Ethereum (ETH) has scaled heights more than Bitcoin (BTC) since they both hit 2-year lows in June.
On June 19, BTC nosedived to $17,601, whereas ETH dropped to $880.93 as more bloodbath engulfed the crypto market.
At the time, the Federal Reserve (Fed) news about interest rate hikes was still ripe, which bearishly impacted cryptocurrencies.
Nevertheless, the two leading cryptocurrencies have weathered the storm based on the upward momentum witnessed.
ETH has recorded the highest rise of 97.8% compared to Bitcoin’s 24.7%.
Ethereum’s price was hovering around $1,743 during intraday trading, according to CoinMarketCap. Bitcoin was trading at $21,939 during the same time.
The much-anticipated merge slated for next month is the major catalyst giving ETH the upper hand.
The transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism called the merge is speculated to be the biggest software upgrade in the Ethereum ecosystem. Nevertheless, it has been elusive since its launch in December 2020.
Ethereum’s co-founder, Vitalik Buterin, recently hinted that the merge would happen around September 15.
Jacob Joseph, a research analyst at CryptoCompare, pointed out:
“It is reasonable to believe Ethereum can still rally as we edge closer to the Merge.”
Nevertheless, Joseph noted that the $2,000 level had become a significant resistance level. He said:
“However … $2,000 has proved to be a major resistance for Ether, and the asset needs more wind behind its sail to break that level.”
Once the merge rolls out, the PoS algorithm will enable the confirmation of blocks in a more cost-efficient and environmentally friendly way because validators will stake Ether instead of solving a cryptographic puzzle.
Ripple, a US-based leading provider of crypto solutions for businesses, announced on Thursday the launch of its crypto on-demand liquidity (ODL) in Brazil.
According to the statement, Travelex Bank will become the first Brazilian financial institution to use the ODL to boost its trading activities.
Ripple’s ODL solution uses XRP, a digital asset ideal for payments, to allow clients to send money across borders instantly with a very low-cost settlement between countries and without the need to hold pre-funded capital in the destination market.
Travelex Bank was seeking to provide a better customer experience to its partners, who have limited capital to cover the costs of pre-funding, which was causing hindrances to their growth.
Travelex will use ODL to deliver instant settlement and access to liquidity 24/7/365, allowing its partners to grow better and scale their business.
Travelex will initially use ODL to support payments between Mexico and Brazil, with plans to support more international destinations as well as more use cases such as internal treasury and bulk small and medium-sized enterprises (SME) payments in the future.
Brad Garlinghouse, CEO of Ripple, talked about the development: “Brazil is a key market for Ripple given its importance as an anchor to business in Latin America. We are excited to collaborate with an innovative partner like Travelex Bank to help move money more efficiently for the benefit of its customers across Brazil.”
Continues to Conquer Banking Sector
Travelex joins other Ripple customers and partners in the region, including Banco Rendimento, Remessa Online, Frente Corretora, Banco Topazio, and B&T Câmbio already benefiting from RippleNet cloud technology.
In 2019, Ripple opened its local office in Sao Paulo, Brazil, to set foot in Latin America and expand its footprint in the region.
In June 2020, Banco Rendimento acquired RippleNet Cloud services to increase payment volumes and to provide clients with greater visibility, transparency, and standardization in their balances.
Rendimento Bank joined many other financial institutions already running on the RippleNet Cloud.
Financial institutions and banks use the RippleNet cloud to maximize their business benefits with increased speed of innovation and time-to-market while reducing the total cost of ownership.
RippleNet cloud enables the ability to send and receive payments between financial institutions on RippleNet, the global network of Ripple’s blockchain payments.
Ripple and XRP enjoy the trust of several banks as a model for CBDCs because it is highly centralized and is based on a permissioned network where only certain network nodes can validate transactions, as opposed to permissionless and decentralized cryptocurrencies such as Bitcoin and Ether.
Garlinghouse’s firm previously looked to partner with Brazil for the CBDC (Central Bank Digital Currency) issuance.
