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BlackRock’s bitcoin trust launch and Tornado Cash mixer ban. Main events of the week

12.08.2022

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11 min

The bitcoin exchange rate has increased by 4,1% over the past seven days. The asset reached the highest values on August 11, when 1 BTC was trading at $24 918, the lowest values were recorded on August 10 with $22 664 per coin. As of August 12, 10:00 Moscow time, the bitcoin exchange rate is $23 985 (according to Binance).

The value of the second most capitalized cryptocurrency, Ethereum, has risen 14,18% over the past seven days to $1891. The native token of the cryptocurrency exchange Binance (BNB) has risen by 2,5% and is trading at $326,3.

The total capitalization of the crypto market has increased from $1.108 trillion to $1,195 trillion over the week, with bitcoin dominating at 38,46%. Ethereum's share is 18,72%.

Institutional entry into the cryptocurrency market

BlackRock, an investment firm with $10 trillion in assets under management, launched a private spot trust offering US institutional clients investments in bitcoin. The company noted significant customer interest in using investment products based on the first cryptocurrency, despite the sharp downturn in the digital asset market. BlackRock representatives believe the most promising areas of the industry for clients and capital markets to use are stablecoins, permitted blockchains, crypto assets and tokenization — areas in which the company is “conducting work.”

ARK Invest founder Cathie Wood said that BlackRock's entry into the crypto market would more than double the value of BTC. She explained that companies that want to use cryptocurrencies, but also reduce their volatility, allocate only 2,5% of their portfolio to them. If this rule is applied to the $40 trillion BlackRock, it would result in more than $1 trillion in demand.

Tornado Cash crypto mixer ban

On August 8, the US Office of Foreign Assets Control (OFAC), part of the Treasury Department, added the cryptocurrency mixer Tornado Cash to its sanctions list. The restrictions mean a complete ban on the service's use in the United States. According to OFAC, more than $7 billion in total has been laundered using Tornado Cash since its inception in 2019, and it was used by North Korean hackers from the Lazarus group, among others.

After the blocking, Tornado Cash was removed from the GitHub hosting service, and, Circle, the issuer of the USDC stablecoin, froze more than 75 000 coins linked to the mixer's sanctioned addresses.

Uniswap protocol founder Hayden Adams criticized the banning of the entire service because of the actions of individual users. He believes OFAC's actions are a threat to free speech and privacy. Adams also called the arguments that privacy is only needed for illegal activities absurd.

The developers of the anonymous cryptocurrency Zcash from Electric Coin Company also noted that this precedent could negatively affect the civil liberties of Americans. At the same time, they declared full compliance of their asset with international AML/CFT standards.

Crypto exchange dYdX blocked users whose addresses interacted with Tornado Cash. The restrictions affected even those accounts whose insignificant amounts of funds “were associated at some time with Tornado Cash.” Also there are cases of mistakenly blocked accounts, “whose owners may not have been aware of the origin of funds,” they were later restored.

Amid the sanctions, Tornado Cash faced a sharp outflow of users and a 79% drop in deposits compared to the previous week. Since the imposition of restrictions, only $6 million has been deposited and $62 million has been withdrawn. This reduced the amount of cryptocurrency stored in the service by 15%.

Ethereum hard forks on PoW algorithm

On August 7, the Poloniex exchange launched trading of Ethereum hard fork tokens, which could happen after the network switches from the Proof of Work (PoW) consensus algorithm to Proof of Stake (PoS). Users can exchange ETH at a ratio of 1:1 for ETHS or ETHW. The former is a network asset on PoS, the latter is a blockchain coin on PoW. The platform cancelled trading fees for all ETHW and ETHS currency pairs.

Representatives of Chainlink (LINK) said that the oracle network will continue to operate on the Ethereum blockchain during and after its transition to the Proof-of-Stake (PoS) consensus algorithm. The protocol will not support any Ethereum forks, including those based on the Proof-of-Work (PoW) algorithm. The developers stressed that its decision is in line with the Ethereum Foundation and the entire community.

Representatives of cryptocurrency exchange Huobi said they would support hard forks, provided they meet security requirements. The company also opposes any form of pre-mining. The exchange will take an objective and neutral approach to evaluating projects created as a result of hard forks (including but not limited to ETH).

Cryptocurrency exchange BitMEX will launch trading of Ethereum hard fork tokens on PoW. If it does, the exchange will offer customers trading in linear futures margin contracts on ETHPoW with collateral in Tether (USDT) stablecoins. The product ETHPOWZ22 is already available for study in the testnet.

Circle announced that its USDC stablecoin will exclusively support Ethereum on the PoS algorithm.

Tether Limited, the issuer of the USDT stablecoin, called the Ethereum upgrade “one of the most significant moments in blockchain history.” Tether stressed that the switch to PoS should not carry risks that could cause confusion and harm the entire ecosystem.

The Binance team said that if new tokens emerge as a result of the hard forks, the platform will evaluate them for a potential listing in the same manner as other assets. According to Binance's internal policy, it currently does not guarantee any future token listings.

