The crypto market has had a strong start to the week, but can it continue?
Welcome to The Daily Forkast, May 31st, 2022.
I'm Megha Chaddah of Forkast covering all things blockchain.
Ethereum was just one of the winners, gaining over 10% within 24 hours and briefly crossing
the US$2,000 mark early Tuesday in Asia.
We'll take a look at that, plus a whole lot more coming up.
Let's get you up to speed from Asia to the world.
Join thousands of NFT tTraders who already start their day on CryptoSlam.
Let's kick off with the latest on India's crypto regulation plans.
On the sidelines of an event yesterday, the country's secretary for economic affairs Ajay
Seth said told local media that the government's crypto consultation paper is almost ready.
Seth said the Indian government will study how other countries have regulated the asset
class before drafting laws for the industry.
India's Finance Ministry is reportedly consulting with the International Monetary Fund, the
World Bank, the Reserve Bank of India and the Securities and Exchange Board of India
on developing a regulatory framework for digital assets.
While India has imposed a tax on capital gains from crypto transactions, Finance Minister
Nirmala Sitharaman has asserted that taxation doesn't necessarily mean legalization.
According to research by Crebaco cited by local media, the 30% flat rate tax has hit
the country's crypto industry hard, with trade volumes slumping to their lowest level in
years following its introduction in April.
You can find that story and more at Forkast.News.
Meanwhile, there is yet more trouble for Terra.
That's after a number of anonymous social media users reported that a pricing mismatch
could lead to a collapse in Terra Mirror Protocol, with at least one saying that could happen
as early as Tuesday afternoon Asia time.
Forkast's Danny Park reports.
The Mirror Protocol Defi platform, which is built on Tara classic, allows users to create
and trade assets that mirror the price of stocks or major cryptocurrencies.
Reports of a problem began surfacing a couple of days ago with one mirror from user alleging
that the protocol was suffering from an ongoing exploit of more than US$2 million due to a
pricing error on the Tara classic token.
Meanwhile, Twitter user ChainlinkGod pointed out that Terra classic validators were reporting
the price of the new Tara 2.0 token, which is close to US$10, rather than that of the
Tara classic token, which is close to zero.
Todd Garrison, founder of blockchain developer BlockPane, reported that a majority of Tara
classic or LUNC validators are running an outdated version of the pricing mechanism.
And Twitter user FatManTerra added that the exploit could be spotted in liquidity pools
mirroring Bitcoin, Ethereum, Polkadot and Galaxy digital stocks within the protocol.
That same user has past form as they also discovered a US$90 million drainage in Mirror
Protocol just last week that had gone unnoticed since October 2021.
Another Mirror Forum user highlighted the start of pre-market trading at 4 a.m.
Eastern Time on Tuesday as being the crunch point, saying that without a fix, all assets
could go to zero at that time.
FatManTerra tweeted again shortly after that to say the crisis had been averted in the
nick of time , with Mirror stepping in to disable the usage of mBitcoin, mEthereum and
mGalaxy Digital and mPolkadot as collateral, thus preventing the attacker from draining
the rest of the pools.
Terra launched its new blockchain over the weekend, taking over the names Terra and Luna
and renaming the old chain and token Terra Classic and Luna Classic.
For Forkast.
I'm Danny Park.
Over in the markets, the crypto top ten is back in the green, with the total global market
cap up almost 6% in the 24 hours to Tuesday morning in Asia.
Forkast's Lachlan Keller takes a look at the market action.
The top ten cryptocurrencies by market capitalization and Coingecko rankings all gained at least
5% in the 24 hours to early Tuesday in Asia, as US traders returned from the Memorial Day
public holiday.
Cardano led the charge, surging over 15% following the recent launch of the Aegon Cross-chain
Bridge, which allows Ethereum based USDC and ERC-20 IAG tokens to run on Cardano.
Cardano's native currency, ADA, was trading at almost US$0.59 Tuesday morning in Asia.
Meanwhile, after spending the better part of a week below US$2,000, Ethereum staged
a comeback, gaining over 10% and briefly heading north of the US$2,000 mark.
The world's second largest cryptocurrency had hit a low of US$1,721 last Friday after
a seven block reorganization was spotted on the proof of stake beacon chain.
Bitcoin also had a strong start to the week and was trading above the US$31,000 mark for
the first time since mid-May.
One expert told Forkast two factors interested him around the recovery.
We saw capitulation in the crypto space two weeks ago with the collapse of Terra.
Now the Bitcoin price action to me signified capitulation down to the $25,400 low.
And since trading to that $25,400 low, Bitcoin has been consolidating up towards $29K, $30K,
trading in a very, very tight range.
And I think what that signifies is there has been some support for the quality and of Crypto,
of which you would say Bitcoin and possibly Ethereum are the two that I'm referring to.
