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THE MARKET THIS WEEK
Cybersecurity firm Cybertrace has issued a warning regarding a sophisticated deep fake video featuring Australian mining magnate Andrew “Twiggy” Forrest. The deep fake, circulating on Facebook, promotes a fake crypto trading platform, urging users to sign up for a fraudulent service claiming to generate substantial daily profits. The associated website, named “Quantum AI,” has become synonymous with scams and financial fraud. The warning emphasizes the increasing use of deep fakes in promoting deceptive schemes within the cryptocurrency space.
Ethereum developers are planning to announce the mainnet launch date for the Dencun upgrade, introducing several Ethereum Improvement Proposals (EIPs), including proto-dank sharding. This upgrade aims to reduce transaction costs on layer-2 solutions. Recent testing of the upgrade reportedly went well, as highlighted in the All Developer Execution Call (ACDE) 180 call. Ethereum developers pointed out the success of the Sepolia fork and the upcoming Holesky testnet upgrade on Feb. 7, indicating progress in the development and implementation of Ethereum’s network upgrades.
OPNX, a crypto bankruptcy claims platform launched by the co-founders of the failed hedge fund Three Arrows Capital, has announced its official cessation of operations. The platform has advised its users to settle all positions by Feb. 7 and withdraw their funds by Feb. 14, after which all withdrawal functionality will be disabled. This decision marks the end of OPNX, signaling challenges and closures in the crypto financial sector.
A December 2023 report by Vietnamese venture capital firm Kyros Ventures reveals that crypto enthusiasts in China are more willing to invest heavily in cryptocurrencies compared to counterparts in Vietnam, South Korea, Taiwan, and Thailand. Over 70% of Chinese participants in a survey claimed that cryptocurrencies constituted more than half of their asset portfolios. Additionally, the U.S. federal government has charged three individuals with a yearslong phone hacking conspiracy, resulting in the infamous theft of $400 million from the FTX crypto exchange as it faced collapse. The indictment accuses the individuals of wire fraud and identity theft in operating a SIM swapping ring that targeted fifty victims between March 2021 and April 2023.
BATTLE OF THE BULL AND BEAR
Recent analysis suggests that Bitcoin is poised for a potential surge, drawing parallels from historical market behavior. Virtual entertainment observer Ali highlighted the significance of the market value realized value (MVRV) metric, often considered Bitcoin’s “fair value.” The MVRV is approaching the mean level, similar to patterns observed before significant market rallies in 2016 and 2020. Despite short-term challenges post the spot exchange-traded fund (ETF) releases, optimistic signals are observed, emphasizing a positive outlook for Bitcoin.
The stability of the stablecoin supply versus Bitcoin supply ratio (SSR) being 80% below its all-time high, combined with Ichimoku Cloud analysis, contributes to the overall positive sentiment. The SSR ratio decline suggests potential for a Bitcoin price increase. However, Ichimoku Cloud analysis indicates resistance as Bitcoin struggles to regain ground after a retreat from the recent high of $49,000. Despite challenges, these market indicators collectively reinforce the notion of Bitcoin being in a positive trend.
Bitcoin faced challenges in February after closing the month nearly flat for the beginning of 2024. The price attempted to recover losses on February 1, bouncing around $1,000 off lows of $41,860 on Bitstamp. The struggle to regain lost ground comes after a 20% decline from two-year highs of $49,000. Monthly charts hint at the possibility of new lows unless contradicting trading signals emerge, with January’s low at $38,500 marking a critical level.
On January 31, macroeconomic developments, including the U.S. Federal Reserve’s decision to maintain interest rates, affected Bitcoin’s performance. The Fed’s attempt to counter expectations of rate cuts was perceived as a signal by risk-asset traders, impacting liquidity conditions. Speculation about potential rate cuts in the first half of the year has implications for Bitcoin and the wider market. The Fed’s cautious stance and the evolving economic outlook contribute to the complexity of predicting Bitcoin’s short-term movements.
The initial days of February witnessed significant outflows of around 6,200 BTC from the Grayscale Bitcoin Trust (GBTC), a notable but lower figure compared to previous days. These outflows align with the conversion of GBTC into a spot Bitcoin exchange-traded fund (ETF). In contrast, U.S. spot Bitcoin ETFs experienced net inflows of nearly $200 million on January 31, reinforcing the growing trend of institutional interest. Analysts highlight the overall positive net inflows of $1.46 billion since the launch of these ETFs, signaling sustained investor confidence in Bitcoin.
