| Assaf Elmaleh, Senior Crypto Analyst at Proxibit Investment House |
| Key points in the weekly review:
The leaked order and the market response: US in a positive response to regulation in the field
Stable currency adoption continues: USDT leads the race
On-chain analysis: The effect of document leakage on merchants.
Conclusions and a look to the future
| The leaked report and the market response: US in a positive response to regulation in the field
On Wednesday, the crypto market turned green and rose more than 6%. This can be linked to a presidential decree on it.
Due to the ongoing confrontation with Russia, and the claim that the Russian elite will use digital currencies to circumvent the sanctions imposed on them, many investors saw Biden’s order as a cause for concern and feared that the US administration would handle digital currencies harshly.
However, a deepening of the presidential order raises other, more positive conclusions. The issues discussed in the order paint a clearer picture of the direction of the U.S. regulator when it comes to digital currencies. The topics discussed are:
Protecting investors from fraud in the field
Maintaining financial stability
Illegal activity in digital currencies and its enforcement
“Maintaining U.S. Competitive Advantage in the Field”
“Creating responsible innovation”
The very fact that the US government talks about maintaining a competitive advantage in the field of digital currencies, gives a thick hint on the administration’s understanding of the power of digital currencies.
The phrase “responsible innovation” also clarifies the line that the US administration seeks to take. In other words, the US Treasury wants to develop the field and create a fairer and safer market. The administration does recognize the ability of digital currencies and blockchain technology to streamline the financial system, and yet, recognizes the risks that the field brings with it and handles it with the necessary caution.
This reference by the US Treasury Department received a positive interpretation in the markets on Wednesday. The cooling in the market on Thursday was not long in coming, although I would not link this to the publication of the order, because indeed the atmosphere in it was positive. This is even if one takes into account President Biden’s requirement of government ministries to prepare reports on the risks involved in the use of digital currencies and how more significant regulation can be applied to the field.
| Stable currency adoption continues: USDT leads the race
Despite the regulatory uncertainty and the problems facing the company, the adoption of the world’s largest stable currency is only gaining momentum. The most famous example is the Myanmar government, which declared it the official currency of the country last December.
In addition, the Ukrainian government has in the last two weeks raised donations in the stable currency (Stablecoin) USDT, thus further announcing the harnessing of the power of digital currencies as a means of global payment. What these two countries have in common is the uncertainty and instability that lies within them.
Therefore, the following news surprised many in the crypto world: Lugano Municipality and a company behind the stable currency USDT, announced an unprecedented collaboration, which will allow Swiss city residents to pay taxes, parking reports and additional public service payments via, USDT and various cryptocurrencies.
Switzerland is one of the most stable countries in the world, and everyone knows that the adoption of digital currencies will come from the need for developing and less stable countries. Is this a change of trend? Probably not, but the adoption of digital currencies by a stable country like Switzerland, certainly makes a difference.
USDT is the largest stablecoin in the digital currency market, with a market value of about $ 80 billion, and constitutes about 4% of the entire crypto market. As noted in previous reviews, the importance of stable currencies pegged to the dollar is rising in conditions of uncertainty such as those in Russia and Ukraine, and their adoption only widens with the collapse of the Russian ruble.
| On-chain analysis: document leakage, levers, and coin movement
In connection with this week’s events, it seems that before the leak of the same document by US Treasury Secretary Janet Yellen, which instilled hope in crypto investors, most traders in the market were quite pessimistic about market movements, due to the ongoing uncertainty (Russia-Ukraine war, rising inflation around the world ).
It can be seen in the funding rate that most traders were in open short positions on Bitcoin, they were significantly discounted and moved to longs.
As for the leaks in the market, with the leak and the jump in the price of the shortlisters, they lost about $ 40 million within two hours – unpleasant. Leverage is a powerful tool, but unusually dangerous in the so volatile crypto market.
Another statistic we are keeping an eye on is the amount of bitcoins in the stock exchanges, which is still going down. More and more people, investors and traders are transferring their money off the crypto exchanges – which indicates that traders and investors are still in the process of “accumulating”. When the opposite happens, and there seems to be a flow to the stock markets, it will indicate a greener market, one in which investors and traders will want to make changes and sell at a profit.
| Looking ahead
In a broader aspect, the digital currency market seems to be hanging on to such and such events over and over again to keep its head above water, and it seems that global uncertainty and macro effects will further flood pessimism markets.
In other words, there is fragility in the market, and you should be careful with announcements about the return of the wave of increases. Good luck to investors.
The author is a senior crypto financial analyst at Proxibit. The website does not contain investment advice and / or marketing and / or tax advice and does not contain any substitute for such services that take into account the data and the special needs of each person. The website does not contain any recommendation regarding the viability of investing in virtual currencies and / or any financial products or instruments, nor does it contain any order and / or offer to perform operations in the products mentioned. This does not constitute an obligation to bear any return. Investing in virtual currencies is risky and can result in a loss of full investment. The field of virtual currencies involves regulatory, taxation and application uncertainty by various entities with which interactions are required for the purpose of performing operations.