Last week showed a good recovery and stability across the board. In contrast, a drop was seen on Monday owing to the protests in China. The dump was short-lived, and net positive to neutral commentary from FED further pushed the markets to the upside. This week brought another bankruptcy in the name of BlockFi – one of the most popular retail crypto wallets and apps after Coinbase. With a lot of funds and funding from influential people, BlockFi’s bankruptcy outcry will undoubtedly continue for some time. S&P 500, NASDAQ, BTC, and ETH closed the week with good gains, while Energy (SPN) continued to trend downward.
BlockFi’s Bankruptcy Blunders
Following the demise of FTX, crypto lender BlockFi Inc. is the latest provider of digital assets that have submitted to declare bankruptcy. Current estimates say that the firm has more than 100,000 creditors and between $1 billion and $10 billion in assets and obligations. According to the petition, BlockFi Inc. owes three of its biggest creditors more than $1 billion, and its 50 biggest creditors owe the company $1.3 billion. As mentioned in previous outlooks, the bloodshed from FTX’s collapse will continue to ooze over many months.
Having an excellent reputation for being one of the broadest organic brands built on word of mouth and good service, BlockFi’s bankruptcy is no short of an apt story to understand the current grim waters the industry is in. A few months before the bankruptcy, Sam Bankman Fried had allegedly offered Robinhood’s common stock as security to borrow funds against it. The borrower is now identified as Alameda. This reinforces the deep connections and dependency that FTX had that it left next to no crypto entities unaffected. Moreover, it highlights a big case for transparency and decentralization that protocols like Ethereum and Bitcoin network bring.
Following this, there’s 1inch, a top-tier DEX aggregator that has introduced a tool named “Rabbithole” to help traders and Metamask users against malicious Sandwich Attacks, which cause a lot of front-running trades. Front running is a common issue with DEXes, but consistent developments like these are being made to make the DEX ecosystem robust. While the ecosystem is facing enormous challenges and a lot of bearish signals, consistent outcomes are incredibly bullish for the space’s medium to long-term growth.
Small but Significant regulatory wins
Amidst all the slight relief this week, apart from BlockFi’s bloodshed, many bullish developments have emerged across the ecosystem. Brazil’s Chamber of Deputies has reportedly approved a bill that legalizes cryptocurrencies for payment throughout the country. While cryptocurrencies’ legal tender status is still on hold, it should be expected to have positive results soon. However, the final signing by the President of the Republic is still pending.
From Belgium, the Financial Services and Markets Authority (FSMA) has reaffirmed that cryptocurrencies such as Bitcoin, Ether, and others that are only issued by computer code do not qualify as securities. The clarification comes in response to increased inquiries, per the FSMA, about how Belgian financial laws and regulations now apply to digital assets. This is a great push for the ecosystem as a recent case against $LBRY (Library) from SEC has made some new presidents crucial to cryptocurrencies survival in the US which is an enormous market. Debates and tussles like this will increase for the next year and a half before many new project launches are seen in space. This doesn’t mean the building stops, but nimble steps help build a high-value ecosystem in the medium to long term.
Japan strives to maintain its position in Digital Assets Race
Three megabanks and regional banks in Japan will participate in a central bank digital currency (CBDC) issuing trial being conducted by the Bank of Japan (BoJ).
Beginning in the spring of 2023, the pilot will examine the feasibility of accepting deposits and withdrawals in a digital yen. Additionally, it will test if a CBDC can function in remote locations and during natural catastrophes. If all goes well, BOJ may introduce a CBDC by 2026. Japan is one of the biggest economies and has had a disaster like Mt.Gox in its province, so it always takes cautious steps now. While the speed of implementation to market matters, resilient decisions and systems are what Japan is known for. A big tussle between multiple groups of countries CBDCs and, ultimately, their currency is imminent. It will be a significant deciding factor of who has the behemoth status in a world of Digital Assets and Currencies.
Bitcoin returns were 3.03% for this week. The Alpha Blue Chip Focused Strategy returns were 5.94% during the same period (24 NOV – 1 DEC ). The Top Cap Digital Assets Strategy and Arbitrage and Balanced Opportunities Strategy returns were 7.04% and 1.24%, respectively.