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ETFS 21Shares Crypto Monitor - 28th April 2022

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This Week in Crypto

The cryptoassets market has stagnated at $1.89T in market cap, with Bitcoin and Ethereum dropping by over 5% since April 19. Whales have been buying the dip shortly after Bitcoin fell below the $40K mark, as shown in the figure below. On the other hand, high outflows of approximately $97M were made from crypto funds in reaction to the Federal Reserve’s plans to shrink bond holdings by $95B a month, as a hedge against inflation. Fluctuation in price action is speculated to persist in the coming few months, as the Fed expects to raise interest rates by 50 BPS in May. Another macro factor that might be driving the red candle wicks on the chart below is the fall of Chinese stocks, commodities and yuan after the country’s strict Covid Zero policy intensified on Monday.

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Source: TradingView

One interesting metric worth looking into is Bitcoin’s Network-Value-Transaction (NVT) pricing model. The framework takes the two-year median of the NVT ratio – determined by dividing the network’s total value by its daily transaction volume – then multiplying it by the current transaction volume. Looking at the 28 and 90-day periods, it can be argued that both models are starting to show signs of bottoming. This has historically preceded phases where Bitcoin began initiating a rally, as indicated through the several blue circles on the chart below, during January 2019, May 2020, and September 2021. It will still take some time to confirm the continuing crossover of the 28-day above the 90-day period, so it is a development we’ll be watching closely.

Bitcoin: NVT Price Model (Entity-Adjusted)

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Source: Glassnode, 2022.

Regulations

The US Treasury Department imposed sanctions on BitRiver, the Russian Bitcoin mining hosting firm whose parent company is based in Switzerland, along with its 10 subsidiaries. Tied to Russian oligarch Oleg Deripaska, BitRiver is one of the largest Bitcoin mining hosts in Europe and operates six data centers, with another three under construction. Further in this effort, the European Union is forcing Binance to crack down on Russian users moving assets worth more than $10K.

Rug pulls could soon become an outright felony, as New York lawmakers lobby for new legislation that proposes limits on the ability to found development teams to sell significant percentages of their token holdings within a five-year period. This comes shortly after the rug pull of Frosties, a fraudulent NFT project whose creators were charged last month for looting $1.3M in ETH. This could be a great victory for, not only US investors, but for the entire DeFi community that is often being associated with rug pulls and fraud

German banking giant Commerzbank has applied for a crypto license, making it the first major bank to move towards cryptocurrencies in the country. Similarly in the UAE, Kraken was granted the license to operate in the emirates, to become the first cryptocurrency exchange to offer direct funding and trading in UAE dirhams against Bitcoin, Ether, and a range of other virtual assets.

DeFi

Near’s long-anticipated native stablecoin USN has finally launched on Mainnet after weeks of excitement, with reports coming out that the project’s efforts led by the Decentral DAO will help offer a range of at least 11% APY - generated via the DAO’s revenue from staking NEAR. Figures will fluctuate based on staking rewards, while USN’s emergency funds will be backed with a treasury of USDT and NEAR reserves. In the same vein, Justin Sun of Tron announced that the network will introduce its own native algorithmic stablecoin named USDD. The new project is similarly expected to offer a 30% base APY, with $10B worth of diversified crypto held in reserves. Interestingly, the risk-free interest rate seems to be unsustainable in hindsight considering Anchor’s protocol challenges in preserving their advertised 20% yield. But as it is too early to assess how feas