Crypto companies' problems continue

On August 8, the native token of blockchain game Dragoma (DMA) plummeted 99,9%, dropping to $0,0015. Analysts at PeckShield reported that the project's assets were transferred to centralized exchanges, the company's official website was down, and social media channels were removed. They suspect the project's developers of scamming using the Rug Pull scheme.

On the same day, crypto platform Hodlnaut suspended withdrawals and deposits, token exchanges, and withdrew its license application from the Monetary Authority of Singapore (MAS). The company said the freeze was necessary to stabilize liquidity and preserve assets. Representatives of the platform said in a statement to users that they were working on a recovery plan and would provide details as soon as possible.

On August 9, German cryptocurrency exchange Nuri filed for bankruptcy in a court in Berlin. Company representatives said that they were forced to take such a step by the current situation in the macroeconomics, geopolitics and digital asset market. They explained that this measure would avoid possible long-term problems with liquidity and develop a concept for business restructuring.

On August 9, hackers stole about 327 ETH (~$570 000 at the time of the hack) from DeFi-protocol Curve.Finance. The developers later assured that they had discovered and fixed the vulnerability. Part of the assets — 112 ETH (~$191 000) — was blocked by the FixedFloat exchange team when the hackers transferred funds to the platform. Changpeng Zhao, head of Binance, later said that his team had blocked another $450 000 stolen by the hackers.

On August 10, cryptocurrency exchange Hotbit suspended service on the site. Deposit and withdrawal, trading and funding functions are unavailable on the platform. The time of resumption of work is not known. The suspension is related to a lawsuit against an ex-employee of the exchange over his actions as a participant in a third-party project, Hotbit's top managers are involved in the investigation.

Cryptocurrency exchange Coinbase reported that the US Securities and Exchange Commission (SEC) opened an investigation into its digital asset staking programs. The company received subpoenas to appear before the SEC, as well as “requests for documents and information about certain customer programs, operations and existing and intended future products.” The requests, in addition to staking, relate to the listing and classification of cryptocurrencies as well as stablecoins.

NFT market news

In honor of International Friendship Day, the Coca-Cola Company released an NFT collection on the Polygon blockchain. It was distributed to NFT holders from the company's previous collections. The tokens have a unique share-to-reveal feature — drawings are revealed only after users share them with friends.

Jewelry company Tiffany sold all 250 NFTiff passes, which CryptoPunks token holders can exchange for precious metal pendants that replicate their NFT-collection characters. The sale began on August 5 and closed 20 minutes after launch. Each NFT was sold for 30 ETH (about $53 000), generating ~$13,2 million in revenue for the company.

Ethereum co-founder Vitalik Buterin suggested securing confidential NFT transfers using stealth addresses. In this case, the new owner of the token would be visible only to his counterparty. Buterin noted that this method has great potential and it may not be long before the market sees this feature.

The social network VKontakte announced a large-scale upgrade to its mobile app interface, which will be the basis for the integration of new features, including those related to NFTs and Web 3.0. The upgrade will take place in several stages, the first of which already began on August 9.

Representatives of the OpenSea NFT marketplace will begin engaging the police to prevent the sale of stolen tokens. The platform will start using police reports, which will indicate the names of specific NFTs that are better not to buy on the marketplace. OpenSea pointed to cases where users were punished by unknowingly buying a stolen NFT. Due to this, as well as negative feedback from the community, the marketplace changed its policy.

New predictions for the price of BTC

Bloomberg Intelligence senior commodity strategist Mike McGlone believes that bitcoin is trading at a significant discount. He cites technical analysis, a number of observations, and one specific indicator in his statements. The full version of the interview with the analyst can be found in the feature on the Forbes website. McGlone noted that the bitcoin rate reached its lowest level relative to its 100-week moving average (MA) in July. He called this situation an “extreme discount within an enduring bull market.”

Crypto analyst and host of YouTube channel InvestAnswers explained how a partnership between Coinbase and BlackRock could push the price of bitcoin to $773 000. According to him, if BlackRock invests 0,5% of its assets in BTC with a multiplier of 21x, the capitalization of the first cryptocurrency will grow by $1,05 trillion. This would add $75 000 to the price of bitcoin, raising it to $99 000.

Mike Novogratz, CEO of investment firm Galaxy Digital, said that bitcoin is unlikely to rise above the $30 000 level in the near future. He noted that there is currently no flow of institutional investors into the first cryptocurrency. Novogratz himself “would be happy” if BTC stopped for a while in the $20 000 to $30 000 range.

Representatives of JPMorgan, a financial holding company, said that after bitcoin fell by 75% of its all-time high (ATH), the cryptocurrency market “found a floor.” Analysts cited community expectations for the Ethereum network’s upgrade as one of the factors influencing the digital asset market’s recovery. Another reason for the strengthening of the crypto market analysts called the limited spread of damage from the crash of the Terra blockchain ecosystem.

New materials in GetBlock Magazine's knowledge base

“Holders are in for some good news.” The last of the Ethereum testnets switched to PoS

“Dirty” tokens. The threat of blocking the Tornado Cash mixer

“The long-term outlook is unclear.” Is it possible to make money on the Ethereum fork?

“The most underrated token right now.” Why Solana's price is resistant to bad news

Author:

Michael Golikov Michael Golikov

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