News Updates July 08, 2022
1. Bitcoin spikes above $22,500, but odds are it’s a fakeout.
Bitcoin’s (BTC) price spiked to $22,500 in the early hours of July 8, prompting calls of a bullish revival from some quarters.
The relief comes after weeks of extreme volatility that saw BTC dip as low as $17,600. However, considering the extreme events of late, it’s too soon to call an end to the bear cycle.
Bitcoin relief rally in precarious territory
Since the start of the new month, Bitcoin has gained 13% in value and exhibited signs of bottoming, as evidenced by a definitive uptick pattern forming on the daily closes.
The total market cap has seen an improvement over the past week. Since the start of July, inflows have totaled $53.2 billion, representing a 6% increase.
Despite the positive signs, @CryptoCapo warns investors not to get carried away or even expect an imminent move significantly higher. His reason — “not a single bullish sign to support” this thesis.
Moreover, despite the relief rally, @CryptoCapo expects a firm rejection of the local top retest, adding that alts could suffer up to 50% losses as a result.
2. Bitcoin ‘Fear & Greed’ index recovers to 2-month high after market sell-off.
After one of the worst quarters in their history, cryptocurrency prices might make a comeback, or at the very least, stop falling, if the attitude of traders is any indication.
The Bitcoin Fear and Greed Index hit 20 on July 8, which is the highest position it has reached in the last two months as per alternative.me. Indeed, this is the highest the gauge has reached since May 7, according to the multifactorial crypto market sentiment analysis.
As per a note published by Arcane Research on July 5, the indicator is moving closer to the “fear” level after spending a prolonged amount of time in the “extreme fear” level.
“The sentiment in the crypto market has been depressed for several months, but we’re seeing a slight improvement this week,” the platform stated.
3. US Fed Vice Chairwoman Brainard Doesn’t Like What She’s Seeing in Crypto
Lael Brainard argued aggressive regulation is needed for the sector before things get out of hand. One of the top officials at the Federal Reserve made it abundantly clear that the central bank – which is also a powerful financial watchdog – is paying careful attention to the flaws showing up as the crypto sector founders.
“Recent volatility has exposed serious vulnerabilities in the crypto financial system,” Fed Vice Chairwoman Lael Brainard said in a speech in London on Friday, which offered a laundry list of the failings of the digital assets sector. Brainard has been leading the Fed’s work on a potential digital dollar and has been minding the store on crypto policy discussions until the central bank appoints its permanent vice chair for supervision.
Brainard said the Fed has been “closely monitoring recent events where risks in the system have crystallized and many crypto investors have suffered losses,” according to a copy of the speech. And she suggests an answer: “Strong regulatory guardrails will help enable investors and developers to build a resilient digital native financial infrastructure.”
The vice chairwoman contends that the shortcomings of crypto are basically the same as traditional finance, and the sector needs to meet the same safety standards before it gets large enough to become a threat to the rest of the financial system.
“We have seen crypto trading platforms and crypto lending firms not only engage in activities similar to those in traditional finance without comparable regulatory compliance, but also combine activities that are required to be separated in traditional financial markets,” she said at the Bank of England event. “For example, some platforms combine market infrastructure and client facilitation with risk-taking businesses like asset creation, proprietary trading, venture capital and lending.”
TerraUSD’s meltdown has drawn the attention of the Fed and other regulators, and Brainard equated it with other financial runs throughout history.
4. Crypto Prices Spike As Fed Warns Of Upcoming Interest Rate Hikes.
There have been a number of events that have taken place in the crypto space recently. Perhaps, the most significant is Bitcoin’s (BTC) price breaking above $21.5K today. Furthermore, a recent event in the crypto space was a court order against Three Arrows Capital (3AC). The order revealed that the CEO of 3AC, Su Zhu, and his wife are creditors.
BTC’s positive performance over the last couple of days has seen other popular cryptos rise in price as well. For instance, Ethereum (ETH) is up 5.61% in the last 24 hours. According to CoinMarketCap, the top 10 largest cryptos by market cap also experienced price gains.
Moreover, crypto investors seemed to have liked last month’s minutes released by the Federal Open Market Committee. The minutes, which were released late Wednesday, put to rest some of the fears regarding the U.S. Central Bank’s commitment to tightening monetary policy. As a result, BTC traded as high as $21,600 – a +6% gain over the past 24 hours.
5. Crypto Lender Voyager’s Marketing Materials Under FDIC Scanner: Report
* Customers are figuring out their Voyager deposits aren’t directly insured by the FDIC
* The crypto lender said customers would be able to access funds “after a reconciliation and fraud prevention process” is completed
Voyager, the cryptocurrency lender that filed for bankruptcy this week, is under the spotlight for the way it marketed its deposit accounts to users.
The crypto lender had publicly said dollar deposits are insured by the Federal Deposit Insurance Corporation, owing to a partnership with Metropolitan Commercial Bank.
The Wall Street Journal reported on Thursday that a December 2019 statement on Voyager’s website claims customers would receive full reimbursement in “the rare event your USD funds are compromised due to the company or our banking partner’s failure.”
But the same statement has now been altered to remove references to the banking partner or itself, now simply saying in the “rare event your USD funds are compromised, you are guaranteed a full reimbursement (up to $250,000).”
What is notable is that Voyager’s rule applies only to customers’ dollar deposits — not cryptoassets. The lender’s customers have expressed frustration at not being able to access their funds, and are especially concerned after it revealed significant exposure to embattled crypto hedge fund Three Arrows Capital.
