Cryptocurrency Market: Crypto Week At A Glance: Volatility Rocks Crypto Markets, BTC Below $20,000

The cryptocurrency industry is living up to its legendary volatility. After rising more than 20% from the lows of 2022, it immediately reversed completely and fell another 12%.

This decline can be attributed to the DeFi Contagion effect that started with the collapse of LUNA and the rejection of GBTC’s application to become a Bitcoin Spot ETF.

3AC or 3 Arrows Capital has wreaked havoc in the crypto industry. It is a digital asset focused hedge fund that started in 2012. It had invested in major cryptocurrencies and had shares in cryptocurrency-related companies.

The hedge fund borrowed from many institutions and reached $18 billion in assets under management. The hedge fund’s management took advantage of its reputation and secured these loans at a very low collateral rate.

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The hedge fund has already suffered from the current market conditions and its investment in Terra Luna, which is worth next to nothing compared to its investment.

The leveraged Gbtc trades could have been the last straw for the hedge fund as the positions were liquidated. Simply put, this means that the hedge fund may not be able to repay the loans taken out.

There are new allegations that the hedge fund is a Ponzi scheme, where they have borrowed capital to pay interest on already borrowed capital.

BlockFi, Voyager and Babel Finance were among the institutions and have now been confirmed to have defaulted on Voyager’s $700 million loan. Voyager, a platform similar to a crypto bank, has completely stopped its withdrawals.

This is a terrible sign for people who have their money on the platform. The platform’s price action indicates that people have lost faith in Voyager. It looks suspiciously like the Lehman Brothers crisis of 2008.

BlockFi and Celsius sought a rescue operation. BlockFi may have just gotten it in the form of a line of credit and a possible acquisition of FTX. This clarification put an end to a rumor that the company, which was worth billions of dollars before the unrest, was about to be sold for as much as $25 million.

However, FTX passed on Celsius after noting that there was a $2 billion misstatement in its balance sheet. Celsius, another crypto bank that had suspended withdrawals, may wave the white flag once FTX officially reports the $2 billion difference.

US SEC says no

GBTC is the ticker name for Grayscale Bitcoin Trust and has $12.3 billion in AUM. GBTC represents a certain amount of BTC and the price of GBTC must be equal to the price of Bitcoin.

However, it has been trading at a discount since March 2021 and is currently trading at the highest discount of 30%. Unfortunately for Grayscale, the SEC rejected their request.

This percentage discount has been a problem for Grayscale because it has made their products undesirable and the only sustainable solution to eliminate the discount immediately is to convert GBTC into an ETF.

The markets were not hoping for this, as a Bitcoin Spot ETF would have been an event that could have reversed or at least stabilized the markets. Grayscale has sued the regulator.

Demand versus supply

Microstrategy and the country of El Salvador have bought 560 Bitcoins together. While people are cheering for the purchase, on-chain data shows that the trade balance has grown to 9,000 Bitcoin in the past week.

Top winners this week (from 3 July 2022 at 12:40 PM)

Terra Classic USD (USTC): +448.18%

USDD (USDD): +2%

Top losers this week (from 3 July 2022 at 12:40 PM)

Avalanche (AVAX): 25% less

KuCoin Token (KCS): 24% less

THORSto (RUNE): 24% decrease

Zcash (ZEC): 23% decrease

STEP (GMT): 23% decrease

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