All Been Crypto — Week 25 Feb 2022
This week saw major risk off in the markets across the board after news of Russia’s invasion into Ukraine broke. We shaved another 10% off market cap in a week and are now sub 1.8tn with BTC ‘outperforming’ at -5% pushing dominance to highs last seen in Nov around Taproot activation. Only major winners this week are LUNA and ANC which i’ll talk about in the articles. What’s also notable is how the basis trade basically disappeared with June/Sep around 3% and March even at discount resulting in a significant reduction in open interest.This is a crypto weekly and so i’ll not talk about geopolitics more than necessary but I really liked Vitalkis statement you can read in the quotes sections. I’m watching at unease what is going in on Canada and fear how our asset class can get soaked into conflicts because of BTCs core qualities of censorship resistance. To close on a positive note on the adoption scale we continue in the right direction with major international exchanges boosting their tokenization game and more funding being raised and deployed. Enjoy reading and stay safe
Bat Tai Chi — firstname.lastname@example.org
1bn Luna sale for BTC reserves to back UST and 450m for ANC
Now that was a headline that we didn’t expect and if you look at price action one that’s very positive for Luna. The Luna Foundation Guard (LFG) announced they sold ~1bn USD worth of Luna to a consortium of VCs, Crypto Trading Shops lead by Three Arrows and Jump Crypto and will use the proceeds to buy BTC for UST Forex Reserve. This changes the dynamics of UST moving it away from being only back by the Terra Ecosystem but also now FX reserves. Currently there’s 12bn UST vs 24bn LUNA so you might as why that’s necessary and why a decentralized protocol and the only major decentralized stablecoin jumps into bed with VCs OTC trading shops. Well the Luna bulls would argue that this is a show of strength for the treasury reserves making the peg with USD even more stable as not UST is not just secured by LUNA and the creation/burn mechanism. The critics are also along those lines as well as the 4 year vesting of the VCs which could also translate into a major overhang. Key argument from the bear camp is what makes Luna different from Dai then if it’s supported now by a basket rather than just native asset?
That was however not the only major event in the Luna ecosystem this week. LFG also announced to inject 450ml UST into Anchor in order to boost their reserve funds. Reserves had recently dwindled to as low as $6.56 million as there wasn’t enough borrowing demand to keep up with an influx of lenders. When such an imbalance occurs, the protocol must tap into its reserves in order to pay lenders the promised yield. From the beginning of December to late January, Anchor’s reserve funds fell by about $35 million. ANC up >70%
This one got quite some headlines and is a very controversial one though. I leave you to it to make up your own mind about how an ex Forbes journalist found the traces and revealed them in a Forbes article at the same time as publishing her book (great marketing) — if true I would expect some kind of official authorities involved as well so we’ll see. For now presumed innocent. It is nevertheless a very interesting read and shows us once more the power of Chainalysis and how we are getting better at decomposing previously thought privacy preserving tools. One mistake is enough and often even years later could be coming to surface. If you are surprised about the increasing amount of crypto content in Forbes it might not be totally coincidental as Binance bought a 20% stake two weeks ago.
TradFi Exchanges push into Digital Assets
Two of the world’s largest Tradfi Exchanges announced investment upping their game in tokenization as they see their lunch beeing taken away. This should come as no surprise to anyone in the industry and would expect more such moves form exchanges around the world. The London Stock Exchange this week announced to buy U.S. cloud-based technology provider TORA for $325 million to add digital assets to its trading tools. The acquisition opens the door to the possibility of offering crypto or NFT trading in the future. Same time NYSE parent ICE announced an investment into security token firm tZERO who’s subsidiary operates an SEC-regulated alternative trading system (ATS) and broker-dealer for the issuance and trading of tokenized stocks. Its own stock, TZROP, is listed on the ATS. This comes just a week after NYSE revealed NFT related trademark applications amongst which they registered the name ‘NYSE’ for an NFT marketplace. At the time they were saying they “don’t plan on diving into digital currencies or NFTs any time soon” but i guess the “anytime soon” is probably the key word here.
Most of you have been following the protest situation in Canada, again its a political event and usually outside of the scope of this newsletter, however after the Canadian Gov cut of funding for the protesters naturally crypto picked up the baton. Then exchanges got told to stop that as well and CEO of Coinbase and Kraken suggested how easily you can circumvent that by having your own wallet instead of on the exchange (pitching against their own book you may say). These tweets that advocated self-custody of digital assets are now being looked at the by the Royal Canadian Mounted Police for violating sanctions put in place to curb the trucker protests in the country. This is worrying because one of the core value(propositions) of digital assets that is censorship resistance is at risk here. Forbes ran an article arguing the bull case for BTC against this backdrop and use reverse logic that bans might actually serve more as an ad for the same value. But then again as mentioned above they are not really independent anymore
Reminder: Ethereum is neutral, but I am not
Russia’s invasion of Ukraine may well spell the end of cryptocurrency’s freewheeling stage. Russia will use crypto tools to evade sanctions, which means Western governments will now view crypto as a threat. If you are in the crypto business, you need to consider this. Your business model is probably obsolete
Jamie DiBiasio — Founder of DigFin
We just gave 25$ to every Ukrainian on FTX do what you gotta do
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