Good morning! Welcome to The Daily Moon. Still stuck over the constantly nosediving prices of Bitcoin? Well, take some inspiration from Cathie Wood’s ARK Investment Management, which is making most of the market dip. After crypto exchange Coinbase shares dunked on the market over the last week, Wood went ahead and bought almost 500,000 of its shares. Now, it forms 7% of the fund’s total assets. Imagine the landmine of profits awaiting them when the stock bounces back.
Crypto Drift Season Is Here
If you thought the UK had the most unpredictable seasons, welcome to the world of crypto. Stormy in one region and sunny in the other.
First off, there’s a storm brewing in Europe as the EU plans to come out swinging on stablecoins. It gets worse in El Salvador, which is on the brink of defaulting on bond payments as its legal tender bitcoin nosedived 50% from its all-time high this week.
But it gets a little sunny in Argentina, Brazil, and Germany, where lawmakers and bankers are warming up to crypto. Let’s break it all down.
First, the EU twist
The EU has plans to ban large-scale stablecoins. Since stablecoins such as USDT or DAI are usually pegged to the US dollar, they are less prone to wild price fluctuations. And, this is exactly what the EU member countries don’t want. Because if these stablecoins become too popular, the Euro is at risk.
But don’t fret too much so soon. The EU proposal is still non-paper, meaning it isn’t final yet.
El Salvador is in trouble too
After bitcoin was made legal tender in 2021, El Salvador was struggling to get its citizens to adopt it. Now it's on the verge of defaulting on its bond payments, given the Bitcoin plunge. Things could get worse. The country is in heavy debt, with $800 million in repayments due in just eight months.
Meanwhile, El Salvador President Nayib Bukele is doing what politicians do.
It’s sunny elsewhere
While the EU is closing in on crypto, Germany cleared the air on tax for lent/staked crypto. It’s tax-free if held for over a year. This comes at a time when finance giants such as Commerzbank have applied for a crypto licence.
Some good news is brewing in Latin America, too. NuBank, which is Brazil’s largest digital bank, allowed its users to buy and sell BTC and ETH on their platform. Two of the largest banks in Argentina tried their luck in crypto trading too, but their central bank thwarted this plan soon after.
Bout Of Mayhem
We’ve kept you updated about this week’s crypto plunge. And there’s more.
It’s the time for futures traders to face the brunt. Ether futures traders lost $333 million, as crypto markets lost 16% in just 24 hours.
Making risky bets
Trading in futures is like playing with fire. Here’s why:
It is a contract where you promise to buy or sell an asset on a fixed date at a pre-set price. The asset, in this case, is Ethereum.
Since it's hard to accurately predict which way the market will turn, you either make big returns or deep losses.
You are constantly on the edge because returns are always volatile.
Many people don’t have money to pay for these contracts. So they take loans or pledge some personal assets. And when the futures tank, there is a risk of liquidation. In Ether’s case, this liquidation was worth $1.2 billion, far worse than Bitcoin and Terra’s LUNA.
But Terra has its own worries
Terra has been under the weather for a while now. As a stablecoin, TerraUSD has to be pegged to the US dollar. So when TerraUSD fell, there was a ripple effect. Even Binance decided to suspend withdrawals temporarily. Then TerraUSD and LUNA fell further. LUNA has, in fact, fallen 99.7% in under a week.
There’s another complication. TerraUSD is an algo-led stablecoin. So this means that TerraUSD stablecoins are not really backed by a physical cash reserve of dollars.
For now, Terraform’s Do Kwon has a plan in mind. Here:
The company will mint 4X the usual supply of UST, boosting circulation.
A crypto burn will be initiated to restore balance.
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Who are we? There is a lot happening in our world. Everything has layers, and each layer has to be carefully peeled so you, the reader, know how the world of money is changing every day. That’s our promise. Help you unpeel the onions, which are the public markets in the US, India, and crypto, so that you know just a little more.