Crypto Flipsider News – Celsius’ Liquidity Crisis; Crypto Loses $170 Billion; Ethereum Merge Delayed; EU Crypto Regulation; Grayscale Pension Fund
Read in the Digest:
- Celsius freezes withdrawals, price crashes after sending $320 million to FTX.
- May CPI report sparks Bitcoin and crypto market crash, wiping $100 billion.
- Ethereum drops to $1,200 as developers announce Merge delay.
- European Union nears agreement on cryptocurrency regulation.
- Grayscale: pension funds are exploring crypto, Yellen pushes against 401(k) crypto funds.
Celsius Freezes Withdrawals, Price Crash After Sending $320 Million to FTX
The Celsius Network, one of the foremost decentralized finance platforms, has been hit with a major liquidity crisis. To combat the situation and “stabilize liquidity and operations,” the lending platform unstaked $247 million worth of Wrapped Bitcoin from Aave.
With investors rapidly pulling funds from Celsius, the developers announced the halting of all trades and withdrawals. The Celsius team stated that they took “this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.”
Data tracker Watcher.Guru reported that the Celsius Network transferred as much as $320 million (consisting of the aforementioned unstaked wBTC and 54,749 stETH worth $74.5 million USD) to the FTX exchange before announcing that it would be halting all trades and withdrawals on the platform.
In light of the liquidity crisis and the withdrawal restrictions, the price of Celsius (CEL) has fallen by as much as 75%. Over the last 24 hours, CEL has dropped by 49% to trade at $0.2074 at the time of writing, marking significant losses from its 7-day high of $0.76.
The 7 day price chart for Celsius (CEL). Source: CoinMarketCap
- Celsius claims that its “ultimate objective is steadying liquidity and restoring withdrawals, swaps, and transfers between accounts as soon as possible. Although the voluminous workload might delay the process.”
Why You Should Care
The fear, uncertainty, and doubt surrounding DeFi projects after the Terra crash has played a role in the sell-off which is crippling Celsius.
May CPI Report Sparks Bitcoin and Crypto Market Crash, Wiping $170 Billion
On Friday, June 10th, the Bureau of Labour Statistics released its May ‘Consumer Price Index’ (CPI) report, stating that the United States has hit an annual inflation rate of 8.6%, its highest since 1981.
The report sparked a downtrend in the stocks and bonds markets, accelerating the ongoing crypto sell-off. Since the announcement, the price of Bitcoin has plunged from a high of $30,400 to as low as $23,400.
The 7 day price chart for Bitcoin (BTC). Source: CoinMarketCap
Over the last 24 hours, the price of Bitcoin has fallen by 15%—the third largest single-day price drop of the last decade. As of this writing, Bitcoin trades at $23,607, its lowest price since December 2020.
The 24 hour price chart for Bitcoin (BTC). Source: CoinMarketCap
The massive sell-off is not unique to bitcoin, with each the top 10 Altcoins ranked by market cap reporting losses of at least double digits over the last 24 hours. The crash has subsequently seen more than $170 billion wiped from the global crypto market cap over the same period.
The 7 day price chart for the global crypto market cap. Source: CoinMarketCap
- Despite the market crash, Nigel Green, the CEO of Devere Group, predicts Bitcoin to experience a significant bull run and price rise in the fourth quarter of this year.
Why You Should Care
According to analysts, the fear of worsening inflation has caused many investors to sell their Bitcoin and Altcoin stakes.
Ethereum Drops to $1,200 as Developers Announce Merge Delay
On Monday, the price of Ethereum, the world’s second-largest cryptocurrency, fell to below $1,200 for the first time since November 2020. at the time of writing, ETH is down by 16% over the last 24 hours, trading at an interday low of $1,999.
The 24 hour price chart for Ethereum (ETH). Source: CoinMarketCap
Ethereum’s sharp decline, which kicked off with an announcement from network developers that the “Difficulty Bomb” would be delayed by at least two months, was intensified by the announcement that inflation in the U.S. had hit a four-decade high of 8.6%.
