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This Week in Crypto
The overall sentiment for the cryptoassets industry is still in shock from the market correction that happened over the past few weeks. The macro factors driving the markets are a by-product of the Russian invasion of Ukraine and China’s COVID Zero policy combined, with the Federal Reserve’s latest interest rate hike adding fuel to the fire. Food prices have gone up 37% year-over-year, spurring protests in Sri Lanka and Iran. However, panic selling seems to be coming to an end; large investors, such as MicroStrategy, are still holding on to their crypto holdings. Bitcoin is down by 13%, trading between $33K and $29K over the past week, shrinking its market cap dominance to 42.4% as shown in Figure 1. Ethereum is down by 20%, trading between $2,423 and $2,013. On the upside, the top gainers out of last week’s rally were Cosmos, Solana, and Cardano.
Major Cryptoassets by Percentage of Total Market Capitalisation
Regulations and Adoption
Treasury Secretary Janet Yellen urged the Senate Banking, Housing, and Urban Affairs Committee to pass a bill this year to regulate stablecoins. The current framework, she believes, does not provide consistent or comprehensive standards for the risks of stablecoins as a new type of payment product. The pending Stablecoin Trust Act does not affect non-payment stablecoins, which include algorithmic stablecoins. It is still unclear whether Congress will embrace algorithmic stablecoins or impose an outright ban.
Germany released a document on Tuesday outlining clear income tax rules for cryptoassets. Individuals who sell Bitcoin or Ethereum more than 12 months after acquisition will not be liable for taxes on the sale if they realize a profit. This is a great win for the cryptoassets market, especially in a time of bearish sentiment.
On the other hand, Portugal will allegedly start imposing taxes on cryptoassets in the “near future.” Until this announcement was made public in the country’s parliament, Portugal was considered a tax haven for investors holding and trading cryptoassets, primarily due to an effective capital gains rate of zero.
As Bitcoin enters its seventh week in decline, Bitcoin miners in Norway breathed a sigh of relief. The Norwegian parliament rejected a bill banning Bitcoin mining, proposed back in March. Norway contributes up to 1% to the global Bitcoin hash rate, taking advantage of the country’s renewable energy generated by hydropower.
In El Salvador, representatives of 44 countries met on Monday to discuss financial inclusion, digital economy, banking the unbanked, the Bitcoin rollout, and its benefits in the country.
On the back of the ordeal of Terra Luna, being a Singapore-registered company, the country’s regulators are expected to focus their lens of scrutiny on Terraform Labs, which has no material ties to the country. There is a trend of crypto companies registering in Singapore to conduct business abroad without having a physical office in the country. Last month, the parliament passed a bill that requires these companies to be licensed primarily for anti-money-laundering reasons. Terra Luna’s bank run might inspire regulators to expand the provisions.
DeFi and NFTs
Many crypto exchanges, including Binance and OKX, have delisted LUNA and UST. Founder of Terraform Labs Do Kwon revealed a “revival plan” that will essentially reboot the network as “Terra Classic,” with Luna Classic (LUNC) as its new token, and redistribute the ownership of the network entirely to UST and LUNA holders through 1 billion new tokens. Luna Foundation Guards also just revealed its reserve and Bitcoin spending of 80K BTC, and after the crash was left with 313 BTC, which it will use to compensate its UST holders, starting with the smallest.
TerraUSD (UST) Performance in the Past Week
Aurora, an Ethereum Virtual Machine, has launched a $90M fund, in partnership with Proximity Labs, to scale decentralized apps on Near Protocol. PancakeSwap, a decentralized crypto exchange (DEX) built on Binance Smart Chain, announced in a new lite paper that it’s switching from an unlimited supply model to one capped at 750M CAKE.
Bancor, a decentralized exchange built on Ethereum and EOSIO, released the third upgrade of its protocol, which has new features meant to provide easier staking; which include Instant Impermanent loss protection, dual rewards, and auto compounding.
On the NFT front, the largest GameFi app on Avalanche, Crabada, will be migrating to Swimmer Network, Subnet of Avalanche, easing congestion on the network and therefore reducing gas fees. Dapper Labs, the company behind CryptoKitties, NBA Top Shot, and the Flow blockchain, unveiled a $725M ecosystem fund to support the latter. With the participation of venture capital firm a16z, Coatue, and others, the monumental fund will offer support for existing and future developers to build apps on the