weekly roundup – Market Rundown | CVS Eyes Metaverse | Virginia Senate Allows State Banks to Offer Crypto Custody Services
Here’s our roundup of the top stories from the past seven days in crypto.
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MARKET RUNDOWN FROM OUR TEAM
Despite a strong labour report on Friday the markets continue to focus on events in Ukraine. News over the weekend that the US is considering banning Russian oil imports has sent oil soaring (>$130). This has seen risk markets come under pressure overnight and first thing this morning.
It is the oil market where things are really starting to get interesting and has large repercussions for the wider financial economy. Backwardation – when the current price/spot price of oil is far higher than prices trading in the futures market – now shows demand for the soonest possible crude deliveries far outstripping those due just a month later by the largest gap on record since 1984. This will have knock on effects. Risk markets won’t like such a thing with airline stocks now understandable getting hit hard. Crypto has sold off inline with the risk sentiment and this now puts central banks in a difficult position. Central banks who have been hawkish pre the invasion will now be concerned about stagflation and hiking into such a scenario.
Our views have not changed and we continue to look to trade extremes. The desk is actually a little split on their views this morning. There is a view that risk may struggle to go much lower – caveat would be Putin severely escalating matters (nuclear). US indices are more tech focused which will be able to largely weather a high oil price and current levels do provide appealing buy levels. Where we agree on is that crypto is worth re-buying at these levels as we scale into a long position. As we spoke about last week – we do not view BTC as a safe haven and its price action over the last few days has reaffirmed that view. BTC now trades sub $38k and it will be crucial that it now holds $35k support. A break below may target the $28k-$30k support level. We are happy to buy dips toward $35k and to $2300 in ETH.
We should note that whilst we are slowly scaling into long crypto positions we acknowledge that it may be a tough few days ahead. The fear and greed index is now back into the ‘extreme fear’ zone.
In other markets, gold is once again flirting with $2000 and a breach of the all time highs of $2070 is now on the cards. In FX, we are seeing a deterioration of EUR across the board. We spoke of last week how European indices are suffering in this current environment and at the time of writing the DAX is 4% down. EUR/USD breached the 1.1000 psychological level and has remained offered since. EUR/CHF traded sub parity overnight as the CHF remains in demand as a safe haven. We remain short EUR/USD and looking to add on a rally toward 1.0920. The ECB announcement on Thursday will be interesting to see how policymakers take into account the Russia-Ukraine conflict. We also remain rather bearish on GBP/USD and remain short. We are sitting on support here at 1.3160, a break of which opens up a test of the psychological 1.3000 level.
SOUTH KOREAN CRYPTO PROVIDERS BOOK $2.7B NET PROFIT FOR 2021
According to a survey announced last week, published by the Korea Financial Intelligence Unit (KoFIU), South Korean virtual asset service providers (VASPs) took in substantial net profit from trading activity last year, amounting to over 3.3 trillion South Korean won.
The aim of the survey was to gain a better understanding of the cryptocurrency market based on statistical data provided by individual business operators.
The survey states that during the second half of 2021, total transactions across 24 “virtual asset exchanges” came to 2.073 quadrillion won ($1.7 trillion).
South Korea currently ranks 16th for crypto adoption, with 1.9 million of its 55.7 million-strong population owning some form of cryptoasset.
According to a series of trademark filings made public last week, American drug store chain, CVS, is looking to enter the metaverse and digital goods industry.
The trademark filings lay claim to a number of “downloadable virtual goods” which includes prescription drugs, beauty products, and general merchandise for use online and “in online virtual worlds”.
CVS is not the first brand to venture into the metaverse with trademark filings, but its bid to offer virtual health care services in a metaverse environment could be the first of its kind. Recently, other brands such as Wrangler, Champion, and Wingstop have also filed trademarks for NFT-related ventures, and multinational retail outlet, Walmart, filed several trademarks in December 2021 with plans to sell virtual goods in the metaverse.
US VIRGINIA SENATE ALLOWS STATE BANKS TO OFFER CRYPTO CUSTODY SERVICES
In January 2022, delegate Christopher T. Head introducedHouse Bill No. 263, seeking an amendment to allow eligible banks operating in the Commonwealth of Virginia to offer crypto custody services.
The bill passedthe Senate of Virginia with an unanimous 39-0 vote, and is now waiting to be signed into law by Governor of Virginia, Glenn Youngkin.
In order to offer this service to clients, banks must adhere to three requirements outlined in the bill: implementation of effective risk management systems, adequate insurance, and creation of an oversight programme to address risks.
CRYPTO MORTGAGE LENDERS ARE ENTERING THE HOTTEST HOUSING MARKET EVER
Across the U.S. housing prices have soared since the pandemic, and the market has never been more crowded. Meanwhile, a growing number of individuals in possession of serious crypto holdings have the wealth to buy a home, but not in dollars. This creates issues when working with traditional mortgage lenders.
These issues have paved the way for the establishment of crypto mortgage lenders. In January 2022, Milo, a crypto lending company, launched a crypto mortgage department which allows clients to apply for and receive a loan by putting up the equivalent amount in Bitcoin.
