Investors Turn to Stablecoins amid the Crisis on Cryptocurrency Exchanges

Alexander Salazar
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Investors Turn to Stablecoins amid the Crisis on Cryptocurrency Exchanges

The crash of UST has led many investors to stop thinking that stablecoins can protect the value of money. The reduction in the market capitalization and the liquidity of Tether (USDT) might also lead it to collapse.

Considerable disruptions have occurred in the crypto market due to the collapse of Terra (LUNA) and the stablecoin TerraUSD (UST). At its zenith, the Terra network became one of the leaders of the crypto revolution. Investor panic now moves to Tether (USDT), the most prominent stablecoin in the market.

After the price of LUNA and UST plummeted, Tether has suffered an outflow of more than USD 9 billion. That reduction in the capitalization of USDT could pose a risk to the overall crypto market.

Many investors used to see stablecoins as a relatively safe store of value in the crypto market. However, recent events have made it clear that they cannot protect the value of money.

The reserves and collateral of Tether, amid much controversy, are likely to be the target of regulators. They have not fully audited its funds and has not provided clear information even after losing its parity to the US dollar.

Some of the Advantages of Stablecoins

Amid the collapse of the overall crypto market, stablecoins have behaved quietly through limited volatility. When the market capitalization of Bitcoin and other cryptocurrencies dropped, that of stablecoins gained prominence.

Stablecoins allow investors to react to price changes and buy cryptocurrencies more quickly. The role of some of those pegged cryptocurrencies has expanded, allowing their holders to earn additional passive income.

Reserves of fiat currencies like the US dollar or the Swiss franc serve to back most of the stablecoins in the market. However, it is not only cash but also a variety of other assets such as company-issued short-term debt securities.

There is Controversy over Some Stablecoin Projects

Algorithmic projects like TerraUSD (UST) rely on a trading code that creates demand and supply to maintain their value. The convergence of the collapse of Terra and the growing uncertainty about Tether is putting pressure on USDT. The latter has lost its 1:1 parity with the US dollar several times over the last two weeks.

The recent drops in prices have drawn attention back to the reserves of Tether. When the platform last disclosed its funds, cash represented around USD 4.2 billion of its assets. Most of them (USD 34.5 billion) consisted of unidentified treasury bills with maturities below three months, while USD 24.2 billion was debt securities.

The decrease in liquidity of Tether, its shrinking capitalization, and widespread loss of confidence in it might lead it to collapse. However, USDT is still the leading stablecoin with the most cryptocurrencies listed.

Paolo Ardoino, the CTO of Tether, refused to disclose security features, citing privacy concerns after the price of USDT dropped to USD 0.95. The computer scientist also threatened to sell reserves in US government bonds to defend the centralized token.

By Alexander Salazar

Growing Bitcoin Adoption Raises Alarms at the ECB and the Fed

Alexander Salazar
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Growing Bitcoin Adoption Raises Alarms at the ECB and the Fed

The survey by ECB revealed that 10% of families in Europe own small amounts of Bitcoin. In the United States, those with incomes higher than USD 100,000 see cryptocurrencies as investments.

Surveys conducted by the European Central Bank (ECB) and the US Federal Reserve (Fed) show the growth in Bitcoin adoption. The European financial regulatory agency stated that investor demand for crypto assets has not stopped rising.

The study by the ECB reveals that up to 10% of families may have Bitcoin and other cryptocurrencies. There is a slight predominance of smallholdings, like the acquisition of Bitcoin below EUR 1,000.

The results indicate that around 6% of respondents confirmed owning more than EUR 30,000 worth of crypto assets. The ECB pointed out that the higher the income, the more likely a family will have crypto assets. They added that low-income households are more likely to hold crypto than middle-income households.

That situation raises the systemic risk with the level of interconnection between cryptocurrencies and the traditional financial sector. The financial institution is also worried that the use of leverage and credit activity will increase.

The ECB believes that the approval of the MiCA bill will help avoid risks and establish rules but says that will not be enough. They also say it is necessary to review regulations to reduce financial stability risks posed by crypto assets.

The above draft law, under discussion since 2020, establishes a regulatory framework for cryptocurrencies. It proposes a licensing regime and a single regulation for member states throughout the continent.

