Weekly News Digest for May 7-13
Market Update
Last week in the cryptocurrency market saw a notable divergence between market activities and speculative sentiment,. Bitcoin experienced fluctuations with a bearish bias, evidenced by a significant drop to a low of $60,634, which triggered over $34 million in liquidations of long positions. Despite these declines, there were moments of recovery as Bitcoin attempted to regain momentum, pushing its price briefly above $63,000. This recovery was short-lived, however, as broader market uncertainties and mixed technical indicators suggested ongoing challenges. Concurrently, meme coins associated with political figures saw unusual gains following endorsements, contrasting with the broader market's struggles. Overall, the week highlighted the crypto market's sensitivity to both macroeconomic factors and speculative trading, with significant price movements creating a cautious atmosphere among investors.
News of the Week
U.S. spot bitcoin ETFs saw a marked increase in positive inflows, with $595.3 million accumulated over two consecutive days after a streak of outflows. Grayscale's Bitcoin Trust also experienced a turnaround, registering inflows after 77 days of consistent outflows. Overall, U.S. bitcoin ETFs recorded significant trading volume, with Fidelity's, Ark Invest's, and Blackrock's funds leading in positive inflows.
Joachim Nagel, President of the Deutsche Bundesbank and ECB Governing Council member, argues for the evolution of central banks' business models in light of declining appeal of traditional currency and the potential of digital currencies. He highlights the urgency to adopt digital innovations, including a digital euro, and sees distributed ledger technology (DLT) as a tool to modernize central banking. Nagel mentions the progress on the digital euro project with the ECB preparing to issue the currency in upcoming years, although a final decision has not been made.
Bitcoin Cash is set to undergo a network-wide upgrade on May 15th to implement an adaptive blocksize limit algorithm, aiming to enable the network to automatically adjust to increases in demand. The upgrade, named "Jessica," follows the inclusion of Ethereum-like smart contracts and is designed to safeguard against social attacks and disagreements among network participants. The adaptive blocksize limit will maintain the current 32 MB as a floor value, ensuring a standby capacity for the network and signifying Bitcoin Cash's commitment to scaling as demand grows.
Franklin Templeton, a significant investment firm with over $1.5 trillion AUM, predicts Solana could ascend to the third-largest cryptocurrency spot due to its robust project and network. The firm commends Solana for its response to the FTX crisis, ability to capitalize on trends like meme coins, and the potential of its ecosystem following a series of airdrops and developer efforts to resolve network congestion. With its various initiatives and favourable traits like low fees and scalability, Franklin Templeton believes Solana stands a strong chance to be at the forefront of the next major wave of crypto adoption.
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The Philippines Securities and Exchange Commission (SEC) intends to introduce a cryptocurrency regulatory framework in the second half of 2024 to protect Filipino crypto traders. The SEC, led by Chairperson Emilio B. Aquino, has recently taken action against Binance and requested its application be removed from Apple and Google app stores for not having the proper license to operate in the country. The upcoming regulations will require crypto exchanges to obtain necessary permissions before operating, stemming from the SEC's increased vigilance following the FTX collapse.
Bancolombia Group, a leading banking company in Colombia, has launched a cryptocurrency exchange called Wenia, aiming to challenge dominant exchanges like Bitso and Binance by offering a Colombian peso-pegged stablecoin and promoting financial inclusion and the digital economy's development. Wenia is expected to attract 60,000 users in its first year, providing a user-friendly platform that encourages newcomers to engage with cryptocurrency. In addition to high-security standards, Wenia allows deposits in Colombian pesos to be transformed into its stablecoin, COPW, and supports various digital assets including Bitcoin and Ether, though these are not considered securities or currencies by the government.
FTX's reorganization plan indicates that nearly all account holders are set to be fully repaid. The exchange, having raised roughly $15 billion through asset sales, will pay 118 cents on the dollar to 98% of creditors with claims up to $50,000. The repayment plan comes after the collapse of FTX and the conviction of its founder, Sam Bankman-Fried, for fraud.
Genesis Digital Assets has partnered with YPF Luz to use flare gas for operating a Bitcoin mining site in Argentina, where 1,200 miners will be hosted at the Bajo del Toro thermoelectric plant. This approach utilizes flare gas, a byproduct of oil exploration usually wasted due to the high cost of transportation, thereby monetizing it and reducing emissions. The project exemplifies a more environmentally friendly and sustainable energy source for cryptocurrency mining, showing that such operations can have a positive environmental impact.
Ethereum Improvement Proposal (EIP) 7702, led by Vitalik Buterin and others, aims to improve Ethereum's account abstraction for better quantum resistance and standard compatibility. This proposal introduces a new kind of transaction that transforms user accounts into smart contract wallets for simpler operations and lower costs. With features to enhance network security and user autonomy against quantum threats, it has sparked optimism within the Ethereum community.
Vaneck has launched a "MEMECOIN" index through Marketvector Indexes to track the performance of the leading six meme coins. The index operates as a modified market cap-weighted index with a 30% cap per coin to ensure diversification and risk mitigation. Dogecoin (DOGE) and shiba inu (SHIB) are the most significant holdings, and Vaneck's research lead Matthew Sigel notes that meme coins are mainly for entertainment.