MARKET UPDATE 1

14-03-2022

March 14, 2022

Headlines

Europe’s crypto crackdown

The European Parliament ECON Committee will today vote for MiCA (markets in crypto-assets regulation), a regulatory proposal that could impact how crypto-assets exist in Europe. Some parts of the proposal indicate it may aim to impose regulations on transacting in proof-of-work (PoW) coins.

An excerpt from the latest draft of the proposal reads,

“providers shall not provide services related in any way, shape, or form to crypto-assets that do not meet the environmental sustainability criteria”

There are currently many blockchain operations utilizing proof-of-work technology including Bitcoin, Ethereum, and Litecoin. These potential sanctions could effectively ban exchanges from offering support for these assets. There are many alternatives to PoW technology, the most promising being proof-of-stake (PoS) - usually these alternatives are more energy-efficient but compromise on security/reliability.

Figures from the last financial year indicate that upwards of 7% of people living in Europe own cryptocurrency. The implications for individuals could be drastic if the proposal is adopted.MEP for Paris, Pierre Person, explains the potential implications,

“As it stands, it definitively condemns the future of crypto-assets in Europe. By banning Bitcoin and Ether, by complicating the use of NFT and DeFi, the European Parliament is mortgaging our monetary and financial sovereignty.”

Voting will commence today on whether to accept the current draft and whether to commence Interinstitutional negotiations, the last stage before a provisional agreement is constructed and the act is adopted.

Market volatility and executive order

Following an extended period of volatility, Bitcoin closed the week out respecting the $38k support level. This came off the back of US President, Joe Biden, signing an executive order in relation to regulating digital assets. Although the scope of the regulatory measures was not outlined in the order it is understood it will be a multi-year effort to consolidate government efforts to encourage safe growth of the space.

Chief Policy Officer at the Chamber of Digital Commerce, Teana Baker-Taylor, said,

“The EO reinforces that the Administration acknowledges that crypto is here to stay, and that the U.S. government is taking digital assets seriously.”

Inflation and digital gold

With inflation reaching a forty-year peak, exceeding 5% in Europe and 7.5% in the US, people are looking for ways to protect their capital. To rub salt in the wound the conflict between Russia and Ukraine is causing unprecedented volatility in commodity markets. These factors are carving the battlefield which will be the ultimate test for how cryptocurrency acts as a store of value.

Chief technology officer at crypto exchange Bitfinex, Paolo Ardoino, compared Bitcoin to gold,

“Crypto and Bitcoin, in particular, have unique properties and are a form of digital gold. In particular, it has shown to perform well when money is being debased by central bank stimulus methods. This, of course, is one of the original intentions of Bitcoin - to protect people from this very phenomenon.”

With gold prices soaring in the past week it leaves the question if Bitcoin is digital gold, why has it remained stagnant?Entrepreneur, Michael Saylor, wrote on Twitter,

“USD consumer inflation will continue near all-time highs, and asset inflation will run at double the rate of consumer inflation. Weaker currencies will collapse, and the flight of capital from cash, debt, & value stocks to scarce property like #bitcoin will intensify.”

Regardless of what the future holds, the coming year will be one of the largest tests for the crypto ecosystem as a whole.

Innovation

Kadena lists on Binance, price soars 40%

Kadena (KDA) is a highly-scalable layer-1 proof-of-work (PoW) blockchain protocol that saw a large spike in attention following the release of their own DEX. Only days later the token would be listed on Binance, sending the price up by 40% - it has come down significantly since then and is currently sitting at approximately $6.45 (USD). They have also released an in-depth roadmap which outlines the exciting stuff on the horizon for the project.

Everything else

JUNO token and governance

Thousands of Juno token stakeholders have until the 20th of March to vote on how to rectify a bungled stakedrop in which users could exchange ATOM for JUNO 1:1. One user accumulated more than 2.5 million JUNO tokens, which if dumped onto the market could provide major liquidity issues for other holders and send the price plummeting. Whether the user knowingly circumvented the rules of the stakedrop is still in question however proposal #16 allows stakeholders to vote on whether to reduce the whale’s holdings by 98%, moving the remaining funds to a community reserve fund.

At the moment the future of the network is uncertain, so the broader implications for token governance and redistribution should this proposal pass. Despite immediate concerns of a sell-off following a redistribution, many speculators believe this will just be a bump in the road. 

Popular crypto analyst and trader, Altcoin Psycho, said in a livestream,

“Longterm, regardless of the outcome, the community shouldn’t be worried. I think the project will be totally fine.”