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A look back at September

Date
02/10/2023
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Lykke
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Crypto markets rose slightly during the course of September but ended lower on a quarterly basis.

Crypto assets started off the month trading sidelines, before heading south mid-September ahead of the expected court ruling on the fate of the 3.4 billion US dollars of assets held by the bankrupt FTX exchange. Investors feared a massive selling pressure when these assets were released to the market. The verdict did not come, and the crypto markets rebounded.  

The second half of the month was dominated by fading expectations of interest rate cuts. The European Central Bank (ECB) as expected raised its key rate to a record 4 percent, while the Federal Reserve took the markets by surprise when it warned another rate hike will be necessary before year-end. Additionally, the Fed announced that there will be fewer rate cuts than previously indicated in 2024.

In September, the monthly cryptocurrency exchange volumes fell to 304.5 billion US dollars, the lowest volumes in three years, data from The Block shows. “The biggest risk vector for entities with exposure to cryptocurrency markets is a notable contraction of liquidity in the market,” Glassnode writes in its Finance Bridge report.

Hopes for quick spot Bitcoin ETFs approvals in the US dashed

Bitcoin’s dominance in the crypto universe remains unchallenged, with a market share just below 50 percent on Sept 30, according to TradingView data.

The Securities and Exchange Commission (SEC) once again delayed its decisions for the applications of BlackRock, Invesco, Bitwise, ARK Invest and Valkyrie’s spot Bitcoin exchange traded funds (ETFs) by an additional three months to early January, Bloomberg reports.

The potential approvals of the ETFs are likely to trigger a crypto rally driven by institutional investors rather than private individuals, with estimates that these “would bring 20-30 billions of fresh cash into Bitcoin,” the Bitcoin profile Lark Davis speculates.

Grayscale Investment’s Bitcoin Trust, which it tries to transform into an exchange traded fund (ETF), is the world’s second-largest holder of Bitcoins, holding more than 16 billion dollars of Bitcoins, as data from Arkham Intelligence shows. As for MicroStrategy, it announced it has purchased another 5,445 Bitcoins in September and now holds 158,245 Bitcoins, more than any other publicly listed company.

Bitcoin increased 4.3 percent during the month and is up 64 percent since the beginning of the year.

Ether ETFs in the pipeline

The nine applications for Ether futures ETF that the SEC is currently reviewing may be approved and available on the market as of Oct 2, Bloomberg reports. Futures ETFs provide exposure to the underlying asset through futures contracts predicting its future price.

Ethereum put on 0.8 percent during the month and is up 39 percent since the beginning of the year.

Visa expands its cross-border settlements to the Solana blockchain

The global payment provider Visa will enable stablecoin settlements on the Solana blockchain, following a successful pilot program involving USDC and the Ethereum blockchain. Solana added 7.8 percent during the month and up 120 percent since the beginning of the year.

Global crypto spot trading volume concentrated to five exchanges

Roughly 84 percent of the crypto spot trading volume is currently concentrated to five exchanges, data from The Block shows. Roughly two fifths of these trading flows (41.7 percent) go through the largest exchange, Binance.

Binance will, however, exit Russia and sell its Russian operations to CommEX. In the US, Binance also tried to get the enforcement action filed against it by the Securities and Exchange Commission (SEC) dismissed.

The Chair of the SEC, Gary Gensler, was unphased and told a US Congress committee that “given this industry’s wide-ranging noncompliance with the securities laws, it’s not surprising that we’ve seen many problems in these markets... Thus, we have brought a number of enforcement actions—some settled, and some in litigation—to hold wrongdoers accountable and promote investor protection.”

The price of Binance finished unchanged at 215 dollars during the month, but down 13 percent since the beginning of the year.

Coinbase expands in Europe & Bermuda – warns jobs lost due to US rules

Coinbase, the largest crypto exchange in the US, wants to expand in jurisdictions with a clear regulatory framework. It obtained an anti-money laundering (AML) registration with the Bank of Spain as a cryptocurrency exchange and custodian wallet provider as well as regulatory approval from the Bermuda Monetary Authority to enable perpetual futures for non-US retail customers.

