News
01
Mar
crypto-news-review-9

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News Summary 1/3: Russia, Ukraine, Terra, Coinbase, and BitMEX

Russia’s invasion of Ukraine has been a hot topic globally. The impacts on the stock market and cryptocurrencies are still unclear. Bitcoin has been strongly featured in the news related to Ukraine. Terra acquired a $1 billion Bitcoin reserve. Coinbase’s Q4 result surprised everyone. The founder of BitMEX pleaded guilty.

Impacts of the Russian invasion on the market

Russia’s invasion of Ukraine has been the number one topic all over the world. In addition to the war itself and the humanitarian crisis, the attack has implications for the economy and cryptocurrencies.

Investors were scared that the market would collapse as the attack began last Thursday. However, this did not happen. The prices started to rise already on Thursday evening, so the drop was very minor and fast.

Historically, the market has been very little affected by wars and terrorist attacks. Usually, it is only a few percentages. In this case, the crisis had already been priced in several times before the Russian invasion started in practice. The market cannot fall forever for one and the same reason.

Bigger impacts will be seen through sanctions of the western countries. These sanctions have been surprisingly fast and powerful. In addition, many companies and organizations (such as FIFA) have started boycotting Russian products. European airspace is closed to Russian planes, oligarchs’ assets have been frozen, and so on.

Perhaps the most significant impact will come from the banks, as some of them have already been closed off from the SWIFT system. In addition, the Russian ruble plummeted by more than 20% on Monday. It was the worst daily drop since 1998. The country’s stock market will also plunge the next time it opens. The Moscow Stock Exchange has been closed since the beginning of the week.

The Russian economy is in danger of collapsing. If the country’s banks start to fall, it could affect the financial institutions in the West. Sberbank’s European subsidiary is already close to bankruptcy.  Yesterday Sberbank stock fell more than 70 percent to $1.25. Just a couple of weeks ago the price was over $13.

There is also a risk of higher oil prices, which would further increase inflationary pressures.

Investors must now keep their eyes open, as situations change every day. The correlation between cryptocurrencies and the stock market has been very strong for months. On Monday we saw a slight difference, but most probably it was just a speculation of a single day.

Central banks may also take advantage of the situation. Speculation is already underway that the Fed would make a smaller-than-expected interest rate increase in March. Most probably this would push the markets higher.

Although war is always a shocking event, its effects on the market (and on cryptocurrencies) are not always negative.

Bitcoin has received a lot of attention

Russia’s invasion of Ukraine has also brought Bitcoin to the news.

Firstly, it is clear that events in Canada (Freedom Convoy) and the war in Ukraine have awakened people to see the true value of Bitcoin in western countries. Until now, Bitcoin has been seen mainly as a speculative asset that does not have “real use” in Western countries.

The protesters’ bank accounts were closed in Canada. Now the Russian currency is collapsing and the ATMs in Ukraine are empty. Many have woken up to the fact that the current monetary system can become unstable very fast.

This was noticed by journalists from Ekstra Bladet in Denmark. They got ahead in Ukraine after buying a used car with bitcoins.

Cryptocurrency has also been used to make donations to Ukraine.

The addresses shown in the tweet above are apparently official donation addresses, as the tweet is from the official Twitter account of the Ukrainian government. Currently, about 184 BTC and 6 ETH have been donated.

We remind our readers to be very careful with crypto donations. Cybercriminals have already taken advantage of the situation creating fake accounts and YouTube live streams in the name of President Zelensky trying to attract donations to Ukraine.

Bitcoin has also been a safe haven for Russian citizens against the crash of the ruble. Bitcoin’s trading volumes against the ruble jumped to the highest level in nine months yesterday. According to Coindesk, a large part of the trades have been done in Binance.

Ukrainian Deputy Prime Minister Mykhailo Fedorov has also demanded the banning of Russian users from cryptocurrency exchanges. However, representatives of the Kraken and Binance have already refused. You can read here, how Jesse Powell, founder of the Kraken, commented.

Yesterday Coinbase also justified, that the ban would mainly be a punishment for ordinary citizens, who are innocent of the disaster caused by Russia.

A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilization as a result of their government’s aggression against a democratic neighbor.

The situation has also sparked much debate about Bitcoin’s position on a global scale. Will Russia start using Bitcoin to circumvent sanctions? Will we see stricter requirements for the regulation of cryptocurrencies? Time will tell.

