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Here’s what happened in blockchain and crypto this week.
The rebound in cryptoassets turned out to be fairly short-lived as US equities are heading for a second consecutive weekly loss amid downbeat news on the U.S. economy. A four-month low in the S&P Global’s services US PMI reading along with a weaker than expected manufacturing PMI suggest that US business conditions are deteriorating as 2022 draws to a close. On Tuesday, November CPI came in at a lower-than-expected 7.1%, showing that inflation has probably peaked. The Fed slowed the pace of its previous rate hikes, raising interest rates by only 50 basis points on Wednesday. However, FOMC members continue to maintain their hawkish rhetoric which triggered a sharp selloff in equities. In contrast, government bond markets indicate that investors still do not expect the the Fed to raise rates past 5%. In crypto, the arrest of FTX founder and former CEO Sam Bankman-Fried (SBF) hit the headlines earlier this week. Binance was also in focus amid record withdrawals from the exchange.
On Monday, FTX founder SBF was arrested in the Bahamas after the US filed criminal charges. Prior to the arrest, the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. The arrest set the stage for extradition and U.S. trial for the former CEO. The eight charges by the Department of Justice against SBF include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. In addition, SBF was also charged by the SEC and the CFTC on separate fraud counts. SBF is still being held in The Bahamas’ Fox Hill prison without bail until a hearing on February 8th. Before his arrest, SBF was expected to testify virtually before the US House Financial Services Committee on Tuesday, although this was later denied by his attorneys. During the hearing, FTX CEO CEO John Ray III who also performed the same task when Enron collapsed, told lawmakers that FTX embezzled customer funds “right in front of their eyes”.
Elsewhere, crypto exchange Binance is under investigation for possible money laundering and criminal sanctions violations, according to a Reuters article. However, splits between U.S. Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation into the world’s largest crypto exchange. The investigation in Binance’s potential non-compliance with U.S. anti-money laundering laws and sanctions reportedly started as early as 2018. Meanwhile, Binance’s CEO Changpeng “CZ” Zhao warned his staff of turbulent times turbulent times ahead as the crypto exchange has experienced a wave of withdrawals amid concerns about its financial health, according to an internal memo.
Net outflows of cryptoassets from Binance amounted to about $3.7 billion within seven days, including almost $2 billion on December 13, according to data from research firm Nansen. While withdrawals have slowed since, net outflows remained negative as of December 15. According to CryptoQuant, on-chain data shows that Binance is far from exhibiting “FTX-Like” behavior. The data analytics company found the exchange is almost entirely collateralized and diversified away from its proprietary token BNB. The financial audit, tax and advisory firm Mazars came to a similar conclusion as part of a proof-of-reserves and proof-of-liabilities assessment. However, the firm later deleted the report on its website while also pausing the work with Crypto.com and KuCoin (see also story below).
Market Overview The global cryptoasset market capitalization currently amounts to $852 billion – down from the $890 billion since Friday last week, with bitcoin accounting for 38%. Among the Top 30 cryptoassets by market cap, Telegram’s Toncoin (TON) outperformed, gaining roughly 35% over the week. During the same period, the price of bitcoin (BTC) dropped by 2.4% to $16,827 while the price of ether (ETH) fell 6.6% to $1,196. For the first time since February 2021, the total value locked (TVL) in DeFi is sitting below $40 billion – down from the $45.4 billion last week – with Ethereum accounting for about 58.5% of TVL.
This Week’s Headlines
Notable Deals and Fundraising
Manuel Trojovsky, Head of Crypto Investments & Research
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