Crypto in bold: The biggest stories of the week

Market overview

After trading mostly sideways for almost two months, BTC experienced a flash crash below USD 26 000 in the late hours of Thursday (UTC time), causing the rest of the crypto market to decline as well and resulting in the liquidation of over USD 1 billion in trading positions within a day. At the time of writing, the total BTC and crypto market capitalization is down by around 10% in a week, hovering just above USD 1 trillion. 

Analysts are uncertain about what exactly triggered the sale in the spot market, which subsequently led to cascading liquidations and wiped out most of the gains BTC had achieved since BlackRock submitted their BTC ETF (exchange-traded fund) application to the US Securities and Exchange Commission (SEC) in June. 

Among the discussed possible reasons for the sell-off are speculations regarding SpaceX’s sale of their BTC holdings and investors preparing for a ruling in the Grayscale vs. the SEC case, which pertains to the transformation of the Grayscale Bitcoin Trust (the largest BTC fund) into an ETF. In either case, these market movements also need to be evaluated in the broader context of a not-very-positive macro environment, issues related to the weakening yuan, interest rate hikes in the US, a challenging week for tech stocks, increasing bond yields, and persistently low liquidity.

Total market capitalization chart (last 7 days ):

Politics 

• Argentina, suffering from over 100% inflation, could bring the first official Bitcoiner president to the G-20 club of nations in the form of Javier Milei. We wrote about this here.

Adoption

• A new wave of speculation in the crypto world involves crypto influencers jumping onto a new project on the Base platform, a blockchain developed by Coinbase. The platform, friend.tech, aims to tokenize users’ social networks. It’s somewhat similar to trading “shares” in people, giving you the opportunity to privately interact with a specific influencer whose “shares” you own. However, the platform has faced criticism for its lack of privacy, transparency issues, technical problems, and has been referred to as the second BitClout – a project that initially garnered hype and raised hundreds of millions, later evolving into DeSo and almost fading into obscurity.

• Distributed ledger technology (DLT) project Hedera Hashgraph‘s token, HBAR, experienced pump and dump this week when the US Federal Reserve (Fed) disclosed a collaboration with the micro-payment project Dropp built on the Hedera platform as part of the FedNow payment service, launched by the Fed this past July. Following the news that we wrote about here, HBAR surged by 30%, but it has now erased the entire gain.

HBAR price chart:

• It turns out that former US President Donald Trump holds not USD 250,000 – USD 500,000 worth of ETH tokens as previously stated, but rather USD 2.8 million. Additionally, from his crypto/NFT projects, Trump earned a total of about USD 7.6 million, according to updated data.
• The Helium Network (HNT) has introduced a somewhat decentralized 5G internet service priced at USD 5 per month. For now, it’s only available in Miami and has raised suspicions among some reviewers.

Blockchains

• One of the founders of Ethereum (ETH), Vitalik Buterin, openly stated that developers associated with Ethereum’s layer-2 and rollup solutions that help this blockchain scale, essentially have a backdoor to address matters if they believe something is amiss. 

• The blockchain platform Gitcoin (GTC), designed for open-source project collaboration, surprised and stirred the market with a new partnership focused on climate projects with the oil giant Shell. Critics call this a straightforward case of “greenwashing,” where more attention is given to advertising supposed positive actions against climate change than to the actions themselves.

• The blockchain giant ConsenSys has opened to the public another Ethereum scaling solution, Linea, while the creators of the popular memecoin Shiba Inu (SHIB) have launched their new blockchain, Shibarium. However, it didn’t start very successfully – when transferring ETH tokens from Ethereum to Shibarium, around USD 1.7 million worth of ETH got stuck. The developers of the new blockchain claim that “ALL IS WELL” and the issues arose due to what they call a supposedly high interest in Shibarium. In any case, there’s been a growing sentiment lately that there are already too many of these infrastructure blockchain projects and perhaps more attention should be directed towards developing/improving more useful applications.

Stablecoins

• The most popular stablecoin, tether (USDT), issuer Tether, announced that it will no longer support USDT on networks such as Omni Layer, Bitcoin Cash SLP, and Kusama due to lack of market interest. Omni Layer, built on the Bitcoin blockchain, was particularly important for Tether in its early days. The company mentioned that USDT could still return to Omni Layer if demand increases.

Regulation and taxes

• While the U.S. Federal Deposit Insurance Corporation included cryptocurrencies in its annual market risk review, the UK market regulator stated that since January 2020, it has only approved 13% (38) of crypto companies’ applications to operate in this kingdom.
• Kenya states that the controversial Worldcoin (WLD) project disregarded orders from its data protection agency to cease collecting personal data of the country’s residents until such directives were issued by the Ministry of Interior and Administration.
• Brazil plans to raise taxes on cryptoassets held overseas, incentivizing local crypto exchanges. 

