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June Monthly Market Update

2022-07-01

Welcome to our monthly wrap-up newsletter, where we scan the metaverse for the most important pieces of information that you need to know; from DeFi to stablecoin, markets to regulation, we’ve condensed it for your convenience. 

Markets

The Fed raised rates by three-quarters of a percentage point in June, its largest rate hike since 1994, to a range of 1.5%-1.75% in an attempt to battle inflation which sits at a 40-year high. Inflation is sitting 7% higher than the current interest rate, the last time that gap was this wide was during and shortly after the 1940s. On the eve of U.S. earning seasons, investors are almost fully pricing a 75 basis point increase at the Fed's July 26-27 meeting. Currently, rates are estimated to be peaking at 3.6% next year and projecting an unemployment level of 4.1%. The question of whether the Fed can pull the economy back without pushing them into recession is yet to be known. 

Closer to home, the Australia Reserve Bank has announced the biggest single rise in the cash rate in 22 years as Australia too attempts to curb inflation concerns in June. The RBA lifted its cash rate target 50 basis points to 0.85%. RBA governor, Philip Lowe, has warned Australians to be prepared for higher interest rates, saying inflation will likely reach 7%. The CBA hiked fixed rates by 1.4% which may represent the biggest one-off rate hike by a bank on record. Despite inflation fears, Lowe said the economy was in remarkable shape, with the unemployment rate at a 50-year low, households having built up financial buffers of around $250bn, and the number of people falling behind on their mortgage repayments is declining. 

BTC 

Bitcoin continues to struggle, finishing its worst month on record since it’s been available on exchanges, 12 years ago, with a 38% decline. El Salvador President, Nayib Bukele celebrated by purchasing 80 additional BTC at $19,000 average and Michael Saylor’s MicroStrategy, purchased an additional 480 bitcoin for ~$10 million.  

ETH

Wen merge? The Ethereum blockchain's test for its upcoming Merge was successful earlier this month, with the Ropsten test network successfully merging its proof-of-work (PoW) execution layer with the Beacon Chain proof-of-stake consensus chain. The Gray Glacier upgrade was released yesterday. It relates to delaying the "Difficulty Bomb" for an additional 700,000 blocks, meaning it won't detonate until around ~October 2022. Ethereum's "Difficulty Bomb" refers to a mechanism that increases the difficulty level of puzzles at a predefined block number in the Proof of Work mining algorithm. Its purpose is to force miners to gradually stop mining the Ethereum 1.0 PoW chain as the network moves to the updated PoS.

DeFi

On Monday, crypto broker Voyager Digital announced that Three Arrows Capital had not made the required payments on a loan of $665 million, paid partly in BTC. On Wednesday, the British Virgin Islands ordered 3AC into liquidation following its failure to repay creditors as the value of their holdings declined. 

The world's largest DEX, Uniswap, has overtaken its host blockchain Ethereum in terms of fees paid over a seven-day rolling average mid this month. On average, total user fees have grown to about $4.1 million, surpassing Ethereum's $3.9 million. 

DeFi protocol, Bancor, paused its impermanent loss protection function on Sunday, citing "hostile" market conditions. Impermanent loss (IL) happens when the price of your tokens changes compared to when you deposited them in the pool. The larger the change is, the bigger the loss. The Bancor protocol previously compensated users for IL. 

Regulation

Last week Senator Cynthia Lummis of Wyoming took an unusual path when she put her cryptocurrency regulation bill on GitHub for commentary from the crypto community, a space usually reserved for open source code. Introduced by Lummis and Senator Kirsten Gillibrand, the Responsible Financial Innovation Act would create a framework for regulators to determine whether a certain digital asset should be considered a commodity or security. The framework is also calling for new stablecoin provisions that would require all types of stablecoins to keep 100% reserves on hand and maintain a 1:1 peg with those assets. The bill is still in its infancy and would be required to be approved by several Senate committees before it could be taken to a floor vote. 

The SEC has denied Grayscale's proposal to convert the GBTC to an ETF. In response, CEO Michael Sonnenshein tweeted that Grayscale was suing the regulator, and the company has filed a lawsuit in the U.S. Court of Appeals for the D.C. Circuit. 

Adoption

Crypto adoption of June: 

  • PayPal users can now transfer their crypto to and from PayPal and other wallets and exchanges; while there are no transfer fees, network or gas fees may apply.

  • The international payment platform Checkout.com started accepting stablecoins as a payment method. Through a partnership with digital asset security firm Fireblocks, the payments company will allow merchants to accept payments in USDC.

  • The Reserve Bank of India is piloting a blockchain-based trade finance project. The pilot project will use blockchain technology to store transaction data and better trace money flows. 

  • After introducing the ability for merchants to sell NFTs last year, Shopify is now letting merchants use NFTs for their customers to unlock unique products, perks and experiences.

  • Mastercard went further down the rabbit hole in Web3, partnering with Immutable X, Candy Digital, The Sandbox, Mintable, Nifty Gateway and MoonPay to let consumers use their Mastercard to buy NFTs.

  • It's hip to be square. Jack Dorsey and Jay-Z teamed up to release the Bitcoin Academy offering free BTC classes for residents of Marcy Houses, a public housing complex in Brooklyn.

  • TradFi giant Goldman Sachs appears to be gauging interest in raising $2 billion to purchase the Celsius Network's assets in the event of bankruptcy.

All values are in USD 

Disclaimer

This content is for general information purposes only, not investment advice. Cryptocurrencies, including Bitcoin, are volatile and fluctuate on a day-to-day basis, thus, trading requires proper diligence and sound judgement in order to evaluate the risks associated. Nothing in this newsletter constitutes investment or legal recommendation, nor should any data or content mentioned in the newsletter be relied upon for any investment activities. You should consider seeking independent legal, financial, taxation or other advice to check how the newsletter information relates to your unique circumstances. 

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