Tag: LIQUIDITY

HashKey Launches Wealth Management Platform for Institutional Investors

by Blockchain News

Hong Kong-based digital asset firm, HashKey Group, has launched a new wealth management platform aimed at professional and institutional investors. The move comes in response to a growing demand from investors seeking access to virtual assets. The platform will allow the group to offer solutions to help tap into the “growing opportunities of virtual assets.”

HashKey’s venture capital arm, HashKey Capital, is the first to benefit from the new platform. It will manage portfolios that only contain virtual assets. The company was granted a “Type 9 asset management license” by Hong Kong’s Securities and Futures Commission, which likely paved the way for its latest offering.

The launch of the wealth management platform comes after HashKey closed a $500 million investment round for a fund that aims to push for mass adoption of blockchain and crypto technologies. The move highlights the company’s commitment to driving the adoption of digital assets.

According to a 2022 study from consultancy firm Boston Consulting Group, only 0.3% of individual wealth is invested in crypto, compared to the 25% invested in equities. However, HashKey believes there is “potential robust demand for virtual assets in the future.”

In addition to launching the new platform, HashKey is expanding its over-the-counter trading service. The company plans to increase the number of tokens in its spot market and increase its liquidity coverage to 24/7. The move is a response to recent challenges in the crypto market, which have highlighted the need for deep and reliable liquidity.

HashKey’s move into the wealth management space comes as institutional investors continue to explore the potential of digital assets. Many are looking for ways to gain exposure to the emerging asset class, which has been one of the best-performing asset classes in recent years.

Overall, HashKey’s launch of a wealth management platform for professional and institutional investors is a significant step forward for the digital asset industry. The move highlights the growing demand for virtual assets and the increasing interest from institutional investors seeking exposure to the emerging asset class. With its new platform and expanded over-the-counter trading service, HashKey is well-positioned to capitalize on the growing interest in digital assets.

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Bitcoin Liquidity Drops Despite Price Surge

by Blockchain News

Bitcoin (BTC) has seen a significant price surge of 45% in 2023, making it one of the best-performing assets in recent times. However, despite the bullish quarter in terms of price gain, BTC’s liquidity has dropped to a 10-month low. The liquidity dry-up is partly attributed to the ongoing financial crisis in the traditional financial market and regulatory actions against crypto companies.

The current financial crisis has caused several banks to collapse, which has directly impacted the crypto ecosystem. In particular, the collapse of crypto-friendly banks such as Silicon Valley Bank and Signature Bank has removed crucial U.S. dollar payment rails for crypto, leading to a liquidity crisis, especially on U.S. exchanges. This, in turn, has led to increased price volatility, forcing traders to pay more fees in slippage.

Slippage refers to the price difference between the expected price of a transaction and the price at which it is fully executed. For instance, for a $100,000 sell order, the slippage for the BTC/USD pair on Coinbase climbed by 2.5 times at the beginning of March. During the same time frame, Binance’s BTC/USDT pair’s slippage barely moved.

The liquidity crunch has also led to higher price volatility on U.S. exchanges, where the price discrepancy between BTC and U.S. dollar pairs has increased drastically compared with non-U.S. exchanges. For example, the price of BTC on Binance.US is more volatile than the average price across 10 other exchanges.

Conor Ryder, research head of on-chain data analytics firm Kaiko, explained the drastic impact of the liquidity crisis on traders and the market. He noted that stablecoins are replacing U.S. dollar pairs, and although it lessens the impact of U.S. banking troubles, it has an adverse effect on liquidity in the United States. He added that it would indirectly harm investors there.

Despite the regulatory actions taken against crypto companies, the price of Bitcoin has remained relatively strong, outperforming traditional assets such as stocks and bonds, which have seen one of their worst years. However, the liquidity crisis has undoubtedly impacted the market, and it remains to be seen how it will evolve in the coming months.

In conclusion, Bitcoin’s liquidity drop despite its price surge is a concerning development for traders and investors alike. The ongoing financial crisis and regulatory actions against crypto companies have led to a liquidity crunch, causing increased price volatility and higher fees for traders. As the market evolves, it will be interesting to see how BTC’s liquidity and price behave in response to the changing market conditions.