Tim Beiko, an Ethereum core developer, announced that, after analyzing the bugs in the recently concluded Ropsten Testnet merge, the Difficulty Bomb would be pushed to August 2022, marking its sixth delay.
The Difficulty Bomb is crucial in forcing validators to accept the merge and the new PoS model. The implementation of the Difficulty Bomb will exponentially increase the difficulty level of puzzles required for Proof of Work mining, forcing miners to adopt PoS.
- Last month, Vitalik Buterin and Preston Van Loon, an Ethereum core developer, announced that “if everything goes to plan,” the mainnet merge will be carried out in August.
Why You Should Care
The Difficult Bomb was pushed back due to the fact that it could prove to be problematic for the stability of the Ethereum network if it were to be detonated too soon before the mainnet merge.
European Union Nears Agreement on Cryptocurrency Regulation
The European Union is concluding its ‘Markets in Crypto Assets‘ (MiCA) proposal, which will introduce standardized rules for the regulation of the cryptocurrency industry across its 27 member countries.
The French President, the current chair of the EU, and the European Parliament (EP), are all optimistic about settling the issues that have delayed the draft’s advancement. Sources familiar with the move report that negotiators are expected to meet to iron out any issues on June 14th and 30th.
According to these reports, the EU is assessing the impact of cryptocurrencies on financial stability, and look to ensure investor protection, which has sorely risen in priority in light of the fall of the TerraUSD stablecoin in May.
Member states and the EU parliament are still discussing ways to reduce the use of stablecoin for payments, especially for transactions which are not denominated in euros.
- According to reports, EU members and legislature are heatedly discussing the addition of anti-money laundering provisions in the crypto legislation.
Why You Should Care
Should a consensus be reached, the EU will proceed to introduce a union-wide framework for the regulation of the crypto industry.
Grayscale: Pension Funds Are Exploring Crypto, Yellen Pushes Against 401(k) Crypto Funds
Michael Sonnenshein, CEO of digital asset management firm Grayscale Investments, has said that more pension fund companies are looking to add crypto to clients portfolios, even despite the declining crypto market.
According to Sonnenshein, investors are looking at the crypto sector with a long-term perspective in mind. Sonnenshein further emphasized that investors are particularly aware of regulatory outlooks when exploring such digital assets.
Janet Yellen, the U.S. Treasury Secretary, has pushed back against the inclusion of crypto in retirement accounts, due to their nature as “very risky” options for regular savers.
Yellen expressed that the inclusion of crypto in retirement plans is not something she would recommend. The U.S. Treasury Secretary then added that Congress could look to regulate the use of crypto in retirement plans.
- Sonnenshein has criticized Yellen’s stance, claiming that she was shortsighted in pushing for restrictions to access to Bitcoin.
Why You Should Care
The exploration of crypto for pension funds aligns with the sentiment that cryptocurrencies will eventually regain their previous highs, and naturally grow in value in the future.
Is stablecoin a security? Crypto Investors get rid of stablecoins: USDT suffered the most
The market capitalization of the leading stablecoins has dropped significantly after the FTX crash. Let’s find out what this means for the market and whether it’s worth following the example of other investors and going into fiat. Is stablecoin a security?
The drama surrounding FTX seriously undermined investors’ confidence in centralized exchanges and forced them to get rid of stablecoins en masse. USDT suffered the most: according to CoinMarketCap, its supply has fallen from $67 billion to $65 billion in the last two weeks.
Because of concerns about Tether and stablecoin security reserves, users are redeeming USDT or converting it to USDC. A similar situation was observed after the collapse of Terra Luna – then within two weeks the market capitalization of the asset fell by $10 billion.
However, CTO Paolo Ardoino says that Tether was not affected by the FTX crash and users have nothing to worry about.
BUSD and DAI were also hit
USDT is not the only stable coin affected by the FTX story. For example, the circulating supply of BUSD fell from $23 billion to $22.5 billion, and DAI fell from $5.7 billion to $5.2 billion.
