Destabilizing speculation

Bitcoin (BTC) recovers a handful of $20,000 after weekend turmoil

The rapid recovery from the breakout of key support levels over the weekend in major cryptocurrencies will provide relief to investors, but analysts continue to argue that risks remain tilted towards further losses given the unfavorable macro backdrop. Fed Chairman Jerome Powell will testify before Congress this week and detail the Fed’s hyper-hawkish policy shift last week, which saw the bank accelerate the pace of rate hikes to 75 basis points against 50 basis points and signal its intention to bring interest rates well below. territory described as “restrictive” in the years to come to cope with inflation.

Powell made a point of stressing last week that the Fed will do whatever it takes to bring US inflation under control, even if that means tolerating higher unemployment (which would typically result from a recession). ). With the Fed signaling in its latest dot chart last week that it does not see rates going above 4.0% in 2023, crypto investors should prepare for the risk that inflation will remain elevated and the Fed eventually has to raise interest rates to 5-6% region.

This would be catastrophic for risky assets like US stocks and crypto, which perform better when monetary conditions are accommodative rather than restrictive. Data from the U.S. Purchasing Managers’ Index survey on Thursday will provide a timely update on the health of the U.S. economy as concerns over a deepening U.S. recession could also impact equity/crypto risk appetite. Trade will be quiet on Monday as US markets are closed for the June 16 holiday.

SOL rebounds to test 21DMA, key downtrend despite Solend governance debacle

Now let’s move on to some of the major stablecoins. Solana’s SOL returned towards last week’s highs near $36 per token, alongside the broader market rebound. SOL/USD does not appear to have been much impacted by a governance debacle at Solend, the largest decentralized lending (DeFi) platform running on the Solana blockchain.

On Sunday, a Solend governance proposal proposing to create “emergency powers” that would give Solend Labs the power to access a major whale’s wallet to mitigate the risk of a large liquidation. However, after a massive social media backlash, with Solend accused of going against the values ​​that underpin crypto by creating powers to hack a wallet, a new governance proposal that would override those “emergency powers” ” was adopted.

SOL/USD is eyeing a test of its 21-day moving average just above $36.00 and a test of a key downtrend that has capped price action since mid-May. A break above these levels could open the door for an extension of the recent rise towards the next key areas of resistance around $45 and $48.

Elsewhere, Cardano’s ADA was last trading near $0.50, up around 18% from weekend lows. Binance’s BNB last changed hands near $215, up 17% from weekend lows. Dogecoin, meanwhile, did a little better and was up more than 20% from weekend lows below $0.05 near $0.06 after Tesla CEO and precocious billionaire Elon Musk doubled down on his support for the play via Twitter. Ripple’s XRP was last trading around $0.32 focusing as always on Ripple’s ongoing lawsuit against SEC.

The Algorithmic Stablecoin Problem Continues

The algorithmic blockchain stablecoin Tron Decentralized USD (USDD), which many in the crypto space see as a cut-and-paste of Terra’s ill-fated UST stablecoin, continues its slow decline. USDD last traded below $0.95, after falling to $0.92 on Sunday, despite claims by Tron founder Justin Sun that the stablecoin is significantly over-collateralized.

Elsewhere, Magic Internet Money (MIM), another USD-pegged algorithmic stablecoin, has also lost its 1:1 peg to the dollar in recent days. According to CoinGecko, MIM/USD fell to $0.975 on Sunday before bouncing back to current levels of around $0.99 as the Abracadabra token platform was accused on social media of accumulating $12 million in “ irrecoverable debts “.

Cryptocurrency markets will attend a US Congressional hearing this week on the topic of stablecoins, with the Fed lately making some criticisms of them in a recent monetary policy report.

FTX Expands Presence in Canada, Binance Suspends Withdrawals/Deposits Via Brazil’s Pix App

FTX, one of the fastest growing cryptocurrency exchanges in the world, reached a deal over the weekend to buy Canadian platform Bitvo. The acquisition comes as FTX seeks to expand its presence in Canada, with the purchase expected to be completed during the third quarter of 2022, subject to regulatory approval. “We are excited to enter the Canadian market and continue to expand FTX’s global reach,” FTX CEO Sam Bankman-Fried said in a statement. “Our expansion into Canada is another step in proactively collaborating with cryptocurrency regulators in different regions of the world,” he added.

Elsewhere, the world’s largest cryptocurrency exchange, Binance, suspended deposits and withdrawals via the Brazilian government’s online payment platform Pix last Friday. The split with Pix comes after the end of a deadline set by the Brazilian Central Bank (BCB) for all Pix suppliers to implement the new Know Your Customer (KYC) requirements. But deposits and withdrawals from Binance via Pix may return soon, as the exchange is in the process of buying Brazilian securities brokerage firm Sim;paul Investimentos, which has already obtained approval from the BCB and the Securities and Exchange. Exchange Commission of Brazil.

The number of NFT platforms in China has increased 5 times since February

According to a report published over the weekend by local Chinese press, the number of non-fungible token (NFT) platforms operating in the country has increased fivefold since February 2022 to more than 500. The report notes that the increase in the number of Platforms operating in the country comes as the popularity of digital collectibles grows, with Chinese tech giants Tencent and Alibaba also showing interest in the space and filing multiple trademarks. According to the Chinese press, the government continues to take a dim view of the NFT market, believing that it is filled with speculation that poses risks for investors.

Regulatory landscape

In a semi-annual monetary policy report released last Friday, the Fed noted that “the recent strains experienced by the markets for stablecoins…and other digital assets have highlighted the structural fragilities of this rapidly growing sector.” “In general, stablecoins that are not backed by safe and sufficiently liquid assets and that are not subject to appropriate regulatory standards create risks for investors and potentially for the financial system, including vulnerability to runs potentially destabilizing,” the Fed report continues.

The report criticized the “concentrated nature” of the current stablecoin market, pointing out that the total stablecoin market capitalization is currently concentrated in USDT, USDC, and BUSD coins. Stablecoin “Vulnerabilities may be exacerbated by a lack of transparency around the risk and liquidity of assets backing stablecoins,” the report adds. Fed Chairman Jerome Powell will give two-day testimony this week before the US Senate and House of Representatives, where he will discuss the monetary policy report. He can comment on stablecoins.

Separately, a group of 14 US senators signed a letter to the US Environmental Protection Agency arguing the benefits of crypto mining, which can have a “substantial stabilizing effect on energy grids.” The letter asserted that mining can use flared gas and renewable energy sources and that “digital assets and their related mining activities are critical to the economic future of the United States.”

Meanwhile, in Russia, state-owned Gazprom Neft has entered into a partnership with BitRiver, Russia’s largest crypto-mining hosting service provider. Under the new agreement, Gazprom Neft will supply BitRiver’s mining centers with electricity produced from petroleum gas. BitRiver will also develop the digital infrastructure needed to use energy from Gazprom’s flare gas.