Fed likes crypto now

Good morning! Welcome to The Daily Moon. A new day, a new Celsius crisis. New court documents show it is running out of cash. After misleading everyone about its debt, it seems the lender’s cash reserves could run out by October. Never a dull day with this one.

The markets were down Tuesday. Bitcoin fell below the $24,000 mark, while Ethereum was at $1,891. Nasdaq was down in early trade. Back home, the Sensex rose for the third consecutive session and Nifty closed above 17,800, led by oil & gas, banking, and auto stocks.

Staking ETH on the Merge

The Merge is happening. On September 15. At least for now. The thing is, few have forgotten this plan was first announced as far back as 2017, and has already undergone a few delays this year. We told you the final test run for the shift of Ethereum to a proof-of-stake model was successfully completed last week. But enthusiasm is measured. Take what is happening with ETH’s derivative token stETH (staked ETH).

Where’s stETH at?

stETH from Lido Finance is a derivative digital asset. With the Merge making PoS the default, stETH has crossed 13.3 million. A sign of things to come, considering miners will be turning to validators post the change. So where is the deal? Valid, we say.

A market research firm had a few, erm, observations.

The analysis

Enigma Securities, the market research firm, says the current price of stETH shows there is not enough confidence that the Merge will come without major bugs or delays.

Here’s how they explain it:

1. stETH has been trading around 0.973 ETH levels. This translates to a 93.5%-93.75% chance of the Merge going through smoothly and on time.

2. Enigma’s pricing model broadly says that 1 stETH = 1.04 ETH in a year. Enigma says the Merge is not priced into the current pricing.

3. The discount to stETH to ETH has narrowed from 7% to 3%, so overall it is not bad news. Also, ETH touched $2,000 over the weekend.

So what we’re saying is, the current pricing of stETH also takes into account the fact that the Merge may not be a 100% smooth process. Cautious optimism, like they say.

Fed Got The Hots

Crypto-native banks like Custodia and Kraken should have reason to smile, if not rejoice just yet. The US Federal Reserve has signalled that things might get easier for crypto banks, adding to a list of measures we told you were adding to the mainstreaming of digital assets.

What’s happening?

The US Federal Reserve released “Final Guidance” Monday, detailing the process for “institutions offering new types of financial products or with novel charters”. It will grant three types of entities access to “master accounts,” a key financial status that allows for direct payments with, and access to, the Fed.

Why it matters

Master account is a critical requirement for crypto banks to function as traditional banks. State guidelines allow their functioning as both, but the buck stopped at the Fed granting it master account status. Custodia has earlier sued the Fed over delays in reviewing its application for a master account.

Polygon Got Good News & Bad

It has been a strange month for a Polygon investor. Throughout this month, Polygon’s biggest competitor Solana saw its value decay once reports of a rug pull emerged and Polygon’s total value locked rose to $2.07 billion making it the fifth largest blockchain in the world. Excitement? Yes but then Matic, Polygon’s native token, lost its $1 peg. But it’s not time to hit panic stations yet.

Wait, what?

Mid day on Monday, the Matic price dipped to below $1 and it is now trading at about 95 cents. There are no obvious reasons for the crash but it is more on the back of the general market trend of a sell off.

Silver lining

But the ecosystem seems to be supporting Polygon. The number of weekly NFTs minted is up 200% from three weeks ago. Polygon’s wallet users are on the upward trend with the number at ~160,000 currently. It is strengthening its ecosystem by making strategic partnerships.

Return Of The Meme

Two of the largest meme coins championed by Elon Musk made a curious comeback. Both Dogecoin and Shiba Inu saw a sudden increase in prices. Shiba Inu is up by ~30% in the past week, while Doge is up ~22%. What comes next?

What do the experts think?

There are three possible reasons for this rise.

1. The retail investors have returned. According to data on Bloomberg, crypto’s market cap has broken the $1 trillion mark again after hovering near $875 billion two months ago.

2. There is enthusiasm for crypto after the US declared that it managed to get a hold on inflation. The job numbers look encouraging and gas prices are expected to drop even further.

3. The Merge has given people reason to be optimistic about the future of crypto.

Neither token has too much depth. Doge has one use case but not much else.

And that’s it for today. If this email was forwarded to you, please consider subscribing. It’s free. We’ll never show you an ad or charge you for this. We swear.

Who are we? There is a lot happening in our world. Everything has layers, and each layer has to be carefully peeled so you, the reader, know how the world of money is changing every day. That’s our promise. Help you unpeel the onions, which are the public markets in the US, India, and crypto, so that you know just a little more.