In any other asset class, it would have been worrying. For cryptocurrency investors, it’s Tuesday.
Yesterday, we covered the moment when the cryptocurrency market was turning red for the day, although three instruments (Binance Coin, Polkadot, and Uniswap) were still counting gains in a 7-day period. Half-day later that is no longer true.
Risk sentiment has disappeared as a whole and, besides stablecoins, the first cryptocurrency in the green can only be found in the #53 position of cryptos by market cap – Hedera Hashgraph (5.00%), but volatility has turned extreme, so it could well be in the red by the time you are reading this.
A recent report released by CryptoCompare has highlighted that spot volumes have plummeted by 42.7% following China’s crypto mining ban while total derivative volumes decreased 40.7%.
The crypto crash in June saw Bitcoin hitting a monthly low of $28,908 and ended the month down 6.0%.
The negative news coming from China was balanced out with the positive news arising from El Salvador, which became the first country to formally adopt Bitcoin as legal tender.
A leaked report by JP Morgan, however, shows that Bitcoin’s high volatility is a major challenge alongside the country’s official dollarization and warns a high demand for bitcoin to U.S. dollar conversions on the government’s bitcoin spending platform could “cannibalize onshore dollar liquidity.”
“Daily payment activity in El Salvador would represent [around] 4% of recent on-chain transaction volume and more than 1% of the total value of tokens which have been transferred between wallets in the past year”. A large portion of bitcoin is now thought to be locked up in illiquid entities and 90% of bitcoin not moving in over a year.
Why are cryptocurrencies prices falling now that we’re in mid-July? Maybe because they fell in mid-June. And mid-May (quite strongly) and every month this year, whether as a correction or as a more sustained movement.
“Crypto crash” has become a common expression for digital asset markets, but it is mostly due to volatility that can’t be found elsewhere. In any other asset class, it would have been worrying. For cryptocurrency investors, it’s Tuesday.
Nevertheless, Ethereum is down by nearly -15% in a 7-day period which makes it the worst performer in the top 10, at the moment. This could be revealing as the market anticipates the ETH2 upgrade from a proof of work model to a proof of stake.
There is a case to be made regarding the change of Ether’s status in the eyes of the US regulators. The digital asset is informally considered to be a commodity, but the SEC could eventually deem it a security.
Such a move could be driven by the financial watchdog’s need to show clarity and neutrality amid the SEC v. Ripple lawsuit.
Ripple Labs has been putting pressure on the regulator by calling ex-SEC Director William Hinman, who stated that Ethereum and Bitcoin were not securities. Hinman then moved to a law firm close to the Ethereum Foundation right after leaving the SEC, thus prompting accusations of conflict of interest.
The Defendants have most recently requested to schedule the deposition for July 19, 2021, a week from now. This could be revealing of growing impatience among Ripple Labs and its co-founders as the back and forth of motions keeps the firm from going forward with its planned IPO.
The abovementioned impatience could be related to a letter from US Senator Elizabeth Warren to SEC Chair Gary Gensler, which implicitly offers the SEC wider authority over the asset class.
That didn’t sit well with many within the space, including influential names within the XRP community, who see it as an “orchestrated powerplay” by the SEC Chair, Senator Warren, and the SEC to outflank its sister regulator, the CFTC.
Despite the tense legal battle between the blockchain firm and the US regulator, Ripple continues to offer new use cases for its XRP Ledger, with the most recent being the tokenization of assets.
Its plans to go public via initial public offering will remain tied up until the lawsuit is over. When will the lawsuit end? and Why is it taking so long? are very legitimate questions in such fast pacing industry.