Voyager is among some firms that have taken a hit from plunging cryptocurrency prices and a liquidity crisis in the market. After freezing withdrawals and trading on its platform, the firm filed for bankruptcy and said customers would receive their funds upon reorganization. It has said it holds more than $350 million in cash at the Metropolitan Commercial Bank.
In its statement on July 6, Voyager said customers with dollar deposits would receive access to their funds after a “reconciliation and fraud prevention process” is completed with Metropolitan Commercial Bank. But it didn’t lay out how long that would take.
Some customers have only just worked out that their deposits are not insured in the way they initially thought, according to The Journal. It appears Voyager guaranteed a safety net — when there actually isn’t one — by stealthily packaging how its deposits are insured
The firm’s individual customer accounts are eligible for insurance, but only in the event of failure by Metropolitan Commercial Bank. The New York-based bank clarified that this week, saying FDIC insurance would only be available if the bank itself failed and not in case of Voyager’s failure. It added that it maintains an account for Voyager customers holding only US dollars, not cryptoassets.
6. Court Grants SEC’s Request to File a 120-Page Omnibus Motion Against 10 Ripple Experts
In other developments, District Judge Analisa Torres has granted the SEC’s request to file a 120-page omnibus motion to limit or exclude the testimonies of 10 Ripple’s experts.
Recall that the SEC requested that it file a 120-page omnibus motion to exclude or limit the testimonies of 10 Ripple experts. The SEC opted to file an omnibus motion instead of utilizing the 15-page limit per expert as previously ordered by the court.
The 10 experts the SEC plans to limit or exclude their testimonies have made various reports regarding the lawsuit.
Meanwhile, the blockchain company and Individual Defendants, Brad Garlinghouse and Chris Larsen did not object to the SEC’s request.
However, Ripple and its two executives demanded that they should also be allowed the same page limit when filing an opposition to the SEC’s motion.
7. CFTC Sanctions Commodity Pool Operator with $13 Million
David Seibert was ordered to pay $10,794,508 in restitution to victims of his scheme.
He allegedly accepted over $10 million from 11 participants in his scheme.
The US Commodity Futures Trading Commission ( CFTC ) announced on Thursday that it imposed sanctions against an unregistered commodity pool operator, who was ordered to pay over $13 million.
According to the press release, David Seibert from Lakeway, Texas, is accused of running a commodity fraud and was found liable for solicitation fraud and the misappropriation of client funds. A permanent registration ban and trading ban were also imposed by the court, which prohibited him from violating the Commodity Exchange Act in the future.
Over $10 million was fraudulently solicited and accepted by Seibert from 11 participants from March 2016 to April 2019. During the time, Seibert claimed to use participant funds for short-term, high-interest, secured 'bridge loans' to third-party borrowers for the purpose of making property repairs while they sought permanent financing.
According to Seibert, he would find the lending opportunities, confirm that the borrower was qualified, and then close and service the loan. However, no loans were originated by Seibert. As a result, Seibert used most of the funds to trade commodity interests in his personal trading account, where he lost over $8.3 million. Funds from other participants were used for personal expenditures by him.
8. Celsius Accused of Fraud in Lawsuit by Ex-Employee
The roughed-up crypto lender froze withdrawals last month and later said it was exploring restructuring options.
A lawsuit filed in the New York State Supreme Court by KeyFi accuses Celsius of crypto market manipulation and failure to put in place basic accounting controls to protect customer deposits.
Jason Stone – the founder and CEO of KeyFi, which was partly acquired by Celsius – took to Twitter with the court filing to describe the falling out between the parties.
Stone wrote: "We discovered Celsius had lied to us. They had not been hedging our activities, nor had they been hedging the fluctuations in crypto asset prices. The entire company’s portfolio had naked exposure to the market."
The lawsuit accuses Celsius – prior to Stone coming on board – of having no organized investment strategy other than "desperately seeking a potential investment that could earn them more than they owed to their depositors."
9. US Treasury Develops 'Framework' for International Crypto Regulation
The document is the first publication from the department to stem from President Biden's executive order on digital assets.
The U.S. Treasury Department published a fact sheet Thursday outlining how it could work with foreign regulators to address the cryptocurrency sector.
The fact sheet, which is the first report published by the department as a result of U.S. President Joe Biden's executive order on crypto, said the framework "is intended to ensure that ... America's core democratic values are respected," pointing to consumer, investor and business protection, the safety of the global financial system and interoperability.
According to the sheet, the framework's policy objectives also include reducing the potential use of crypto for illicit finance, promoting access to financial services, supporting technological advancement and "reinforc[ing] U.S. leadership in the global financial system."
"The United States must continue to work with international partners on standards for the development of digital payment architectures and CBDCs (central bank digital currencies) to reduce payment inefficiencies and ensure that any new payment systems are consistent with U.S. values and legal requirements," the fact sheet said.
This work should address those concerns, the document noted.
"Additionally, the United States will promote the adoption and implementation of international standards through bilateral and regional engagements. Across all engagements the United States will seek to ensure a coordinated message, limit duplication and encourage that work is maintained within its primary stakeholders," the document said.
To support this work, the Treasury Department said the U.S. should hold "engagements" and other types of forums, the fact sheet said.
The Justice Department published its response to Biden's executive order on digital assets last month.
