A monthly review of what is happening in the crypto markets, enriched with institutional research on the most important topics in the industry in collaboration with the Swiss specialist for digital assets, 21Shares AG.
The market value of the overall crypto market has fallen by 31% since April and has reached $ 1.48 trillion. USD. Bitcoin (BTC) and Ethereum (ETH) have fallen by 23% and 26.7% respectively since last month. April was not easy for the stock market either. The S&P 500 experienced the worst April in 52 years with a 13.3% year-to-date decline. We will dive deeper into the macroeconomic factors that caused these declines. In this monthly summary, we also highlight the most important developments related to the regulatory situation, DeFi and the meta-verse.
Macro and rules
U.S. regulators have had a busy month drafting new guidelines and revising existing ones to meet deadlines set by President Joe Biden’s executive order. On April 5, Congress introduced a new bill – the Stablecoin TRUST Act. The law allows for the regulation of stablecoins and allows issuers to obtain a government money transfer license, a traditional banking license, or a newly created OCC license for stablecoin issuers who will also have access to the Federal Reserve’s master account system.
Crypto-fraud, often called “carpet dragging”, could soon become a direct crime. New York lawmakers are lobbying for new legislation that would ban founders from selling significant percentages of their token holdings within a five-year period. This happened shortly after the Frosties carpet, a fraudulent NFT project whose creators were accused of stealing $ 1.3 million in ether last month. This can be a big win, not only for US investors, but for the entire DeFi area.
German banking giant Commerzbank has applied for a cryptocurrency depository license and has become the first major bank to venture into cryptocurrencies in Germany. In the United Arab Emirates, Kraken was licensed to become the first cryptocurrency exchange to offer direct financing and trading of UAE dirhams against bitcoin, ether and a number of other virtual assets. Finally, the Portuguese central bank granted Bison Bank its Virtual Asset Service Provider (VASP) license, making the bank the first in the country to offer its crypto services to individuals with high net worth.
Algorithmic stable coins on the rise
Remarkable for the month of April was the resurgence of algorithmic stack coins, this time to take advantage of Luna’s UST model. It can be expected that this will create a new incentive for capital rotation among investors. Other Layer 1 blockchains could apply a similar principle to Terra’s Anchor, exemplified by the launch of Near’s USN stablecoin. Tron’s announcement to launch its own variant called USDD was another example of this. The Stablecoin is said to provide a 30% annual return, with project reserves backed by $ 10 billion in crypto security, analogous to the Terra model.
Not only has the stablecoin sector been driven by the excitement surrounding the news of the new algorithmic currencies and their lucrative returns, the firm behind USDC has also had its share of attention. First, it was revealed that Circle had closed a $ 400 million round of funding led by Blackrock, Fidelity Management and more. The new round of financing aims to help the issuer support its growth effort and narrow its market gap with leading stablecoin USDT.
Another part of the agreement involves Blackrock becoming the primary asset manager of USDC liquidity reserves and exploring further applications for how USDC can be leveraged as a streamlined resource in the traditional financial world. It has also been revealed that Circle is considering launching a sterling-denominated stablecoin to complement its burgeoning ecosystem, shortly after the company announced its UK expansion plans.
NFTs, DAOs and Metaverse
The NFT market saw a 14.5% increase in total traded volume in April, with the number of addresses with NFTs approaching 4 million. In addition, institutional adoption continues to grow, with Hyundai partnering with Meta Kongz – an NFT project with more than $ 20 million trading volume – to release 30 NFTs on OpenSea. In addition, the American talent show American Idol has entered into a partnership with Theta Labs to launch their own NFT collections. In addition, the famous video game company Sega announced that it intends to incorporate NFT technology into its new Supergame initiative.
Not surprisingly, Meta’s back-to-back announcements have dominated the new sector’s news cycle. The company is reportedly considering in-app and social tokens for its Metaverse. The announcement came shortly after Zuckerberg hinted at his plan to bring NFTs to Instagram. But that’s not all, when Meta announced that they will charge 47.5% on NFT sales.
As for the companies that are increasing access to the expanding ecosystem, Coinbase finally launched the beta version of their NFT marketplace. Amazon’s new CEO, Andy Jassy, also hinted that the company is considering selling NFTs to take market share from Opensea and LooksRare. As for Opensea, the company has finally added support to the long-awaited Solana-based NFT collections in its beta mode.
Data and crypto infrastructure
A notable innovation at the infrastructure level is Polygon’s latest addition to its arsenal of scaling solutions, called “supernets”. Designed to complement the vision of an Internet of blockchains, the network’s latest capacity is similar to Avalanche’s scaling solution. Like the AVAX subnets that help developers build application-specific blockchains, Polygon’s supernet solves the same problem. They allow the creation of four different types of customizable networks.
Also, the Lunas Foundation Guard (LFG) continued its bulk purchase, accumulating around 11.8k Bitcoin in April. In the future, the protocol’s reserves are said to be backed by $ 10 billion in digital gold. The Foundation top was supplemented with an additional $ 200 million purchase of Avalanche tokens. While not immediately apparent, Terra’s reserve diversification with Bitcoin may be a catalyst that encourages other stack coins to follow suit.
On the other hand, Ethereum suffered a setback when the long-awaited Proof of Stake merger was again postponed and will take place in Q3 rather than July despite the successful implementation of the shadow fork last week. Nevertheless, traders are still pulling significant amounts of Ether from centralized exchanges and depositing it with DeFi protocols like Lido Finance. Apparently, many investors are still betting on a further upward movement.
expectations for the future
Jerome Powell’s restrictive policies could mean another tumultuous month for cryptocurrencies. So it is worth keeping a close eye on this development. However, given the high level of adoption of cryptocurrencies at government and corporate level, the cryptocurrencies with the highest market values will continue to exist. Looking at this vertical, it will also be exciting to see how the Terra model will get other L1s to adopt comparable mechanisms to attract new users and liquidity.
It will be interesting to see how sustainable some of these proposals are, starting with Tron’s latest product. Ultimately, UST stablecoins’ recovery depended on the cryptocurrency market and the correspondingly high demand for credit. Given the low-risk sentiment that stock markets are heading toward, it remains to be seen how stablecoin projects will be able to maintain their announced returns amid reduced demand.
We also expect U.S. Representative Patrick Toomey to push through his proposed Stablecoin TRUST Act before his term ends in 2023. Toomey said that after his term expires, he will no longer seek re-election and will retire completely from politics. The senior MP, who has been in office for 11 years, now has seven months to lobby for stablecoin innovation and translate this proposal into law.