Author: Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

Categories
Crypto News DeFi Market Analysis Terra TerraUSD

Terra (LUNA) Collapse Triggers Contagion Across DeFi

The sudden de-pegging of TerraUSD (UST) and the associated breathtaking decline of Terra (LUNA) over the past few days has triggered huge falls across the wider DeFi market, extending beyond those projects directly linked to the Terra ecosystem.

While projects built on Terra have been hardest hit, the damage has spread widely. DeFi tokens on virtually all blockchains are now seeing sizeable declines, even if they have no direct link to the Terra ecosystem:

Terra-based DeFi Projects See Massive Declines

According to CoinGecko, the native token for Anchor Protocol (ANC), the largest DeFi protocol in the Terra ecosystem, is down over 90 percent since May 7, falling from US$2.14 to US$0.19 at the time of writing.

Other prominent Luna-based DeFi projects have also taken huge hits. Since May 7 the native token of Astroport (ASTRO), an automated market maker protocol, has dropped 89 percent and Mars Protocol (MARS), an on-chain credit protocol, is down almost 65 percent.

At the time of writing the native cryptocurrency of the Terra blockchain itself, LUNA, is down an astonishing 99.6 percent since May 7, trading at a mere US$0.29. Just over a month ago it hit its all-time high of US$119.18. 

The Luna Foundation Guard, the group tasked with stabilising UST’s value, is currently seeking an additional US$1 billion capital to attempt to restore the stablecoin’s peg and potentially save the Terra ecosystem from complete collapse – a goal that is, sadly, beginning to look unachievable:

Contagion Spreads to Connected Blockchains and Beyond

Assets from the Cosmos ecosystem have also seen large declines due to their integration with Terra through the Interblockchain Communication Protocol. CoinGecko shows that since May 7, ATOM is down about 47 percent, while DeFi tokens Mirror Protocol (MIR) and Osmosis (OSMO) are down 73 percent and around 50 percent respectively.

Virtually all DeFi projects across all blockchains have been negatively impacted by this ongoing collapse. According to data from DeFi Llama, total value locked (TVL) across the entire DeFi market has dropped more than 21 percent in the past 24 hours and, since April 4, TVL is down over 48 percent – now sitting at US$120.17 billion, down from US$231.5 billion. 

Of the top 10 DeFi projects listed on DeFi Llama, every one has seen seven-day losses of TVL in excess of 27 percent:

7-day losses of TVL experienced across the board. Source: DeFi Llama

In one small piece of positive news for DeFi, earlier in the week Compound Treasury became the first institutional DeFi project to get a credit rating from ratings agency Standard & Poor.

Categories
Crypto News Markets Regulation Stablecoins TerraUSD

US Fed and Treasury Hint at Incoming Stablecoin Regulation Following UST Fiasco

Both the US Federal Reserve and Treasury are eager to see stablecoins regulated by the end of this year, a move they say would improve the overall financial stability of the US economy.

A new report from the Federal Reserve has identified several risks associated with stablecoins – cryptocurrencies whose value is pegged to the US dollar – and has suggested that government-backed alternatives may reduce risks to consumers and investors.

The report follows the recent collapse in value of the stablecoin Terra USD (UST), which threatens to destabilise the DeFi market, and calls from Treasury Secretary Janet Yellen for stablecoin legislation to be enacted by the end of 2022.

Report Identifies Weaknesses of Asset-Backed Stablecoins

The Federal Reserve Board’s ‘Financial Stability Report’ identifies significant stability risks in the US economy. When discussing stablecoins the report focuses on centralised, asset-backed stablecoins such as Tether and USDC, highlighting the opaque nature of the assets backing the coins and the risks posed if or when there are runs on these coins.

Stablecoins typically aim to be convertible, at par, to dollars, but they are backed by assets that may lose value or become illiquid during stress; hence, they face redemption risks similar to those of prime and tax-exempt MMFs [money market funds]. These vulnerabilities may be exacerbated by a lack of transparency regarding the riskiness and liquidity of assets backing stablecoins.

US Federal Reserve report

Algorithmic Stablecoins Aren’t Necessarily Stable

The recent decoupling of TerraUSD from the dollar has shown yet again that algorithmic stablecoins, like their asset-backed counterparts, are not necessarily as stable as they purport to be. 

