UK Regulator is about to Test Terra Collapse to Set New Crypto Policies

Jenson Nunez
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UK Regulator is about to Test Terra Collapse to Set New Crypto Policies

Market instability in stable coins will require consideration, said the executive director of markets at the Financial Conduct Authority, alluding to the crash of Terra’s UST.

The Financial Conduct Authority, a UK regulator, and the Treasury Department will focus on the collapse of the Terra tokens, which will help set up more excellent policies regarding the crypto sector.

Recent market instability in stable coins will require more importance; The Financial Conduct Authority will work with the Treasury to set up better pólicies later this year.

Almost 70% of adults aged 40 and under who didn’t purchase crypto assets following the proper steps assumed that digital assets were under regulation, citing an Opinium survey highlighted by the FCA in October.

Consequences of this Crash

On May 13, Terra’s UST algorithmic stablecoin fell as much as 23 cents. The LUNA token founded to keep the UST algorithmic stablecoin from presenting volatile rates crumbled down to 96% at one point.

An algorithmic stablecoin keeps its parity by employing only software and policies, which means it doesn’t need any collateral support. Instead, the programming of the token, or smart contract, can make the supply grow if the price is crashing or minimize the pool if the price is reaching high peaks.

The two tokens had a combined market value of over $40 billion before the delisting, which wiped out at least $380 billion from the more comprehensive crypto sector.

History of a Regulation

In March, the UK said it would work on a new digital assets regulatory package to regulate stable coins. The government presented that algorithmic stable coins should not face regulations in its consultation.

In fact, in the annual speech of Queen Elizabeth of the United Kingdom a few days ago, the possibility of executing broader regulation of the crypto space arrived this year.

The Treasury said in April that it desires to amend existing procedures for electronic funds and payments businesses to include the management of stable coins and the provision of wallets and more extraordinary custody features.

According to Bloomberg, firms scratching the surface of regular coin activities could need Bank of England oversight and FCA clearance if their services get applied by many customers due to the systemic risks they could present.

Also, in March, the UK Advertising Standards Authority considered that 50 crypto entities should review whether they were breaking advertising policies.

By: Jenson Nuñez

According to Bank of America, there’s No Reason to Worry about “Contagion” in the Market after Terra’s Crash

Jenson Nunez
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According to Bank of America, there’s No Reason to Worry about “Contagion” in the Market after Terra’s Crash

The fall of Terra is not the only factor that could be generating volatility in the Bitcoin market space, as there are other causes to consider. Goldman and BoFA brought a detailed analysis on the subject.

The second-largest bank based in the United States of America, Bank of America (BoFA), has issued some hopeful analyses of the general bearish scenario in the cryptocurrency market.

In a recent report, the bank’s analysts highlighted that investors’ excessive concerns about the possibility of the digital asset market facing a “contagion” risk from Terra following its dramatic collapse last week are unfounded.

While the experts discussed that the decadence of Terra’s stable coin UST and its native cryptocurrency LUNA possibly helped boost the volatility in Bitcoin and the rest of the market, they think other factors are having a strong influence over the phenomenon.

In a May 17 note revealed by CoinDesk, the bank’s analysts highlighted that investors should already know that digital assets are an emerging technology asset class and tokens that manage the ecosystem as a dangerous place.

Digital assets face similar headwinds as traditional assets, including fluctuations in inflation, higher interest rates, and heightened recession risk.

BoFA Gives Hopes

The bank stated that the decoupling of UST is also not necessarily conducive to concluding the more extended stable coin market downturn. UST does not receive support from traditional assets, and the loss of its peg shows the durability of the broader tough coin market because the most significant stable coins kept theirs, CoinDesk wrote, citing the note.

The report also included factors that could have led to Terra’s recent implosion. According to the expert, the fall happened due to Terra prioritizing UST adoption over its price balance.

According to CoinDesk coverage, BoFA didn’t show a positive stance about Terra’s revival plans, still trusting in the potential for a successful algorithmic stablecoin. A governance vote got released to fork the Terra blockchain and thus generate a new and more improved version of the network.

The banking entity also explained that the event would boost regulations around stable coins, although it does not believe that this could lead to an outright ban. According to the coverage, the analysts said that banning algorithmic stablecoins would be a premature decision and could slow the evolution of the ecosystem.

Goldman Sachs Shows Optimism

The legendary Wall Street bank, Goldman Sachs, shared some views. In a report on Thursday, reviewed by CoinDesk, Goldman said it was unlikely that the Terra crash could impact the US economy. BofA analysts had already said that they did not consider that the event could indirectly impact traditional financial markets.

Both financial entities also appear to coincide with their bullish stance on the future of algorithmic stable coins. In a previous study, highlighted by The Block, Goldman analysts discussed that such currencies require further adoption in real-world payments to achieve success.

By: Jenson Nuñez

Binance’s CZ Said It’s “Poor Again” Because of its $1.6B Luna Holdings That Crashed Down to $2,200

Jenson Nunez
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Billionaire crypto exchange Binance creator Changpeng Zhao highlighted that he is “poor again” after his holdings in Luna crashed down and are now worth just $2,200.