A billion-dollar Bitcoin reserve for Terra’s UST stablecoin

Terra’s LUNA token has been on an upward trend for the past week. Its price has risen by 79 percent. Only Waves has fared better in the top 100 list. Terra’s DeFi protocol Anchor has increased its price the third most.

Both Anchor and LUNA tokens are related to UST stablecoin. This is an algorithmic stablecoin issued by Terra, which price remains at one dollar using LUNA token and based on demand & supply. You can read more about UST in our Terra beginner’s guide.

Terra ended up to headlines last week after acquiring a $1 billion Bitcoin reserve for UST.

The maneuver was done by the Luna Foundation Guard. It is the foundation that leads Terra’s development. It sold LUNA tokens worth $1 billion to leading VC companies. The trade was done as OTC, which means Over The Counter. It is a way to process unusually large transactions without impacting the market price.

OTC is the same thing if you agreed to buy bitcoins from your friend. You could agree on a price independent of the market and complete the trade of euros & bitcoins without intermediaries. This way the trade would have no impact on exchange prices.

It is not yet known how Terra’s new Bitcoin investment will work in practice. This is apparently a reserve that could be used to stabilize the price of UST stablecoin in an unexpected market situation.

Terra’s measure is also an interesting step in the bigger picture. Historically, the dollar has been guaranteed by gold. We are now entering a new era in which digital gold (Bitcoin) is being used as collateral for digital dollars. This could be one of Bitcoin’s most important uses in the future – as a reserve for both traditional central banks and digital stablecoins.

Coinbase’s Q4 result was a surprise

Along with Binance and FTX, US-based Coinbase is one of the world’s leading cryptocurrency exchanges. It is also a publicly listed company. Coinbase was listed on the US Nasdaq stock exchange on April 14, 2021, with the ticker COIN.

The status of a publicly listed company means that the company reports its financial figures quarterly. Coinbase published the Q4 2021 results on Thursday. The news was overshadowed by the Russian invasion.

You can read the details from this link. The image below shows the most important figures.

coinbase-q4-2021

The key figures from the last quarter of 2021 are astonishing. Coinbase even managed to beat the Q2 results hit by the previous peak of the crypto rally. The number of users, trading volume, and turnover set new records.

The readings are surprising as the crypto market slowed down badly at the end of the year by almost all indicators. Bitcoin’s price peak was seen in early November, followed by nearly two months of lows before the end of the year. In addition, many things suggest that large masses have fallen off the ride since the summer. This seems not to be the case for Coinbase.

coinbase-trading-volume

The table above shows which currencies Coinbase’s trading volume was directed at. The altcoins’ share increased to a new record; as much as 68% of the trades came from cryptocurrencies other than Ethereum and Bitcoin. Bitcoin’s share in particular has plummeted significantly from last year.

Despite the good results, Coinbase’s stock price has been closely linked to the price of Bitcoin. COIN was at $357 on November 9, but currently, the price is only $190. The drop is almost identical with Bitcoin in terms of percentages.

BitMEX founder Arthur Hayes pleaded guilty

BitMEX was the number one platform for pro investors in the years after the 2017 crypto boom. We are now talking about the Bitcoin futures market. BitMEX was a market leader in this sector before Binance also introduced Bitcoin futures.

During 2019 and 2020, BitMEX founder Arthur Hayes had kind of a rock star status in the crypto industry. He seemed to run the exchange ignoring the regulation and even joked about bribing authorities with coconuts.

Hayes’ journey ended harshly in the autumn of 2020 as BitMEX was charged by the CFTC, which oversees the U.S. futures market. CFTC claimed that Hayes and other BitMEX founders had violated money-laundering laws. Hayes disappeared for months shortly after until the man reported himself to authorities about a year ago.

Last week there was news of the situation of Mr. Hayes and his colleague Mr. Benjamin Delo.

Hayes and Delo pleaded guilty and will each pay $10 million in fines. They could be sentenced to up to five years in prison, but this will be decided by a judge at a later date.

Many thought the BitMEX exchange would collapse as a result of the event, but it has turned out differently. BitMEX is still in operation, but the company is run by new leaders. However, it has lost its position as one of the big players in the derivatives market.

The Hayes case caused major reputational damage, so many of the platforms’ customers moved elsewhere. Especially since there are a lot of options on the market today. BitMEX trading volume is currently only a couple of percent of Binance.

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