Weekly Newsletter – 23 Sep 2022

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Weekly Summary

  • Fed raised 0.75% rates as expected, along with a market dump
  • Wintermute, one of the largest crypto market makers, got hacked for $160m in DeFi operations
  • Microstrategy acquired ~301 BTC for $6M
  • SEC claimed ETH transactions falls under US jurisdiction & new draft bill to ban algo-stables
  • XRP price rallies after odds of winning a legal battle against the SEC leans in favour of Ripple

Industry Stories

Fed hikes rates by 0.75% in FOMC meeting: The Fed raised interest rates by 0.75%, aligned with market expectations, but the S&P 500 and crypto markets reversed course as Bitcoin closed below $19k at daily close. In just 3 months, year-end projection rates have been adjusted to be between 4 – 4.5%, vastly higher than June’s median year-end projection of 3.4%. There is no easing of rates until 2024 and the term ‘soft landing’ is now replaced with ‘some pain’ in the Fed Chairman’s language. Speculative tech stocks and cryptocurrencies are expected to see some volatility in the coming months as we are nowhere near a slowdown of rate hikes and easing inflation.

Crypto top-tier market maker gets hacked for $160m: Wintermute has been hacked for about $160m in its DeFi operations. CeFi and OTC operations are not impacted and the company remains solvent with “twice over that amount in equity left”, based on the latest Tweet by Evgeny Gaevoy, CEO of WIntermute. Blockchain cybersecurity firm Certik, said the hack is likely due to a vulnerability in private keys generated by the Profanity app. A 10% bounty was offered to the hacker and Wintermute will continue to operate its on-chain trading operations.

MicroStrategy acquired 301 bitcoins for $6m: MicroStrategy has purchased an additional 301 bitcoins for $6 million at an average price of $19,851. As of 19 September 2022, MicroStrategy now holds about 130,000 bitcoins acquired for $3.98 billion at an average price of $30,639. Based on the current market price of bitcoin, the company has lost more than $1.5 billion in paper losses.The company’s former CEO and current Executive Chairman, Michael Saylor, remains unfazed and has plans to reinvest $500m of stock sales into bitcoin based on the latest SEC filing.

XRP price rallies as Ripple’s hopes of winning its long-running legal battle against SEC increases: Ripple could see some relief from its ongoing legal battle with SEC which has been acting as a major impediment for the past few years. Both parties have agreed to expedite the lawsuit to get an answer on whether $XRP should be classified as security. Ripple’s attorney, Stuart Alderoty, is feeling confident that they might win the case, tweeting that for two years, the SEC has been unable to ‘satisfy a single prong of the Supreme Court’s Howevy test’ and they could not find evidence of XRP sales constituting an ‘investment contract’. After the tweet, $XRP rallied to a three-month high of $0.43 despite the bearish outlook from Fed’s FOMC meeting.

US Regulatory overwatch in crypto increasing: In a recent SEC civil complaint against crypto influencer Ian Balina, it was observed in the fine print that ETH transactions should fall under the US government’s purview as it was validated by a network of nodes (around 46%) clustered in the US region. The SEC concluded that since the majority of transactions took place in the US, all ETH transactions globally should be considered as originating from the US. In other news, a new stablecoin draft bill was released proposing to ban algorithmic-stablecoins like UST for two years. The issuance of stablecoin without approval from appropriate regulators could be punishable for up to five years in prison and a $1 million fine.

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Matrixport News

Matrixport’s Anthony DeMartino discusses the impact of #POS ETH in driving institutional interest with Forkast.News #Marketmovers.
1) ETH merge represents the ability for chains to evolve for the long term in terms of scalability, flexibility & energy efficiency;
2) POS ETH introduces a risk-free rate benchmark reference as a catalyst for more sophisticated investment products;
3) ETH being inflationary or deflationary will depend on activity levels on chain.

From the rapid growth of crypto to the dramatic volatility of the asset class, governments around the world are responding through regulatory and legislative actions. Some jurisdictions have announced clear and accommodating frameworks in the hope to create the crypto hubs of tomorrow, while others are taking a slower, more thoughtful approach. Matrixport founding partner, Cynthia Wu was joined by sFOX for a Blockworks webinar, exploring the topic of compliant crypto trading for institutions.
To learn more, you can find the webinar here.

Matrixport recently listed $PAX (Pax Gold). It is a digital asset fully-backed 1:1 by physical gold reserves, held in custody by Paxos Trust Company, an entity fully regulated by the New York State Department of Financial Services (NYDFS). Investors can gain exposure to fractional tokenized gold without drawbacks of high storage costs. PAXG is now available for swap, auto-invest, deposit, withdrawal and transfer on Matrixport app.

Grow and manage your digital wealth with the Matrixport app: 

Stay connected in our community: https://t.me/matrixport