Companies 

• The largest crypto exchange, Binance, due to changing market conditions, has optimized its operations by closing down the Binance Connect service. It was launched in March last year and provided fiat-crypto on-ramp/off-ramp services. The division was initially launched as Bifinity, an LLC of the same-name operating in Lithuania. However, according to a source with direct knowledge of the matter, Bifinity itself will continue to operate, and the team remains unaffected. In a post published by Binance in July, it is explained that Bifinity offers Binance clients services related to fiat currency conversion to/from BTC and crypto, such as purchasing crypto assets with payment cards or transferring funds from Binance to a bank account. The focus is primarily on European clients.
• The collapsed crypto lender Celsius obtained permission to survey former clients regarding the company’s revival and the distribution of USD 2 billion worth of BTC and ETH.
• The Bitcoin Frontier Fund has launched the first startup accelerator aimed at supporting projects utilizing the Ordinals protocol that helps upload arbitrary data (e.g., NFTs, videos, etc.) into the Bitcoin blockchain. An investment of USD 100,000 is offered (cash – only 70% of the sum) in exchange for a 2%-3% equity stake.
• The Orange Pill App, an application that helps Bitcoiners discover each other, secured a USD 250,000 investment.
• The developer of the payment-oriented Stellar (XLM) blockchain, the Stellar Development Foundation (SDF), invested in the remittance giant MoneyGram, with which it has been collaborating for some time. With this investment, the SDF also gets a position on the board of directors in this company.
• The Goldman Sachs-supported BTC and crypto custody company BitGo has attracted a new investment of USD 100 million, valuing the company at USD 1.75 billion. The company plans acquisitions and service expansion.
• BTC and crypto wallet device manufacturer Ledger will allow its customers in the US to buy BTC, ETH, Bitcoin cash (BCH), and Litecoin (LTC) using PayPal.
• At the same time, PayPal confirmed that it will no longer allow customers in the UK to buy cryptocurrencies from October to next year, citing regulatory uncertainties.

Mining

• The Bitcoin infrastructure giant Blockstream presented investors with a new product, the Blockstream ASIC (BASIC) Note, allowing them to invest in currently discounted Bitcoin mining computers (ASICs, application-specific integrated circuits), which would be more expensive to sell once (if) the BTC bull market gains momentum.

Exchanges

• Blockchain analysis company TRM Labs estimates that nearly two-thirds of “parasitic crypto exchanges” operate in Russia and Iran. These platforms are referred to as “parasitic” because they use solutions from major exchanges without permission and offer trading services with minimal or no KYC/AML (know your customer / anti-money laundering) requirements.

Metaverse and Web3

• The Lamina1 blockchain, dedicated to metaverse projects, has launched its beta version. One of the project’s co-founders is sci-fi writer Neal Stephenson, who introduced the term “metaverse” to the world in 1992. 
• Meanwhile, the Sichuan province in China announced its plans to grow the local metaverse industry to USD 34 billion by 2025.
• Polygons Labs, the team behind the Polygon (MATIC) blockchain, has partnered with South Korean telecommunications giant SK Telecom to foster the development of the Web3 ecosystem.

CBDCs

• Another payment giant, Mastercard, has introduced the “CBDC Partner Program” aimed at bringing together blockchain and payment companies interested in CBDC (central bank digital currency) projects.
• Two professors from the University of Bern claim that the “digital euro,” or the euro zone’s CBDC, is doomed to fail on arrival, as instead of taking real transformative steps, the European Central Bank is focused on how to maintain/protect the current banking system.

Security

• DeFi, presenting itself as the “first web3 antivirus and super application,” has launched a “crypto antivirus” designed to safeguard against prevalent scams and other attacks in the crypto world.

Law and Crimes

• The crypto community lost a legal battle financed by Coinbase against the U.S. Department of Treasury concerning a crypto privacy-enhancing and department-sanctioned crypto mixer Tornado Cash, controlled by a decentralized autonomous organization (DAO). The court disagreed with the plaintiffs’ argument that the department overstepped its powers, and recognized that a DAO could also be considered a responsible legal entity. Coinbase seems likely to support an appeal as well.
• These days, there’s no shortage of crime-related news at various levels – from thefts from projects on the new Coinbase’s blockchain Base (in one instance, thieves even created their own token afterward), exploited DeFi protocols Zunami and Exactly Protocol, and the FBI report on confiscated BTC and crypto, to yet another gruesome murder: the second case this year of a chopped body linked to another “crypto kingpin” discovered, or in this case, what’s left of a 41-year-old U.S./Bulgarian citizen. The crime took place in Bulgaria.
• The warning from the Philippine police might be relevant not only to Filipino players engaged in play-to-earn crypto games like Axie Infinity. Police warned that “cybercriminals are now using fake rewards in so-called “play-to-earn” mobile and online games to steal millions worth of cryptocurrency.”

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