News updates May 23, 2022
1. Bitcoin (BTC) Registers A Strong Bullish Divergence Moving Past $30,000
After trading under $30,000 for almost a week, Bitcoin registered a strong bullish divergence on late Sunday, May 22. As of press time, Bitcoin is trading 2.5% up above its crucial resistance of $30,000 levels. Popular crypto analyst Lark Davis writes:
Davis further adds that although the global macro setup is currently worrisome, there’s some hope after all the bearish sentiment. It will be interesting to see whether Bitcoin could flip this resistance into a strong support zone. Historically, $30,000 has served as a critical support level for Bitcoin.
Spotting the trendline of lower highs and lower lows, Davis notes that we can possibly see a relief rally up to $37,000. By this time, we could also be moving closer to the 200-day moving average. But this could also mean a possibility of Bitcoin price slipping to a low of $22,000 before giving a decisive breakout on the upside.
2. Crypto Market Forecast: Week of May 23rd 2022
A curated weekly summary of forward-focused crypto news that matters. This week, Bitcoin and Bitcoin-centric stocks continue to deal with the Terra collapse fall-out and a bearish macro-environment. Additionally HEX, a token with a large retail community, suffers heavy losses.
Another challenging week for crypto sees the Bitcoin (BTC) price continue to range around the US$30K mark. Ether (ETH) is down just over 2% (US$2K), and Binance coin (BNB) is up by almost 7% (~US$320). The latter two maintain their status as the second and third largest (non-stablecoin) assets on the Brave New Coin market cap table.
The crypto-ecosystem as a whole has taken a dive following not only the macroeconomic environment (and arguably a correction from the “free money” era of COVID spending) but also since the TerraUSD and Luna series of events, beginning on May 8th. But the broader ecosystem of the traditional financial system also felt the pinch. MicroStrategy, Coinbase, and Robinhood all saw drops in their stock prices following 8 May (albeit with some recovery since then).
MicroStrategy currently owns over 129,000 bitcoins, and its CEO, Michael Saylor, has said his company would buy more if the BTC price dropped to the US$21K price point. Saylor has called MicroStrategy a “non-existent spot ETF”. But as an ongoing strategy, the company “will be buying bitcoin at the top forever”. MicroStrategy’s new CFO, Andrew Kang, confirmed in an interview with the Wall Street Journal this week that “There are no scenarios that I’m aware [in which] we would sell”.
*Some Learnings From The Terra/Luna Debacle*
The idea of algorithmic stablecoins, and even stablecoins more generally, pose some problems that deserve close consideration.
First, there is the problem of centralization. Terra tweeted on May 12th that they had “halted” their blockchain. This in itself shows just how centralized the Terra blockchain was to begin with. (For benchmarking, compare this to Bitcoin’s ~15K reachable “full nodes”). Certainly it is arguable that a stablecoin (whether backed by real assets or algorithmic) must be centralized so that somebody can be held accountable for its ‘stability’. But to the extent that you centralize, you necessarily move away from the trustlessness (or “trust minimizing”) characteristic that cryptographic assets are supposed to represent.
Second (yet another point of centralization), the Terra blockchain is a proof-of-stake (PoS) model, which despite the perk of relative environmental friendliness, prompts the envitable questions of “Who then owns the majority of the stake? And what are the stakeholders’ interests and values?”
Third, just how good is the algorithm that has been deployed for this “stable” coin’s supposed stability? The very fact that the Luna Foundation Guard acquired ~80K bitcoins in the first place to maintain the 1:1 peg between TerraUSD and the US dollar implies, on one hand, some level of conscientiousness on their part in case something were to “go south” (as it did) but, on the other hand, a lack of confidence in their own algorithm.
The 20% yield offered by the Anchor protocol for TerraUSD holders led investors to skip due diligence that they otherwise might have done. And the inflationary climate in which we now live pushed investors towards higher risk, higher potential reward like TerraUSD and Luna to begin with. The two factors are interconnected in a subtle but important way.
*Crypto news for the week ahead
24 May*
The DC Blockchain Summit will focus on public policy around crypto Tuesday, with both in-person and streaming tickets available for the event. The summit will host top industry leaders, legislators, and regulators.