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Institutional Investors Seek Tokenization Solutions

by Blockchain News

Institutional investors managing trillions of dollars worldwide are seeking solutions for tokenization, which can allow fractional ownership of an asset that previously had to be sold as a whole. This method can improve liquidity for global assets, which is expected to reach $145.4 trillion by 2025, according to Big Four firm PwC. Polygon, a blockchain scaling and infrastructure development platform, has been working with many global players in this space, including Hamilton Lane and JPMorgan.

In January, Hamilton Lane announced the first of three tokenized funds backed by Polygon, bringing part of its $824 billion in assets under management on-chain. By tokenizing its flagship Equity Opportunities Fund, Hamilton Lane was able to lower the minimum required investment from an average of $5 million to $20,000. This move enables greater accessibility for smaller investors and creates a more liquid market for the asset.

JPMorgan also explored the potential of decentralized finance (DeFi) for wholesale funding markets by executing its first cross-border DeFi transaction on the Polygon network in November. This initiative is part of a pilot program that aims to leverage the benefits of blockchain technology to improve traditional financial markets.

Polygon offers a blockchain scaling solution that enables developers to build and connect decentralized applications. The platform has been working on providing institutional-grade infrastructure for tokenization, which is crucial for institutional investors who require reliable and secure systems. Colin Butler, the global head of institutional capital at Polygon, acknowledges the need for institutional-grade systems and solutions that are easy to implement, flexible, and upgradeable, which are essential for institutional investors to integrate tokenization into their existing systems.

Overall, tokenization presents a significant opportunity for institutional investors to improve liquidity and accessibility to a wider range of investors, and platforms like Polygon are working to provide the necessary infrastructure to support the growth of this market.

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Circle Plans to Cover USDC Shortfall After SVB Shutdown

by Blockchain News

Circle, the issuer of the stablecoin USD Coin (USDC), has announced that it will use corporate resources to cover the shortfall on its reserves after Silicon Valley Bank (SVB) was shut down by the California Department of Financial Protection and Innovation. USDC liquidity operations will resume as normal when banks open on Monday, enabling redemption at 1:1 with the US dollar. The stablecoin lost its $1 peg on March 11, trading as low as $0.87, due to the disclosure of $3.3 billion of Circle’s reserve held at SVB. (Read More)

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POSA Publishes Two White Papers

by Blockchain News

On February 21, a collection of white papers was released by the Proof of Stake Partnership (POSA), a nonprofit industry organization. These white papers investigate the legal status of deposit tokens in regard to their respective subfields of the law, namely securities law and tax law, within the framework of the securities legislation and tax law of the United States, respectively. Contributors originating from more than ten various departments belonging to a range of industrial organizations and representatives of those departments were instrumental in facilitating the publication of these pieces.

The act of producing transferable receipt tokens on blockchains that use a proof-of-stake consensus mechanism as their method for obtaining network consensus is referred to as liquid staking. Liquid staking is also known as proof-of-stake consensus. In the context of cryptocurrencies, this activity is referred to as “staking.” The statement that inspired the term “liquid staking” also gives its name to the practice, which is referred to as “liquid staking.” In order to establish ownership of cryptographic assets that have been staked or prizes that have been received for the purpose of staking, these tokens are put into circulation and employed in the process of establishing ownership of those assets. Staking the tokens itself is one method for accomplishing this goal. The POSA is opposed to the description of “liquid staking derivatives” because, according to their argument, it paints a false picture of the qualities that are associated with the tokens. The POSA stated that the tokens should now be referred to as “liquid staking tokens,” and they advocated for this change as a direct result of the event that took place. Since the Ethereum Merge took place, there has been a perceptible increase in the number of people who are contemplating taking part in liquid staking. This boost in interest comes as a direct result of the Ethereum Merge.

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Digital Currency Group Suspends Payouts To Maintain Liquidity

by Blockchain News

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In an effort to maintain its existing level of liquidity, the venture capital company Digital Currency Group (DCG) has informed its shareholders that it would temporarily suspend the payment of its quarterly dividends until further notice.

In the letter that was sent to shareholders on January 17, the primary objective of the company is to improve the quality of our balance sheet by lowering operational expenditures and maintaining a sufficient level of liquidity.

DCG said that it was also mulling over the possibility of selling some of the assets included within its portfolio.

The company’s financial problems stem from the difficulties experienced by one of its subsidiaries, a cryptocurrency broker known as Genesis Global Trading. According to reports, Genesis Global Trading owes its creditors more than $3 billion.

