The DeFi market is slowing down as the entire crypto market slumps.
Binance Smart Chain has been the biggest loser, according to Messari.
Polygon, on the other hand, did well in Q2.
Binance is having a tough go of things recently. It’s lost partnerships with payment processors, has had to limit onramps to its platform, and is being blocked by banks.
If that weren’t enough, its Binance Smart Chain is also losing the race to overtake Ethereum as the go-to blockchain for decentralized finance (DeFi), the group of experimental products that provide loans, interest, and asset swaps without banks or other intermediaries.
The DeFi worldexplodedin popularity last year, and some people who jumped on the bandwagon early madea lotof money. But according to areportreleased today by cryptocurrency data provider Messari, things have slowed down in Q2 2021. And Binance Smart Chain took the brunt of it.
In its Q2 2021 DeFi Review, Messari writes that “DeFi protocols saw activity decrease in the second half of the quarter as speculation in markets died down.” Messari notes that volume on decentralized exchanges (DEXs) in particular was up from April through June, jumping from $221 billion to $405 billion. (DEXs are DeFi applications that allow you to swap tokens—but unlike crypto exchanges like, say, the hugely popular Coinbase, they allow trading without a middleman.)
While that initially looks positive, volume slumped toward the end of the quarter.
And slumpedhard.In May, the monthly DEX volume was $203.5 billion; in June, it had halved to $95 billion, according to Messari data. (Though that monthly figure is still good enough for the third-best haul of all time.)
The disproportionate loser of May’s market crash, said Messari, is Binance Smart Chain (BSC), the blockchain kickstarted by the world’s biggest crypto exchange, Binance. That extends to DeFi applications in its orbit, includingPancakeSwap, a DEX built atop BSC thatrivaled Ethereum’s Uniswap in terms of active users during points of Q1.
“Combined with a series of hacks and exploits on BSC leading to hundreds of millions of dollars in losses, BSC saw speculation dry up dramatically in June leading to PancakeSwap volumes diving 69% in June,” wrote Messari.
BSC may have been a victim of short-term thinking, suggests Messari. It notes that most investors using BSC products were using “mercenary capital” for crypto tokens that had “little use outside of incentivizing user speculation,” too. In short, BSC was being used to make a quick buck.
BSC’s loss has been Polygon‘s gain. The Ethereum-based project is a scaling solution that seeks to address some of the blockchain’s major limitations by speeding up transactions and making transactions cheaper.
“The rise of Polygon also played a significant role in eating away Binance Smart Chain’s (BSC) share of decentralized exchange volumes,” the report said. “As the party shifted towards Polygon, with its new set of tokens to speculate on and farms to harvest, BSC was squeezed out of the picture.”
The report added that UniSwap v3, an update to the original Ethereum-based DEXlaunchedin May, has firmly reestablished itself as king of the DEX market. “Uniswap v3 now accounts for more than 40% of all DEX volume and continues to eat the DEX market, showing no signs of slowing down,” Messari said.
Binance’s DeFi ecosystem has had a good run, but Ethereum seems to be reasserting its traditional dominance. And with Binance entrenched in regulatory battles and partner deflections, it just may not have the bandwidth to focus on DeFi.
ChainSwap has experienced another exploit in what has turned out to be a terrifying month for the exchange. The platform which acts as a bridge for assets had succumbed to an exploit earlier this month, and now, only eight days later, ChainSwap has succumbed to another exploit. This time, the attacker made away with $8 million before it was shut down.
The attack was carried out using the token ASAP, affecting a wide variety of tokens and projects in the process. The ChainSwap team had taken to Twitter to warn their users to not purchase the platform’s native ASAP token for the time being while the team carried out their investigation into the hack.
Related Reading | Ledger Scam: Scammers Mail Hacked Ledger Devices To Steal Crypto
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The exploit led to some coins like WILD losing almost all of their value, before promptly recovering back up. The price of WILD had fallen 99.8 percent following the attack but the price has since recovered.