Weekly review of IC 15
The global cryptocurrency market experienced a decline, reflected in the IC15 Index dropping by 371 points to 54,095. Notable coins like Ethereum-based tokens like Polygon and Cardano faced losses in the range of 1% to 3%, while Polkadot, Tron, and Binance emerged as the top gainers within the 0-1% range. The political support for cryptocurrency among U.S. senators, notably led by Lummis and Burr, underscores a political divide reflecting ongoing uncertainty surrounding the role of crypto. Hong Kong’s proactive stance on crypto infrastructure, including ETFs and stablecoin regulations, highlights the region’s commitment to integrating traditional finance with the thriving crypto sector.
The cryptocurrency market staged a robust recovery, with the IC15 Index surging by 1,427 points to 55,522. During this resurgence, prominent cryptocurrencies like Cardano, Solana, and Avalanche demonstrated significant gains ranging from 4% to 8%, while Tron and Toncoin experienced minimal declines within the 0-1% range. Notably, Google ended a five-year ban on crypto ads, allowing companies like BlackRock and VanEck to promote Bitcoin ETFs, signaling a shift in perspective. The European Securities and Markets Authority (ESMA) proposed new regulations to restrict non-EU crypto firms serving EU clients, aiming to prevent unfair competition. The New York City Bar Association plans to update New York’s Uniform Commercial Code (UCC) with “Emerging Technologies Amendments” to attract and retain crypto firms.
Regulatory developments continue to shape the cryptocurrency landscape globally. The US SEC charged individuals in the $1.7 billion HyperFund crypto scheme, highlighting ongoing regulatory challenges. PayPal Ventures invested in Lattice, a crypto payment startup using the Ethereum-based stablecoin PYUSD, demonstrating commitment to digital payment innovation. Additionally, Thailand is advancing crypto-friendly regulations by removing the limit for retail investors, aiming to promote digital assets. China also plans to update its AML regulations by including crypto-related transactions by 2025.
Central Bank Digital Currency (CBDC) developments were notable during this period. The UAE’s central bank executed the first cross-border transaction using its CBDC, the digital dirham, sending 50 million dirhams ($13.6M) to China through the mBridge platform. The Bank of Japan held a historic meeting with the government to discuss CBDC legal issues, with a resolution expected in the second quarter of 2024. Meanwhile, Belarus is progressing with its CBDC, the digital ruble, by developing a blockchain platform on the open-source Hyperledger Fabric blockchain for cross-border transactions. In addition, the UK’s Labour Party outlined plans to make the UK a digital hub for securities tokenization and the development of a digital pound.
Weekly Spotlight
1. Cybersecurity firm Cybertrace issues a warning about a convincing deep fake video featuring Australian magnate Andrew “Twiggy” Forrest promoting a fake crypto trading platform. The video circulates on Facebook, leading users to a fraudulent platform named “Quantum AI,” emphasizing the growing use of deep fakes in cryptocurrency scams.
2. Ethereum developers plan to announce the mainnet launch date for the Dencun upgrade, introducing various Ethereum Improvement Proposals (EIPs) such as proto-dank sharding. Recent testing of the upgrade has gone well, highlighted during the All Developer Execution Call (ACDE) 180, showcasing progress in Ethereum’s network development.
3. OPNX, a crypto bankruptcy claims platform launched by the co-founders of Three Arrows Capital, announces its cessation of operations. Users are advised to settle positions by Feb. 7 and withdraw funds by Feb. 14, marking a closure in the crypto financial sector.
4. A December 2023 report by Kyros Ventures reveals that Chinese crypto enthusiasts are more willing to invest heavily in cryptocurrencies than counterparts in Vietnam, South Korea, Taiwan, and Thailand. Meanwhile, the U.S. federal government charges three individuals in a phone hacking conspiracy resulting in the theft of $400 million from FTX crypto exchange during its collapse.
5. Bitcoin shows optimistic signals according to market analysis, drawing parallels with historical market behavior. Factors include the approaching mean level of the market value realized value (MVRV) metric, stablecoin supply versus Bitcoin supply ratio (SSR), and Ichimoku Cloud analysis, reinforcing positive sentiment. However, challenges include resistance after a retreat from recent highs and ongoing macro-economic developments.
6. Global cryptocurrency market trends reveal a decline in the IC15 Index, with notable coins experiencing losses while others like Polkadot, Tron, and Binance emerge as top gainers. Regulatory developments include the ESMA proposing new regulations and the New York City Bar Association updating the UCC for emerging technologies. The market sees a recovery, and Google lifts a five-year ban on crypto ads, allowing BlackRock and VanEck to promote Bitcoin ETFs.
7. Regulatory developments continue globally, with the US SEC charging individuals in the HyperFund crypto scheme, PayPal Ventures investing in Lattice, and Thailand adopting crypto-friendly regulations. CBDC developments involve the UAE executing a cross-border transaction using its digital dirham, the Bank of Japan discussing CBDC legal issues, and Belarus progressing with its digital ruble and cross-border transactions on the Hyperledger Fabric blockchain.
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