Traders in US Surging 149% to 2.3 Million As Pandemic Hits
Traders in the US have surged 149% to 2.3 million as a crypto-pandemic has struck, according to a recent survey from Bank of New York Mellon. While the number of crypto-assets held in the US surged to $3 trillion in just a year and a half, thieves have stolen more than half a billion dollars worth of the digital currencies, a sign that the crypto-asset market has not yet become a true hedge against inflation and a stronger dollar.
FTX meltdown is a sign that cryptocurrencies are not yet a true hedge against inflation and a stronger dollar
FTX’s collapse is the latest bad news in the digital asset space. It is a sign that cryptocurrencies aren’t yet a reliable hedge against inflation and a stronger dollar.
There are three important aspects of the FTX problem that will have a direct effect on the crypto, financial and global markets. It is the first time that a major crypto firm has gone belly up, and that is a major concern.
One of the big concerns is that FTX might have used the money from its customers to prop up its business. The company merged its users’ deposits with trading funds held by its parent company, Alameda Research.
This made its balance sheet look stronger than it was, and it also meant that the company had a lot more liabilities than people might have realized. Alameda borrowed money from other lenders to fund its investments in other crypto ventures. It appears that it is owed billions of dollars in trading money.
Cryptocurrency theft rose 516% from 2020 to $3.2 billion
Despite the hype surrounding crypto, crypto-related crime remains a growing problem. According to a new report by Chainalysis, crime in the crypto space has reached new heights. Crypto theft hit a new high in 2021, with total stolen value hitting $3.2 billion. This is a 516% increase from the value stolen in 2020.
The report identifies two categories of cryptocurrency-based crime. The first is scamming, the second is money laundering. Scams have become commonplace in the digital world, with an estimated 82% increase in scamming revenue in 2021.
Unlike other scams, crypto-related crime hasn’t stalled. Money laundering has actually increased 30 percent in the last year.
Scammers took advantage of the growth of the decentralized finance (DeFi) platform. DeFi is a crypto-denominated lending platform, outside of traditional banking. The DeFi protocol aims to reduce middlemen from traditional financial transactions.
The DeFi protocol saw the largest growth in money laundering in 2021, with a 1,964% increase in the volume of money laundered. The report notes that DeFi hasn’t yet established a standard set of guidelines, and thus doesn’t have accountability.
Market value of the world’s crypto assets surged 20-fold in just a year and a half to $3 trillion
During the first six months of this year, the market value of cryptocurrencies in the world surged to more than $3 trillion, 20-fold increase in less than one and a half years. That’s according to the International Monetary Fund (IMF), which published an article arguing that the link between crypto assets and stock markets in Asia is stronger than expected.
The IMF believes the key drivers of the interconnectivity between Asian crypto assets and equity markets are the growing acceptance of cryptocurrencies and the growing acceptance of cryptocurrency-related platforms. But as the market gains in popularity, it is raising financial stability risks for investors, and could also inhibit the effectiveness of capital controls in developing economies.
The IMF believes that many Asian investors have positions in both stock and crypto markets. In some countries, like Vietnam and Thailand, the emergence of crypto assets has led to an increase in regulation.
Bitcoin and ethereum are still outperforming tech stocks
Despite the ongoing selloff of the US equities market, crypto prices have still been outperforming tech stocks. In the past three months, Bitcoin has outperformed the S&P 500 index and NASDAQ 100.
Cryptocurrencies have also been more sensitive to news of bullish events than the US equities market. The S&P 500 index and NASDAQ 100 were both down 1.8% this week, while Bitcoin was up 3%.
The price of ether, the native token of the Ethereum blockchain platform, has been rallying recently. It is now up nearly two months after a nearly 50% plunge since mid-July. But despite the rally, ether is still below its all-time highs.
Meanwhile, many of the largest mining companies have announced bankruptcy. Core Scientific, the latest to do so, announced that it would stop paying its service providers. This means less liquidity in the market and less buying pressure to push prices up.
The combination of reduced liquidity and reduced buying pressure could mean that the bottom is in for the crypto market. Many analysts have speculated that this is the end of the bear market.