FreeCryptoCurrency.Me

Following an abrupt start to the week, which saw most major bitcoin miners’ stock drop by double digits, many continued on a downward path during Wednesday’s trading session.

Hive Blockchain’s stock fell over 20% on Wednesday, following an announcement the company plans to consolidate shares by a 5 to 1 ratio on Tuesday afternoon after market close.

After posting results on their most recent quarter Tuesday, CleanSpark, Riot and Cipher were also down on the markets by -11.93%, -9.16% and -5.23%, respectively.

These market moves occurred against the backdrop of continued volatility in equities markets. The Nasdaq Composite closed Wednesday’s trading session down 3.18%. 

Bitcoin — which makes up a significant portion of some miners’ assets — has seen its value temporarily dip below the $30,000 mark since the start of the week. Bitcoin is trading at $29,106.43 on Coinbase as of press time.

Here is a look at how other crypto mining companies fared in the markets on Wednesday, May 11:

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto history was made this week as one of the most popular stablecoins, TerraUSD (UST) lost its peg to the US dollar and then, over the course of a few days, collapsed below $0.30.

The stablecoin began to lose parity with the US dollar over the weekend. Despite expensive attempts this week by UST’s backers to maintain the peg, the coin has fluctuated wildly in price and has failed to regain its peg. 

As of writing, UST is now trading at around $0.68 on Binance against Tether’s USDT, the most voluminous trading pair for UST. And Luna, Terra’s native asset that is supposed to help UST maintain its peg, is down to around $1.25, from $84 a week ago. 

The UST situation is complicated and has unfolded very quickly. Here’s a rundown of how we got to this point — and why it all matters.

Setting the stage

A stablecoin is a type of cryptocurrency whose value is supposed to maintain parity with that of a non-volatile asset, most commonly the United States dollar.

Traditional stablecoins like Tether’s USDT and Circle’s USDC are said to be backed by cash and other assets. There are also crypto-collateralized stablecoins, most prominently Maker Dai.

UST, which was created by a startup called Terraform Labs, fits into the somewhat loosely defined category called “algorithmic” stablecoins. Instead of relying on collateral, these coins are designed to use market incentives to maintain their pegs.

Terra launched in 2018, with backing from Binance Labs, OKEx, Huobi Capital and Dunamu, the firm behind Korea’s Upbit. UST launched in the fall of 2020, and the stablecoin saw massive growth during the bull market of 2021.

Do Kwon, CEO of Terraform Labs, described how UST is supposed to work on a recent episode of The Scoop: 

“The idea is that at any given time a person can burn a dollar’s worth of Luna in order to mint one TerraUSD, and vice versa you can always redeem one TerraUSD for a dollar’s worth of Luna. So insofar as the Luna token has some sort of market value, you can always try to arbitrage against the system in order to mint and redeem stablecoins.”

“Just in case a de-pegging event happens — so for example if TerraUSD is trading for $0.90 — an arbitrageur can simply buy up TerraUSD from the open market and then trade it against the protocol for a dollar’s worth of Luna, thereby capturing 10% arbitrage profit that way. And vice versa, if TerraUSD is ever trading at $1.10, you can buy a dollar’s worth of Luna from the open market, mint TerraUSD and then sell that to capture 10% profit on the other side.”  

That’s supposed to maintain the peg. But beyond that, a non-profit based in Singapore called the Luna Foundation Guard, or LFG, had been raising enormous amounts of funds — mostly in the form of bitcoin — to serve as a “forex reserve” for UST.

In February, The Block reported that LFG had raised $1 billion to form a bitcoin reserve for UST. In March, Do Kwon revealed that LFG upped the number to $2.2 billion for its bitcoin reserve and had a long-term goal of $10 billion. In April, it added $100 million in AVAX tokens and an additional $231 million worth of bitcoin.

On May 5, LFG said it had purchased $1.5 billion worth of bitcoin, bringing the total in the reserve to $3.5 billion.

