The crypto market may be in turmoil, but South Korea is forging ahead with its crypto plans.
Welcome to The Daily Forkast, May 12th, 2022.
I'm Megha Chaddah of Forkast covering all things blockchain.
South Korea's new president, Yoon Suk-yeol, made a number of pro-crypto promises during
his election campaign, and despite only officially taking office on Tuesday, according to a leaked
report, he's already acting on them.
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 traders who already start their day on CryptoSlam.
Let's kick off with an update on Terra.
The algorithmic stablecoin UST briefly climbed above US$0.80 Thursday morning in Asia after
Terra proposed a network upgrade to increase supply of its native token Luna.
The UST is minted by locking Luna, meaning Terra intends to concede Luna's value in the
hope of saving the Stablecoin pegged to the greenback.
In a series of tweets, Terraform Labs founder Do Kwon said the increased Luna supply will
be sold on the open market to raise funds and rescue the UST peg.
Kwon admitted that the cost of the plan would be high to UST and Luna holders, but added
that Terra is also seeking external capital sources.
Luna had dropped to US$3 by the time the recovery measure was announced and had fallen below
the US$1 mark by Thursday morning in Asia.
The fiasco has led to concerns over the feasibility of algorithmic stablecoins with the broader
market in turmoil.
Indeed, major cryptocurrencies were down Thursday morning in Asia, while the Nasdaq composite
finished down over 3% on Wednesday.
Forkast's Carolyn Wright takes a look at the market action.
Wall Street fell on Wednesday after the latest US inflation data showed that the Consumer
Price Index, or CPI, rose 8.3% in April as compared with a year ago.
Despite a slight easing on March's 40 year high reading of 8.5%.
Investors were still spooked.
One expert told Forkast that stubbornly high inflation and the threat of higher interest
rates have led to a complete risk off environment.
The more aggressive rate hikes into year end is something which equity markets and crypto
markets have just completely unraveled about today, and more so in the cryptocurrency space
because of what is happening with terror.
So obviously the breaking down there from it's from from one there was obviously some
large outflows that went through the stabilization mechanism, the algorithm there which which
kept it pinned to that level.
It's broken down.
And now we can see with Terra sitting around US$0.26, US$0.27, I think it's irreversibly
broken.
I can't see it coming back from that, having gone from US$77 six days ago to $0.26, that
is a broken market.
Sycamore says there's only one bright spot for investors right now.
That is the US dollar, because the US dollar and US investments, the interest rates on
cash investments there are pushing higher.
We're looking at interest rates now out towards the ten year at around 3%.
Gold doesn't yield us anything.
So there's no flows going into gold.
And this is where I think the money is going at the moment.
It's going into US dollars to get exposure to real interest rates because there isn't
many countries with real interest rates and it's affecting everything gold, equities,
cryptocurrencies, you name it.
The money is going into one spot.
The US dollar, the US dollar is king today.
As for Bitcoin, it dropped below US$28,000 Thursday morning in Asia, but has it hit a
bottom?
I'm still thinking that this is about the right level that Bitcoin should stabilize,
but I need to see signs of basing.
And by signs of basing I mean I need to see bitcoin get back above US$30,000.
If we were to see that, I would then say that today has just been capitulation.
Capitulation is one of those things you see in markets which often precedes a recovery.
So today is capitulation day.
We've broken through US$30,000.
We've broken through the US$28,800 low from last year.
We're now into fresh cycle lows and that really just signifies people saying, stop the pain,
get me out.
It is capitulation.
But to signify that the capitulation is complete, it has to get back above US$30,000 in the
coming session.
Sycamore also says that for the moment, the correlation between crypto and equity markets
is set to continue.
But once the Fed takes its foot off the pedal later in the year, individual cryptocurrencies
will then begin to trade on their own merits.
For Forkast, I'm Carolyn Wright.
Over in Australia.
After a last minute delay, the country's first three cryptocurrency exchange traded funds
or ETFs, have now gone live, bringing Bitcoin and Ethereum products to the stock market.
One of the funds, the Cosmos Purpose Bitcoin Access ETF, tracks the purpose Bitcoin ETF
on the Toronto Stock Exchange.