“There’s a lot of people that at this point in time have a significant portion of their wealth, and even for some of them, all of their net worth in crypto, and the existing mortgage solutions won’t work for them” stated Milo CEO and founder, Josip Rupena.
TOKOCRYPTO’S T-HUB HERALDS THE RISE OF IN-PERSON CRYPTO COMMUNITIES
For the first time since the Covid-19 pandemic, people are becoming more comfortable with meeting and socialising in real life. Indonesian crypto exchange, Tokocrypto, is responding to this change in attitude by establishing T-Hub, an IRL space that provides Bali’s crypto community with a combination of sanctuary, clubhouses, and leaning centres.
Opened in January 2022, T-Hub allows visitors the opportunity to participate in an in-person crypto community, where enthusiasts can share knowledge and advice.
“Pre-pandemic there were always people coming into our Jakarta office, every single day. At first, we thought they must be having problems with their apps—but actually a lot of these people were coming in to ask crypto questions or find out whether we held community events” stated CEO and co-founder of Tokocrypto, Pang Xue Kai.
BRAZIL CENTRAL BANK PICKS DIGITAL REAL CHALLENGE PARTNERS
In late 2021, Brazil’s central bank outlined plans to carry out a CBDC pilot in 2022, with a final version ready by 2024. To help with this plan, the bank invited applicants for the ‘Lift Challenge Real Digital’ to investigate various aspects of the project, such as the development of the CBDC.
The bank has now whittled down 47 proposals from eight different countries to just nine submissions, including: DeFi outfit Aave, Banco Santander Brasil, the Brazilian Federation of Banks, Giesecke + Devrient, Itaú Unibanco, Bitcoin Market, Tecban, Vert, and Visa do Brasil.
The proposals cover areas such as delivery versus payment, payment versus payment, DeFi applications, and payment solutions when both payer and receiver are without internet access.
RARIFY GETS $10M IN SERIES A LED BY PANTERA CAPITAL TO FURTHER HIRING EFFORTS
NFT infrastructure startup Rarify has secured $10 million via a Series A led by Pantera Capital, which will be used for hiring efforts and product launches with enterprise partners, according to a press release published last week.
Rarify offers commerce API infrastructure for marketplaces and applications to build “end-to-end experiences” with NFTs (non-fungible tokens). It aims to reduce barriers to entry for NFT technology and to enable businesses to “participate” in an expanding sector.
“Rarify removes the biggest hurdles companies face when introducing NFTs to their existing products. We’re excited to partner with the Rarify team to accelerate their growth trajectory and make NFTs accessible to companies and, by extension, consumers at large” said Pantera partner Paul Veradittakit.
DEFI WALLET ARGENT LAUNCHES LAYER 2 ACCOUNT WITH WAITLIST OVER 500,000
London-based startup, Argent, has launched a new crypto wallet that aims to cut down the costs and environmental impact of interacting with DeFi systems.
So far, more than 500,000 people have signed up to a waitlist to use the layer 2 account built on zkSync, according to Argent.
CEO and co-founder of Argent, Itamar Lesuisse, stated that getting access to crypto has become “expensive, slow and less secure.” Argent’s non-custodial layer 2 wallet aims to fix that by cutting gas fees to as little as $1, while offering speedy transactions and a carbon emission reduction of 95% per trade.
COINBASE PROPOSES CRYPTO TECH TO PROMOTE GLOBAL SANCTIONS COMPLIANCE
Crypto exchange Coinbase recently published a blog written by their chief legal officer, Paul Grewal, proposing the use of cryptocurrencies to help ensure compliance with economic sanctions, amid the Russia-Ukraine conflict.
The recommendation highlights the ease of laundering and sanction evasion of fiat currencies made possible by traditional financial infrastructures. The exchange supports the government’s decision to impose sanctions on individuals and territories in “promoting national security and deterring unlawful aggression”.
“By transacting through shell companies, incorporating in known tax havens, and leveraging opaque ownership structures, bad actors continue to use fiat currency to obscure the movement of funds” stated Grewal.
SEC REPORTEDLY TARGETS NFT MARKET OVER POTENTIAL VIOLATIONS OF SECURITIES LAW
The SEC is reportedly investigating NFT creators and cryptocurrency exchanges over potential violations of securities law, specifically looking into whether NFTs “are being utilised to raise money like traditional securities”.
NFTs can be deemed securities if they pass the so-called “Howey Test,” a regulatory standard used to determine if a transaction has an “investment contract,” according to the SEC.
“Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction. People need to be thinking about potential places where NFTs might run into the securities regulatory regime” stated SEC Commissioner Hester Perice during an interview with Coindesk TV last December.
BITCOIN IS SHOWING THE POWER OF DECENTRALISED MONEY
Sean Stein Smith from Forbes discusses the growing importance of decentralisation.
“As the war between Russia and Ukraine continues to rage, the human toll and cost cannot be understated…Seemingly trivial, but financial headlines and the actions taken by both Russia and the nations supporting the people of Ukraine have generated significant conversation and debate. At the heart of the matter lies the following question, among others; what role do cryptocurrencies have to play during times like this?”
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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