This attack comes on the heels of the first exploit on ChainSwap eight days earlier which had seen the attacker make away with $800,000 in the hack. The ChainSwap team had given a post-mortem report on the attack but there is yet to be a follow-up on that attack.
What Is ChainSwap?
ChainSwap is a cross-chain bridge that acts as an intermediary for multiple chains. The bridge supports the Ethereum network, MATIC, and the Binance Smart Chain. A cross-chain swap enables the trading of tokens by users without the need for an intermediary or a third party like exchanges.
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ChainSwap enables holders to trade coins from different blockchains without having to go through an exchange like Binance. For example, a holder can trade their coins that are on the Ethereum blockchain for coins that are on the Binance Smart Chain without ever needing to deposit their coins in an exchange. This means that traders can trade a variety of coins in one go no matter what blockchain their coins or tokens are based on.
Total DeFi market cap above $60 billion | Source: Crypto Total DeFi Market Cap on TradingView.com
This also means that coins that are not listed on any exchanges can be traded on ChainSwap. Smaller projects which are just starting out are traded by holders for other coins on cross-chain bridges all the time and it has become a very popular way of trading coins in the market.
Given this, there are a lot of small projects and tokens on ChainSwap, and those projects have been affected following the second hack.
Token Projects Suffer In Second Hack
Several projects took to their official accounts to announce how the ChainSwap hack had affected their tokens and their projects. The hack which affected a lot of projects included Wilder World, Nord, Razor, Antimatter, and a host of other coins which had seen their projects take hits from the exploit.
Projects like ROOM announced that they had seen a $550,000 loss from the attack and had to make a quick decision to pull all liquidity.
Related Reading | How Hackers Looted 2600 ETH In Rari Capital Cross-Chain Exploit
The Umbrella Network (UMB) also announced that they planned to buy back $230,000 worth of UMB tokens and would leave it up to the community to decide what would be done with the tokens. Umbrella Network also said that it would be pulling from ChainSwap and will no longer rely on the decentralized finance platform for token bridging.
The ChainSwap team announced after the hack that they had frozen the Binance Smart Chain mapping token address in order to identify the addresses of the attackers. ChainSwap has assured its users that their tokens are safe, although send and withdrawal functions have been suspended for the time being.
The price of ASAP saw a sharp decrease in its price following the hack. But the price has since recovered. Although the ETH-BSC bridge remains paused at the moment.
Featured image from Epiq, chart from TradingView.com
Prominent crypto analytics firm Santiment is revealing some potential signs that Bitcoin may be ready for a bounce up in price after weeks of sideways trading.
Santiment shares two metrics on Twitter with its 77,600 followers that suggest Bitcoin sellers are starting to lose steam.
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“The amount of daily inflow of Bitcoin to known exchange wallets, as well as the total supply of BTC on exchanges, have experienced a sharp 50-day drop, which may point to diminishing sell-side pressure.”
Source: Santiment
Additionally, Santiment points out that Bitcoin’s funding rate on the crypto exchange BitMEX has veered positive as traders remain indecisive as to whether Bitcoin’s price can recover. The analytics firm indicates that this pattern of negativity and excess shorting has usually been matched by quick price bounces every time it sinks too low.
Source: Santiment
According to Santiment’s chart, a positive BitMEX funding rate tends to align with Bitcoin rallies.
The analytics firm is also keeping an eye on Ethereum (ETH), noting that its fees – which are at seven-month lows – don’t seem to have an effect on Ethereum’s rise in utility.
“Ethereum’s average fees are down to $2.19, which is the lowest the #2 market cap asset has been since December, 2020. This is a promising sign that ETH’s utility can rise with little impact of fees standing in the way of healthy circulation.”
Source: Santiment
At the time of writing, Bitcoin is trading at $33,062, while Ethereum is sitting just above $2,000.
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Within the past few hours, a fresh wave of selling pushed Bitcoin (BTC) price close to the $32,000 support level as the low trading volume and general disinterest from traders saw the price revisit the lower section of its current range.