However, Sycamore says the more interesting aspect was around the Bitcoin-Nasdaq correlation.
For the better part of 12 months, those two have been walking hand in hand, firstly up
towards the November highs and then selling off from the November highs down to the low
that we saw last week.
Certainly in the crypto space, the bottom in the Nasdaq was around the same time as
well.
Nasdaq and the US equity market rebounded by about 6.5%, 7% last week.
And strangely enough, Bitcoin was just sitting there over the weekend.
Sycamore concludes that Bitcoin simply got congested around the US$29,000 temporarily,
as he can see, no reason for a permanent breakdown of the correlation.
He says that if the recovery in equity markets continues, Bitcoin could be headed towards
$36 or even US$40,000.
For Forkast.
I'm Lachlan Keller.
JP Morgan says that 38,000 USD is a fair price for Bitcoin and that they expect more upside
for the OG of crypto world and overall crypto markets.
The bank also says it now prefers crypto over real estate as an alternative asset.
Could this be the impetus for traditional investors to dabble in crypto?
Let's find out from Benjamin Stanni, Business Development and Sales Director at Matrixport.
Great to have you with us again, Benjamin.
Hey, thanks for having me back.
Now, one of the biggest traditional banks, or at least its CEO, seem to have changed
their mind about the value of crypto markets and Bitcoin in particular.
What did you make of the bank's note saying the current selloff has not stopped venture
capital from coming in?
I believe what they're talking about here is that despite the Luna fallout, we've not
seen a dry up in liquidity.
And that's true.
In fact, we've had some very high profile, large raisings the last couple of days.
A16z there are 4.5 billion web three funds.
Standard crypto did 5.5 billion.
Just to name a few.
And even on the project side, we saw stock.
Where did a series D at 8 billion?
I think it's a bit too quick, though, to draw that conclusion yet.
Of course, I think things are very different now than during the last cycle.
And I mean, we're just discussing an opinion piece here of a major Wall Street bank that
was unthinkable in 2017.
But I want to warn that these fund raisings, they tend to have a lead time of a few weeks,
if not months sometimes.
And so whatever was announced over the last couple of days, I would guess the majority
of the heavy lifting had already been done pre-Luna.
So therefore I think we probably need a few more weeks before we can actually gauge the
impact on private side valuations.
But I'm convinced that that we won't see a repeat of that 2018/19 crypto winter because
there's one significant difference here.
We're talking about adoption and we're much further down that road.
And so far it's been only one where I streamed at.
JP Morgan's call of the $38,000 level on Bitcoin as fair value means a significant upside from
current levels.
They also said that crypto is a preferred alternative asset given the selling seen in
it relative to other instruments like Realty & PE.
Could the sort of target bring big institutional and retail money into crypto?
Yeah, it's certainly had a number that will get people's attention and I think it's interesting
that they're putting Bitcoin in reference to other asset classes because that's exactly
how I would look at it in the short term as well.
Of course, the target price depend on your investment horizon and we all know in the
long run you're always bullish Bitcoin.
But in order for large asset allocators to be interested in the space, you need to give
them a relative valuation pitch because these money managers work on a quarterly or annual
performance targets and they're trying to either beat the benchmark or generate absolute
returns.
So if they see good risk adjusted returns, they will come just like they have done over
the past couple of months.
You can see it from the number of clients that we've been onboarding and the amount
of Treasury institutions that are setting up crypto arms and businesses.
Interestingly, JP Morgan seems to be going full throttle on blockchain tech.
They recently tried out their private chain for collateral settlement, will banks the
bridge to bring institutional investors to DeFi?
I think the answer here is also depending on your time horizon.
We're seeing banks pushing aggressively into crypto, actually mostly starting from the
private banking side because they've seen demand from their end clients that they just
simply couldn't ignore.
Likely the first access product will come from five banks because they have an existing
trust relationship with these clients.
However, banks are very slow and bound by a lot of legacy overheads, so it's not surprising
that many trade institutions are embracing crypto via setting up new departments or even
new vehicles.
And crypto financial institutions like ourselves by nature are more agile because we are closer
to the pulse of the market.
So we can quickly react to changes and adjusting our product offering, which at least for the
time being, DeFi feels like it's very dynamic still.
So as market matures, maybe banks will become more important.
But I think for the time being, banks haven't even solved some of the most important questions
around DeFi foremost the custody side.
And I fear as long as our industry keeps changing at the pace it does tread for bankers, will
having a hard time to catching up on innovation.
Well, the times they are a changing and keeping up with DeFi innovation would be the key.
Thanks as always, Benjamin.
Thank you for having me.
And that's The Daily Forkast from our vantage point right here in Asia.
For more than Forkast.News.
I'm Forkast's Megha Chaddah, until next time.