In August 2020, the Banco Central do Brasil (BCB) – Brazil’s central bank – launched a working group for the development of its digital currency two months after holding a meeting with Ripple Labs.
In November last year, Palau – the pacific island country – partnered with Ripple Labs Inc. to explore the development of its national digital currency.
In March last year, France’s central bank, Banque de France, openly discussed Ripple/XRP as a possible platform for Europe’s central digital currency.
SuperLayer, a blockchain venture studio, has secured $25 million in funding with backing from its strategic partner, Polygon Network – a Layer-2 scaling solution.
With its knack for selecting projects with innovative solutions that can help improve the usability of the blockchain ecosystem in general, SuperLayer says it is more interested in protocols looking to build on the Polygon Network.
While revealing no other backer, SuperLayer said it will be deploying the funding towards the expansion and strengthening of SuperLayer’s ecosystem of projects. Additionally, it plans on partnering with founding teams on development, design, and the fundraising required to scale projects that meet the needs of consumers around the world.
“Given SuperLayer’s focus on speed and quality, Polygon is a natural partner with industry-leading protocols designed to fix blockchain scalability issues that have slowed innovation,” said Kevin Chou, Managing Partner of SuperLayer.
“Polygon’s technology removes critical costs and congestion barriers to mass-scale consumer adoption, and its thriving ecosystem offers an ideal environment for growth and collaboration, opening the door for transaction-intensive crypto projects like SocialFi, GameFi, NFTs, and DeFi to reach their full potential. Our team at SuperLayer is excited to support ambitious projects to build on Polygon.”
Users in the digital currency ecosystem are now more concerned about usability in the Web3.0 world. Besides users, investors’ focus is clearly centred on innovations with a defined use case, a push that is likely fueling projects that may be emanating from Polygon.
Polygon makes using Ethereum very easy and scalable, and any outfit that may align with this mission may catch the attention of SuperLayer.
While Ethereum 2.0 is fast approaching, the Ethereum Foundation has come out to say the new protocol may not reduce gas fees and speed as is currently expected. This solidifies the need for Layer-2 protocols like Polygon and a viable case to believe SuperLayer will have enough startups to inject its received funds into.
Canaan Inc, a Chinese cryptocurrency mining giant and computing resource provider, has reported a better than expected revenue, despite the ban on crypto mining and transaction activities in China.
As announced by the company, its total revenues came in at RMB1,652.7 million ($246.7 million), a figure that represented an increase of 21.9% from the RMB1,356.1 million it reported in the first quarter of 2022. This impressive revenue also comes in as a 52.8% increase from the RMB1,081.8 million recorded in the same period of 2021.
What was most striking about Canaan Inc’s revenue is the fact that its computing power plunged lower in the second quarter. Per the figures published, the total computing power sold was 5.5 million Thash/s, representing an increase of 27.5% from 4.3 million Thash/s in the first quarter of 2022 and a decrease of 7.7% from 5.9 million Thash/s in the same period of 2021.
Though it is trading publicly on the Nasdaq Global Select Market, Canaan Inc is a Chinese company with its headquarters in Beijing. The firm’s Q2 performance has not really shown any form of dearth in operations and revenue despite the hostility of the Chinese government towards crypto activities as well as the overall impact of the crypto winter.
“The solid topline performance primarily resulted from the sequentially increased computing power sold and relatively high average selling price we secured with contract sales from previous quarters where the Bitcoin price was at a higher level. As the Bitcoin price further decreased in the second quarter, we responsively lowered our product price for spot sales to shoulder the pressure with our clients,” said James Jin Cheng, Chief Financial Officer of Canaan.
While Canaan’s financials show it is cash flow positive, the situation was notably different for other key stakeholders in the crypto mining ecosystem like Core Scientific, which sold more of its mined BTC to offset some of its debts and liabilities.
Nasdaq-listed financial services platform Robinhood Markets Inc has lowered its bid for United Kingdom-based crypto fintech firm, Ziglu in light of the current realities in the digital currency ecosystem.
The interest in Ziglu was first revealed in April when the US-based brokerage app unveiled a $170 million bid to take up ownership of the startup.
Robinhood has changed its bid and is offering $72.5 million representing a £28.29 share price, an amount less than half its initial proposal. While this new bid will result in losses for some of Ziglu’s investors, Chief Executive Officer Mark Hipperson affirmed that the company’s board has already approved the new bid.
He explained that should Robinhood terminate the existing sales and purchase agreement (SPA), the company would be left in an “extremely challenging market, and undercapitalized for the period ahead.”
“The board has spent significant time in discussion with Robinhood’s CEO and executive team negotiating and improving the terms of their revised offer. Based on these discussions and other considerations, we believe the revised proposal…is the best and only reasonable path forward for the company,” Hipperson said.
Robinhood’s move to slash its offer to acquire Ziglu was influenced by the current market condition, which has revalued most companies by about 50 to 90%. With its initial failure to penetrate the United Kingdom about two years ago, Ziglu, drawing on the regulatory backing, customer base, and unique solutions, represent the best bet for Robinhood to expand its footprint into the UK.
It is unclear when the new deal will be finalized. However, the new bid submitted by Robinhood is evident the company is keen, according to CEO Vlad Tenev, to “work to leverage the best of both companies, exploring new ways to innovate and break down barriers for customers across the UK and Europe.”
As record breaking temperatures have scorched the Northern Hemisphere, winter has hung over the crypto industry, with 2.25 trillion lost across the entire market in the past few months alone.
Yet a report released in June by technology consulting firm Capgemini found that approximately 71% of high-net-worth individuals (HNWIs) have invested in digital assets – a figure that rises to 91% for those under 40. Cryptocurrencies were reported as the favourite digital asset investment, followed by exchange-traded funds (ETFs) and metaverse investments.
It’s true that this time it’s different, and the growing interest of institutions will doubtless lift us out of the downturn eventually. But if this latest research paints such a rosy picture, what are the underlying reasons we find ourselves in this crypto winter?
1. Hawkish Fed Policy
In the context of the US’ suUS’-soft monetary policy of recent years, the debt burden of the markets has grown significantly, while borrowing has been carried out at historically minimal rates. As a result, the Federal Reserve hiked its benchmark rates by 75 basis points (bps) on June 15 to curb inflation that reached 8.4% in May.
This has inevitably seen a concurrent rise in the rate on deposits and loans, as well, causing people to shift money out of high-risk assets – including stocks and cryptocurrencies – into protective deposits, as the latter begin to provide more attractive returns.
A rate increase also affects the yield of US bonds. As the deposit rate rises, in order to attract investors to buy US government debt, the government must offer a similarly higher rate. As risk-free returns rise, so does the required return on investment in risky assets, so investors overprice them down. While this applies to all stocks, the companies that are most at risk that are not yet earning EBITDA or FCF – typically high-growth techs and biotechs, where the bet is on the company’s company’s potential.
2. Correlation between crypto and stock market
Cryptocurrencies have gone through various stages in their life span. They were initially “fads” that “eeks”and fanatics invested in. Some were “digital gol”” investors “led to in order to hedge their risks in a falling stock market.
With the increase in mass adoption, cryptocurrencies began to take the position of a specific, risky, but in many ways common stock market asset – in part facilitated by the rapid growth in institutional adoption over the recent years.
The entry of such large investors has seen capital soar and patterns and strategies for trading and investing appear. This has meant that, since 2020, cryptocurrencies – especially Bitcoin – have become financial instruments similar to other exchange traded assets, just with increased risk. This has led to a high correlation with the stock market which, in the current crisis, has been to the detriment of the crypto market.
3. Regulatory challenges
2022 has been a rollercoaster ride for cryptos. The global crypto market has been under the scrutiny of many different governments, with varying degrees of regulation popping up all over. Plenty are still in the process of studying cryptocurrency and trying to create suitable regulatory frameworks for the ever-evolving space. Central banks are actively developing CBDC concepts that may affect the distribution of stablecoins, regulators are reviewing the conditions for obtaining licenses, and all new jurisdictions are on the FATF grey list.
All these regulatory changes clearly impact crypto companies and investors, creating the effect of a suspended state in which it is extremely difficult to create clear entry and action strategies in the market. In fact, until there are regulations governing the reporting and trading of cryptocurrency assets, it’s unlikely that ait’sf these price drops will be the last.
For a large financial firm, this type of uncertainty is untenable. Due to their massive balance sheets, they may avoid speculating in assets that could lose them massive amounts of capital due to underlying fiscal problems. The monetary pullback and reduction of balance sheets will have an effect on all assets. However, with broader institutional adoption still in its early stages, the next wave of financial capital could be enormous. The key to unlocking it is in the hands of the regulators.
Waiting out the winter
Confidence does seem to be re-emerging in the market, but these three factors represent sizeable ‘cold fronts’ on the gl’bal crypto ‘arket.
Still, despite the volatility and fears surrounding the “crypto winter”, investor”interest in t”e region has not stagnated – suggesting that the momentum for mainstream digital asset adoption is likely to continue. We are, of course, seeing some institutional investors actively take profits in an attempt to keep at least some part of their assets. But many other investors are laying low, so as not to lose more on the fall of the market.
No one knows how long this crypto winter can last. What we do know is that winter always ends, and that the spring that follows can bring with it bountiful opportunities for growth.
Gemini, a major cryptocurrency exchange headquartered in New York, announced on Thursday that it launched a staking program called “Gemini Staking”, which allows customers to lock up their assets within their accounts and earn rewards or interest.
The program enables investors to seamlessly stake any crypto amount without fees and receive staking rewards in their Gemini account.
Gemini said customers can begin staking MATIC on the Polygon network, with plans to support Ethereum (ETH), Solana (SOL), Polkadot (DOT), and Audius (AUDIO) will take place next month after the Merge goes live.
Layla Amjadi, Vice President of Product at Gemini, said that customers’ interest influenced by the Merge was the key to the company’s move to launch its staking services.
Amjadi stated: “It’s now clearer than ever that people are interested in staking, especially now that we’re on the cusp of the Ethereum Merge. With Ethereum being a staking option for them on Gemini soon and after the Merge, and with there being more liquidity and higher yields, staking is becoming more and more appealing for people.”
In a statement, Gemini explained: “Staking is central to Proof-of-Stake consensus mechanisms, whereby users pledge crypto to validate transactions on a blockchain network securely. Once validated, users who have staked their crypto receive tokens as a reward.”
Gemini said the staking service is available to users across the United States (excluding New York, where local laws prohibit staking), Singapore, and Hong Kong.
The firm said the staking program protects customers’ staked assets by reimbursing them for penalties imposed by malicious validators on their staked tokens. Gemini will cover any expenses associated with the staking and de-staking processes.
Earning Interest in Crypto on The Rise
Gemini said staking is the second yield-generating product it has launched after its Gemini Earn. In February last year, the exchange launched “Gemini Earn”, an interest-earning program that enables customers to up to a 7.4% annual percentage yield (APY) on cryptocurrencies.
Although both Staking and Earn allow clients to earn a yield on their crypto, there are important differences in how such yields are generated.
Gemini’s staking launch comes as other crypto firms are establishing their offerings to create opportunities for retail and institutional customers to collect staking rewards.
Early this month, Coinbase introduced an Ethereum staking service targeting institutional clients in the US.
In June, Binance.US launched its staking service to outperform other exchanges in the U.S. like Gemini, Kraken, BlockFi, and Coinbase.
Binance.US’ staking program promises yields of up to 18% Annual Percentage Yield (APY) and allows users to lock in digital assets to support Proof-of-Stake (PoS) blockchains, which include Livepeer (LPT), the Graph (GRT), Solana (SOL), Cosmos (ATOM), Audius (AUDIO), BNB Chain (BNB), and Avalanche (AVAX).
In June, Bitstamp launched a staking offering for its US retail and institutional clients as investors seek out alternatives amid low yields and inflation.
CME Group, a derivatives marketplace based in Chicago, announced on Thursday that it will launch options on Ether futures on September 12 amid pending regulatory review.
