The US Congressional Research Service Expresses Its View on the Crash of UST

Alexander Salazar
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The US Congressional Research Service Expresses Its View on the Crash of UST

The CRS raised policy issues related to the risk that the crash of the stablecoin UST poses. They stated there might be gaps in the regulatory frameworks for stablecoins, restricting the assets that could back them.

A document recently published by the Congressional Research Service (CRS) provides an overview of algorithmic stablecoins. The legislative agency supporting the US Congress also noted factors to consider in the recent crash of TerraUSD (UST).

The CRS described the crash of the stablecoin UST as a bank-run-like scenario. They also raised policy issues related to the risk that those events pose. The agency said a bank run situation begins when users doubt the reserves supporting the parity of the asset to the US dollar.

In addition, they pointed out that there is no proper regulation of the stablecoin sector. There may thus be gaps in the regulatory frameworks for those cryptocurrencies, as the agency indicated in a previous report. They also highlighted that some policy proposals might restrict the assets that could back stablecoins and establish reporting requirements.

Kwon Proposes Reviving Terra and Includes a Redistribution Plan

Do Kwon, the co-founder of Terraform Labs, brought forward a proposal to revive the Terra ecosystem. That happened following the historic decoupling of its algorithmic stablecoin UST, which plunged Terra (LUNA) tokens into nearly zero.

Kwon said the Terra community must rebuild the chain to maintain the developer community and ecosystem.

His proposal emerged as a response to validators discussing the possibility of forking the Terra chain. It involves compensating UST and LUNA holders unable or unwilling to sell their holdings during the price crash.

Kwon Puts Forward His Terra Ecosystem Revival Plan

Kwon returned from his temporary hiatus with what he called Terra Ecosystem Revival Plan 2.

The South Korean developer considers it worth preserving the Terra ecosystem because there are hundreds of valuable developers in it. He said those experts work on decentralized finance (DeFi), fungible job markets, state-of-the-art infrastructure, and community expertise.

The CEO of Terraform Labs proposed restoring network ownership to 1 billion tokens distributed among LUNA and UST holders. He said they would allocate 40% of those coins to LUNA holders before the decoupling event. He explained that 40% would go to UST holders during the new network upgrade.

Nayib Bukele Meets with Several Central Bankers to Discuss Bitcoin

Over the last week, 44 central bankers from developing countries discussed financial inclusion, small and medium business financing, and Bitcoin (BTC). Delegates from Ghana, Burundi, Jordan, the Maldives, Pakistan, and Costa Rica met with Salvadoran president Nayib Bukele.

Douglas Rodríguez, the director of the central bank of El Salvador,  said that El Salvador was proud to receive those financial representatives. They wanted to learn about the implementation of Bitcoin and the policies to promote financial inclusion.

The Salvadoran government seeks to deepen its knowledge of financial inclusion and the digital economy and share how it has benefited from Bitcoin. El Salvador became the first country to adopt the cryptocurrency as a legal tender in September 2021.

By Alexander Salazar

According to the Vice President of the Bank of England Investors could Leave Digital Assets and go for Safer assets

Jenson Nunez
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According to the Vice President of the Bank of England Investors could Leave Digital Assets and go for Safer assets

The director of the Bank of England aims at the increases in interest rates decreed by state entities in various nations, which would leave less capital to invest in the crypto space. However, the official leaves out that inflation in the economies also invites investors to look at Bitcoin and other cryptocurrencies as an alternative.

The vice president of the Bank of England, Jon Cunliffe, highlights that the current financial conditions ongoing in the country and other nations will make investors abandon risky assets such as digital currencies and instead opt for safer options.

Investors will Opt for Safer Assets than Digital Currencies

Cunliffe exposed these ideas during a conference held by the Wall Street Journal (WSJ). The official reflected on increases in interest rates in the US, which would exert pressure against digital assets since there would be less capital entering that sector.

Cunliffe thinks that the country will see an outflow of risky assets as this process continues.

In addition, Cunliffe also expressed that Ukraine’s conflict due to Russia’s armed invasion could also push citizens to invest in currencies that they consider safer, especially since digital assets have not reacted the most favorable in recent weeks.