BTC/USDT 4-hour chart. Source:TradingView
The price of Ether (ETH) also fell under pressure alongside Bitcoin as the building momentum ahead of the network’s upcoming London Hard Fork failed to support a price above $2,000, resulting in a daily low of $1,918.
Bitcoin’s compression range tightens
Some insights into the current market conditions were offered by Gas Fring, a pseudonymous Twitter account, who posted the following tweet highlighting previous instances of range-bound trading for BTC.
1/ Here’s a chart showing occasions when $btcusd has remained rangebound.
Bitmex funding regimes help determine the direction of breakout.
Barring Q4 2018, when funding flipped from a negative to positive regime, a month long regime usually helps determine the direction… pic.twitter.com/te93tA98JO
— Gas Fring (@gas_fring_) July 13, 2021
As shown in the chart below, Bitcoin price has a tendency to trade within a consistent range following significant price moves, with previous instances lasting up to 132 days as was the case in late 2018 to early 2019.
BraveNewCoin liquid index for Bitcoin 1-day chart. Source: Twitter
The current compression range has lasted 55 days with a tighter range between $30,000 and $36,500 being seen since June 19.
According to Gas Fring, in the previous instance of a “layered stricter compression” seen in Q4 of 2018 and in the summer of 2020, the period of tighter compression “lasted for roughly half the overall period.”
“This tells me that we might have another 2 weeks or so of such inner tighter compression which will take the periods to 34 and 68 days respectively.
Related:Nonfungible tokens soar even as Bitcoin price drops close to $32,000
Altcoins hit hard as Bitcoin continues to struggle
The altcoin market was hit hard by the afternoon sell-off, leaving few coins in the green as traders hastily made for the exits.
Nonfungible and gaming tokens like Axie Infinity (AXS) and Small Love Potion (SLP) continue to be the bright spot in an otherwise gloomy market, putting on gains of 22% and 35% respectively as new users embrace the daily income opportunity provided by the blockchain-based trading and battling game.
Other notable gainers include a 16% increase in the price of Phala Network (PHALA) and a 15% gain for MyNeighborAlice (ALICE).
The overall cryptocurrency market cap now stands at $1.314 trillion and Bitcoin’s dominance rate is 46.1%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
You know the New Deal — a massive and unprecedented effort the United States federal government undertook in the 1930s to invest in infrastructure, build hope, and turn the course of a nation towards prosperity and justice. You’ve likely heard of the Green New Deal too — all that infrastructure business, but with a sustainable twist.
We propose an Orange New Deal.
Bitcoin is hope. And it can be an engine of prosperity and justice. But to do that work, it needs infrastructure. Not roads or power lines, but Lightning Network nodes and channels, education, wallets, and sustainable mining.
Image source
The time to build Bitcoin infrastructure is now. But who is to build? Recent events in El Salvador suggest a surprising answer: governments.
Many bitcoiners are libertarians, or even anarcho-capitalists. These tend to think that governments should be small, weak, or not exist at all. They don’t care for the New Deal. If you’re of that mind, you likely won’t agree with what we suggest here and should instead pass this essay on to your big government friends. But if you take a more capacious view about the proper role of the state, if your ambitions are somewhat more pragmatic than those of the libertarian dreamers, and if you rather like the New Deal or the Green New Deal, we hope to uncover a case for an intriguing thesis: national and local governments should invest in Bitcoin infrastructure.
The idea is simple. Bitcoin — like clean water, good roads, or a solid power grid — is for anyone. But for it to truly make good on this inclusive promise, it needs infrastructure. Governments can help accelerate construction of that infrastructure, and so create new opportunities for prosperity and financial inclusion.
Our argument has two steps: governments should invest in public goods, and Bitcoin is one such good.
Governments Should Invest In Public Goods
Focus on the idea of a public good, which has three parts: good, non-rivalrous, and non-excludable. Public goods are good; using them brings some benefit. Your use of a non-rivalrous good doesn’t reduce its usefulness to someone else; you can enjoy the wide, violin-like vibrato as heard in an Yngwie J. Malmsteen concert, for example, without diminishing the enjoyment of the metalhead next to you. A good is non-excludable to the extent that it is very costly to prevent non-paying consumers from accessing it. A flourishing mangrove forest has all sorts of benefits for nearby ecosystems, and it’d be hard to prevent those benefits from accruing, for example, to local fisheries.