Coinbase also warned jobs are being lost in the US due to the unclear regulatory situation.

“Today, 83% of G20 members and major financial hubs [not the US] have made progress toward regulatory clarity for crypto… Europe is leading the way… Thanks to its crypto-forward approach, Europe now claims two thirds of the world’s blockchain jobs, 68%, versus 14% apiece for Asia and North America,” Coinbase said on its website.

Kraken continues EU expansion, obtains licenses in Spain & Ireland

Kraken, the world’s third-largest crypto exchange behind Binance and Coinbase, has obtained a license to operate as an E-Money Institution (EMI) in Ireland and separately registered as a Virtual Asset Service Provider (VASP) with the Bank of Spain.

Deutsche Bank & Citi enter digital asset custody & tokenization services space

Germany’s largest bank has entered a global partnership with the Swiss provider of digital asset infrastructure, Taurus for the launch of digital assets and distributed ledger technology-based products and services across several booking centers.

Citigroup the third-largest US bank will for its part develop a token service aimed at institutional clients following successful pilot schemes.

Value of stablecoins dropped by 26% over past 18 months

The market capitalization of the six largest stablecoins, including Tether, DAI and USDC, has declined by 26 percent over the past 18 months, the data platform Santiment said. The European Central Bank (ECB) is nevertheless concerned about the emergence of private stablecoins, such as PayPal’s PYUSD, one of the ECB board members, Fabio Panetta, said.

Regulatory hurdles such as the EU’s Markets in Crypto-Assets (MiCA) directive could further hamper stablecoins when it is implemented next summer. Binance for instance warned it may be forced to delist all stablecoins as of June 30, 2024.

Stablecoins are the third most traded assets in the crypto universe with a market capitalization exceeding 124 billion US dollars.

Global leaders call for common rules to avoid regulatory arbitrage

The world’s G20 leaders agreed regulatory arbitrage should be avoided when it comes to crypto assets. This could be difficult to enforce as countries take radically different approaches to managing crypto assets.

In the US, the Securities and Exchange Commission (SEC) for instance fined the producer of the non fungible token (NFT) ‘Stoner Cats 2’ one million dollars for “conducting an unregistered offering of crypto asset securities” and warned that charges against additional crypto and decentralized finance (DeFi) exchanges are imminent.

Crypto exchanges exit UK market ahead of new promotion rules  

Both Bybit and NiceHash will exit the UK market ahead of the implementation of tougher advertisement and promotion rules by the country’s regulator, the Financial Conduct Authority (FCA), that will come into force in October. The London stock exchange (LSE), for its part, aims to offer a blockchain-based trading platform for investors, dealing with issuance, trading, reconciliation and the settlement of assets, the exchange’s CEO, Murray Roos, told Financial Times.

EU exchange of information on crypto transactions in place 2026 

The European Parliament voted in favor of an amendment to the Directive on Administrative Cooperation (DAC) that puts forward measures to exchange information on crypto-asset transactions. The European Commission estimates that the introduction of a reporting framework could annually generate up to 2.4 billion euros in additional tax revenue.

Almost half a billion people own crypto assets, with India in the lead

Some 425 million people around the globe owned crypto currencies at the end of June 2023, according to the Crypto Wealth Report of Henley & Partners. India comes in pole position in Chainanalysis’ Global Crypto Adoption Index, followed by Nigeria, Vietnam and the US. No EU country makes it into the top 20.

Crypto fraud losses skyrocketed in Q3

Total losses incurred from hacks, phishing scams and rug pulls soared to nearly 900 million US dollars during the third quarter, exceeding the combined losses reported the two previous quarters, Beosin’s quarterly report shows. DeFi remains the most frequently attacked type, representing two-thirds of the total number of incidents, the Ethereum blockchain accounting for the most losses overall.

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