Although there are specific special allegations in the position of the representative of the Bank of England, the idea could not be counting on various factors present in the current panorama that could be playing a good game for the digital assets ecosystem in general.

Many critics and experts expressed that Cunliffe’s position leaves out the economic struggle faced by the economies of the United Kingdom, Europe, and the United States of America, which is more evident in the latter due to the increase in inflationary rates that harm the North American Nation.

This crash in the US dollar is what would be pushing many investors to put an eye on digital assets such as Bitcoin, whose deflationary features and limited management make it a perfect option in these times.

Michael Saylor, CEO of MicroStrategy, and the famous best-selling writer, Robert Kiyosaki, stand out as defenders of these theories. They reflect the present crash in many fiduciary currencies, suggesting users find shelter in digital assets, mainly Bitcoin, for the aforementioned features.

A More Robust and Proper Regulation

Although the need for digital assets got already felt among traditional investors, for many experts, there is still a significant barrier to reaching this space because there are still no strong regulations on crypto assets.

According to Francois Villeroy, Terra and the crash of its principal exponents is a sign of the need for regulation. This regulation could even be at a global level to set up more appropriate standards for all industry actors internationally.

By: Jenson Nuñez

The Whales Sell their Holdings as the Bitcoin Price Drops and Its Implied Volatility Increases

Alexander Salazar
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The Whales Sell their Holdings as the Bitcoin Price Drops and Its Implied Volatility Increases

The whales transferred 58,410 BTC from unknown wallets to exchanges and 26,228 BTC vice versa. Those long-term holders moved 14,034 BTC between the former platforms but did not make any peer-to-peer transfers.

Over the last week, the whales have moved 98,672 BTC through 65 transactions. Those long-term holders seem to be rapidly selling their holdings as the value of Bitcoin has dropped below USD 30,000. The following analysis shows the details and the influence that this activity may have had on the price.

It is necessary to contextualize that activity to better dig into the status of the whales and the market as a whole. However, this is just a micro approach to one of the many factors that can influence the performance of BTC.

Daily Analysis of the Activity of the Bitcoin Whales

The predominant trend in the activity of the Bitcoin whales was the introduction of liquidity into the market. They moved 58,410 BTC from unknown wallets to exchanges since early in the week, equivalent to 59.19% of the total.

The second-highest trend was accumulation, as 26,228 BTC went from exchanges to unknown wallets, representing 26.58% of the total.

The transfer between exchanges was the third-highest trend, as they moved 14,034 BTC, equivalent to 14.22% of the total. Finally, those log-term holders did not make any transactions between unknown wallets.

Correlation between the Activity of the Whales and the Performance of Bitcoin

Bitcoin is trading at around USD 30,291 and has accumulated a 4.6% gain over the last 24 hours. While its daily trading volume is above USD 29.56 billion, its market capitalization is about USD 576.99 billion, according to CoinGecko.

The short-term realized volatility of Bitcoin remains high as its price struggles to stay at the USD 30,000 level. Meanwhile, its implied volatility based on the expectation of market movement over a week recently rose. Price action might remain choppy as traders react to macro risk and turmoil in the stablecoin market.

The whales seem to want to derive the most benefit from their tokens, but that may have a limit. Data from the on-chain analysis platform Skew indicates that the options market puts the probability of BTC trading above USD 25,000 in June at 66%.

Other Signs of the Behavior of the Bitcoin Whales

Data on the options market shows higher demand for put options than call options. In other words, traders actively hedge the risk that prices will continue to drop.

Over the last two months, the 50-day moving average of the relationship between the purchasing volume and the selling volume has decreased. In that case, the activity of the Bitcoin whales would also reflect the persistent selling pressure.

Other factors have affected the price of Bitcoin and other cryptocurrencies in the last few months. The conflict between Russia and Ukraine led the Unites States and the European Union to sanction BTC holders from the Eurasian country. Amid a bearish trend, the creation of Satoshi Nakamoto has dropped by 56,2% from its all-time high above USD 69,000.

