Crypto Corner - Summary of the Week 06/09/2021

Written by: Yves, Head of Trading at Wirex

The cryptocurrency market tumbled on Tuesday as more than 15% of its total market capitalisation, worth $370 billion, were wiped out. The Bitcoin price (BTC/USD) lost nearly 14% within 30 minutes, printing its monthly low at $42,900.

Tuesday was dubbed ‘Bitcoin Day’, or ‘B-Day’ by the community as El Salvador became the first country to adopt Bitcoin as an official currency. Members of the Bitcoin Reddit community suggested earlier that each of the 3.3 million members could buy $30 worth of BTCs to mark the importance of ‘B-Day’. However, the idea did nothing to prevent the correction. At least 3.58 billion dollars worth of future contracts were liquidated on B-day according to Bybt. Although the leverage and the correction were nowhere near the March levels, the correction remains impressive. And its trigger was certainly difficult to predict in light of Bitcoin’s solid on-chain and off-chain fundamentals. A flash crash could have been triggered by an aggressive whale taking profits, or it could have been the result of a serious hack that has yet to be revealed. The few technical difficulties encountered early by wallet installations in El Salvador, JP Morgan’s warnings against speculative rallies (e.g Solana), or the IMF’s warnings denounced by President Bukele in a tweet, could have hardly triggered this flash crash.

Bybt - total daily value of liquidations across major centralised futures exchanges.

El Salvador bought the dip, adding another 150 BTCs to the 400 BTCs it already held to facilitate BTC/USD exchanges. 50 of the planned 200 Chiva Bitcoin ATMs are being built across the country to let Salvadorans deposit and withdraw equivalent dollars from their Bitcoin account without commissions. The established restaurant and coffee shop franchises including McDonalds and Starbucks are now accepting Bitcoin as payment.

El Salvador’s legal tender is far from the unreasonable step that is often depicted. Transacting in Bitcoin is not mandatory, and if the Salvadorans are not keen on taking the Bitcoin price risk, they can still exchange their BTCs into US dollars using a Bitcoin ATM or the Chivo wallet app. In fact, doing so is certainly a better solution than using Western Union (WU) to send cash to El Salvador. An estimated $400 million per year would be saved if the 2.5 million Salvadorans living abroad were transacting with Bitcoin (via the cheap Lightning Network), instead of using WU (Source: CNBC). Sending 100 EUR using WU costs nearly 10% in fees: how many would prefer to incur a 10% fee with certainty, rather than incur the BTC price risk?

Other countries seem to converge on Salvador’s views. We mentioned Cuba’s legalisation of cryptocurrency exchanges last week. Ukraine also took a positive step in the sector as Parliament voted to the large majority in favour of a cryptocurrency-friendly law.

The crash affected most major cryptocurrencies, including the second cryptocurrency (ETH), Cardano (ADA), or Ripple (XRP). The price of Ether lost nearly 20% on Tuesday despite recording on Saturday its first deflationary day: for the first time, the amount of ETHs burned exceeded the amount of ETHs mined in a day. Nearly 265,000 ETHs have been removed from circulation at the time of writing. That is equivalent to nearly $900 million. However, the NFT market is now slowing down again as the total USD spent on NFT sales dropped by more than 70% since the end of August. The DeFI economy might also be facing a legal challenge as it is now targeted by the SEC: UNISWAP might already be under scrutiny according to an article published last Friday by the Wall Street Journal. The SEC chairman, Gary Gensler, explained in August that DeFi platforms are ‘not immune to the regulator’s oversight’. But it seems that the SEC is actually targeting all cryptocurrency lenders and lending platforms, decentralised and centralised alike. The SEC reportedly wants to sue Coinbase if they release their ‘Lend’ product as the listed exchange was presumably served a Wells Notice this week. Coinbase’s Chief Legal Officer, Paul Grewal, considers this action to be unfair given that crypto lending businesses have been run for years by competitors. Listing Coinbase on a traditional stock exchange might have increased the regulator’s scrutiny… but the exchange has been preparing for the worst: it is keeping at least $4 billion in reserve to potentially cope with its regulatory risk.

data taken at 10:04 am 10/09/2021


The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.

30 minutes of madness , indeed…was looking at charts while it was happening, gobsmacked! :roll_eyes:

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there was to much heat in the market, had to cool down :flushed: