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Here’s what happened in blockchain and crypto this week.
Equities and cryptoassets look set to end a lackluster week with a down day. However, all eyes will be on inflation data next week, with the US CPI reading due for release on December 13 followed by the Federal Reserve’s policy decision on December 14. The US central bank will probably slow its hiking pace and deliver on market expectations of a 50bp rate hike vs. the 75bp in prior meetings. While the current crypto winter might last until the end of 2023, according to a Coinbase research piece, some firms are seeing opportunity in the current crisis. For example, Goldman Sachs plans to spend tens of millions of dollars to buy or invest in crypto firms. Meanwhile, capitulation in the mining space is in full swing. This week, the Bitcoin network experienced its largest downward difficulty adjustment since July 2021, dropping by 7.3%. Current conditions have put significant pressure on miners, with many of them being forced to unplug parts or all of their mining fleet.
As the dust settles around the FTX collapse, lawmakers in the US are gearing up for possible resolutions for depositors and creditors of the failed exchange, starting with a House Financial Services Committee hearing scheduled for next week. Former FTX CEO Sam Bankman-Fried (SBF) confirmed that he is willing to testify in front of the House Committee in Washington D.C. next Wednesday. Elsewhere, the SEC is now seeking details on crypto bankruptcies’ impact on US companies. Publicly traded companies exposed to crypto in general or to the bankruptcy of FTX and other cryptoasset firms will have to disclose those details to investors under new guidance from the agency. The guidelines, which are outlined in a sample letter, are not limited to disclosures regarding the amount of cryptoassets on the balance sheet.
Across the pond, regulators are taking a different view of crypto in the wake of FTX. The “questionable practices” at the offshore crypto exchange would not have been allowed to happen under the new European Union markets in cryptoassets rules (MiCA), according to the European Commission. The latter also aims for new tax rules to be enforced by 2026. As part of the new proposal, companies offering crypto services to EU residents will need to report on transactions to tax authorities. Meanwhile, the UK is taking a more proactive approach and aims at attracting more investments in crypto businesses in the country. Chancellor of the Exchequer Jeremy Hunt shared a package of 30 regulatory reforms (also referred to as “Edinburgh Reforms”) for the UK’s financial services, in an effort to boost economic growth post-Brexit (see also This Week’s Headlines).
As projected in last week’s Weekly Wrap-Up, capitulation in the Bitcoin mining space is in full swing. This week, the Bitcoin network experienced its largest downward difficulty adjustment since July 2021, dropping by 7.3%. Current conditions such as low bitcoin prices, rising hashrate and higher OPEX have put significant pressure on miners, with many of them being forced to unplug parts or all of their mining fleet. The distressed environment has also impacted prices of next-generation ASICs which dropped to new all-time low valuations. Likewise, the hashprice – the the expected dollar value of 1 TH per second of hashing power per day – is hovering near all-time lows. Needless to say, the squeezed profits also translated into sharply lower stock prices of publicly listed miners, with some firms’ share prices shedding almost 98% from their peak. More bankruptcies in the mining space are looming, as both public and private miners are defaulting on their ASIC financing loans. Market Overview The global cryptoasset market capitalization currently amounts to $890 billion – little changed from the $892 billion since Friday last week, with bitcoin accounting for 37%. Among the Top 30 cryptoassets by market cap, Avalanche (AVAX) outperformed, gaining roughly 4.2% over the week. During the same period, the price of bitcoin (BTC) climbed by 1% to $17,142 while the price of ether (ETH) fell 0.7% to $1,267. The total value locked (TVL) in DeFi is sitting at $45.4 billion – up from the $42.7 billion last week – with Ethereum accounting for about 61% of TVL.
This Week’s Headlines
Notable Deals and Fundraising
Manuel Trojovsky, Head of Crypto Investments & Research
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