Image source
Why should governments invest in public goods? Many point here to coordination problems. Clean air, for example, is good for everyone, and its benefits spill over even to those who didn’t pay for that clean air. But who will pay for it? What’s needed here is coordination; we all know this thing will benefit everyone, but the marginal benefits to individuals may be too small to motivate them to act on their own. Or perhaps they’d act, but not as much as one might like. The coercive might of the state can coordinate for optimal behavior, goes one standard argument, so governments invest in clean air. So also for a literate citizenry, or healthy networks of roads and power lines. Governments are supposed to wield their power to coordinate toward goods that would otherwise go underdeveloped.
The Bitcoin Network Is A Public Good
It’s useful to distinguish Bitcoin the network (capital “B”) from bitcoin (lowercase “b”), its native asset. We do not claim that bitcoin is a public good; it isn’t. When you have some bitcoin you diminish the use others might have from that quantity of bitcoin — Michael Saylor, for example. And you can easily keep others from capturing those benefits themselves; just keep your private keys private.
Bitcoin the network, by contrast, is a public good.
The Bitcoin network is good. Bitcoin the network is an open, censorship-resistant, inflation-resistant monetary network for all of humanity that cannot be controlled by any despot or corporate machine. It hosts, furthermore, a digital bearer asset that is readily auditable by anyone with an internet connection, and that offers remarkable settlement assurances. Detractors will disagree, of course — that is their business model — but we think that Bitcoin is net good for humanity.
Bitcoin is non-rivalrous. Our accessing the network — accepting payment in bitcoin, running a node, and so on — doesn’t diminish your access. Indeed, Bitcoin is anti-rivalrous. As with other network goods, its value increases the more people access it. The more people that speak Spanish, the more valuable it is to know that language yourself. As more people offer or accept bitcoin payments, its network grows in usefulness too.
There is a wrinkle here — blockspace is rivalrous and excludable. Not everyone can squeeze their transactions on-chain, and those who pay higher fees get priority. Luckily, though, this wrinkle is ironed out by Bitcoin’s Layer 2 manifestations (like the Lightning Network) that make it possible to transact with Bitcoin with minimal use of precious blockspace.
As for non-excludability, it is here that Bitcoin shines most of all. It is very cheap to access the network; a smartphone will do. And it is very expensive for anyone to stop you from doing so. States have tried, mostly without success. The software that keeps the machine running is free and open-source; anyone can take a look under its hood, make modifications or upgrades, and build new applications atop the network’s fundamental layer.
What makes this all possible, is, in a word, infrastructure: public Lightning Network nodes, a healthy swarm of full Bitcoin nodes validating new blocks, miners that gather transactions into blocks and secure the network, educators who show us all how to navigate the space safely, hardware wallet manufacturers who enable secure transaction signing, and Bitcoin Core developers who maintain the network’s main open source software. The most obvious way to promote the public good that is the Bitcoin network is to invest in infrastructure along these lines.
We could trust private actors to invest. But we might also want governments to contribute too, to accelerate access to Bitcoin, to provide healthy competition, and to coordinate towards optimal outcomes.
Let’s Get Building
With those two steps in place, the conclusion follows: governments should invest in Bitcoin infrastructure. Let’s make that proposal more concrete. What could governments actually do here? We know the New Deal: public works, roads, hospitals, airports, dams, and sweeping regulatory changes. What could an Orange New Deal look like?
Image source
A mighty host of building opportunities here await funding. For example:
Internet access: open WiFi networks, satellite access for remote regions, subsidized mobile data plans for those that need them.
Lightning Network nodes: lots of in-bound and out-bound liquidity, and with a steady network presence and low routing fees.
Developer support: Sponsor developers or projects with grants, and so promote innovation and better user experience across wallets, nodes, mining pools, and protocols built atop Bitcoin’s main layer.
