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Here’s what happened in blockchain and crypto this week.
Cryptoassets rebounded this week, with the price of Bitcoin rising above $25,000 – its highest level since June 2022. After extending its January rally, BTC is up by almost 50% year-to-date. Conversely, US equities look set to end the week lower amid a hawkish Fed as well as signs of sticky inflation. On Tuesday, US headline CPI in January came in at 6.4%. While the data was lower than the 6.5% in December, it was higher than the expected 6.2%, suggesting that inflation is decelerating at a slower pace amid renewed yoy increases in energy prices. Retail sales, another major US economic data release, increased by 3% in January, well above estimates of 1.8%. In crypto, the SEC’s crackdown on the industry continued this week. The agency took stablecoins and announced that it considers Paxos’ BUSD a security. After cracking down on Kraken’s staking-as-a-service offering last week, the SEC has put stablecoins in the crosshairs. The agency issued notice to crypto infrastructure provider Paxos over its involvement in Binance’s USD stablecoin BUSD – the third largest stablecoin by market cap – alleging that the stablecoin is an unregistered security. According to a statement from Paxos, the likely SEC enforcement action was only related to BUSD. The company said it “categorically disagrees” with the SEC’s with the SEC regarding BUSD’s classification as a security and is “prepared to vigorously” fight the agency. Though SEC Chair Gary Gensler has previously stated that he believes certain stablecoins to be securities, the move represents the SEC’s first major action on stablecoins. Meanwhile, Bloomberg reported that stablecoin issuer Circle filed a complaint with the New York State Department of Financial Services (NYDFS) last year over Binance’s “mismanagement of reserves” for its own tokens. This week, the NYDFS said in a consumer alert that it has ordered Paxos to stop minting BUSD, citing “unresolved issues” in Paxos’ oversight of its relationship with Binance. The NYDFS also found that Paxos “violated its obligation to conduct tailored, periodic risk assessments and due diligence refreshes of Binance and Paxos-issued BUSD customers to prevent bad actors from using the platform.” Shortly after Paxos ceased issuing BUSD, it honored redemptions to the tune of 684 million BUSD (i.e. it burned stablecoins in exchange for USD redemptions), on-chain data show. The SEC also charged Terraform Labs and its CEO Do Kwon over its algorithmic stablecoin Terra USD, which collapsed dramatically last year, and over fraudulently misleading investors. On Wednesday, Gary Gensler opened yet another regulatory frontagainst crypto, arguing that crypto firms are not in compliance with current rules around safeguarding digital assets. “The current model in the crypto field is a model that takes control, one would say ownership, of those funds, and commingles that with thousands, and often hundreds of thousands or even millions of other customer funds,” he said. Earlier this week, Coinbase CEO Brian Armstrong said he was in Washington, D.C. on Monday in a push for clearer rules amid rising uncertainty in the sector following enforcement actions this month against Kraken and Paxos. Elsewhere, the share price of crypto-friendly bank Silvergate (SI) continues to experience significant volatility. The company’s stock rose by 28.5% to $22.40 on Tuesday when Susquehanna Advisors Group revealed a 7.5% stake in SI while Citadel Securities also disclosed a 5.5% stake in the beleaguered bank earlier on the same day. On January 31st, BlackRock increased its stake in the bank to 7.2% from 5.9%. However, short interest in SI remains elevated, with roughly 73% of outstanding shares currently sold short, according to NYSE data. On Thursday, SI’s rollercoaster ride continued, with SI shares ending the day more than 17% lower amid weakness in US equities as well as on the back of a Reuters report that Binance moved funds from its US affiliate’s Silvergate Bank Account to a trading firm in 2021.Market Overview The global cryptoasset market capitalization currently amounts to $1.16 trillion – up from $1.06 trillion on Friday last week, with bitcoin accounting for 40.4%. Among the Top 30 cryptoassets by market cap, Filecoin (FIL) outperformed, gaining roughly 55% over the week. During the same period, the price of bitcoin (BTC) increased by 12% to $24,428 while the price of ether (ETH) rose by 9.8% to $1,697. The total value locked (TVL) in DeFi is sitting at roughly $50.1 billion – with Ethereum (excluding Layer 2s) accounting for more than 58% of TVL.
This Week’s Headlines
Notable Deals and Fundraising
Manuel Trojovsky, Head of Crypto Investments & Research
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