🧘♂️Big Crypto Trends
Market Meditations | April 5, 2022
Please note this is our newsletter from 05/04/22 which didn’t send at the usual time due to technical difficulties.
The first quarter of 2022 has been filled with interesting developments despite slow price action. In today’s newsletter, we have rounded up what you need to know.
- Q1 Wrap Up: Key Events & Lessons
- Crypto Waves
- The UK Becoming the Global Hub for Cryptoasset Technology
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⏰ Top Headlines
- FTX US to invest in IEX stock exchange to launch digital securities
- Logan Paul’s marketplace for tokenized collectables goes live after raising $8 million
- Terra Wallet Leap Raises $3.2M in Private Token Sale
- Drama erupts around the Waves blockchain project and trading firm Alameda
? It’s a Q1 Wrap
1️⃣ Legacy Markets Cross Over
A recurring theme of this quarter has been legacy market crossover which has been driven by institutions becoming increasingly bullish on crypto and a surge in regulation.
- Key global players such as the UK, the USA and the European Union (EU) have led the charge regarding digital asset regulation. Although not everyone agrees on new proposals, regulation is key to mainstream adoption.
- As cryptocurrencies continue to grow in popularity, the market becomes more correlated with legacy markets as more money enters the market following similar sentiment.
To find out how you can use key stock market indicators such as the Feds balance sheet, Nonfarm payroll and CPI charts to gain an edge in the market see our ‘Economics 101’ and ‘Hedging Risks’ guides.
2️⃣ Is DeFi Ready for Another Run?
DeFi looks to be gaining traction once again. According to DeFi Llama, TVL currently sits at $230.7 billion whilst steadily increasing. Additionally, according to Dune Analytics, total DeFi users have increased from around 4.2 million at the start of January to over 4.5 million by the end of the first quarter.
Currently, second in TVL is Lido (LDO), a protocol that provides liquidity for staked assets also known as ‘liquid staking’. To find out more about this hot new DeFi trend and how you can profit check out our guide ‘Staying Liquid’.
3️⃣ Hacks and Exploits Plague the Market
- Wormhole, a token bridge that allows users to bridge wrapped assets between supported chains, was hacked for a total of $254 million highlighting the fragility of cross-chain applications discussed by Vitalik Buterin.
- At the end of February, a phishing scam stole $1.7 million worth of NFTs from 32 users’ OpenSea accounts.
- To end the quarter, $600 million worth of crypto assets were drained from the Ronin network making it the largest DeFi hack to date.
The crypto market is still in its infancy and there is a high probability further exploits will occur. Protecting your capital is just as important as growing your capital so to ensure your crypto is best-protected review our ‘Cryptocurrency Security Guide’.
4️⃣ The Terra Ecosystem
The Terra ecosystem has continued to make headlines in the last 3 months resulting in the LUNA token performing extremely well despite slow market conditions.
- Terra’s UST stablecoin has shown considerable strength becoming the 4th largest stablecoin with a market cap of $16.8 billion.
- The Luna Foundation Guard (LFG) has put aside $10 billion to create a BTC reserve to protect the peg of UST and reduce the hypothetical risk of a ‘bank run’ scenario.
- Anchor Protocol currently holds just over 50% dominance of the $30 billion TVL kept within the Terra ecosystem.
Anchor can be utilised as a high-yield savings account as it provides a stable return on UST at around 19.5% APY. Check out our guide here to learn how you can utilise this passive strategy to increase your returns.
? Wave Breaker
The sea is calm before the storm, and perhaps WAVES founder Sasha Ivanov wishes things had stayed that way. Over the last 36 hours the native token has dropped 25% and it’s stablecoin USDN has de-pegged from the dollar. What’s going on?
- Waves is a layer 1 blockchain protocol and development toolset that lets people build smart contracts and dApps without the need for extensive programming.
- Launched in 2016 it has an algorithmic stablecoin (USDN) that is overcollateralised by WAVES tokens. If WAVES drops in price, the “contract issues special tokens that users can buy at a price below $1 and later redeem for USDN at a 1:1 ratio”.
- On Sunday, Ivanov accused Alameda of price manipulation, suggesting they had pushed the price up on FTX before borrowing WAVES to short and creating FUD to trigger a drop.
- He has also backed a community proposal to temporarily reduce the liquidation rate to 0.1% meaning anyone currently shorting WAVES would have to unwind their positions immediately to avoid loss of funds.
- Co-CEO of Alameda suggested looking at funding rates might reveal the truth, whereas Sam Bankman Fried responded in his own colourful way.
- People continued to withdraw liquidity from Vires Finance, causing a drop in token value and a massive de-pegging of USDN from the dollar.
So is it manipulation, bad luck or playing dirty behind the scenes? Whatever it is, make sure you understand how algorithmic stablecoins work and what can cause them to untether.
? A New Global Hub for Crypto on the Rise?
On Monday 4th April 2022 during the UK Fintech Week, the British Government announced plans to turn the UK into a global crypto technology hub. The first steps have been taken to make the United Kingdom an ally to crypto technologies and assets.
- Stablecoins will be brought into UK payment regulations as they aim to create conditions for stablecoin issuers and service providers to operate and invest.
- A Financial Market Infrastructure Sandbox (FMIS) will be developed by 2023. This will allow firms to explore the potential benefits crypto technology can provide.
- The Royal Mint has received orders to create an NFT that plans to be released by the summer.
- The UK’s Chancellor of the Exchequer Rishi Sunak is at the forefront of the push. He said in an official statement “it’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country.”
Other measures include: exploring ways to enhance the competitiveness of the UK tax system, a two day FCA led “CryptoSprint” with industry participants and the establishment of a ‘Cryptoasset Engagement Group’ to advise the government on issues facing the crypto sector.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.