Education: training in self-custody, spending and receiving bitcoin, paying employees in bitcoin.
Translation: bringing educational materials into every major language.
Accessibility: adapting Bitcoin educational materials, wallets, and hardware for use by members of, e.g., the Deaf or Blind communities.
Community wallets: These occupy the middle ground between full self-custody and fully centralized custody — think here of the Bitcoin Beach ecosystem.
Sustainable mining: new dams, wind farms, solar farms, and geothermal mining operations to keep the network secure in an environmentally friendly way.
Fair and consistent tax and accounting rules: National and local regulators have opportunities to coordinate here and thus save bitcoin users (aka citizens) from a host of headaches and pitfalls.
Direct bitcoin payments: Cash payments in a depreciating sovereign currency work well when immediate consumption is the goal. But for redistribution with a longer time horizon in mind (reparations, for example), governments should give away the ultimate anti-inflation asset: bitcoin. This needn’t involve new taxation or debt; many governments already have significant bitcoin holdings seized from criminals. Every payment of this kind would strengthen Bitcoin’s already formidable network effects, and stimulate further interest in the network.
Some of these tasks are more apt for national or state and provincial governments; others work better at the municipal level. Each will contribute to the Bitcoin network and its liberating use — not just for citizens, but for people across the globe.
Objections Answered
The New Deal was not without controversy. An Orange New Deal would inevitably find detractors also. The objections would come from two sides: Bitcoin skeptics, and Bitcoin advocates.
Bitcoin skeptics claim that Bitcoin struggles to scale, is available mostly for the educated and wealthy, or causes environmental harm. But note: the investments described above would cut against each one of these objections. Lightning Network infrastructure helps Bitcoin scale. Education and development expand access to the network. And investments in sustainable mining operations drive hydrocarbon-burning miners out of business. The investments we advocate, in short, don’t just make Bitcoin’s benefits more widely available; they also make Bitcoin better on balance. The argument of this essay supports measures that would help alleviate the very problems the skeptics raise.
Image source
Some of Bitcoin’s most ardent advocates will object that state sponsorship of Bitcoin infrastructure isn’t very cypherpunk. If states get involved, the story goes, they’ll mess up the network by attempting to censor transactions or extract rent. We reply: the Bitcoin network is already large and robust. And the software on which it runs is free and open-source. Any extra gadgets that connect to the network empower their users to access something that is itself beyond the control of any state or corporate despot. Note, too, that governments already invest in their own proprietary monetary networks and routinely censor transactions. Direction of any of those resources towards Bitcoin is net positive for the world. It’s better to achieve marginal gains in the real world than to pursue ideological purity.
Fans of nascent Central Bank Digital Currency schemes will ask why governments shouldn’t invest in their development instead. There are a few reasons. First, CBDCs inherit many of the problems of fiat currencies — their supply can be capriciously inflated, which makes them poor stores of value, and they lack the privacy and censorship-resistance of Bitcoin. Second, this will take some time, whereas Bitcoin already exists. Governments could invest in Bitcoin infrastructure now even as they plan for CBDCs. Finally, Bitcoin is for everyone. To build Bitcoin is to grow a network that benefits the whole world; it is to invest in humanity rather than just in the citizenry of one nation with access to some local monetary regime. Diehard nationalists who wish to benefit just a select group of people — their compatriots — won’t see much sense in this. But others will see the wisdom in benefitting all, we think. And Bitcoin does that.
Image source
We said up top that this wasn’t an article for libertarians. But some will still be reading, and they will object that governments are less efficient than other agents when it comes to the hard work of building. We reply: perhaps so. We encourage those of this mind to start investing, whether for charity or for profit, in Bitcoin developers, sustainable mining operations, educators, and so on. Prove — now, please — that voluntary efforts are superior to state-sponsored ones.
El Salvador is leading the way. It is time for other nations to follow and for each to launch their own Orange New Deal.
Let’s get building.
