Feb 20th: Uncle Sam shifting lanes
Views expressed are mine albeit watered down by compliance and not intended as research or financial advice.
The ripple effects of the second bZx hack in less than a week are trickling down — not just into Defi tokens: Syntethix ($SNX) -8.4%, 0x ($ZRX) -5.9%, Chainlink ($LINK) -8.3%, Ren Protocol ($REN) -9.1%; but all tokens. Interestingly $KNC +15% is pumping.
DeFi platforms are taking it on the chin as collateral locked in smart contracts have dropped 15% since top ticking at $1.25bn just days before the initial hack. bZx’s defense is that the second $635K breach is different from the earlier $300K. It’s understandable to expect mishaps with tech start-ups as they iterate their product — especially in nascent, cutting-edge technology. But, come on, two hacks in less than two weeks? This is a very hard pill to swallow.
There may be a day when these ingenious, trustless platforms reign supreme but I can hardly imagine a professional money manager at ease with parking assets in any smart contract today. Centralized solutions for a decentralized asset… the irony is not lost, but for now, they will be the go-to until a bulletproof defi alternative comes around. #OSLCustody anyone?
Meanwhile, American regulators may have started to take the space more seriously:
- Treasury Secretary Steven Mnuchin guided “significant crypto rules” to-be-released by FinCEN;
- the Government Accountability Office egged on a reluctant IRS to clarify their view;
- the Financial Services Committee is actually listening to proponents of a digital-USD.
- Crypto mom continues to push the envelope with her safe harbor proposal
However, until they get their ducks in a line, the asymmetric risk of dealing with anything US will stop many from even engaging as the risks remain too high. Here’s looking at you taxman! Poloniex is the perfect analogy. Just three months after throwing in the towel in the land of the free, they have launched Russian language support. Countries that have been shot down will continue seeking for alternatives to existing dominant payment rails and they are looking likely to pull it off more than ever. By uncle Sam giving the shaft to the nations they don’t like for whatever reason, they are actually helping accelerate the move away from the petrodollar.
A volatile start to the year has actually led to the best January on record for crypto hedge funds and with the looming halvening you can look for further market dislocation triggered by speculators on both sides of the fence. Pullback from recent highs of $10,500 has nudged the momentum indicators back to mean levels while the ichimoku cloud remains positive. Risk to the upside, for now.
- Middle East & African blockchain investments to grow fourfold by 2023.
- BIS estimates 1.6bn people to have access to CBDCs in next three yrs
- Central bank of Russia completes blockchain tokenization pilot and proposes regulatory amendments despite deeming crypto exchange transactions as money laundering risk.
- MicroBT encroaches market share from Bitmain who is reportedly struggling to maintain capacity
- Contents Protocol ($CPT) returns 29.3K ETH raise to investors, unable to cope with regulations.
- Börse Stuttgart subsidiary Blockknox offers crypto custody services
May the trend be your friend… Happy Trading!