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The most important industry news and detailed analysis of digital assets in the weekly review of GetBlock Magazine.
The bitcoin rate over the past seven days fell by 0.22%. The asset reached its highest values on May 16, when 1 BTC was traded at $ 31,460, the minimum indicators were noted on May 19 – $ 28,654 per coin. As of May 20, 11:50 Moscow time, the bitcoin rate is $ 30,194 (according to Binance).
The cost of the second largest cryptocurrency Ethereum by capitalization over the past seven days decreased by 1.46%. The native token of the cryptocurrency exchange Binance (BNB) increased in price by 2.3%.
The total capitalization of the crypto market for the week decreased from 1.31 to 1.29 trillion dollars, with 44.8% dominance of bitcoin. The share of Ethereum is 19.1%.
Crypto Market Regulation in Russia
On May 18, the head of the Ministry of Industry and Trade of the Russian Federation, Denis Manturov, announced the possible legalization of cryptocurrencies in Russia as a means of payment. The minister did not give exact dates, but noted that this “will happen sooner or later.” At the moment, the Russian authorities are actively engaged in the regulation of digital assets, but the Bank of Russia and the Ministry of Finance still cannot come to a common agreement.
On May 19, the Ministry of Internal Affairs of Russia agreed on the revised bills “On Digital Currency” and “On Amendments to Certain Legislative Acts of the Russian Federation in Connection with the Adoption of the Federal Law “On Digital Currency”.” If these laws are adopted, representatives of the Ministry of Internal Affairs will be able to arrest and confiscate cryptocurrencies by court decision, and in the future store them on a special wallet of the department.
This week, the State Duma in the first reading adopted a bill on taxes on transactions with digital financial assets (DFA). According to the document, the tax base when making transactions with the CFA is defined as the difference between the sale and purchase price, taking into account taxes. For Russian companies, income tax will be 13%, foreign companies will pay 15%. The services of information system operators and the issue of DFA will be exempt from VAT.
The first CFAs may appear in Russia before the end of 2022. This was stated by the head of the State Duma Committee on the Financial Market Anatoly Aksakov. He confirmed the registration of platforms for the release of CFA from Sberbank, Norilsk Nickel and Transmashholding.
According to the official, DFA will be able to become the basis of financial settlements in the blockchain. In addition, their use will gradually transfer all relationships between companies to the distributed registry.
Integration of NFT into social networks
“VKontakte” plans to launch a marketplace for the sale of NFT. The company’s management believes that VKontakte should become the main provider of access to non-interchangeable tokens in Russia and the CIS countries. In the future, the social network can create its own metaverse.
Streaming music service Spotify has begun limited testing of NFT on its platform, giving artists the opportunity to promote tokens through their profiles. Some users of the Android application in the US will be able to go to view and buy NFT on external marketplaces, the platform itself does not sell tokens and does not take a share of sales. The test results will help decide whether to implement this feature and whether to consider further integration of NFT on Spotify. DJ Steve Aoki and indie band The Wombats are taking part in the testing.
Music company Universal Music Group (UMG) has entered into a partnership agreement with the NFT-marketplace LimeWire. The deal will allow artists of UMG labels to issue their own non-fungible tokens.
Previously, LimeWire was a social network for sharing music. In April 2022, entrepreneurs Paul and Julian Zehetmaira bought the project to transform it into a music NFT marketplace. LimeWire has already attracted more than $ 10 million in investments, the official launch of the site should take place at the end of May 2022. On LimeWire it will be possible to buy musical works and other collectibles in the form of NFT.
Expert opinions about bitcoin
Last week, the founder of cryptocurrency exchange FTX, Sam Bankman-Fried, criticized the use of bitcoin as a means of payment. He stated that bitcoin’s transaction confirmation system is not capable of scaling and coping with the millions of transactions that would be required to make the cryptocurrency an effective means of payment. The 30-year-old billionaire also expressed the opinion that to create a functional network of crypto payments will require an alternative type of blockchain with a Proof-of-Stake (PoS) consensus algorithm. He added that it is used.PoS will make transactions efficient, easy and less energy-consuming.
The opposite opinion is shared by the CEO of the company-developer of payment solutions Block (formerly Square) Jack Dorsey. He called bitcoin the only candidate for the role of money on the Internet. According to Dorsey, the development of BTC may seem slow compared to other cryptocurrencies, however, this is due to the balanced decisions made to maintain it as a means of storing and transferring money.
Economist and founder of HS Dent Publishing Harry Dent expects the widespread adoption of BTC as a digital monetary standard in the long term. At the same time, he allowed the price of bitcoin to fall below $ 3,000 with the reach of $ 500,000 by 2037, on the next global market rise.
Senior analyst at Bloomberg Intelligence Mike McGlone believes that in the long term, only Bitcoin and Ethereum will benefit from the tightening of the policy of the US Federal Reserve System (FRS). He considers a temporary decline in cryptocurrency rates against the background of the fall of the stock market to be the norm. According to the analyst, the Fed’s interest rate hike will cause more damage to stock markets than to major cryptocurrencies.