On the contrary, the capitalization of USDC and Pax Dollar steel blockers increased. Over the past two weeks, USDC’s supply reached $44.7 billion.
The cryptocommunity is actively discussing this on Twitter and speculating about the reasons for this growth. Some believe it may be due to USDC’s profitability and the influx of former USDT holders into the asset.
FTX collapse undermined investor confidence
The fall of the Sam Bankman-Fried empire has undermined user confidence in the cryptocurrency and led to a massive collapse in prices.
But market participants also fear that other platforms will follow FTX’s lead. So it’s no surprise that many retail investors are choosing to hold their own assets rather than hold them on centralized exchanges.
Previously, we reported that Poloniex curtailed support for stablecoins on the BNB Chain.
U.S. authorities launch investigation into Genesis investing system
The Securities Commission of Alabama launched an investigation into the Genesis investing system. This edition of Barron’s, citing the head of the regulator, Joseph Borg.
Borg refused to elaborate on what exactly Genesis is suspected of. The newspaper said the Alabama regulator as well as agencies in several other states were investigating whether Genesis had encouraged U.S. citizens to invest in securities.
Which other regulators are in question is unclear. Borg himself has not directly stated the investigation against Genesis. Instead, he said that “if a firm serving institutional investors fails, retail depositors will be affected [as well].”
Is Genesis investing legitimate?
Genesis Global Trading has hired consultants from investment bank Moelis & Company to consider options for restructuring the business, including bankruptcy. As The New York Times has learned, the broker has not yet made any final decision and still hopes to avoid bankruptcy.
It is worth noting that Moelis & Company consultants also tried to save the bankrupt broker Voyager Digital. A Genesis spokesperson said in a media comment that the firm is still trying to find a way to resolve the issue without declaring bankruptcy.
Genesis’ problems have already affected the firm’s partners. The credit division of cryptocurrency exchange Gemeni is known to have frozen the withdrawal of client assets, citing Genesis’ difficulties. The exchange later said it was working on a solution, but did not provide details.
We previously reported that Binance is launching a reserve-proof system.
How the SEC is trying to create conditions for money control bitcoin. What could it lead to?
When CME Group launched the first bitcoin futures contract in 2017, Chairman Emeritus Leo Melamed said he would “tame” the major cryptocurrency. The SEC has since approved several ETFs. But as exchanges increased their supply of BTC, the community began to have questions about market manipulation. Today, it’s about money control bitcoin.
Banks want to control bitcoin. Can banks control bitcoin?
Manipulating bitcoin with ETFs will lower its price in the short term, but will help accelerate the mass adoption of the cryptocurrency by traditional market participants.
The SEC approved the first bitcoin ETF in October 2021. The ProShares Bitcoin Strategy exchange-traded fund appeared on the New York Stock Exchange on Oct. 19, a day when the fund’s shares traded nearly $1 billion.
The Bitcoin ETF is not suitable for retail investors because it gives institutional investors an advantage. A bitcoin futures ETF has “the potential for price suppression and greater volatility due to the dominance of futures.” BTC futures will appreciate relative to the spot price because of positions opened by hedge funds.
The gold standard. Who controls cryptocurrency?
It’s a common belief in the gold market that ETFs are currently outpacing prices. The same practice seems to have been adapted for the bitcoin market as well. CME Group claims that bitcoin ETFs will help investors “benefit from efficient price discovery in transparent futures markets.”
“Paper” bitcoin may change the minds of crypto skeptics
Bitcoin’s core value comes from two factors. First, BTC is truly decentralized. Second, its maximum supply is 21 million coins. However, bitcoin ETFs increase the supply of BTC by selling “paper” assets and thus affect the value of the cryptocurrency.
The threat of decentralization
Bitcoin futures ETFs can accelerate mass adoption. However, their existence runs counter to the decentralization ethic advocated by the BTC. There is concern that the BTC could be “hijacked” by hedge funds and big banks, which could end up manipulating the price.
We previously reported that Polkadot is offering money to fight cryptocurrencies.
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