Over the past few days UST has fallen dramatically in value, at one stage dropping as low as US$0.60 after its algorithm failed to function as intended and the delayed deployment of its Bitcoin reserves failed to prop up its price. According to CoinGecko, at the time of writing UST was changing hands at US$0.83.

UST isn’t the first algorithmic stablecoin to face stability issues; last year, Iron Finance plunged all the way to zero after a similar decoupling triggered a bank run costing investors millions.

Treasury Secretary Wants Legislation, Fast

US Treasury Secretary Janet Yellen. Source: ledgerinsights.com

In a further sign that legislation governing stablecoins in the US may be imminent, Treasury Secretary Yellen, when questioned on the issue during a May 10 hearing, responded that it was “important, even urgent” that Congress act. She went on to say she considers it “highly appropriate” that regulation should occur by the end of the year.

Yellen’s sense of urgency for legislation seems to have been heightened by the problems currently confronting UST:

A stablecoin known as TerraUSD experienced a run and had declined in value. I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate.

Janet Yellen, US Treasury Secretary

This talk of imminent stablecoin legislation follows speculation last year that the US government was considering offering insurance to stablecoin holders of up to US$250,000, similar to the protections provided to account holders at insured banks.

Categories
CryptoPunks Markets NFTs

CryptoPunk Sells for Just $140k, 87% Lower than All-Time High

In a sign that the public’s appetite for cartoonish NFT art might’ve peaked, CryptoPunk #273, a male punk with a cap and “big shades”, sold on May 8 for US$139,836, which is 87 percent lower than its October 19, 2021 purchase price of US$1.03 million. 

That’s an eye-watering loss of around US$890,000 in just over six months and is consistent with a recent downward trend in the CryptoPunks market, with eight of the last 10 NFTs changing hands at a loss:

You’re Not Feeling Lucky, Punk

The slowdown in the CryptoPunks market reflects a general weakening of interest in NFTs in the first quarter of 2022, with data from the crypto analysis site NonFungible showing a decrease in transactions volume of 47 percent quarter on quarter.

An increase in exploits and NFT thefts, such as a recent phishing scam that resulted in the loss of US$2.8 million Bored Ape Yacht Club (BAYC) NFTs, in addition to the downturn in the wider crypto market, may partially explain the cooling of prices.

Other popular NFT collections are also seeing dramatic falls in their floor prices (the cheapest NFT in the collection): BAYC’s floor price is down around 55 percent since April 29 and Moonbirds’ floor price fell 34 percent in a single day yesterday. 

Not All Doom and Gloom

Despite the recent declining values of some collections, it’s not all bad news for the NFT market – so far this year there’s been US$16 billion worth of organic trading volume, almost two-thirds of the 2021 total of US25 billion, and we’re only in May. 

Also, many NFT owners who got in early are still up considerably on their initial investment, such as the Australian man who bought a Bored Ape NFT in 2021 for US$300 which is now valued at around US$5 million.

Categories
Banking CBDCs Economics Payments

90% of Central Banks are Exploring CBDCs: BIS Report

A survey by the Bank For International Settlements (BIS) has found that nine out of 10 of the central banks surveyed are exploring central bank digital currencies (CBDCs), and over 50 percent are actively developing CBDCs or running concrete experiments.

The survey found more central banks were working on retail CBDCs, which are designed for domestic consumer use, compared to wholesale CBDCs, which are designed for institutional uses such as cross-border payments between banks:

Central Bank Interest in CBDCs Increasing Globally

The report, released on May 6 by the BIS Monetary and Economic division, detailed the results of the survey conducted in October-December 2021 which involved 81 central banks, representing 76 percent of the world’s population, including 25 advanced economies.

Key findings include:

  • 90 percent of central banks are exploring CDBCs;
  • 26 percent are currently running CDBC pilots; and
  • more than 60 percent are conducting proof-of-concept work.

The survey also also found the percentage of central banks exploring CDBCs is up from the 2020 figure of 83 percent. BIS suggests that this increase was driven partially by the Covid-19 pandemic and the emergence of stablecoins, particularly in advanced economies. 

Retail CBDCs a Priority 

In many countries, work on retail CBDCs is more advanced than on wholesale CBDCs, with the report finding that:

Globally, more than two-thirds of central banks consider that they are likely to or might possibly issue a retail CBDC in either the short or medium term.