*25 May*
Community voting on whether to implement the proposed Terra Luna rescue plan ends. The plan involves the creation of an entirely new Terra chain and the airdropping of its tokens to existing holders of Luna and UST. At the time of writing, votes in favor were at 65%.
*24-26 May*
An online event called Metaverse Ecosystem & Investment Conference will discuss NFT, DeFi, gaming, and more. The event will focus on the Asian market with industry speakers from around the region.
With the exception of Binance coin (BNB) and HEX (HEX), this week’s top crypto asset prices by market cap are strikingly similar to the week before. HEX was the hardest hit, with almost a 32% drop versus the previous week. Although the reason for HEX’s sharp drop in price is unknown, the ERC20 token’s boast of 38% average annual staking returns is reminiscent of the unusually high yields (20% annually) offered to holders of not-so-stablecoin TerraUSD (UST) on the Anchor protocol before the recent death spiral. This, along with HEX battling accusations of it being a scam, seem indicative of market participants derisking under the current climate.
*Bitcoin Price Chart*
Bitcoin still struggles to fully recover after the downward push as the Luna Foundation sells off the majority of its 80K bitcoins in a failed attempt to maintain the 1:1 peg of its TerraUSD “stable” coin. Glassnode notes that the bitcoin selloff was among the largest realized losses in its history (summing all realized losses divided by total market cap at the time of sale).
3.
India crypto app CoinSwitch chief calls for regulatory 'peace, certainty,' Reuters says
India needs crypto rules to resolve regulatory uncertainty, protect investors and boost the sector, CoinSwitch CEO Ashish Singhal said on Sunday, as reported by Reuters.
“Users don't know what will happen with their holdings - is government going to ban, not ban,” Singhal, who co-founded CoinSwitch, told Reuters at the World Economic Forum in Davos. “Regulations will bring peace ... more certainty,” he added.
While India's central bank has in the past voiced concerns and even supported a ban on cryptocurrencies, a federal government move to tax crypto income has been seen by the industry as a sign of potential acceptance. The Block reported on May 9 that India's Goods and Services Tax Council was considering a proposal to impose a 28% tax on all cryptocurrency transactions, citing a report by CNBC-TV18.
CoinSwitch, which is valued at $1.9 billion, says it is the largest crypto company in India with more than 18 million users, according to the report.
Blockchain and cryptocurrency companies have a large presence at this year's Davos meeting, which coincides with a period of crypto prices plummeting globally.
4. Russian Appellate Court Cancels Decision to Block Tor Project’s Website
A court of appeals in Russia has overturned a ruling by a regional court which allowed the blocking of the Tor Project’s website in the country. Due to violations during the initial proceedings, the case has been returned to the court of the first instance for another review.
*Roskomsvoboda Helps Cancel the Blocking of Tor Project’s Website in Russia*
Procedural violations, mainly the failure to summon the owner, have led to the canceling of the regional court’s decision to block torproject.org, Roskomsvoboda announced this week. The lawyers of the non-governmental organization working to protect the rights of internet users in Russia played a role in the case which has been sent back to the first instance court in Saratov region.
The Tor Project’s website was blocked in December last year on the basis of a decision of the Saratov District Court from Dec. 18, 2017. The hearing in the appellate court, held online, was attended by Ekaterina Abashina from Roskomsvoboda’s legal team. Since the ruling of the district court has been canceled, torproject.org should be unblocked, she said.
Abashina explained that the defense had two main arguments to challenge the initial decision. First of all, the absence of a representative of the platform at the hearings affected the rights and obligations of the owner. Then, Russian law does not currently prohibit the dissemination of information related to VPN technologies and anonymizers.
The prosecutor did not file a written response to the lawyers’ complaint but made only a verbal objection. Roskomnadzor, Russia’s media watchdog which had blocked the website, filed a written response claiming the court had unlimited powers to recognize any information as prohibited, Abashina detailed. The legal expert told Forklog that Russian authorities want to restrict access to the website because of the published instructions on how to download the privacy-oriented Tor browser.
Ekaterina Abashina expects the new proceedings to begin within a month and hopes that the court of first instance considers Roskomsvoboda’s second point, that the spread of information about technologies such as Tor is not banned in the Russian Federation, and also attempts to summon the affected website’s owner as required by law.
