few films that get funded this way will have a place in history. They will be pioneers in a new route that I think is going to be huge for indie filmmaking across the world” stated writer/director Miguel Faus.
Faus’ debut feature film, “Calladita” kicks off its crowdfunding campaign on 2nd March 2022, offering NFTs as rewards and unique perks for NFT owners who contribute to the raise.
Our Chief Product Officer, Chris Aruliah, will be giving a keynote speech titled: “The Money Superhighway: Payments, Crypto and the Metaverse” at the 10th NextGen Payments & RegTech Forum on the 9th March 2022 in Dublin.
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