2021 BIS survey on CBDCs

That’s not to suggest there’s no enthusiasm for wholesale CBDCs, however, with the report finding that cross-border transfer times and complexity are key drivers of wholesale CBDC development:

“Work on wholesale CBDCs is increasingly driven by reasons related to cross-border payments efficiency,” the survey found. “Central banks consider CBDCs capable of alleviating key pain points such as the limited operating hours of current payment systems and the length of current transaction chains.”

In Australia, CBDC exploration is well and truly under way, with the central bank having last September launched Project Dunbar, a multi-CBDC project run in partnership with the central banks of Singapore, Malaysia and South Africa and the BIS. The results of Project Dunbar found that while multi-CBDCs are technically viable, there are significant regulatory and jurisdictional hurdles to overcome.

Categories
Crypto News Economics Investing Markets

Crypto Markets Tumble Amid Worst Stock Market Sell-Off Since March 2020

Despite a short-lived rally mid-week, crypto markets have tumbled over the past few days as they follow the lead of the US stock market, which on May 5 recorded its single worst day of trade since March 2020.

According to data from CoinMarketCap, at the time of writing Bitcoin was trading at US$36,421, a 24-hour loss of 8.07 percent, while the overall crypto market cap was down 7.65 percent.


7-Day Total Cryptocurrency Market Cap. Source: CoinMarketCap

Financial Markets Plunge in Response to Rate Rise

The falls on the stock market that sparked the crypto losses were triggered by the US Federal Reserve’s decision to raise interest rates by 50 basis points. 

On May 4 the news was initially welcomed by markets, as it was in line with what many expected, spurring the S&P 500 to its biggest daily rally in two years. The following day, however, traders reconsidered the implications of the rise and the market dumped: the S&P fell 3.56 percent, the Dow Jones was down 3.12 percent and Nasdaq plunged 5.06 percent – its largest single-day percentage drop since 2020.

Crypto Down Across the Board

In line with the traditional financial markets, crypto was down virtually across the board. In addition to Bitcoin’s almost 8 percent drop on May 5, most top 10 coins saw substantial losses: Ethereum fell 6.78 percent, Solana was down 10.75 percent and Cardano lost 12.09 percent.

Given the changed broader economic conditions, Bitcoin and the wider crypto market face an increasingly uncertain period. Rekt Capital suggested on Twitter that US$38,400 may mark the new line of short-term resistance, and the popular crypto market analyst believes that BTC will need to close the month above that figure to have much chance of a rally in the medium term:

So far, 2022 has been an unhappy year for crypto generally – this latest downturn, in addition to several other sharp declines, including major losses in January and again in April, have left the crypto market cap down over 20 percent since January 1.

Categories
Blockchain Crypto News Markets Tokens

New Move-to-Earn Token ‘FITFI’ Explodes Over 243% in Just Seven Days

The move-to-earn project Step App ($FITFI) has bucked the downward trend of crypto markets over the past week, posting gains in excess of 250 percent in the week since April 28. 

According to CoinGecko, the token was trading at US$0.24 on April 28 before starting its upward climb, recording its recent peak of US$0.67 on May 5 – a seven-day increase of approximately 275 percent. At the time of writing FITFI had retraced some of those gains but was still up significantly, trading at US$0.63.

Step App Lets Users Earn From Exercise

Step App allows users to monetise their fitness, compete with other users, collect NFTs and socialise with other crypto-minded exercise enthusiasts. According to the Step App website, it achieves this functionality by taking advantage of “the leading technology in metaverse, augmented reality and blockchain”.

Step App has a somewhat complicated economy, using three separate tokens – FITFI, KCAL and SNEAK: 

  • FITFI is the app’s governance token, which can be used for a variety of purposes including staking, conferring DAO voting rights and providing liquidity incentives; 
  • KCAL is the in-game currency users earn through exercise; and 
  • SNEAK are NFTs users can mint or buy using using either KCAL or FITFI tokens.

Move-To-Earn Is Latest Crypto Investing Trend

Step App is a part of the fitness finance (FitFi) trend to have recently emerged in crypto, where users can earn crypto rewards by exercising. It seems to be following a similar trajectory to the DeFi and GameFi trends before it: a few innovative projects create a new market segment, and then many similar projects emerge to iterate on the theme and capitalise on the hype.