The collapse

Then, something happened this weekend that caused a large amount of UST selling. As crypto researcher (and former researcher at The Block) Mika Honakasalo explained on on another recent episode of The Scoop, on-chain data showed that “lots of large selling of UST into other stablecoins.” The reason for this is still not entirely clear. 

That selling pressure caused UST to lose parity with the dollar. That’s not the first time this has happened. In May of 2021, the price of UST fell as low as $0.96 before recovering. 

But on Monday, the price fell to as low as $0.61. The same day, the LFG said it would “defend” the peg by lending out $1.5 billion in bitcoin from its reserve to over-the-counter trading firms so they could support the market activity and help maintain parity with the dollar. 

Early in the morning, Eastern time, on Tuesday, Binance suspended Luna and UST withdrawals. 

Later that day, the stablecoin regained some of its losses, climbing back above $0.90. 

Then, The Block reported that the LFG was seeking $1 billion more from large crypto investors. Later on Tuesday, the price began declining quickly again, falling to around $0.30. 

On Wednesday, one of the “big four” exchanges in Korea suspended Luna trading to its users, affecting how some traders in certain parts of the world can restabilize the Terra ecosystem. 

Meanwhile, Anchor, the native token of Terra’s dominant DeFi platform Anchor Protocol, is down more than 70% in the last day. Before the UST collapse, Anchor, which is supposed to pay out 19.5% yield to lenders of UST on the platform, was already on pace to deplete its own reserve within two months. 

Why it matters

On Wednesday, Do Kwon laid out plans to help bring UST back to market parity. The plans include absorbing the increased UST supply from holders selling it off, increasing Luna minting by 400% to let more UST holders cash out, and increasing the amount of UST that can be sold for Luna each day. 

But the collapse has left a huge amount of uncertainty and distrust in its wake. 

It’s far from clear that it will ever regain its peg — much less the trust it needs to be sustainable. 

Besides that, the fallout will have massive implications for the cryptocurrency and DeFi scenes more broadly. To begin with, is Terra’s approach to stablecoins unviable? Other Layer 1s, including Tron and the Near Protocol, plan to pursue similar designs. The ultimate goal is to create truly decentralized stablecoins that are beyond the reach of regulators.

Speaking of regulators, if they weren’t paying attention to this trend before, they certainly are now. In a Senate hearing on Tuesday, US Treasury Secretary Janet Yellen referred to UST by name as she once again asked Congress to pass legislation regulating stablecoins.

“I think that this simply illustrates that this is a rapidly growing product and there are rapidly growing risks,” she said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin miner Hive Blockchain has announced plans for a 5-to-1 share consolidation that would materialize around May 20.

The Canada-based company justified the move as a way to “add shareholder value” and set the number of outstanding shares closer to industry standards, per an announcement on Wednesday. However, the company is still waiting on regulatory approvals.

“In speaking to shareholders at the numerous conferences I have attended in the past 60 days, it is apparent that some shareholders are finding it challenging to compare HIVE to its industry peers as we have many more shares outstanding,” said executive chairman Frank Holmes.

As of the announcement, there were 411,209,923 common shares issued and outstanding and after consolidation, that number is expected to shrink to 82,241,984.

Holmes also indicated that the company’s relatively low price per share has been a barrier to some investors, arguing that consolidation would expand the company’s profile.

Shares were at C$1.22 on the Toronto Stock Exchange and $0.92 on Nasdaq, as of publication time.

“Even though HIVE has a higher market capitalization than many of our peers, and stronger fundamentals as measured by price/earnings ratios, revenue per employee and debt to equity ratios, the increased share price creates more institutional visibility because many of their fundamental screens exclude stocks under $5 a share,” Holmes added.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Brazilian fintech company Nubank inked a deal with crypto firm Paxos to start trading crypto.

The bank is initially offering bitcoin and ether transactions and will start rolling out the new product in May to reach its entire 50 million customer base by end of July, according to an announcement issued Wednesday.