Changpeng Zhao, the leader of the Binance exchange, had some fun on Twitter and said that he was “poor again” after the Luna cryptocurrency crashed.

Well, no kidding. While the CEO didn’t lose his whole wealth, the losses his exchange faced due to the crash of Luna and Terra’s UST stable coin is concerning. The leader expressed that Luna holdings owned by Binance, once worth $1.6 billion, are now worth only around $2,200 or less.

However, Binance remains the largest exchange in the crypto sector. But the amount lost by the conversation highlights how the crash impacted those who owned the crypto. Thousands of people have stated that they lost all their investments.

15 Million Tokens

On Twitter, Zhao said that Binance had 15 million Luna tokens. He said that Binance invested $3 million in 2018 in the Terra de Luna network and received tickets. The leader also added that his Luna tokens were never migrated or sold in the market. He further highlighted that at this same address, he has at least $12,000,000 UST of staking over time. Also, it was never moved or sold.

Moon Fall

Binance’s Luna holdings got valued at $1.6 billion in early April at the peak price of the LUNA token, which, according to CryptoMarkets, reached $119.15 on April 5. According to data brought by media outlets, the coin managed to trade at $0.00014.

Luna’s crash began when its sister token, the stable coin terra USD, lost its attachment to the US dollar; The valuations of the two items have connections with each other. When the price of Terra crashed down, investors rushed to dump their holdings in a scenario similar to a bank run. The drop in TerraUSD, in turn, dragged down Luna’s price. Although Terra’s creator attempted to rescue her, he was unable to save her from collapse.

The freefall of the two tokens should have disintegrated more than $50 billion in paper value. Zhao expressed through Twitter that the Terra team needs to repay its retail investors firstly. He tweeted that Binance will let this slide and ask the Terra project team to compensate retail users first, Binance last, if ever.

Zhao, 45, is not poor despite his stance on the subject. Bloomberg yesterday registered a net worth valued at $14.8 billion. According to Forbes, most of his wealth probably gets fed by its 70% stake in Binance.

Fortune reported that Binance’s market value could be six times that of its closest competitor, Coinbase. A report highlighted by financial services consultancy Opimas stated that Binance received around $14.6 billion in trading fees last year, MarketWatch reported.

By: Jenson Nuñez

Bitcoin Miners Abandon Hopes of Operating in New York Due to Regulatory Uncertainty

Jenson Nunez
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Bitcoin Miners Abandon Hopes of Operating in New York Due to Regulatory Uncertainty

The state was once a draw for Bitcoin miners because of its openness. According to a Coindesk report, many environmental concerns about the effects of mining are affecting the industry.

A few days ago, a study carried out by the University of Cambridge revealed that, despite the prohibitions, there was still Bitcoin mining activity in China, and only the United States beat it in the amount of electricity consumed for Bitcoin mining.

The report from that university highlights that the United States of America contributes 37.84% of the standard monthly hash rate participation, with the state of Georgia being the one with the most prominent areas when it comes to mining activity rates, followed by Texas and New York, the latter with 9.8%. Of hash rate.

However, a report made by the Coindesk media outlet highlights that these numbers may crumble down since many mining entities are considering abandoning their activities in New York.

The Senate of that state is studying a new policy that calls for a two-year moratorium after the Assembly version of the law passed the state lower house last week for new crypto mining projects that use gas, coal, or other nonrenewable energy sources.

A Bunch of Complaints

Due to political and regulatory uncertainty, all crypto entities have total control over running a business in New York. If this law manages to pass, New York will become a constant re-consideration for the crypto space.

In late April, the bill, which passed the state Senate calls for a moratorium on proof-of-work mining empowered by nonrenewable sources in the state while its environmental damage gets evaluated.

According to Whit Gibbs, CEO of Compass Mining, most crypto mining entities are keeping their distance from the state due to authorities’ perceived negative stance toward the crypto space.

Didar Bekbau, the co-founder of Kazakhstan-based miner Xive.io, which wants to expand its operations to the US, also told CoinDesk that it leans toward Texas due to stable regulation and the availability of cheap electric sources.

Unaffordable Prices

Regulatory uncertainty, including the law, is one of the few factors keeping potential mining entities away from New York state. Rising energy prices are another factor that makes businesses flee from the state.

The executive attributed the spike in power rates to global macro situations such as the current war going on in Ukraine and the rising cost of meeting renewable energy mandates in New York. The executive asked to remain out of focus, citing fear of reprisals from environmental defenders and other local authorities.

By: Jenson Nuñez

Pantera Capital and Delphi, Sponsors of Terra, Unveiled the Total Losses after the Crash of LUNA

Jenson Nunez
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0
Pantera Capital and Delphi, Sponsors of Terra, Unveiled the Total Losses after the Crash of LUNA

Delphi Ventures lost at least $10 million on LUNA, while Terraform Lab’s backer Pantera opened up about selling 80% of its investment before the crash.

Two famous entities within the crypto space that encouraged Terra’s growth in the market have brought details on how their balance sheets got harmed due to last week’s crash.

