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ETFS 21Shares Crypto Monitor - 2nd June 2022

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This Month in Crypto: Executive Summary

May ended with the market cap of the entire cryptoassets market resisting at $1.38T down from $1.82T since April. Between panic sellers and hodlers, returning to the fundamentals has been our main thesis that resonates especially during challenging times. In this monthly review, we will delve deeper into the macroeconomic factors driving these drops and showcase some valuable onchain metrics indicating healthy fundamentals. We will also shed light on Terra’s collapse, what led to it, and the repercussions that followed. Moreover, this report will cover the month’s most significant developments on the regulatory landscape, DeFi, and the wider metaverse.

Macro, Regulations; Spot, and Derivatives Markets

Consumer prices in the US have increased by 8.3% in April, the highest in a span of four decades. Inflation struck emerging markets harder, with consumer prices in countries like Lebanon and Venezuela rising over 200%. The World Bank declared a global food crisis, estimating that food products may have increased by 37% year-over-year. On May 4, in a bid to fight inflation, the Federal Reserve raised its benchmark interest rate from 0.50% to 0.75-1%.

There are a number of developments in global regulation addressing the cryptoassets industry that happened this month. In response to the recent disclosures made by Coinbase, the Biden administration is reportedly pushing for a bill that would effectively segregate customers’ funds in a centralized crypto exchange, from their own corporate funds. Germany is exempting individuals selling Bitcoin or Ethereum more than 12 months after the acquisition from paying taxes on the sale. A week after the latter’s announcement, Binance’s CEO confirmed that his team is in talks with German regulators to seek approval in Europe’s largest economy.

The Norwegian parliament rejected a bill banning Bitcoin mining, proposed back in March. Norway contributes up to 1% to the global Bitcoin hash rate, leveraging the country’s renewable energy generated by hydropower. Other developments worth noting:

  • Argentina banned financial institutions from offering clients any operations involving digital assets unregulated by the central bank.

  • Nigeria is upgrading its Central Bank Digital Currency (CBDC), eNaira, to be used on a wider range of goods. The United Nations raised concerns that this effort is crippling Nigeria’s fintech sector.

  • Portugal, once regarded as a tax haven for crypto investors, will be taxing crypto exchanges and crypto sales in the near future.

  • The USA declined Tether’s request to conceal documents related to describing the nature of its cash reserves from the public.

  • Korea fined Terra’s founder $78M for evading taxes.

The adoption of cryptoassets is still on the rise despite the ailing market sentiment. Nomura, Japan’s largest investment bank, started offering Bitcoin derivatives and is working on launching a subsidiary to help institutional clients diversify into cryptoassets, DeFi, and NFTs. One of Switzerland’s oldest asset management companies, Julius Baer, will be offering exposure to cryptoassets for its high net-worth clients.

  • Goldman Sachs, Barclays, and Commerzbank among others invested $70M in UK crypto trading platform Elwood.

  • Gucci and Emirates, the largest airline in the UAE, have plans to accept Bitcoin payments. Emirates will also launch NFT collectibles on its website.

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