Movement of capital in the crypto market
Analytical company CryptoQuant has published data indicating the outflow of bitcoins from exchanges. According to the charts, as of May 16, the lowest net BTC flow on the platforms over the past 8 months was recorded. The net flow indicator is calculated based on the difference between the bitcoins entering the exchange and those withdrawn. A positive value of the indicator indicates an increase in reserves. For spot markets, a high value usually indicates rising sales pressures.
At the same time, the weekly inflow of capital into crypto funds set a record since the beginning of the year. $274 million was invested in investment products based on digital assets. Most of the funds fell on bitcoin – 298.6 million dollars. Ethereum funds, on the contrary, faced an outflow of 26.7 million. An ETF called purpose Bitcoin ETF has invested $284.8 million.
On May 17, the fear and greed index of the cryptocurrency market (F&G) fell to its lowest since March 28, 2020. The sentiment indicator has reached 8/100 (extreme fear), which indicates the extreme concern of investors. Unrest in the market began after the collapse of the TerraUSD (UST) stablecoin and the temporary loss of Tether’s peg (USDT) to the US dollar, as well as the fall of the bitcoin rate below $ 30,000.
The Fear and Greed Index is an indicator that measures the overall mood of investors in the market. It is measured on a numerical scale from 0 to 100, where zero means “extreme fear” and 100 means “extreme greed.” To determine the index, an analysis of volatility, market volume, capitalization of the first cryptocurrency and trends, as well as sentiment in social networks is carried out.
Collapse of the Terra Ecosystem
On May 8, the collapse of the algorithmic stablecoin TerraUSD (UST) began, on May 11 it fell to $ 0.22. On May 13, the Terra network announced the suspension of work in order to think over a recovery plan.
On May 16, the head of Terraform Labs, Do Kwon, proposed a hard fork of the network. According to Kwon’s plans, the new chain will not be tied to the UST stablecoin, and the old one will continue to exist under the name Terra Classic (LUNC). However, the Terra community did not support this idea. 91% of users opposed the division of the blockchain into two separate networks.
On May 17, it became known that the lawyers of Terraform Labs began to leave the company. According to LinkedIn profiles, Chief Legal Officer Mark Goldich, General Counsel for Litigation and Regulation Noah Exler and General Corporate Counsel Laurence Florio have left Terra. Some Twitter users have suggested that the lawyers left the company because of concerns about their subsequent salaries.
The head of Pershing Square Capital Management, Bill Ekman, compared the collapse of the Terra blockchain ecosystem with the collapse of a financial pyramid. Ekman explained that the price of the native LUNA token was supported only by the demand from new investors and the restriction of the supply of available coins. The ecosystem of the network collapsed when the number of token sellers exceeded the number of buyers.
The South Korean authorities intend to hold parliamentary hearings after the collapse of the UST course in order to develop measures to protect investors. Do Kwon was also urged to speak at the hearing and explain the reasons for the incident.
South Korea’s internal revenue service has accused Do Kwon and Terraform Labs of evading income and corporate taxes worth more than 100 billion won ($78.4 million). On the site VedasIt is reported that shortly before the collapse of the UST stablecoin and the LUNA token that supports it, Do Kwon tried to liquidate the South Korean company in order to move abroad. This circumstance caused the authorities to suspect that Kwon was evading taxes.
South Korean law firm LKB & Partners intends to file a lawsuit against Do Kwon on behalf of retail investors. The class action lawsuit may be joined by several employees of LKB & Partners who lost their investments as a result of the collapse in the value of UST.
The European Central Bank (ECB) may begin developing and testing a digital euro as early as 2023. According to a member of the ECB Executive Committee Fabio Panetta, this stage will take the regulator up to three years. He also noted that the successful implementation of the central bank’s digital currency (CBDC) can be facilitated by its recognition as a legal means of payment and use in P2P payments.
The Bank of Russia plans to develop technological cooperation with other countries through a system of fast payments and a digital ruble. In addition, the regulator sees opportunities for integrating the e-ruble with foreign digital currencies, such as the yuan. This was told by the First Deputy Chairman of the Bank Olga Skorobogatova
Circle (the issuer of the USDC stablecoin) announced the full provision of the asset with fiat dollars and US Treasury bonds. According to Circle, as of May 13, 2022, USDC’s centralized stablecoin collateral structure is 22.9% ($11.6 billion) cash, and 77.1% ($39 billion) is made up of U.S. Treasury bonds. In total, 50.6 million USDC is in circulation.
All reserves are stored in American structures – the investment company BlackRock and the Bank of New York Mellon. Circle stressed that one USDC can always be exchanged for one US dollar.
Tether was forbidden to hide information about the usdt collateral. The New York State Court rejected the motion filed by the issuer of the USDT stablecoin Tether Limited. In it, he asked for permission to block public access to documents explaining the composition of Tether’s reserves over the past few years. In addition, on May 12, Tether burned 3 billion USDT to restore the asset’s peg to the dollar. Developers in one day destroyed 3 billion USDT with the help of a special account called Tether Treasury.
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