Due to the fact that Genesis has disabled its customers’ ability to withdraw funds since November 16, Cameron Winklevoss, on behalf of his exchange Gemini and its users who have funds on Genesis, has written an open letter to the board of directors of DCG requesting that Barry Silbert be removed from his position as CEO of the company. The letter was published on January 10.

Winklevoss claims that Gemini is owed a total of $900 million by Genesis for money that were leased to Genesis as part of Gemini’s Earn program. This program gives clients the opportunity to earn an annual return of up to 7.4% on their investments. Winklevoss also said that DCG owed Genesis a total of $1.675 billion, although Silbert refuted this assertion.

Both companies were charged on January 12 by the United States Securities and Exchange Commission (SEC) for marketing unregistered securities via the Earn program. Winklevoss’s letter had only just been sent when the SEC threw gasoline on the flames by adding the charges.

The difficulties with Genesis were not discovered until after the withdrawal stop on November 16, which the company blamed on the extreme market instability that followed the collapse of FTX and was the cause of abnormally high amounts of withdrawals.

On November 10, less than a week earlier, Genesis disclosed that it had around $175 million stranded on FTX. As a direct consequence of this revelation, DCG sent Genesis an emergency equity injection of $140 million in an effort to remedy the company’s liquidity concerns.

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Lido Launches Layer-2 Ethereum Staking And 150,000 LDO Tokens In Rewards

by Blockchain News

Lido is now on layer-2 solutions, Arbitrum, and Optimism, and would allocate 150,000 LDO tokens in rewards per month from Oct 7 for wstETH across each network.

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According to Lido, expanding its services to layer-2 blockchains would better enhance the accessibility of Ethereum staking while also reducing gas fees. 

Unlike traditional staking, where stakers can’t withdraw until their staking period lapses, Lido Finance is a liquidity staking platform that provides flexibility for stakers. It allows stakers to withdraw their staked tokens whenever they want. 

Lido’s first phase of Layer-2 rollout enables the bridging of Lido’s Wrapped Staked Ether (wstETH) token to the two supported L2 networks while preserving the unique properties of stETH in the process.

stETH is the Ethereum liquid staking token Lido gives to stakers when they stake. In opposition, wstETH is the wrapped version that ensures a fixed balance of stETH for use in decentralized finance (DeFi) applications that require a constant balance mechanism.

With plans to issue out the 150,000 LIDO tokens as rewards, the protocol said the aim behind this initiative is to build wstETH liquidity for liquidity mining incentives on DeFi partners, including Beethoven, Balancer, Curve, Kyber Network, and Velodrome.

Notably, Lido’s plan to expand to L2 networks was initially revealed in July when the team admitted that in the future, a large portion (if not a majority) of economic activity and transaction volume would migrate to both general use and purpose-specific Layer 2 networks.

In addition, both layer-2 networks Lido first chose to deploy to have an 80% market share between them. According to L2beat, Arbitrum leads with a 50.68% market share and $2.38 billion in total value locked (TVL), and Optimism follows with a 30.68% share and a $1.44 billion TVL.

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Voyager Digital Suspends Crypto Trading, Deposits, And Withdrawals

by Blockchain News

Voyager Digital, a cryptocurrency brokerage firm, announced last Friday that it has suspended all customer trading, deposits, withdrawals and loyalty rewards.

“This was a tremendously difficult decision, but we believe it is the right one given current market conditions. This decision gives us additional time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform we have built together. We will provide additional information at the appropriate time,” said Stephen Ehrlich, CEO of lending firm Voyager Digital.

Voyager has been facing financial challenges that have adversely affected its operations. On June 22, the lending firm revealed that it had huge exposure to the crypto hedge fund firm Three Arrows Capital (3AC). Last week, Voyager issued a notice of default to the struggling crypto hedge fund for failure to repay its loans.

The loans totalled about $665 million, consisting of 15,250 BTC ($294 million) and $350 million in USDC. Voyager said that it had requested Three Arrows Capital to repay $25 million in USDC by June 24, and repay the entire balance of USDC and BTC by June 27.

Since 3AC defaulted, Voyager recently disclosed plans to pursue all means to recover its funds from the crypto hedge fund firm, including through a court-ordered liquidation process in the British Virgin Islands.