About the Authors: Andrew M. Bailey (@resistancemoney) teaches at Yale-NUS College; Bradley Rettler (@rettlerb) teaches at the University of Wyoming. Both work with the Resistance Money Bitcoin research collective. All images are from Wikimedia Commons: 1, 2, 3, 4, 5.
This is a guest post by Andrew Bailey and Bradley Rettler. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Bitcoin’s second layer payment protocol Lightning Network has been expanding unnoticed by most users. First proposed in 2015 and launched in 2018 as a beta, its adoption and capacity have accelerated during the past few months.
The Lightning Network allows users to send fast and low-cost transactions via payment channels. Unlike the Bitcoin-based layer, lightning transactions are processed “off-chain” via a mechanism called gossip and probing that enables nodes can follow possible transaction routes.
Arcane Research published a recent report wondering if this Bitcoin-based network will have a similar momentum as decentralized financed in July 2021, during the “DeFi Summer”. A mania broke out during this period and seemingly everyone started to interest in DeFi dApps.
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Data from this research firm indicates that the Lightning Network increase its capacity from 1,100 to 1,200 in 39 days. Later, from 1,200 to 1,300, it took it 34 days, as the chart below shows.
Source: Arcane Research
At the moment, Bitcoin’s Lightning Network has a capacity of around 1,800 BTC. Its expansion period has been contracting, it took it 5 days to rise from 1,700 BTC to its current levels of around $60 million worth of BTC.
In contrast, this metric stood at 1,040 BTC at the start of 2021. Thus, Arcane Research records a 70% increase in under six months. In comparison, it took this network three years to go from 0 to 1,000 BTC.
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As a consequence, there has been an exponential rise in the number of nodes activate on the network. This metric stands at 22,705, but Arcane Research noted that only 12,079 operate as active payment channels. The former channels have surpassed 55,000. The research firm claimed:
The rapid growth could be a consequence of the increased use of the Lightning Network, which has seen greater exposure and demand in recent weeks, with El Salvador’s government making bitcoin legal tender.
Bitcoin Could Jump To Mainstream Adoption On Top Of The Lightning Network?
This factor could be the first step for BTC to reach a wider user base. The Bitcoin Beach-based in El Salvador initiative has demonstrated that BTC can be leverage for an everyday, low-cost use case.
As the former Google employee Michael Levin argues in his post, “Lightning Network, Bitcoin’s Crossing the Chasm Superpower”, this payment protocol could drive a new wave of BTC adoption. According to its adoption curve, BTC is at an early adopter’s phase and must close the gap between them and an early majority.
Source: Michael Levin
These users are usually more pragmatic with specific needs that require a solution to meet them. Fast, low-cost transactions with the Lightning Network could be the perfect use cases for Bitcoin to create a “beachhead” into the mainstream. Levin said:
With the Lightning Network and motivated entrepreneurs, Bitcoin, the network, unlocks the power of human ingenuity and optionality in its race to cross the chasm.
At the time of writing, BTC trades at $32,409 with a 1.4 loss in the daily chart. Bitcoin is currently facing a high amount of selling pressure and could see further downside unless the bulls made a decisive move.
BTC trends to the downside in the daily chart. Source: BTCUSD Tradingview
Investment product issuer 21Shares has joined forces with comdirect, a leading online brokerage in Germany, to bring its cryptocurrency exchange-traded products, or ETPs, to savings accounts.
The partnership means that comdirect’s nearly 3 million customers will be able to integrate physically-backed crypto ETPs into their Spar savings accounts. 21Shares claims this is the first such instance where investors can gain crypto exposure in their savings accounts.
Marco Infuso, a managing director at 21Shares, said the new product offering will enable comdirect clients to include crypto in their retirement planning and will also help onboard investors who have been apprehensive about dabbling in Bitcoin (BTC) and other cryptocurrencies due to a lack of investment options.
“Empowering people to choose how they allocate their investments for their retirement has led to such a project to materialise,” he said. “This is very exciting for any investors who have been thinking about purchasing bitcoin but did not offer the proper investment tools to store them successfully in a savings plan.
