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Weekly Report: June 13 - June 19, 2022
Bear Market Territory, 3AC Liquidations, and Elon Musk Sued Yet Again. Read on for this week's market updates and latest headlines!
CoinDesk – June 17, 2022 at 4:10am EST
The crypto market is getting grizzly, entering a bear market that hasn’t been felt in multiple years. And as prices continue to fall, the selling pressure is mounting like never before.
This is evident, in particular, in the investment actions taken by large investors. For example, $ETH dropped to a low of $950 on the decentralized cryptocurrency exchange Uniswap following a huge dump of 65000 ETH by a whale investor early morning on June 13th. The investor exchanges his $ETH for various stablecoins including $USDC, $USDT, and $DAI.
This particular investor sold his $ETH holdings to pay off a whopping $73M debt owed to Oasis.app, a DeFi lending protocol. His first sale alone dropped the liquidation price of $ETH from $1200 to $875. Then, after dumping an additional 28000 $ETH, within five hours of the first sell order, $ETH’s liquidation price rose from $892 back to $1200. This second sell order was used to pay off an additional $32M debt.
In total, 93,000 $ETH was sold in a six-hour period, translating to about $112M worth of value being swapped on June 13th alone.
This instance is just a highlight of the greater industry at large, with most other altcoins and blue-chips falling in price significantly over the past week. Bitcoin has dropped below $20,000 while other tokens like Solana (SOL) and Dogecoin (DOGE) saw their prices leveling out after a minor surge. As the crypto market continues to decline, capitulation is certainly rising among investors as selling pressure mounts heavily upon investors of all risk orientations.
And as liquidity across the market continues to decline, yields will certainly follow. Borrowing has become an integral action for investors in the crypto community, with traders seeking to profit from contango or arbitrage across multiple exchanges. However, with the current fall in contango, institutions and investors will likely feel less incentivized to borrow and capture market positions. Yield providers will thus have to cut rates to accommodate for the lack of financing required in the market.
While the continual increase in sell pressure will provide a foundation for a future long-term rally in prices, the crypto market has yet to hit rock bottom. Investors will certainly be wary of the bears in these woods, for quite some time to come.
Bitcoin.com – June 15, 2022
As if the clouds hovering over the crypto industry couldn’t get any darker, massive digital currency hedge fund Three Arrows Capital (3AC) is facing margin calls and possible insolvency in the midst of this bear market. According to Bitcoin.com, the total value of 3AC’s assets that were liquidated accounted for at least $400M.
On June 15th, large variability was evident in 3AC’s portfolio, specifically with regard to its token holdings. According to Dune Analytics, the portfolio was valued at around $130M, with allocations in AAVE, BAT, CEL, FTT, GUSD, LIDO, and LINK decreasing significantly, being replaced by a greater quantity of USDC. The new proportion of holdings by 3AC certainly indicates its intention to condense its portfolio and cash out its assets through USDC, as much as possible.
Given the huge losses and rumors of insolvency, 3AC co-founder Su Zhu tweeted:
“We are in the process of communicating with relevant parties and fully committed to working this out.”
This is the first tweet to come out of 3AC leadership in quite some time, with his last tweet posted on June 7th and Kyle Davies, 3AC’s other co-founder, tweeting last on June 9th.
3AC has also been accused of ghosting many projects whose treasuries are partly held by 3AC. Many projects allowed 3AC to hold funds raised by them for these projects in order to receive an 8% APR guarantee offered by 3AC. However, since the liquidations, 3AC has failed to indicate the status of those holdings to the protocols that own them.
While not certain, the liquidations and potential insolvency would exacerbate an already bearish crypto market. With issues arising across the landscape, like that with Celsius, Justin Sun’s stablecoin, Microstrategy’s major losses, and overall increased interest rates from the Fed, 3AC’s insolvency would certainly be more than just a drop in the bucket.
TechCrunch – June 17th, 2022 at 6:53pm EST
Bearish investment outlooks have begun to transition over to the side of personnel, and it isn’t looking pretty.
This past week, large crypto exchanges saw their largest sweeps of layoffs and workforce reductions in quite some time. Coinbase, in particular, has announced that it will reduce its workforce by 18%. This follows other news of a hiring freeze and even the rescinding of accepted offers for new employees.
At the beginning of 2021, Coinbase had a strong workforce of about 1,250 employees, who saw lots of success in their careers there when NFT’s were gaining mainstream attention and widespread adoption. Since then, the team had quadrupled in size, but in this bear market, CEO Brian Armstrong admits that Coinbase had simply “over-hired.”
Unfortunately for many Coinbase employees, the bad news came about as bluntly as it could. They were cut immediately from company servers in order to protect sensitive data and told that they were fired effective immediately, without warning. They will receive 14 weeks of severance pay, plus 2 weeks for every year of employment beyond one year, but that is little in the way of comfort for them.
The layoffs don’t stop there. $3B crypto-lending protocol BlockFi cut 20% of its 850 employees. Crypto.com laid off 5% of its workforce, equating to about 260 employees. Overall, this may be the hibernating strategy of large crypto organizations for the time being.
Reuters – June 16th, 2022 at 5:30pm EST
A lawsuit out of Manhattan’s Federal Court on Thursday cited the name of the world’s richest man as the defendant - Elon Musk. Tesla and SpaceX, two companies owned by the South African entrepreneur, were also named along in the complaint about alleged Dogecoin price manipulation.
Dogecoin was originally a “meme token” with a limitless supply, born out as a fork of Bitcoin. However, at some point, the sentiment regarding Dogecoin changed and many considered it an investment vehicle.
Quoting the file, the plaintiff Keith Johnson argued that “defendants were aware since 2019 that Dogecoin had no value yet promoted Dogecoin to profit from its trading.” He continued, “Musk used his pedestal as World’s Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure, and amusement.”
The lawsuit is seeking $86 billion in rectification, as well as a treble damages claim of $172 billion, a sum surpassing the net worth of Earth’s richest man. Furthermore, Keith Johnson is asking to ban the addressed parties from promoting Dogecoin and to declare Dogecoin trading as “gambling” under the law of the state of New York.
Neither the defendants nor the plaintiff has responded to requests for comment.
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