The current leader in the FitFi space is the Australian-based move-to-earn project StepN, whose GMT token has increased in value more than 200x since the start of 2022.

Categories
Algorand Blockchain Markets Sports

ALGO Rallies Amid Blockchain Deal with FIFA for 2022 World Cup

The native cryptocurrency of the US-based proof-of-stake blockchain Algorand (ALGO) has spiked following the announcement of a sponsorship and technical partnership deal with global football governing body FIFA.

According to CoinGecko, in the 24 hours since the announcement the price of ALGO increased from US$0.58 to $0.73, a gain of 25 percent. At the time of writing, ALGO was trading at $0.64, around 10 percent above its pre-announcement price – it’s currently the 31st largest crypto by market capitalisation.

Algorand is Now FIFA’s Official Blockchain Platform

As the official blockchain platform of FIFA, Algorand will provide the body with a “blockchain-supported” wallet, help FIFA implement blockchain technology, and develop its digital assets, including NFTs.

Romy Gai, FIFA’s chief business officer, cited transparency and sustainability as important factors in its decision to partner with Algorand:

At FIFA, we must constantly strive to identify and explore the most cutting-edge, sustainable and transparent means of increasing revenues to continue to support global football development. Algorand is clearly a forward-looking, innovative partner that can help us achieve these goals. 

Romy Gai, chief business officer, FIFA

Deal Provides Valuable Exposure

As part of the sponsorship agreement, Algorand becomes a FIFA World Cup 2022 Regional Supporter in North America and Europe and a FIFA Women’s World Cup Australia and New Zealand 2023 Official Sponsor, providing the blockchain network with valuable exposure and promotional opportunities.

Algorand was founded in 2017 by the Turing Award-winning scientist Silvio Micali, who this week said he was excited about the opportunity this new partnership represents to showcase the capabilities of the blockchain network:

“This partnership with FIFA, the most globally recognised and distinguished organisation in sports, will showcase the potential that the Algorand blockchain has to transform the way we all experience the world’s game.”

Silvio Micali, Founder of Algorand

Algorand is regarded as one of the most efficient and environmentally sustainable blockchains and has been used by over 2000 organisations worldwide, including Blockchain Solutions Australia, who partnered with Algorand in late 2020.

Algorand isn’t the first crypto-related organisation to become a FIFA 2022 World Cup sponsor – in March, leading exchange Crypto.com became an official sponsor for the event.

Categories
Alchemy Pay DeFi E-commerce Payments VeChain

VeChain (VET) Now Accepted as Payment in 2,000,000 Stores Worldwide

VeChain (VET) has partnered with payments provider Alchemy Pay (ACH) to allow VET holders to make crypto payments to over two million merchants in over 70 countries worldwide:

However, the response to the Alchemy Pay partnership, although generally positive, wasn’t enough to see VET buck the general downturn in crypto markets over the past week: 

At the time of writing VET was trading at US$0.047, about nine percent down from when the partnership went live on April 28.

Alchemy Pay Bridges Fiat-Crypto Gap

Touting itself as a hybrid payments system, Alchemy Pay allows merchants to accept both established forms of payment – such as credit cards and PayPal – and cryptocurrency. It provides crypto acceptance payment systems for online and offline businesses including via popular merchant platforms Shopify and Arcadier.

In additional to VET, Alchemy Pay accepts numerous other cryptocurrencies including Bitcoin, Ethereum, Tether, Polygon, Elrond and Algorand.

Regarding the integration of VET into its payment system, Alchemy Pay CEO John Tan said:

Our partnership will improve [VeChain’s] access to users and increase the possibilities for developers on Thor. After integrations with VeChain as well as other leading blockchains, we expect our fiat-crypto on-ramps to be a major driver of the mainstream adoption of crypto services and dApps going forward. 

John Tan, CEO, Alchemy Pay

Payments Capability Increases Utility, Adoption

VeChain CEO Sunny Lu explained that the ability to use VET as payment for goods and services across a vast network of merchants should increase the utility of VET and spur further mainstream adoption of crypto:

With Alchemy Pay’s fiat payment channel and crypto on-ramps, we are bringing more mainstream accessibility to our network. This has benefits, not only for users but also for all developers building on the VeChainThor blockchain. The integration of VET into Alchemy Pay’s crypto payment system is important in further expanding the real-world use cases for VET as a form of payment. 

