The economy as a whole and the financial markets
On the 16th of the previous weekend, the Dow continued to drop and ended up $281 (0.8%) lower than the day before.
At the recent meeting of the US Federal Open Market Committee (FOMC), it became clear that the US Federal Reserve Board (FRB) will continue to raise interest rates, and there are growing worries that the policy interest rate outlook for the end of next year will be longer than the market expects. The market has been forced to correct itself after being too optimistic.
market for virtual currencies
On the market for crypto assets (virtual currencies), bitcoin stayed the same at $16,744, which is up 0.07% from the day before.
After BTC went up after the FOMC, it went down after a big sale at 16:00 on the 16th. The fall was sped up by the $17,300 support line breaking down and the triangle coming together. Compared to the week before, BTC fell by 2.4%, ETH by 6.5%, XRP by 9.0%, and MATIC by 10%.
On the other hand, The Open Network (TON), which quickly climbed to 18th place in terms of market capitalization, saw an increase of +7.8% from the day before and +51.9% from the month before that, which was the biggest increase of any cryptocurrency.
On November 27, the TON Foundation, an open-source community, announced that it would offer a Telegram bot service to help with cryptocurrency trading. Using the wallet extension, you can buy and sell P2P (peer-to-peer) virtual currency within the Telegram app.
On the first of this month, CEO Pavel Durov announced plans to build a decentralised exchange (DEX) and a self-managed wallet. This summer, he is optimistic about the Web3 field and has proposed the idea of a user-named NFT marketplace. This way of thinking is also thought to cause people to buy related tokens just for fun.
According to data from on-chain, Bitcoin whales (large investors) with more than 1,000 BTC have sold a total of 280,000 BTC in the last 30 days. This is because of the effects of the FTX bankruptcy and other factors.
🤯 Breaking: #Bitcoin's addresses holding between 100 to 10,000 $BTC have bought $726m in $BTC the past 9 days. Meanwhile, #stablecoin assets like $USDT, $BUSD, & $DAI are also being bought quickly. This is a recipe for good things. Read all about it. 👉 https://t.co/H0G6oJhWFp pic.twitter.com/lOKPAfzZNO— Santiment (@santimentfeed) December 15, 2022
On the other hand, according to data from the last nine days, whales with between 100 and 10,000 BTC have bought bitcoin worth $726 million.
Also, the number of addresses with 10 bitcoins or more kept going up despite the bear market. It reached 154,796, which was the highest level in two years.
Concerns about Binance Markets were also shaken by the fact that the market didn’t trust Binance’s “proof of reserves” report, which was made by the accounting firm Mazars.
Mazars has worked with Binance, KuCoin, and Crypto.com in the past, but for now, it will stop researching cryptocurrencies. In response to the recent situation, it was said that the bad reputation risk (badrumorr) could spread to the audit results of clients of traditional financial companies, and pressure was applied.
In the Mazars investigation, Binance’s recent “asset proof” report raised questions about its reliability. For example, it did not include “liabilities” like negative customer assets, which is a type of debt.
Mazars had to explain this by saying, “This was done according to the reporting standards agreed with Binance and is not a guarantee or audit opinion on the asset.” It was shown how hard and limited it is to prove assets on the exchange.
Binance, on the other hand, said it was going to start its own Proof of Reserves (PoR) system to solve this problem. It includes sharing information about assets like Bitcoin (BTC) that have been deposited, as well as auditing policies by a third party.
As part of #Binance’s user fund transparency work and Proof of Reserves updates, we're working with digital assets experts at global financial audit, tax and advisory firm, @Mazars_SA.— Binance (@binance) December 7, 2022
The first report from Mazars about Binance’s $BTC Proof of Reserves has been published today.
Fears about DCG
Also, financial products like Litecoin (LTC), Ethereum Classic (ETC), Near Protocol (NEAR), Filecoin (FIL), etc., that are offered by Grayscale, a subsidiary of the Digital Currency Group, are not backed by any government. Concerns have been raised about how to get rid of crypto assets.
Several experts, like Will Clemente (@WClementeIII), an on-chain data analyst, said.
Several crypto coins related to Barry Silbert's DCG have been selling off aggressively this evening (FIL, ZEN, ETC, NEAR), leaving many speculators to wonder whether the selling is derived from DCG itself. pic.twitter.com/M9mkQrEI7q— Will Clemente (@WClementeIII) December 16, 2022
The financial instability of the digital currency group has gotten worse because the lending company Genesis has stopped taking customer assets after the major exchange FTX went out of business.
The Financial Times reported on March 3 that Genesis Lending and Digital Currency Group (DCG) owed Gemini, a major exchange, 120 billion yen.
Grayscale Investments was started in 2013. It is a part of the Digital Currency Group, whose main business is investing in digital currency. The company is based in New York, which is the financial capital of the world. Besides hedge funds, the firm works with family offices, pensions, endowments, and accredited investors.
Grayscale’s Bitcoin Trust (GBTC), which is an open-ended investment trust, reached a discount of -48.57% (negative divergence) on the 16th.
During the bullish trend, there was a big premium (positive deviation) in 2021, but it dropped like a rock as the market got worse.
When the premium becomes the norm in 2021, qualified investors will put down bitcoin borrowed from the lending desk in grayscale and hedge their positions on the futures market to earn the premium after deducting the carry cost six months later. I managed to attract a lot of investors who wanted to buy GBTC’s new shares, but the positive gap made investors less interested in buying.
Bytetree said that if this kind of deep discounting keeps going on, it could lead to more selling pressure and systemic risk.
From March 2021 to June 2022, DCG is said to have bought $778 million’s worth of GBTC, but Three Arrows Capital (3AC) made a hole in Genesis’ balance sheet. After it went bankrupt, it stopped selling GBTC until the end of September.
Ram Ahluwalia, CEO of the digital asset investment advisory firm Lumida Wealth Management, said on November 26 that “DCG has enough earning power to absorb these liabilities and losses and is not likely to go bankrupt any time soon.” But he was worried that its ability to make money is closely tied to the price of Bitcoin on the market. Grayscale’s sales are down 50% from last year.
Ram Ahluwalia said that DCG might have paid for the Genesis loan with GBTC shares. “If Bitcoin goes down, even more, we’ll have to look at the risks again,” he said.
Around this time, the Digital Currency Group and its subsidiary DCG stopped users from withdrawing funds and getting their money back, citing liquidity problems and the fact that DCG’s services are used for off-chain staking. Europe’s largest service provider, Bitvavo Custody BV, made a statement.
After saying that DCG’s finances have been good since the start of the company, he says, “Bitvavo will use an insured custody provider.” “We have decided to pre-finance our deposit assets so that we can handle withdrawals from clients.” “We won’t be affected by DCG’s problems with cash flow.”
Bravo manages deposits and digital assets worth about €1.6 billion, of which €280 million is in DCG.