The other two funds, which were launched by Australia's ETF Securities and Swiss 21 shares,
Spot Trade Bitcoin and Ether by tracking the underlying asset directly.
The ETFs had been scheduled for launch on April 27th, but brokerage concerns caused
a delay.
In response to that postponement, Cosmos said it won't charge investors fee on their funds
for two months.
You can find those stories and more at Forkast.News.
Meanwhile, in South Korea, the future of cryptocurrency is looking bright, according to a leaked report.
The country's new administration, under President Yoon Suk-yeol, is working towards the institutionalization
of the digital asset by 2024.
Focus Danny Pak reports.
There's no stopping South Korean President Yoon Suk-yeol making good on his campaign
promises for the crypto sector in the country.
Based on a leaked report.
The new administration plans to establish a new regulatory framework for crypto institutionalization
to go into effect by 2024 after establishing legislation next year.
The new administration intends to develop a bill for "Digital Asset Basic Act" this
year.
The Yoon administration has confirmed the validity of the leak, but added the draft
is not final.
The draft includes measures to protect investors and stabilize transactions by regulating issuance,
listing and market activities of digital assets, including NFTs.
It also reportedly includes reviewing the development of the nation's central bank digital
currency.
So what developments can South Koreans expect from here on?
One expert told Forkast not to expect much for now, as more discussion is needed for
the bill.
There isn’t a consensus on what should be on the Basic Act.
And the lawmakers in Korea can practically do nothing until June 2.
That’s because there’s a local election.Every development will start after that, so what
should be on the Basic Act, more discussion is needed.
Kim also noted that the leaked report mentions the government will follow the global movement
on regulations.
If you look closely at them saying they will advance in sync with global trends, their
references are [organizations] like the Bank for International Settlements or the Financial
Stability Board.
These are institutions that prioritize financial stability.
So rather than industry promotion, [I think] they are aiming for international cooperation
that does not risk financial stability.
Now, whether the bill will be enacted into law or not lies on the hands of the legislators.
But with Yoon's backing crypto, investors can put their hopes high for Forkast.
I'm Danny Park.
It looks like a firesale in the world of cryptocurrencies with bitcoin breaking the US$30,000 mark and
ETH hovering around the US$2,000 level.
But El Salvador, the world's first country to make Bitcoin legal tender, has used the
dip to add crypto to its coffers, but is making Bitcoin legal tender actually furthering its
adoption in the new economy?
Let's find out from Mark Lamb, Chief Executive Officer at CoinFlex, a leading crypto derivatives
exchange and yield platform.
It's great to see you again, Mark.
Great to be here.
Mark, the countries that have adopted Bitcoin as legal tender have got a lot of criticism,
including from the IMF, which has said it could further financial instability.
Central African Republic, one of the poorest nations in the world, has become the most
recent one to bank on Bitcoin, but doesn't move like this translate into crypto adoption.
A report recently showed only 20% of El Salvadorans continue to use the crypto wallet after spending
the initial free bonus that was offered by the government.
The issue with using something like Bitcoin, BTC as a payment in these Latin American and
African countries is the fees.
The fees on chain are often several dollars, often $5, $10 to spend bitcoin.
If you're making a small amount of money, if you're making a few dollars a day, a $1
fee is like a few hours, 5 hours of your time.
You know, it's a lot of money, it's a high fee.
And so these fees end up pushing people to relatively centralized payment providers.
And the issue with that is you can't tap into the peer to peer liquidity.
It makes it more difficult to convert to cash.
It just limits your options.
The point of a blockchain is to be able to be decentralized and be able to have people
transacting peer to peer on it as cash.
And so I think this is where cheaper blockchains like Bitcoin cash and other things like that
would be a more, more suitable mechanism of payment for some of these poorer, impoverished
countries.
I think there are a lot of reasons to move away from local currency.
There was a recent study that came out that said that majority of the world is living
in double digit inflation right now.
What you'll see is a move towards towards crypto.
But I think it's going to be two things.
I think it's going to be things like Bitcoin cash and other other currencies that have
very cheap transactional mechanisms.