“There is no doubt that crypto is a growing trend in Latin America, one that we have been following closely and believe will have a transformational impact on the region. Yet the trading experience is still very niche as customers either lack information to feel confident to enter this new market or just get frustrated by complex experiences,” said CEO and founder of Nubank David Vélez.

Nubank said it intends to add more cryptocurrencies in the future. Clients could already access crypto via ETFs and funds offered by NuInvest, the company’s investment platform.

In this new venture, Paxos will act as a custody provider and broker.

“Nubank’s move to enter the crypto trading space represents a strategic move not only for the company, but for an acceleration of the crypto currency adoption in the region”, said co-founder & CEO of Paxos Charles Cascarilla.

Nu Holdings, the parent company of Nubank, also announced that it purchased an amount of bitcoin equivalent to about 1% of its balance sheet.

“The transaction reinforces the company’s conviction in the current and future potential of Bitcoin in the region’s financial services landscape,” the announcement read.

Nubank has been listed on the New York Stock Exchange (NYSE) and Brazil’s B3 exchange since December of last year. As of publication time, the company’s stock was down by about 11% in both markets.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

FTX.US has applied with the New York Department of Financial Services (NYDFS) for a trust charter, the firm announced Wednesday.

The crypto exchange, the American affiliate of FTX, seems to be inching closer to opening up its services to New York residents. As it waits for approval from regulators, FTX.US has also started gearing up for the possible launch of a New York State limited purpose trust company.

Just this Wednesday, FTX.US announced it was hiring, Marissa MacDonald, former chief compliance officer at Fidelity Digital Assets, to serve in the same position at the firm’s “to-be formed” New York company.

“Marissa has spent her career leading and building best-in-class compliance programs while working alongside regulators,” said FTX US president Brett Harrison. “Her experience working in both traditional financial services and digital assets will make her invaluable to our efforts.”

MacDonald spent 14 years at Fidelity Investments, having previously worked for Ernst & Young.

“The FTX team’s continued commitment to being proactive when it comes to both compliance and establishing clear regulatory frameworks is exciting and I’m looking forward to leveraging my expertise to help them achieve their ambitious goals,” MacDonald said in a statement from FTX US.

Per the Department of Financial Services, a limited purpose trust company is an institution that is chartered under the bank and trust company provisions of the New York banking law but without the power to take deposits or make loans.

Mostly its been a resource for “out-of-state or foreign banking organizations desiring an expanded New York presence, and insurance and securities companies seeking to complement activities by conducting various trust businesses through subsidiaries,” per the department’s website.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Secret Network is a Layer 1 blockchain with privacy-preserving features.
• Secret smart contracts enable programmable privacy, unlocking use cases from DeFi to NFTs.
• Data privacy is achieved by leveraging Trusted Execution Environments for secure and private smart contract execution. 
• Secret Network is relatively well-positioned to be the leading privacy-preserving blockchain solution as the importance of user privacy gains attention in Web3 development.

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.

Among people watching the red line point vertically down on the price of LUNA, the native asset of the Terra blockchain network, were those whose life savings were invested. 

LUNA and its related stablecoin, TerraUSD (UST), have been set into free-fall over the last 48 hours. 

UST is supposed to be pegged to the US dollar. A combination of burn mechanics involving related token Luna and market incentives are intended to keep UST at its peg. That mechanism has broken down, and this week has seen investors and holders rushing for the exit. 

Even though the Luna Foundation Guard (LFG), a non-profit set up to support the Terra ecosystem, deployed $1.5 billion in assets on Monday to help the stablecoin return to its peg, it has not been enough. The Block reported on Tuesday that LFG is seeking more than $1 billion to support the project. 

The market cap of LUNA has shrunk from $28.9 billion a week ago to $2.1 billion, according to data from CoinGecko.

