Here’s what happened in blockchain and crypto this week. Higher interest rates and the inflationary environment continue to weigh on markets amid a global repricing of risk assets. U.S. equities experienced sharp losses this week amid a more hawkish Federal Reserve which raised interest rates by 75 basis points on Wednesday. It was another difficult week in crypto markets, with a selloff in BTC and ETH bringing two major crypto firms to the brink of collapse. Crypto lender Celsius halted client withdrawals on its platform while crypto trading firm Three Arrows Capital also appears to be hanging by a thread. While the industry is preparing for a potential crypto winter, a number of market participants such as Galaxy Digital’s Mike Novogratz suggested that crypto could be much closer to the bottom than global equities. Despite the recent woes, dealflow momentum is unchanged with crypto startups continuing to raise tens of millions this week. The price of bitcoin hit an 18-month low this week below $21,000 while the global market cap of cryptoassets dropped below $1 trillion for the first time since January 2021 amid recent turbulences. While BTC is down by about 70% from its peak of $69,000 in November, the vast majority of cryptoassets have shed more than 90% from their all-time highs. Recent losses and drawdowns in crypto prices has caused a number of overleveraged firms to go into a tailspin. Crypto lender Celsius Network suspended withdrawals on Sunday to “stabilize liquidity” and “preserve and protect assets”. The firm has been in the business of taking BTC and ETH deposits and and depositing them into other DeFi protocols to generate yield for its clients. In a blog post, the company told its over 1.7 million customers that it would pause withdrawals, swaps, and transfers between accounts, citing “extreme market conditions”. The move was partly triggered by a massive selloff in Lido’s Staked Ether (stETH), an ETH derivative, which caused a decoupling from ETH. On Wednesday, Celsius CEO Alex Mashinsky broke a three-day silence tweeting that “the team is working non-stop” but gave no indication as to when customers would be able to access their funds again. Reuters reported that securities regulators in five U.S. states have opened investigations into the crypto lender’s decision to freeze accounts. Meanwhile, the WSJ reports that Celsius is hiring a law firm to examine restructuring options. Other market participants affected by the recent drawdowns include crypto hedge fund Three Arrows Capital (3AC) and Tron’s stable coin USDD. Singapore-based 3AC has reportedly failed to meet margin calls from its lenders which has fueled rumors of insolvency after this week’s crypto market collapse. Crypto lender BlockFi was among the firms to liquidate at least some of 3AC’s positions, according to the Financial Times. Elsewhere, Tron’s stablecoin USDD has lost its dollar peg, slipping to lows of $0.963 and is currently trading at levels of $0.975. To defend the peg of its stablecoin, the TRON DAO Reserve announced that it would withdraw 2.5 billion TRX tokens from Binance.
Market Overview
The global cryptoasset market capitalization currently amounts to $937 billion – down from $1.25 trillion since Friday last week, with bitcoin accounting for 42.3%. With the exception of stablecoins, all cryptoassets in the top 30 by market cap suffered losses over the week. During the same period, the price of bitcoin (BTC) decreased by 31.5% to $20,620 while the price of ether (ETH) dropped by almost 40% to $1,074. The total value locked (TVL) in DeFi sits at $74.5 billion – down from $104 billion last week – with Ethereum accounting for about 64% of TVL.
This Week’s Headlines
Celsius reportedly appoints Citigroup as an advisor after withdrawal freeze Crypto fund Three Arrows Capital faces potential insolvency after lender liquidation Elon Musk floats crypto payments during meeting with Twitter employees SEC chair Gary Gensler reiterates that much of the crypto space could fall under the securities regime Tron DAO Reserve pulls 2.5 billion TRX from Binance to defend USDD peg Lido staked ether (stETH) discount drops to 5% for second time in one month Tether publishes a statement about its commercial paper holdings Jack Dorsey‘s Bitcoin venture TBD unveils proposal for decentralized Web platform Coinbase cuts workforce by about 18% to weather market conditions
Notable Deals and Fundraising
Gaming project Wildcard Alliance raises $46 million in a Series A round French digital assets service provider Coinhouse raises $42.5 million NFT infrastructure startup NFTPort raises $26 million in a Series A round Atmos Labs has raises $11 million to build a “play and earn” metaverse Web3 tech advisory firm ScienceMagic.Studios raises $10 million pre-seed Decentralized science platform Molecule raises $13 million in a seed round Zero-knowledge proof startup zCloak Network raises $5.8 million Digital fashion company SKNUPS raises $3.5 million, partners with Dolce and Gabbana Payments processor Nume Crypto raises $2 million in pre-seed funding Animoca Brands acquires educational tech firm TinyTap for $38.9 million To be always informed about the latest news in the market -> Subscribe here
Manuel Trojovsky, Advisor Investment & Research