21Shares and other crypto asset firms have been working to integrate digital assets into the traditional finance sphere. Bitcoin ETPs have proven to be a popular option for investors seeking alternative exposure to cryptocurrencies.
Back in 2019, 21Shares became the first crypto issuer to list a fully fully collateralized Bitcoin ETP on German exchanges. Just last month, the company teamed up with asset manager Ark Invest to file for a Bitcoin exchange-traded fund in the United States.
Related:Investment product issuer 21Shares will list Bitcoin ETP on Aquis Exchange
Although the United States Securities and Exchange Commission has yet to approve a Bitcoin ETF, regulators could begin softening their stance over the next few years, according to Todd Rosenbluth. The head of ETF and mutual fund research believes a U.S. Bitcoin ETF could be approved by 2023.
The British police confiscated £180 million or about $250 million worth of digital assets as part of a thorough investigation for money laundering. The operation was marked as the largest seizure ever executed in the United Kingdom.
Breaking The Record
According to a recent Reuters report, the Met’s Economic Crime Command made one of the largest global crypto seizures – nearly $250 million worth of various digital assets. The operation, which was part of an ongoing investigation for international money laundering, was led by Detective Constable Joe Ryan:
“Today’s seizure is another significant landmark in this investigation which will continue for months to come as we hone in on those at the center of this suspected money laundering operation.”
It is worth noting that this move broke the previous record when the British police seized about $160 million worth of virtual assets at the end of June. Back then, a 39-year-old woman was arrested on suspicion of money laundering offenses and later released on bail. Somewhat surprisingly, the UK authorities interviewed under caution the same woman regarding the latest record seizure.
Deputy Assistant Commissioner Graham McNulty noted that more and more criminals nowadays employ cryptocurrencies in their illegal endeavors. However, he outlined that the British officials are prepared to cope with those bad actors:
“While cash still remains king in the criminal world, as digital platforms develop we’re increasingly seeing organized criminals using cryptocurrency to launder their dirty money.
Whilst some years ago this was fairly unchartered territory, we now have highly trained officers and specialist units working hard in this space to remain one step ahead of those using it for illicit gain.”
UK’s Previous Seizures
As the authorities asserted, the aforementioned seizures might be the largest in the UK, but there have been others in the past. CryptoPotato reported another one that transpired at the beginning of the year.
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Back in January, the UK Metropolitan Police Service (MPS) arrested a 35-year-old woman and seized over $150,000 worth of Bitcoin as part of an investigation into fraudulent applications for government-backed loans for businesses affected by the COVID-19 pandemic.
According to the statement, the woman had established multiple mule bank accounts to receive the proceeds of “Bounce Back Loans.” Those loans are a part of a program launched by the UK government to assist small businesses suffering from the consequences of the COVID-19 crisis.
The investigation revealed that after receiving the funds in the mule bank accounts, the woman used them to purchase bitcoin. Detective Sergeant Ian Barrett, who was in charge of the operation, asserted:
“For people to take advantage of government support available to those who really need it in these unprecedented times is appalling.”
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Several key metrics suggest that Bitcoin has begun to recover from the last few months’ upheavals.
While Bitcoin has remained locked in a somewhat narrow price corridor over the past few weeks, several key on-chain metrics are now indicating a positive trend overall, according to the latest weekly report published by crypto metrics platformGlassnode.
“The [past] week opened at a high of $35,128, and traded down to a low of $32,227. It is starting to feel like the calm before the storm as muted and quiet activity appears across both spot, derivative, and on-chain metrics,” Glassnode’s researchers noted.
BTC miners recover from China’s ban
Glassnode pointed to early signs of Bitcoin hash rate recovery followingChina’s crackdown of BTC mining, which forced local mining pools to either go offline orrelocate abroad. The speed at which the Bitcoin network’s computing power returns could determine whether overall market sentiment is bearish or bullish, the researchers noted.
Per the report, Bitcoin’s hash rate—the total computing power dedicated to the network—has somewhat recovered from its recent peak drop of 55% to a 39% decline. Should the metric remain at this level, it would mean that nearly one-third of the hash power that was affected by China’s clampdown has come back online.