Now, as the future of Terra Labs co-founder Do Kwon’s brainchild hangs in the balance, ordinary investors are taking stock. 

Sunk costs

Finn Hatherell, a Dubliner who runs a media startup, got into crypto in 2020, having bought bitcoin after listening to Galaxy’s CEO Mike Novogratz wax lyrical about its benefits on a podcast. Months later, he noticed another tip from Novogratz on Twitter, suggesting that Luna might be a good investment. He bought €500 worth at around $0.36. 

By Christmas 2021, his Luna holdings were worth around €160,000, a level which had sustained pretty consistently, until now. 

“I had heard it could go to zero if the peg gets attacked,” says Hatherell. 

His Luna is locked up in staking pools for the next 21 days, so in theory, there is time for a recovery. He says he’s made his peace with the fact it may well go to zero, though. 

“This is a case of billionaires getting rich again,” he says, referencing the market meltdown which happened shortly after day traders discovered Gamestop:

“The game is rigged and the hedge funds are winning no matter what. I remember thinking that what happened [with Gamestop] was such a case for crypto and decentralization, but it’s happened again.”

Other people are also in similar situations. 

One person on Twitter told The Block over direct message they had more than $7,000 in LUNA on Binance, which tanked to little or less than $100. They had tried to use leverage trading to cut their losses but were still down $2,000 at the time of writing. 

“I’ve never been so shellshocked before,” they wrote. 

Another anonymous user, whose screen name is “Lunatic,” messaged to say they had lost $30,000 – a figure they said was three-quarters of their money. 

Others tweeted at Do Kwon that they were down $133,000. “I’m officially fuckin broke,” a user with the scren name “Wicklidation” wrote. “I’m beside myself.” 

The LUNA subreddit tells graver tales of loss due to crypto nosedives. Its top post on Wednesday was a story of someone who had attempted suicide during a previous downturn, urging people to take stock before they do something rash. 

“If you’re considering ending your life, I sincerely hope you re-consider your feelings. Whatever it is you’re going through, like everything else in life that ever was, shall pass. A brighter day will come, and you will be surprised how life will open its doors back up for you when you allow it to,” the user wrote. 

Another user posted a list of suicide prevention hotlines for different countries. 

Meanwhile, Kwon revealed a rescue effort to restore the UST peg earlier today. In a tweet thread, he acknowledged that the last 72 hours have been extremely tough for the Terra community and that he hopes he can help it to survive. 

Many of the losses for ordinary traders have already been booked, though, as question marks hang over future prospects of algorithmic stablecoins in general. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

CoinDesk reported Wednesday that Do Kwon, co-founder and chief executive of the development firm behind the Terra blockchain, was closely involved with an earlier stablecoin effort that failed to gain traction.

Basis Cash, as reporters Danny Nelson and Sam Kessler noted in their report, was an Ethereum-based stablecoin that aimed to revive an algorithmic stablecoin concept known as Basis. Basis was a venture-backed project that folded amid concerns about regulation. Basis Cash first was unveiled in August 2020.

The disclosure is significant given the turbulence around TerraUSD (UST), an algorithmic stablecoin that has seen its value fall significantly in recent days. As of the time of writing, UST is trading at roughly $0.54 after reaching an all-time low of $0.22 on Binance.

Citing former employees of Terraform Labs, CoinDesk reported that Kwon was one of two pseudonymous co-founders, going by the moniker Rick Sanchez, a reference to the adult cartoon show Rick and Morty, and that Basis Cash was largely developed by Terraform employees. 

The project’s total locked value (TLV) peaked in December 2020 at roughly $175 million before falling in subsequent days, according to data from Defi Llama. BAC’s current market value is $0.007, per CoinGecko. 

UST was first launched in September 2020, according to an announcement blog post at the time penned by Kwon. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange Coinbase saw its shares drop by more than 20% Wednesday morning, a day after the company released earnings that revealed a declining user base and hefty expenses for the first quarter of 2022.