And I think it'll also be stablecoins because Stablecoins tracked the value of the dollar.
In the case of flexibility, you're also earning interest.
And so things like that are probably more likely to get adoption than than Bitcoin BTC
because, you know, the ability to transact first class on the network is very important.
We were also seeing a lot of innovative use cases emerge in Latin America.
One report says that one in five Argentines have used crypto.
What's the driving factor here?
A lot of these countries don't have a very strong local currency, don't have a very strong
central bank.
It comes down to inflation.
You know, if you're an Argentine and you've seen over the last hundred years, I don't
know how many times, but it's been it's been many, many times, probably more than almost
any country in the world - the the entire currency has just been completely wiped out
to inflation.
You don't trust local currency.
You probably don't even trust the dollar.
But at the end of the day, they value things that are are safe havens.
But but but if you're if you're not rich, gold is hard to get in a in a way where you
can easily store it and you can easily do certain things with it.
Bitcoin, crypto...
This is the way forward.
This is where you can actually you can actually get a meaningful amount as a, as a small individual
and an everyday person and you can protect yourself.
And so I think it's only natural that anywhere that's dealing with double digit inflation,
which again is the inverted world.
Interestingly, the governments in these countries seem to be pro-crypto unlike the conservative
wait and watch stance we've seen in the United States or the European Union or even India.
In fact, Buenos Aires is happy to accept crypto for making tax payments.
What explains the dichotomy in the different approaches at state level?
If you think about a country like El Salvador, El Salvador, Saint Kitts, Central African
Republic, many of these...
Argentina, the citizens in Argentina, many of these countries don't actually have a lot
of ties to the US banking system or don't have very privileged access in the US banking
system and the US dollar financial system.
And really their their ultimately their citizens are looking for an escape and so a government.
Can only not listen to its citizens for so long.
At the end of the day, it's at the behest of its citizens.
And so if all the citizens are saying, look, we want crypto, we want to escape from inflation,
we want all these things, you know, at some point the government has to listen.
And I think also in some cases the governments are getting some publicity and maybe people
moving their and other things from the crypto space.
So crypto is is becoming a large economy and it's it's not the biggest by far, but it's
a it's a multi-trillion dollar market cap.
There's a huge amount of economic activity in the space that as that grows, it becomes
more of an incentive for more governments to be friendly to it.
It may not be big right now, but digital currencies are certainly a giant in the making.
Thank you as always, Mark.
Thank you for having me.
And finally, here's a sneak preview of the latest edition of Word on the Block, where
we go beyond the headlines.
This week, Sam Bankman-Fried, billionaire founder and CEO of FTX and Amy Wu, who heads
the $2 billion FDX Venture Fund, join in to talk about the need for a crypto regulator
and trust levels in stablecoins.
If there was a clear if we knew who it was, who is overseeing these marketplaces, like
what agency is it?
And so that's sort of another piece of this that that they think about.
They think about, well, how about the assets?
How about stablecoins?
Can we trust them?
Like.
And I'm like, you know, I think like these set of stablecoins are really upstanding companies
and we use them heavily and sort of have trust them like great.
Is there like a, you know, are they registered?
Is well, no.
There's nothing for them to register as right now as money transmitters or something.
But like that's not really what they're asking.
And so I think there's a lot of pieces here where like they don't know exactly what it
is they're looking for.
It's a holistic thing.
It's not necessarily that the technology is the best, but you're sort of capturing the
zeitgeist and culture.
And that's absolutely what's happened with the Bored Ape Yacht Club NFT collection, for
example, like one, this is a most popular collection in the world right now.
And I got to know the team some, some months ago and the community was launching was thinking
about like launching the Apecoin DAO, right.
And, and so I was asked to join the board of that and was totally thrilled to because
it is, it was at the time and it is now one of the most visible experimentations in decentralized
autonomous organization governance of one of the most valuable IPs right now in the
Web3 space.
The full episode airs tomorrow, so do check it out.
And that's The Daily Forkast.
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Thanks for watching.
I'm Forkast's Megha Chaddah, until next time.