A group of congresspeople recently proposed limiting the use of Proof-of-Work (PoW) cryptocurrencies like Bitcoin (BTC) and Ether (ETH). However, most members of the European Parliament rejected the proposal.

The Interest in Bitcoin Also Grows in the United States

A recent survey by the Fed shows that the interest in Bitcoin and other cryptocurrencies has also expanded in the United States. According to the study, Americans see Bitcoin more as an investment than payment for goods and services.

In 2021, 11% of respondents preferred to invest in cryptocurrencies, probably as a hedge against the growing inflation in the United States. For example, inflation set a new annual record of 8.5% in April, the highest in 41 years.

While 2% bought goods or paid for services with cryptocurrencies, 1% used them to send money to friends or family.

The study indicates that those holding cryptocurrencies only for investment purposes had disproportionately high incomes. They almost always had a traditional banking relationship and other retirement savings.

Of those who used cryptocurrencies to invest, 46% had an income of USD 100,000, while 29% had an income below USD 50,000. Almost 6 in 10 adults using crypto assets for transactions had an income of less than USD 50,000.

The growing use of cryptocurrencies has also led the US government to issue various regulations for the sector, as announced by president Joe Biden.

The government has ordered federal agencies to assess the risks and opportunities posed by cryptocurrencies. That includes their impact on the US national security and economy.

By Alexander Salazar

Experts Predict What Will Happen with the Bitcoin Price in the Short Term

Alexander Salazar
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Experts Predict What Will Happen with the Bitcoin Price in the Short Term

The value of Bitcoin has decreased by 1% every day over the last month, according to Glassnode. Experts from that blockchain analytics firm agree that demand might continue to experience headwinds.

Bitcoin (BTC) has not reached above the USD 30,000 band for over ten days as its minimum price has risen. Despite demand, that behavior proves to be insufficient for making its value increase, and there could even be another drop soon.

The price of Bitcoin has temporarily achieved stability between the USD 29,000 and USD 30,000 bands. That reflects the consolidation of the market after the sell-off following the collapse of LUNA and UST. Over two weeks ago, that event caused BTC to drop to USD 25,500, a low not seen since 2020.

However, the support of BTC at USD 29,000 could crumble if demand failed to become stronger to reach above its set prices. Financial analyst B. Ali predicted that the value of Bitcoin would drop if it did not break the USD 30,600 resistance level.

The expert showed that a triangle pointing to the right had formed for over two weeks. In other words, the price of Bitcoin has increasingly small lows and highs, showing weakness in supply and demand.

Specialists Think that the Price of Bitcoin Will Drop Soon

Bitcoin not reaching above USD 30,000 could lead demand to lose even more strength and its price to drop. In that regard, B. Ali expects the bulls to take a firm position at support close to USD 28,500 in the short term.

According to a recent report from Glassnode, demand for Bitcoin might continue to experience headwinds. For that reason, there could be lower prices soon, in tune with its latest behavior.

Besides being to the downside for eight weeks, Bitcoin has also lost 1% of its value daily for a month. The study points out that this behavior with that mediocre monthly returns is relatively infrequent.

The head of investment research at Valkyrie said this bearish movement of Bitcoin will bottom out in the third or fourth quarter of 2022. Many specialists do not find that strange and warn that the price of BTC usually pulls back before continuing its bullish trend.

There Are Further Long-Term Bullish Predictions for Bitcoin

According to cryptocurrency analyst Benjamin Cowen, pullbacks have been less severe each time than previous moves and bearish markets. The first was 94%, the second 87%, the third 84%, and the current one around 60%, falling from almost USD 69,000 to USD 25,000.

However, he added that the market would change if Bitcoin dropped by over 84%. Jeffrey Ross, the managing director of Vailshire Capital, agrees with him in maintaining a long-term bullish view as its global interest grows.

The two experts acknowledged that this is the first time the economic decisions of the US Federal Reserve have impacted Bitcoin. They thus understand that its influence could prolong the recovery of BTC as the market maintains a risk aversion appetite.

Ross said that the price of Bitcoin could drop to USD 15,000 in a strong bearish market. However, he concluded that many people would back the truck to buy as much as possible.