Shares in Coinbase were trading at $56 per share at the time of writing, representing a drawdown of more than 70% since the beginning of the year.

Coinbase — which is among the largest publicly traded companies in the crypto market— went public in April 2021 and has declined by 83% since its market debut. 

Its first-quarter earnings revealed mounting expenses for the firm, which translated into a net loss of $430 million. The firm’s revenues fell to $1.17 billion, missing Wall Street’s target of about $1.5 billion.

Unsurprisingly, given the drawdown in activity across crypto exchanges, the firm’s monthly transaction users dropped to 9.2 million during the first quarter from 11.4 in Q4. Adjusted EBITDA declined from $1.2 billion in the fourth quarter to $20 million in Q1. 

In a letter to shareholders, Coinbase addressed the broader market conditions that underpinned the quarter, noting that “we believe these market conditions are not permanent and we remain focused on the long-term.” 

Investment analysts aren’t convinced with Goldman and JPMorgan slashing their price targets to $171 and $80, respectively.

“In the current macro backdrop, we believe COIN is unlikely to return to recent levels of profitability in the near term absent a significant increase in crypto prices or volatility,” analysts at Goldman Sachs noted in a note published Wednesday.

Coinbase, much like other technology stocks, has been gripped by broader macro conditions as well with tightening monetary policy wreaking havoc across risk assets from stocks to cryptocurrencies. 

In a conversation with The Block post-earnings, executives from the company noted that it was a “good quarter for the business, but the macro environment weighed on financials.”

The team added that Coinbase gained market share in seven of its top tradeable assets and also saw the number of clients engaging with multiple products increase to 54%. Another bright spot: fees. 

Here’s Coinbase CFO Alesia Haas: 

“Just factually, our fees actually have not declined. In fact, our blended fee rate is up over the last two quarters. Our transaction revenues are down on an absolute basis in Q1, and that reflects the broader weakness in the markets, which is not surprising given crypto volatility in price cycles, which we previously talked about. But we’re not seeing that competition on fees.”

John Todaro, an analyst at Needham & Company, told The Block that fee compression is among the concerns of investors, adding that they think that fees will compress to zero, much like how they have in equities trading. 

“What I am telling folks every day is, well, they haven’t come down yet,” he said. “I think the fee compression concern is overblown but it is one of the biggest concerns.”

FTX.US, FTX’s American affiliate, sent out an email to users Tuesday highlighting a slash in its taker fees for certain tiers, suggesting that a tide may be turning when it comes to fees. 

Coinbase said that consumers are going to be willing to pay for the security and platform that Coinbase offers.

As for expenses, a slowdown in hiring might help address the firm’s expenses, which came in at $1.7 billion in the quarter. The company hired more than 1,200 people during the quarter as part of an effort to right-size the firm given its growth last year. 

“We are able to hire aggressively because we are coming from this with a strong balance sheet,” a spokesperson said. “Are we going to go from where we are today to tripling again? That’s probably too much.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Galaxy Digital announced in an update on Wednesday that it would commence a share buyback program of approximately 10.6 million shares, or 10% of the company’s public float. 

The crypto investment manager explained in the operational notice that it may use repurchases “opportunistically at times when it believes that the current market price of its shares does not reflect their intrinsic value and that purchasing its own ordinary shares is consistent with the objective of creating long term shareholder value.”

The share price for GLXY, which is listed on the Toronto Stock Exchange, has declined more than 34% in the last five days of trading alone. As of press time it is down roughly 10% today, according to Yahoo Finance. 

The move comes just days after Galaxy reported that it had swung to a first-quarter loss, as tumbling crypto prices forced the firm to book unrealized trading losses. It reported a net loss of $111.7 million in the first quarter of 2022, compared to a profit of $858.2 million in the same period last year.

Galaxy’s billionaire CEO Mike Novogratz told Bloomberg earlier this week he expects the digital-asset market to be “volatile and difficult” for at least the next few quarters.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.