Sites disseminating useful information and providing services to the crypto community have been targeted by Russian authorities in the past few years. Last June, a court in Russia’s Perm region decided to block a number of platforms describing how to exchange cryptocurrency for fiat cash. In December, Roskomnadzor took steps to restrict access to six VPN providers for helping Russians reach “banned” information. Some operators have successfully challenged these measures in Russian courts.
5. Indian Central Bank Head Bashes Crypto After Latest Crash.
Reserve Bank of India’s (RBI) Governor Shaktikanta Das on Monday has reaffirmed his negative stance on crypto. RBI had always raised concerns that cryptos will undermine the monetary, financial, and macroeconomic stability of India. In fact, investors and the government had been warned against cryptocurrencies, which have now crashed immensely.
In addition, RBI Governor hints at announcing an interest rate hike in the next monetary policy meetings in June.
“Crypto Lacks Value” – RBI Governor Shaktikanta Das
In an interview with CNBC-TV18 on May 23, RBI Governor Shaktikanta Das said investors were warned against volatility in the crypto market, which has now made several investors lose money.
“We have been cautioning against crypto and look at what has happened to the crypto market now. Had we been regulating it already, then people would have raised questions about what happened to regulations.”
Furthermore, he thinks regulating cryptocurrencies is a difficult task as they have no underlying value. Recently, Indian Finance Minister Nirmala Sithraman also made a strong case for regulating cryptocurrencies at a global level to mitigate risks such as money laundering and terror financing
6. Central African Republic's Bitcoin Adoption: The Real Work Must Start Now.
The Central African Republic (CAR)’s surprise bitcoin adoption decision once again shows that the top cryptocurrency can be an alternative to fiat currency. However, the African country still needs to invest heavily in its telecommunications infrastructure. The CAR also needs to prioritize education that helps the population to familiarize itself with cryptocurrency basics.
The CAR’s Expensive Internet
There is little doubt Central Africa Republic’s decision to designate bitcoin (BTC) as legal tender has surprised many. Few people expected CAR — one of Africa’s most impoverished countries and one whose economy has been ravaged by a civil war — to be the first to adopt bitcoin.
For critics still trying to understand why another nation has joined El Salvador in making bitcoin legal tender, the CAR’s move is perplexing. To begin with, they cannot understand how a country with such a low internet penetration rate — less than 12% — has chosen the top cryptocurrency as its transacting currency.
The Central Africa Republic’s reported infrastructure deficit and the fact that mobile connections are only available to 30% of the population seemingly renders the case for adopting bitcoin less convincing. Also, according to a 2018 ICT Profile of the CAR, the country’s then “uncertain institutional situation” was said to be constraining investment in broadband networks and access to cross-border submarine cables.
As a result of this and many other factors, the Central African Republic, according to the ICT profile, has had to rely on expensive satellite connections for most of its international internet bandwidth and this translates to high internet prices. Expensive internet is one of the many barriers that impede adoption efforts.
7. International Monetary Fund to Assist El Salvador in Compiling Bitcoin Adoption Statistics.
The International Monetary Fund has mentioned it is providing technical assistance to the government of El Salvador in various ways. According to Gerry Rice, a spokesperson for the organization, the group is having talks with people of the Salvadoran government about tax and money laundering matters, including critical issues that the IMF raised in earlier reports.
International Monetary Fund in Talks With El Salvador
While the International Monetary Fund disagreed with the move that El Salvador made last year by declaring bitcoin as legal tender, it is still having regular talks with representatives of the Salvadoran government. In a press conference offered last week, Gerry Rice, a spokesperson of the organization, stated there was contact with the government about several issues related to bitcoin adoption in the country.
Rice declared:
IMF staff and Salvadoran authorities continue to hold regular conversations on the critical issues that were emphasized by our Executive Board in January of this year.
Even though the fund warned that the decision made by approving the Bitcoin Law in the country might pose stability risks for the nation, El Salvador has stayed its course, with president Nayib Bukele investing public funds and purchasing more than 2,300 BTC, and maintaining bitcoin as legal tender.
8. Middle East Crypto Exchange Coinmena Enters the Qatari Market, Regulator Says No Institution Licenced
Coinmena, the Bahrain-based cryptocurrency exchange, recently announced that residents of Qatar can now buy and sell cryptocurrencies on its platform. The cryptocurrency exchange claimed it is the first regulated digital asset exchange to open its platform to Qatari residents.