By Alexander Salazar

The Central African Republic Intends to Create a Tax-Free “Cryptocurrency Hub” for Bitcoin

Jenson Nunez
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The Central African Republic Intends to Create a Tax-Free “Cryptocurrency Hub” for Bitcoin

The second nation to accept Bitcoin as an official currency will launch a “cryptocurrency center” to raise interest among entrepreneurs in the crypto space and other economic sectors.

The Central African Republic opened up about creating a new “cryptocurrency hub” to attract businesses and entrepreneurs in the sector to the country with limited economic income.

After becoming the second region n the world to accept Bitcoin as legal tender after El Salvador, the Central African Republic (CAR) is now working hard to encourage the adoption of digital currencies.

According to the project’s official website, called ‘Project Sango,’ the initiative consolidates a digital future filled with tons of new possibilities. The plans got revealed on Monday on the government’s official Facebook page, as The Block highlighted. The president of the nation, Faustin-Archange Touadéra, also tweeted on Tuesday with a link that leads to the project.

Sango: A “Cryptocurrency Economic Zone”

According to an online project presentation, one of the primary missions of the proposal will be to set up “the first legal digital currency center approved by the parliament of a nation based in Africa. The 24-page document contains images of rolling skyscrapers, sailboat-dotted lakes, and blue skies, which bring a purported outline of strategies.

Among the outlined intentions, the Sango project will also intend to build a cryptocurrency economic zone, where users will have the possibility to propose, view, and contribute to its future development.

According to the document, the Central African Republic’s plans include making the acquisition of land in Bitcoin easier for investors worldwide and creating a National Digital Bank. The government highlighted in the document that it would also give total support to access to the nation’s natural resources, such as gold, diamonds, uranium, and even oil.

The presentation also highlighted some vital benefits for crypto enthusiasts and entrepreneurs, including an e-residency program, citizenship by investment, online business registration, and no corporate or income tax for crypto enthusiasts and entrepreneurs.

Likewise, the creation of a wallet to send, receive, and house Bitcoin compatible with the Lightning Network, the second layer protocol of Bitcoin for cheaper and faster payments, was also mentioned. The wallet will also back up Point of Sale (PoS) for businesses to accept payments in digital assets and have an integrated accounting system.

The central African Republic Moves Towards Bitcoin

Although the most prominent logistics details are still scarce, the document highlights that the African administration intends to design a specific legal framework to encourage the center of the digital asset before 2022 ends. According to Bitcoin Magazine, the project appears to get motivated by the National Assembly of the Central African Republic with the support of President Touadéra.

As The Block highlights in its report, the landlocked nation is among the world’s least developed economies and agriculture is the most significant contributor to its GDP. According to World Bank figures, the Central African Republic’s economic output stood at just US$2.38 billion as of 2020, and the nation has a position near the bottom of the United Nations Human Development Index.

By: Jenson Nuñez

Privacy of the Litecoin Protocol does not Bring Happiness to Korean Exchanges

Jenson Nunez
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Privacy of the Litecoin Protocol does not Bring Happiness to Korean Exchanges

MimbleWimble is Litecoin’s newest privacy update. Litecoin enjoys age and a strong market capitalization.

Some South Korean exchanges showed their worries about Litecoin’s MimbleWimble update, which effectively covers the number of transactional operations on this platform, giving adequate privacy to its users.

Upbit and Bithumb revealed their statements, highlighting concern about this update’s risks following anti-money laundering and other financial crime regulations.

Bithumb was the most inflexible of the exchanges regarding the possibility of delisting litecoin (LTC) entirely from its exchange market. Although the decision is still unclear, Bithumb indicates in its statement that it will get revealed when the time comes.

Given the cited policies, Bithumb has placed LTC under observation and plans to announce a final move on whether or not it will keep allowing its transactions.

Upbit Does not Obstruct Litecoin but Remains Vigilant

Upbit, for its part, explains in its statement that to follow financial and anti-money laundering regulations, it also has LTC under study.

Although it does not represent a threat to delist LTC, it alerts users not to conduct any operation through MimbleWimble. They would not confirm this financial operation because it cannot set verification on the user’s wallet following the current policies.