CME said such new contracts will deliver one Ether futures, sized at 50 Ether per contract, based on the CME CF Ether-Dollar Reference Rate, which serves as a once-a-day reference rate of the U.S. dollar price of Ether.
The Ether options offerings will expand CME Group’s existing suite of crypto options contracts, including Bitcoin options and micro-sized Bitcoin and Ether options.
Tim McCourt, Global Head of Equity and FX Products, CME Group, commented about the development: “The launch of these new options contracts builds on the significant growth and deep liquidity we have seen in our existing Ether futures, which have traded more than 1.8 million contracts to date.”
McCourt said as the crypto market approaches the highly awaited Ethereum Merge next month, CME continues to see market players turning to the company to manage Ether price risk.
The launch of the new options is supported by market participants who are seeking to provide their customers with wider hedging options within the crypto landscape.
Sam Newman, Digital Assets Head of Brokering at TP ICAP, said: “With the upcoming Ethereum protocol merge, we expect this new contract to see significant interest from both our traditional customers as well as crypto native clients.”
Ryan Duckworth, head of trading at US-based Akuna Capital Head of Trading, also commented: “As the demand for crypto derivatives increases, we look forward to providing liquidity to allow customers to hedge risk and manage exposure to Ether.”
CME disclosed that its standard- and micro-sized Ether futures contracts have witnessed tremendous growth and continue offering consistent customer liquidity, volume, and open interest.
The firm experienced record daily volumes of Ether futures trading in July, with trading volumes in the second quarter surging 27% over the first quarter.
Responding to Needs of New Customers
The latest launch aims further to expand CME Group’s suite of cryptocurrency derivatives offerings.
Early this month, CME launched Bitcoin Euro and Ether Euro futures. In March, the firm launched Micro Bitcoin and Micro Ether futures options.
Such product launches are parts of efforts by CME to provide a broad range of market players – from institutions to sophisticated, active, individual traders – with greater flexibility and precision to manage their exposure to the two major cryptocurrencies by market cap.
Such a wide variety of global products are an important step in the growth of a thriving marketplace for institutions and sophisticated investors who want crypto exposure in a regulated environment.
The smaller contract sizes give investors and traders greater flexibility in participating in crypto markets with less upfront cost while opening the market up to new participants.
The Korea Financial Intelligence Unit (KoFIU), a top financial regulator in South Korea, on Thursday urged its local consumers using overseas cryptocurrency exchanges to verify whether such platforms have been registered under the Korean financial authority.
The watchdog disclosed that a total of 16 virtual asset service providers (VASPs) have failed to register themselves with the financial authority and are therefore regarded as illegal business operators in South Korea.
The regulator identified the crypto exchanges as follows: KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex.
The KoFIU stated that it has informed the investigative authority about the illegal crypto exchanges targeting Korean users by providing Korean-language services.
The financial regulator further said it has requested the Korea Communications Commission to block the companies’ website access to local users to prevent their unregistered business activities in the country.
In July last year, the KoFIU informed foreign virtual asset service providers, which are attracting Korean users, to register themselves with the financial regulator.
So far, the 16 platforms have failed to conduct the required registration obligation within the given timeframe.
In a statement on Thursday, the KoFIU said: “Virtual asset users should check whether the VASPs that they are dealing with are legitimately registered with the authority according to the law.”
The watchdog mentioned that it will continue closely monitoring illegal business activities by unregistered firms.
Strengthening the local Digital Asset Markets
South Korea’s crypto market grew to more than 55 trillion Korean won (US$42 billion) at the end of 2021, with a total number of users reaching over 15 million people, according to statistics by the KoFIU.
The crash that hit the crypto market in May and June this year adversely affected the Korean market at its prime — affecting around 280,000 investors in South Korea, with many claiming to have lost their life savings and some even taking their own lives.
Dealing with the repercussions of the multi-billion Terra-LUNA disaster, regulators in South Korea recently began embarking on reforms in the digital assets sector.
The authorities promised to build infrastructure for digital finance innovation by developing a regulatory framework for emerging digital sectors like crypto assets and fractional investments, among other things, including the direct involvement of banks in the country’s US$42 billion crypto industry.