Voyager recently secured over $500 million loans in form of $200 million in USDC and $294 million worth 15,000 BTC from Alameda Research, a quantitative trading firm owned by FTX boss Sam Bankman-Fried, to mitigate its $665 million exposure and weather the crypto winter.

So far, Voyager has received access to the $75 million part of the FTX loan, but it seems that was not enough to keep its business operating as usual. The firm looks forward to accessing more funds whenever available. 

The Fragile Crypto Market

The ongoing crash of cryptocurrencies has left several market players in the industry facing financial difficulties.

Bitcoin and altcoins have plunged hard as the market experiences new realities triggered by interest rate hikes by the Federal Reserve and the collapse of TerraUSD stablecoin and its sister cryptocurrency Luna.

On June 12, crypto lender Celsius suspended all account withdrawals, citing “extreme market conditions.” Reports showed that Celsius invested hundreds of millions of dollars in the illiquid token derivative called Staked ether, or stETH, another controversial cryptocurrency that caused damage in the digital asset market, after the fall of TerraUSD.

A prominent crypto lending firm BlockFi also has been facing financial struggles as it had significant exposure to Three Arrows Capital. The crypto lender recently announced massive job cuts and its valuation dramatically reduced from $5 billion to $1 billion. Last week, BlockFi secured a $250 million revolving line of credit from FTX to bail out its business.

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Bitfarms Sells 1500 BTC Goes for New Loan to Boost Liquidity

by Blockchain News

Bitfarms Ltd, a global Bitcoin self-mining company headquartered in Canada, announced on Friday that it entered into an equipment financing agreement to stabilize its financials amid the plunge in crypto prices.

Bitfarms announced plans to sell 1,500 BTC of its mined Bitcoins in order to reduce a Bitcoin-backed credit facility it put into place in December with Galaxy Digital Holdings (GLXY). The firm intends to reduce the outstanding debt related to the facility by one-third, reducing the US$100 million loan to US$66.0 million.

Since the Galaxy facility was set to expire on June 30, Bitfarms is now negotiating with Mike Novogratz’s crypto merchant bank to renew the line. The sale of 1,500 Bitcoin to raise $34 million will help Bitfarms partially pay down the loan. To raise $34 million means that the Bitcoins were sold at the recent average price of about $22,000 per coin.

Besides that, Bitfarms has entered a new $37 million equipment financing deal with NYDIG at a 12% interest rate. Bitfarms collateralized the loan by the mining rigs at the company’s Leger and Bunker facilities.

This means that the NYDIG equipment financing agreement offers non-dilutive funding to Bitfarms’ miners to support growth in Quebec. In other words, the agreement provides equipment financing at an interest rate of 12% per annum collateralized by Bitfarms at the company’s Leger and Bunker facilities, funded as the assets are installed and become operational.

Initial funding of US$37 million has been completed with Bitfarms also in talks with NYDIG for additional funding, which might come in July and October as construction continues at the miner’s Bunker facility.

Reduced Profitability

Last year, Bitcoin’s price surged as high as $68,000. The move made miners earn profits as high as 90%. As a result, many of them expanded their operations at a rapid pace and started 2022 with great fortune.  However, Bitcoin mining has recently become less profitable as the price of the crypto has dropped downwards. Cryptocurrency markets have slid, with Bitcoin’s price currently trading at $20,573 at the time of writing.

Some major mining firms such as Riot, Marathon, and Core Scientific, that prefer not to shut down their rigs, have decided to raise capital in the debt or equity markets or sell off some of their Bitcoin holdings in order to sustain their business operations.

Argo Blockchain recently announced a plan to raise debt and sell some of its Bitcoin to cover expenses. Core Scientific has already sold some of its mined Bitcoin this year and planned to continue doing so. Most of these firms have missed their bullish revenue estimates and have conservatively revised their expansion plans.

Some miners also have resorted to buying newer mining rigs to churn out more Bitcoin to make mining more profitable. A few days ago, CleanSpark ordered purchases of new Bitcoin mining rigs.

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Bitcoin (BTC) $ 26,472.09 0.36%
Ethereum (ETH) $ 1,834.46 0.08%
Litecoin (LTC) $ 87.43 1.30%
Bitcoin Cash (BCH) $ 111.19 0.02%