Global Uncertainty Hinders Crypto Development
2022–03–15
Market Recap
Crypto market failed to produce any notable price action last week ($BTC -0.32%; $ETH +0.44%), except for the content of Biden’s executive order leaked on 9 Mar which caused a pump-anddump price action. Bitcoin generally ranged between $40.2k and $37.3k. The leaked content of Biden’s executive order on digital asset called for ‘a coordinated and comprehensive approach on digital asset policy’ and aimed to ‘support responsible innovations’. The content was implied as positive news to crypto industry and bitcoin price surged to $42.6k immediately. However, the rally was short-lived, and Bitcoin price returned to familiar range the next day, ended the week flat. Technically, Bitcoin is now trading below the 50DMA. Ethereum saw similar price action with a range between $2.6k and $2.4k.
The average funding rates stayed around zero last week, slightly leaning to the negative side (Chart 1). Generally, Alts still underperformed. Once again, $LUNA outperformed the market with a +14.89% weekly change recorded. The total value locked under Terra (LUNA) chain is now $25.3b and Anchor Protocol contributes $15.3b which is 60% of the entire ecosystem. The protocol proposed to bring down the overall yield earned by depositors and maintain higher yield for small-sized and medium-sized users. The adjustment is focused on long-term sustainability. The APY will be adjusted in 3 stages subject to the $UST deposited: the first $100k earns 19.56%; the next $400k earns 17.50%; and the rest above earns 10% only. Downward revisions to the rates in the second and third stages will be implemented. Therefore, it is expected that the incentive for large-sized depositors to stake in Anchor Protocol will drop accordingly.
Government Front
Several countries hinted the potential development in crypto industry. Biden’s executive order mentioned above was a major concern. The price reacted positively as crypto industry was probably given green light to exist in the coming future. The newly elected South-Korean President, Yoon Suk-yeol, was pro-crypto and has promised a crypto-friendly administration. He has mentioned that the virtual asset market has unlimited potential, and he would like to deregulate the crypto industry. He has yet to confirm his intension but let’s keep an eye on it. Dubai introduced new regulation on crypto asset and aimed to help this sector to grow. Thailand has adopted tax-relief rules for crypto trading: Value-added-tax (VAT) of 7% will be exempted for transfers of cryptocurrencies or digital tokens on regulated crypto exchanges.
Institution Front
news continued with growing crypto acceptance. The investment bank giant, Goldman Sachs, will be offering Bitcoin options and ETH funds to clients. Meanwhile, State Street, announced they will be offering crypto custody. Crypto funding environment heated up this week with over $1.8b poured into the space. Immutable, valued at $2.5b, had a $200m financing round led by Temasek; Bain Capital Venture launched a $560m crypto-focused venture arm; Cake DeFi launched its corporate venture arm of $100m capital, the venture will be focusing on Web3 development, ranges from metaverse to NFT and gaming spaces.
Macro Front
Geopolitical tension between Russia and Ukraine continued. Major countries continued to propose economic sanctions on Russia including the ban of commodities import and exports, banks’ closures etc. The US clarified that they will not fight a war against Russia in Ukraine, but they will defend every inch of NATO territory with full effort. Commodities had a tiny correction compared to the boost last week (Gold -0.8%; Oil -10.1%; Wheat –15.8%), it is worth noting that they are still trading at huge profits compared to the prices in early 2022. Inflation also raised economic concern as US CPI index reached +7.9% in Feb, a 40-year high.
Conclusion
Fundamentals continue to look positive in the crypto space this week, buoyed by governmental supports in the digital-asset industry and extensive capitals added into new protocols and related companies. However, macro uncertainty, including geopolitical tensions in Ukraine and inflationary concerns are weighing on the broad risk markets, including cryptos. Ergo, we are playing defensively, keeping our bags light until the outlook is clearer. Good luck!