If the hash rate recovers rapidly, it could mean that a significant number of miners have successfully relocated and/or relaunched their hardware. By extension, this сould also take some selling pressure off them since those miners would be able to profit again and not worry about liquidating their earnings.
At the same time, active miners’ total net position in Bitcoin is growing again, which means they are increasing their BTC holdings at a high enough rate to offset sales conducted by offline miners.
Bitcoin flows out of exchanges again
Another indicator of the Bitcoin market’s sentiments is whether BTC is being predominantly deposited on exchanges or withdrawn from them. Essentially, the more BTC users are moving to exchanges, the higher the likelihood of them selling their coins—and vice versa.
Back in May, when Bitcoin was still trading at nearly $60,000, we saw “relentless depletion of exchange coin reserves, with many of them en route to the Grayscale GBTC Trust, or accumulated by institutions.”
However, after the price of BTC plummeted by roughly 50% over the past couple of months, users began depositing their Bitcoin back to trading platforms en masse, likely to sell it amid the dip—or to prepare for it at least.
That’s now shifted again.
“Throughout May…a flood of BTC was deposited to exchanges, alongside the market selling off by ~50%,” Glassnode pointed out. “On a 14-day moving average basis, the last two weeks in particular have seen a more positive return to exchange outflows, at a rate of ~2k BTC per day.”
As Bitcoin’s volatility is scaling back, more BTC holders are withdrawing their coins from exchanges without the looming threat of a panic sale. As such, “the transactions that are executed tend to represent a less speculative and more ‘purposeful’ sample compared to a frothy bull market.”
Derivatives markets declining
Meanwhile, the activity on crypto derivatives markets, such as futures and options, continues to decline. Following a series of massive liquidations that accompanied the crypto market’s dip in May, this could suggest “a reduced appetite for leveraged speculation.”
Such a significant decline across all derivatives markets lessens their impact on the price. As a result, BTC spot trading volumes are gradually reclaiming their role as the main driving force behind Bitcoin’s price movements instead of “short/long squeezes or leveraged liquidations,” Glassnode explained.
Thus, the direction of Bitcoin’s next big move will likely be conditioned by underlying supply and demand rather than “a speculative premium/discount,” the researchers concluded.
Banking giant JPMorgan has some reservations regarding El Salvador’s recent decision to make Bitcoin legal tender.
In a report revealed by Bloomberg, analysts from the bank say they believe that BTC being used as legal tender will put strains both on Bitcoin and El Salvador itself.
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According to JPMorgan’s analysis, there is too much Bitcoin locked up in illiquid entities for it to function as a proper currency. They say that more than 90% of Bitcoin stays in the same hands for more than a year – with a “significant and rising fraction held by wallets with light turnover.”
“Daily payment activity in El Salvador would represent ~4% of recent on-chain transaction volume and more than 1% of the total value of tokens which have been transferred between wallets in the past year.”
The illiquidity of Bitcoin that the bank alleges could act as, in their words, “potentially a significant limitation on its potential as a medium of exchange.”
The bank also mentions that constant demand for Bitcoin/US dollar conversions on the government platform could overwhelm dollar liquidity, leading to risks in the balance of payments and fiscal stability.
According to the report, JPMorgan also points to a recent survey first reported by Reuters that suggests most El Salvadorans are still skeptical of their country’s embrace of Bitcoin. The survey, done by Disruptiva, an affiliate of Francisco Gavidia University, concluded that out of 1,233 participants, 54% of respondents view Bitcoin adoption as “not at all correct”.
JPMorgan’s latest critique of El Salvador’s embrace of Bitcoin isn’t their first. In June, they said in a report first shared by Documenting Bitcoin on Twitter that they couldn’t see any coherent benefit behind the country’s decision and lamented the possibility of other countries doing the same.
“It is difficult to see any tangible economic benefits associated with adopting Bitcoin as a second form of legal tender, and it may imperil negotiations with the IMF.
Those moves may be complicated if this is the beginning of a broader trend among similarly situated, smaller nations.”
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