By Alexander Salazar

Ethereum CEO Urges Terra to Focus on Small Investors amid the Collapse of Its Stablecoin

Alexander Salazar
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Ethereum CEO Urges Terra to Focus on Small Investors amid the Collapse of Its Stablecoin

Vitalik Buterin urged Terra to focus on the poorest 99.6% of wallets to allow for the full recovery of its investors. Even though he did not ask for regulation, he highlighted that potential hedges, like financial deposit insurance, might help.

Vitalik Buterin, the CEO of Ethereum, expressed his support for the proposal of Terra to prioritize the compensation of small investors. He considers that this would allow them to fully clear 99.6% of wallets and stabilize the feeling of the community.

Do Kwon, the founder of Terra, is working on a plan to help UST and LUNA holders. The executive said the Terra community must rebuild the chain to maintain the developer community and ecosystem.

Curiously, Changpeng Zhao, the CEO of Binance, described the proposal as wishful thinking, saying it is impossible to reverse all transactions.

Vitalik Buterin Expresses His Position on the Collapse of Terra (LUNA)

Buterin stated that every small investor affected by the drop of the stablecoin of Terra should recover. As precedent, he cited the USD 250,000 from the Federal Deposit Insurance Corporation (FDIC).

To better understand, the FDIC is a federal agency that dates back to the 1930s. That regulation amid the Great Depression represented the first time the government-supported bank deposits in US history.

Terra fell apart last week when its algorithmic stable coin TerraUSD (UST) crashed well below its parity of USD 1. In addition, the price of its sister token LUNA drastically dropped to almost zero.

As a result, the demise of UST and LUNA wiped out the savings of many investors. In that regard, Kwon proposed a plan to repair the damage caused by the collapse of those crypto assets.

The South Korean developer said that Terra should help its investors recover their remaining funds. Vitalik Buterin agreed with his proposal if he made some adjustments.

The CEO of Ethereum explained that Terra could make that group 100% complete if they only targeted the poorest 99.6% of wallets.

He added that he supported coordinated sympathy and relief for average UST smallholders. He said an influencer told them about 20% US dollar interest rates but pointed out it was their responsibility.

Other Proposals Related to the World of Crypto Assets

Vitalik Buterin did not explicitly ask for regulation but highlighted that potential hedges, like financial deposit insurance, could be helpful.

He mentioned tighter regulation for low-income employees and a more determined approach for the wealthiest in Singapore Employment Act. The legal document only applies to workers earning over USD 4,500 and employees earning a basic salary of no more than USD 2,600.

Billy Markus, the co-founder of Dogecoin (DOGE), stated that Terra should use already funneled funds to pay the victims of their failed protocol. He said that this was more convenient than using money from new investors.

LUNA is trading at around USD 0.000176 and has accumulated an 11% loss over the last 24 hours. While its daily trading volume is above USD 679.41 million, its market capitalization is about USD 1.15 billion. It occupies 58th place in the cryptocurrency ranking, according to CoinGecko.

By Alexander Salazar

Terra Community Discards in Preliminary vote Do Kwon’s Strategy to Fork the Network

Jenson Nunez
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Terra Community Discards in Preliminary vote Do Kwon’s Strategy to Fork the Network

Although the official vote, a preliminary poll reveals that the Terra community would not be overwhelmingly in favor of forking and creating a new version of the network as proposed by Do Kwon.

Although the members of the Terra space would have the responsibility to show themselves on the actions that will take place to safeguard the project’s integrity, a preliminary poll highlights that the majority of voters may not be happy with the strategy encouraged by Do Kwon.

Do-Kwon proposed to apply a Hard Fork and fork the network to find a more suitable version in which the UST stable coin ceases its existence.

Community Might not be Happy with Do Kwon’s Strategy Proposed for Terra

The survey comes from the number of critics revealed on the Agora; Terra Blog, where Kwon, and members of the community debated about the path to follow and the measure of forking the network to generate a better version, and a new token distribution plan to consolidate the decentralized governance of the protocol.

The said strategy shown by Kwon received more than 2,740 votes, and 90% of these were rejective stances about the procedure of forking the network, while the remaining 10% would agree with creating a new version of Terra.