Sunny Lu, CEO, VeChain

Founded in 2015, VET is built on top of the Thor blockchain and is known predominantly for its supply chain focus. Recently, however, VET has branched out into other sectors, such as real estate, through a partnership with Jones Lang LaSalle Incorporated, and vaccination passports, via a partnership with the government of the small European republic of San Marino.

Categories
Crypto Exchange DeFi Hackers

Stablecoin DEX ‘Saddle Finance’ Exploited for $10 Million

Decentralised exchange Saddle Finance was hacked over the weekend, resulting in the loss of over US$10 million in funds. The DEX is working with blockchain security organisation BlockSec to return some of the lost funds and at the time of writing the identity of the hacker remained unknown.

Saddle Finance is an automated market maker that specialises in the trading of stablecoins and other pegged assets such as wrapped BTC.

Timeline of the Hack

According to on-chain data, the hack occurred at 7:40am UTC on April 30, with the hacker initially stealing approximately US$14.8 million in assets. 

Twitter user @web3isgreat, who catalogues blockchain hacks, claims it was a flash loan attack and, once stolen, the assets were funnelled through Tornado Cash to anonymise the transactions and make tracking the hacker virtually impossible:

Based on Twitter interactions, it appears BlockSec’s monitoring and attack blocking systems detected the exploit shortly after it began. Once aware of the attack, BlockSec tweeted an alert to Saddle Finance:

Around 20 minutes later, Saddle Finance tweeted that it was investigating a “possible exploit” and had paused pool withdrawals, later clarifying that only metapool withdrawals had been suspended:

Around two hours after it was first notified about the hack, Saddle tweeted that BlockSec had been able to secure approximately US$3.8 million of the lost funds:

In all, over US$10 million in assets remain missing with little chance of recovery.

In a worrying trend, DeFi hacks are becoming an increasingly common occurrence. In February, Meter.io was hacked for US$4.4 million and March saw Axie Infinity lose US$625 million in what has since been assessed as the largest DeFi exploit on record.

Categories
Blockchain Crypto News Crypto Wallets Toncoin

Telegram’s 550 Million Users Can Now Send Crypto Via Chat

Users of the instant messaging app Telegram can now easily buy, send and receive crypto in-chat using the app’s newly released wallet bot:

The wallet bot, which runs on the Telegram-designed TON blockchain, simplifies crypto transfers between Telegram users. Initially, users will be limited to transferring Toncoin (TON) only, although they will be able to purchase both TON and Bitcoin (BTC):

TON’s price gained around 18 percent following the announcement, jumping from US$1.92 to US$2.28. At the time of writing TON was holding on to most of those gains, with the price sitting at US$2.25.

Toncoin to AUD chart. Source: CoinMarketCap.com

How Does the Wallet Bot Work?

The new wallet bot allows Telegram users to buy crypto (TON or BTC) in-app using a bank card and transfer TON to other users. Once users have added the wallet bot to their attachment menu, they can use the wallet button to send TON to any user they’re chatting to. 

While the bot only allows for user-to-user transfers for now, the TON Foundation expects its functionality will expand to include consumer-to-business payments in future.

The addition of crypto transfers to Telegram follows a recent trend by social media and messaging apps towards implementing crypto payments systems. Twitter has added support for Bitcoin and Ethereum tipping in the past few months and the Meta-owned messaging app WhatsApp has been trialling crypto transfers using its new Novi wallet since December.

TON’s History with Telegram

The TON blockchain started life in 2018 as a Telegram project and was initially known as the Telegram Open Network. However, after a legal battle with the US Securities and Exchange Commission over the sale of unregistered securities, Telegram gave up control of the project in 2020 to the community driven, open-source TON Foundation. In 2022, TON changed its name to The Open Network to highlight its separation from Telegram and its open-source nature.

According to the TON Foundation, the TON blockchain is designed to be a fully decentralised, ultra-fast, low-fee and environmentally friendly blockchain that can meet the needs of large-scale apps such as Telegram, which currently boasts around 550 million users.