The overall cryptoassets market declined by 9.37% over the past seven days, according to data gathered by CoinMarketCap. Bitcoin declined by 5.7% over the past week, while Ethereum performed 10% worse. UK inflation hit a 40-year high of 9.4%, with the main contributors being soaring energy prices which are expected to increase sharply in October. While the Bank of England is scheduled to hike interest rates in August, the European Central Bank (ECB) went ahead with a 50 BPS interest rate hike, its first since 2011, which raises rates to 0% putting an end to the eight years Europe has been experimenting with negative rates. ECB will most probably introduce another rate hike in September. In its quarterly earnings report filed to the Securities and Exchanges Commission (SEC), Tesla revealed that it had sold 75% of its Bitcoin holdings, worth $936M. As revealed in their earnings reports, Bitcoin’s 59% dip in Q2 cost Tesla, MicroStrategy, and Block $5B collectively. However, this figure is not scaring any of the affected CEOs who have continuously tweeted about their eagerness to buy more BTC.

Figure 1: Bitcoin Network Value to Transactions Ratio

Source: Glassnode

As more tech companies hand in their earnings reports, it’s important to keep an eye on the on-chain indicators such as the Net Value to Transactions Ratio (NVT). As shown above, a high NVT ratio indicates that the price of Bitcoin is overvalued, whereas downtrends like the one seen on July 24 indicate that investors are buying Bitcoin at a discount. If the ratio starts moving sideways, that means the cryptoasset entered a growth trend.

Key Takeaways

• The first insider trading case involving cryptoassets
• Ethereum exchange balances reaching lowest point since July 18
• Sushi molding into an interoperable DEX
• Opensea competes with Solana’s Magic Eden
• A new era for Ethereum’s scalability is upon us with zkEVMs

Macro, Regulations; Spot, and Derivatives Markets

In the US, the SEC has been investigating insider trading within crypto exchanges and only last week that we started seeing the fruits of it. A former Coinbase product manager and two others got arrested for wire fraud in the first insider trading case involving cryptoassets. On that note, the SEC listed 9 tokens as securities, these include those of Amp, Rally, DerivaDAO, XYO Network, among others.

Russian President Vladimir Putin amended the law banning use of cryptoassets as payments to include other token types, such as security tokens, utility tokens and even NFTs as forms of payment for goods and services in the country. This drastic measure comes most likely as a response to the crypto donations gathered for icons of the Russian opposition behind bars last year. A few days after this amendment news broke out that Russian activists are turning to crypto to support Ukrainian refugees.

On-chain Indicators

The wider crypto market turned optimistic last week as the news surrounding the soft schedule of Ethereum’s merge began circulating on social media. Even though a target date was set for the event on the 19th of September, Tim Beiko, the ETH core developer, articulated that this is still very likely to change in case of any last-minute code adjustments.

Figure 2: ETH balance on exchanges

Source: Glassnode

Nevertheless, the news still became a catalyst for the wider market rebound and caused investors to hoard Ethereum to levels not seen since July of 2018 by withdrawing from exchanges into cold storage, as depicted above.

Media Coverage

21Share’s co-founder and president Ophelia Snyder made an appearance on ETF TV to talk about investor demand and product development during the crypto winter. You can watch the segment here.

Our Director of Research Eliezer Ndinga was interviewed for a report on Forbes to talk about the price developments of Bitcoin and helpful indicators during risk-off environments. You can read the full report here.

Finally, our very own research associate Adrian Fritz was featured on Trend Report about the adoption of DeFi during the bear market. You can read the report here.

News

Paraguay Gets 100MW Deal for Crypto Mining

What happened?

The Commons Foundation signed a 100-megawatt power purchasing agreement with Paraguay’s grid operator, buying energy over the span of 10 years to power its crypto mining. This comes a week after the country passed a bill regulating crypto mining and trading. This deal is estimated to create 1,000 jobs over the next four years in Villa Hayes in the Jose Falcon district in central Paraguay.

Why does it matter?

Similar to many neighboring countries in South America, Paraguay’s iconic rivers have encouraged the state to build dams, one of which is the world’s largest, that have made electricity prices become as cheap as 5 cents per kilowatt hour. Paraguay relies heavily on hydroelectric power on which the country’s grid runs almost entirely. Most of the electricity generated from one of Paraguay’s dams, and the world’s largest in terms of annual production, is exported to Brazil under a treaty that is set to expire next year. Hence, the government is looking to attract Bitcoin miners to soak up excess energy.

On a separate yet similar note, data gathered by BTC Mining Council shows that mining usage of sustainable energy reached 59.5%. This goes hand in hand with our thesis at 21Shares, that with soaring energy prices coupled with the consequential market crash and miners losing profits, governments with an abundance of energy will begin attracting proof-of-work mining operations as a lucrative way of generating revenue amid the global financial crisis.

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.