ETH’s twisted

Good morning! Welcome to The Daily Moon. The Terra contagion has a new perpetrator, Terra co-founder Daniel Shin. Reports suggest he may have been involved in the UST crash. There’s a suspicion that Shin’s company leaked customer data to Terra. South Korean cops want answers. Let’s see if Shin is as difficult to find as Do Kwon.

The markets were shaky. Bitcoin was at $16,500 while Ethereum edged owards $1,200. Nasdaq fell in early trade. Back home, Sensex and Nifty ended flat.

Ethereum Turns Wavy

Ethereum is kinda lost right now. The token’s hit hard ever since Sam Bankman-Fried caused a financial crisis. Now dormant addresses have woken up, which raises selloff fears. It is down 38% from August’s Merge-fuelled high of $1,990.

What’s up with ETH?The FTX bankruptcy is not the only reason for ETH’s woes. Glassnode data shows that a majority of ETH HODLers have lost money because of the fall in prices since their previous trade. Post Merge, prices started to slide because many investors made money and sold their ETH. Since then, two things have happened:

1. The total value locked (TVL) is down $5 billion to $25 billion. TVL is the total value of all assets deposited in a DeFi protocol. A fall means there is a slowdown in DeFi activity.

2. Inactive wallets have turned active. The wallet users may either buy or sell, but the market fears this sudden activity.

FYI Merge marked Ethereum’s shift from proof-of-work to proof-of-stake.

Can it recover?To be fair, it isn’t all gloomy. Some wallets have accumulated ETH. Wallets with more than 0.1 ETH are at a three-month high. Wallets with over 100 ETH have hit an almost two-year high of 46,579. Looks like there are takers for ETH at a discount. There’s hope that investors who bought at discounted prices won’t sell till there is room for profits.

Digital Dollar Takes Shape 

And so it begins. The US has taken the first steps towards digital currency. A group of banks has started an experiment to figure out if the digital dollar works. The NY Federal Reserve is game.

So what is it?It’s a three-month pilot to find out how and where to use digital currency. The New York Federal Reserve is part of the proof-of-concept project where there’ll be payment simulations. MNC firms such as BNY Mellon, Citi, HSBC, Mastercard, and Wells Fargo are participants.

A tokenised version of the US dollar will be tried out for test payments. Stablecoins, which are 1:1 redeemable with currency, may also be used. What they want to find out is if it’s safe and whether it’ll be compliant.

Then what?Well, there’s no guarantee that we’ll see a digital dollar soon after, but it is at least a sign that things have moved.

BlockFi: The Next Fall?

It’s been less than a week since BlockFi suspended withdrawals. Now, the WSJ reports the crypto lender could be preparing for a potential bankruptcy.

What’s happening?BlockFi has denied it has most of its assets tied to FTX but accepted on Monday that it had an undrawn line of credit from the company. This is in addition to deposits on FTX.

Fine, but bankruptcy?Remember we told you BlockFi and FTX US had a deal? It provided BlockFi with a $400 million credit facility. It also gave the SBF-led company an option of acquiring BlockFi for ~$240 million.

It seems BlockFi drew down most, if not all, of the facility. It also extended millions of dollars in loans to FTX’s sister company, Alameda. In related news, Genesis' crypto-lending arm has also paused withdrawals. No way out from this one.

Circle In The Ring Too

There are skeletons tumbling out of all closets. All at once. Now USDC issuer Circle has said its performance will be impacted. That is not what is most interesting about this story, though.

Uh, but one small thingLast week, Circle’s CEO said the company is a “tiny equity holder of FTX”. That “tiny” is worth $10.6 million. Oh, the things CEOs say.

Besides, in its filing, Circle also said rising interest rates have caused investors to move their assets out of stablecoins and into “US Treasuries, money market funds and other traditional investment products”.

So, what next?The usual “we have limited our exposure” to the risks drill. But whatever could go wrong is going wrong. There’s no turning away from that. And this is just one more in the ongoing, unfortunate bloodbath.

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