This week, digital asset research firm Delphi Digital highlighted an autopsy on the recent events that have severely damaged the Terra ecosystem. Terra’s algorithmic stable coin UST lost its expected $1 level, making its price crumble down negatively, affecting its native asset LUNA.

Delphi Digital admitted in a blog post that it always knew that something like this event would take effect. However, it felt that a sustained reserve by the Luna Foundation Guard (LFG), an entity that backs up the Terra ecosystem, would prevent huge losses.

The company acknowledged its error by saying that it understood the risks of the algorithmic model in advance and intended to show complete transparency about them at all times; however, it could not get rid of the consequences.

A Loss of 10 Million Dollars

The company, a sponsor of LFG, highlighted in the publication that the error had cost Delphi Ventures millions in losses. According to the report, Delphi Ventures Master Fund acquired a small amount of LUNA at the beginning of 2021, equivalent to 0.5% of its net asset value (NAV).

That position evolved as the price of LUNA also reached favorable peaks. The fund progressively increased its holdings, including a $10 million investment in LUNA, as part of a sale by LFG. Native Terra tokens counted on about 13% of Delphi Ventures’ NAV when they hit their peak price.

Delphi admitted that it didn’t sell any LUNAs during this time, so the recent crash has left it with a massive loss. The $10 million investment got lost in its entirety.

Last month, Delphi said in a newsletter that Terra’s Bitcoin investment offered increased security to defend UST’s peg to the dollar” and reduced the risks of a deadly crash. However, the company said that guarantee was not enough. They have received criticism for this over the last week, and they think they deserve it all.

Pantera Capital Sold before the Crash

Another high-profile Terra backer, Pantera Capital, also explained how the fall of LUNA and UST had damaged him. Pantera, an American hedge fund that focuses on digital assets, had invested at least twice in Terraform Labs, the development company behind Terra.

The company participated in a round of USD 25 million in 2021 and then, in July, in another competition. Although the investments in LUNA were separate and were made previously, in 2020, Joey Krug, a co-chief investment officer of Pantera Capital, highlighted this in an interview with that medium.

By: Jenson Nuñez

Tether Announced 17% Reduction of Commercial Paper from its Reserves amid Fears of Decoupling from USDT

Jenson Nunez
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0
Tether Announced 17% Reduction of Commercial Paper from its Reserves amid Fears of Decoupling from USDT

The issuer of the famous stable coin USDT revealed a 17% reduction of commercial paper in its reserves. The message addresses fears of a possible decoupling from the dollar.

Tether, the company in charge of the dollar-pegged stable coin USDT, has released a new report highlighting the current status of its reserves.

In its Consolidated Reserves Report, revealed this Thursday, the company highlighted a 17% reduction in its commercial paper holdings to upgrade the quality of its reserves. Tether expressed that its commercial paper holdings went from $24.2 billion to $20 billion during the first quarter of 2021.

As of March 31, the date the first quarter ended, Tether reserves remained at $82 billion, of which 86% consisted of cash and cash equivalents. According to the report, the rest includes $4 billion in corporate bonds, $3 billion in secured loans, and $5 billion in other investments like digital assets.

Tether Lessens its Commercial Paper by 20%

Although the company recognized making further progress in its decrease of commercial paper since then, commercial paper is still a short-term unsecured debt managed by an entity.

In another announcement highlighted by Decrypt, Tether’s CTO Paulo Ardoino expressed that the entity keeps going with an additional 20% cut since the beginning of April.

The news about the lowering of commercial paper arrived after Bloomberg highlighted a controversial report last year. It explained that much of Tether’s commercial paper got managed by big Chinese entities, which made many analysts question the quality of the company’s reserves.

To date, Tether has refrained from unveiling the names of said entities. CoinDesk reports that the company’s latest research did not point to the list of entities that rate the commercial paper, except for “Standard & Poor’s Ratings, or equivalent ratings from Moody’s, Fitch, or others nationally statistical rating organization. The Tether report also does not bring the geographic location of the issuers of the commercial paper.

Afraid of USDT Untethering

The USDT issuer also pointed out that it has slightly lessened its cash deposits to grow its holdings of US Treasuries. According to CoinDesk, Tether’s cash went from USD 4.2 billion to USD 4.1 billion, while the bonds ran from USD 34.5 billion to USD 39.2 billion.

Other assets in the company’s reserve did not appear to change much. As reported by that medium, the “Other investments” category, which includes cryptocurrencies, has remained constant, falling slightly from USD$5.02 billion to USD$4.96 billion. However, Tether has not disclosed which assets specifically make up this category, which has led to some uncertainty.

Tether’s most recent report comes along with a certification from independent auditing firm MHA Cayman, which independently confirmed the accuracy displayed by Tether’s quarterly reserves report.

Tether’s decoupling came amid the sad situation of Terra’s algorithmic stable coin, UST, which lost its attachment to the dollar. Since then, USDT’s market capitalization crumbled to $9 billion amid increased sell-offs and a more comprehensive panorama for correction in the digital assets market.

By: Jenson Nuñez

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