According to the CoinRanking portal, Upbit is the second exchange with the highest daily LTC exchange rate because it approached at least 35 million dollars (USD). Bithumb ranked in 19th place because it permits LTC trading with at least USD 3.2 million daily.

Could Other Exchanges Obstruct Litecoin?

A different case to that of the South Korean exchanges has been Binance, whose mining pool supported the MimbleWimble update. So far, there have been zero comments on keeping Litecoin under notable observation or setting up an obstruction in its operations. However, Binance has certain fame for following KYC and AML policies globally.

Setting up a suspension on the exchange of LTC could seriously impact both Binance and the cost of Litecoin, as Binance ranks first among the exchange markets for this digital asset, with a constant volume of USD 64 million daily in trading operations.

Other exchanges have not highlighted their stance on this new Litecoin update. However, regulatory entities such as the Financial Action Task Force (FATF) are strengthening regulations globally, with a solid focus on Bitcoin and digital assets since April.

Suppose the volume of LTC deposit transactions in exchanges experiences new growth. In that case, the procedures may approach a more intense fluctuation. Some markets will close this digital asset, even if it is one of the most critical digital items appearing in the market space.

By: Jenson Nuñez

According to the Co-founder, Tether has Not Lost its Parity and Can still Get Exchanged for USD 1

Jenson Nunez
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0
According to the Co-founder, Tether has Not Lost its Parity and Can still Get Exchanged for USD 1

The Tether cannot lose its attachment to the dollar because it can always get redeemed for one US dollar, said Reeve Collins.

One of the consequences of the recent crash of Terra (LUNA) and its algorithmic stablecoin UST has been the strengthening of scrutiny routines applied to stable coins.

Tether (USDT), the most prominent stablecoin in the market, also fell victim to these accusations and criticisms, especially after the asset momentarily lost its attachment to the US dollar amid Terra’s fall.

Despite these harmful situations, some USDT enthusiasts went to unveil their confidence in the project, assuring they would always support the cause. In an interview held by CNBC, Tether co-founder Reeve Collins confirmed that the stablecoin receives full support from its dollar reserves. Investors need not raise concerns about a probable decoupling.

Co-Founder Defends USDT Attachment

Collins, the CEO of BLOCKv and a businessman that currently does not carry out activities linked to the stable coin’s issuing entity, received some questions at the meeting about the slight drop in price that USDT detected a few weeks ago. A situation appeared when the cryptocurrency market, in general, got seriously harmed by the collapse of Terra.

The co-founder denied any drop affecting thether, saying that price applied only to “third-party exchanges” because those markets focus their efforts on supply and demand. Collins then explained that Tether can always get redeemed for $1.

While acknowledging that a big issue could arrive if all the tokens in circulation get redeemed simultaneously, given that the stablecoin receives support from various financial instruments that could need a considerable time to settle, the co-founder gave a lot of trust to the project. It is backing 1:1 in US dollars.

Collins also spoke about the sudden fall of UST, labeling algorithmic stable coins as tests that may fail. He said this case is a total tragedy for those who employed the Terra stablecoin.

Tether Show its Concerns

The co-founder’s thoughts parallel a Tether post revealed on Monday. The issuing entity addressed recent investor criticism and concerns after the crash of Terra USD. In the statement, the team explained that the principal stablecoin cannot lose its parity due to its reserves and that it is always possible to get the coin redeemed.

The company also stepped away from UST, explaining that this algorithmic stablecoin does not count on any guarantee from dollar reserves as USDT is. A few days ago, Tether highlighted these general fears when it presented in its last quarterly report a lowering of 17% for its reserves in the commercial paper, a pretty controversial issue.

European Central Bank Raise Red Flags about Stablecoins

The event has put stable coins and the digital asset environment under the magnifying glass of regulators worldwide. The European Central Bank (ECB) launched a report this week that points to the recent crash of Terra’s UST and generally casts doubt on whether stable coins could offer 100% parity.

10% of eurozone households counts on digital assets, reveals European Central Bank report

The report, titled “Deciphering Financial Stability Risks in Crypto Asset Markets,” determines that the fall in this asset highlights the need to discuss how risks and developments affect this economic space.

By: Jenson Nuñez

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