According to analysts and enthusiasts, the community had all the right not to agree, opting to make a “clean slate,” significantly since people got harmed after the crash of the UST token and, therefore, the LUNA digital asset.

The strategy created by Kwon would not make the decentralization sure that the protocol expects. Therefore it would only benefit the crypto whales within the Terra ecosystem, who would receive a more significant number of governance tokens for the new network version.

Instead, many of the critics of Kwon’s proposal defend that a system of burning and buying back tokens should get applied to save the Terra ecosystem. This theory got also backed up by the CEO of Binance, Changpeng Zhao (CZ), who expressed that forking the network would generate value for those victims.

Terra’s Fate

Although it is difficult to expect the community to change its mind regarding the proposals on the table, the truth is that the final decision must get made.

Let’s not forget that the possible fork of the Terra network does not imply the destruction of the previous version. What would happen is that the Blockchain would get split into two: One part would go under the Do Kwon plan and contemplates following a new course, while the previous network would maintain its operations as it was, but it would become known as Terra Classic.

At the moment, the repercussions have had a domino effect both within the crypto ecosystem and outside of it. Inside the market, the fall has caused an impact that also impacted the leading altcoins, while doubts appeared about the functioning of the algorithmic stable coins currently active.

By: Jenson Nuñez

The Luna Foundation Guard (LFG) Shares an Update on Its Reserve Wallet

Alexander Salazar
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The Luna Foundation Guard (LFG) Shares an Update on Its Reserve Wallet

The LFG shared the volume of cryptocurrencies they held in their reserves and promised to compensate UST users. The price of TerraUSD dropped from nearly USD 19 billion to below USD 2 billion, severely hitting its market capitalization.

The Luna Foundation Guard (LFG) recently shared on Twitter the volume of cryptocurrencies they dumped and how much they still have in their reserves. The team behind the stablecoin UST and the LUNA token also promised to compensate users with the remaining assets.

The LFG has already taken 80,081 BTC, 99.61% of their holdings in that cryptocurrency, out of the fund. The organization confirmed the sale of 33,206 BTC for 1,164,018,521 UST. They did not account for the remaining 47,188 BTC while keeping 313 BTC in their reserves.

The group has not sold any Binance Coin (BNB) or Avalanche (AVAX), holding around 40,000 tokens of the former and 2,000,000 of the latter.

The Latest Announcement by Binance CEO Affects TerraUSD

The drop in the TerraUSD (UST) price from nearly USD 19 billion to less than USD 2 billion hit its market capitalization severely. However, the supply of UST on exchanges increased when the stablecoin started losing its value.

Following that panic, sales slowed down while high volumes of UST began to leave exchanges on May 11th. That may have happened due to those investors looking to buy UST cheaply, expecting the stablecoin to recover.

However, UST has been rapidly returning to exchanges since May 12th, indicating that most investors are selling their holdings at a loss.

A message from Binance CEO Changpeng Zhao may have contributed to that development. The executive criticized the Terra team for allegedly not communicating with them or devising a plan of action to follow.

Zhao confirmed that Binance did not buy any UST but added that they received 15,000,000 LUNA as part of the original investment. He also stated that the cryptocurrency exchange would let go of some assets.

UST is trading at around USD 0.088572 and has accumulated an 88.6% loss over the last seven days. While its trading market is above USD 409.52 million, its market capitalization is about USD 996.72 million, according to CoinGecko.

UK Treasury Seeks to Legalize Stablecoins amid the Crash of UST

The UK Treasury Department has decided to continue with the regulation of stablecoins as legal tender. Although the cryptocurrency community welcomes the bill, the decision is surprising due to the recent crash of the popular stablecoin TerraUSD (UST).

According to local media, the Treasury revealed its intention to regulate stablecoins across Britain during the Queen’s Speech.

Prince Charles announced the introduction of new laws in various sectors and measures to boost economic growth to improve living standards. He said that a bill would further strengthen powers to deal with illicit finance, reduce financial crime, and help businesses grow.

Everyone expected the recent collapse of the Terra ecosystem to raise alarm bells among regulators. However, the UK Treasury aims to ensure that the financial services industry is always at the forefront of technology and innovation.

By Alexander Salazar

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