5 Things to Know in Crypto Today

Key Points

• Cryptocurrency prices have flatlined since last Friday amid a lack of volumes as the US celebrates Independence Day.
• Bitcoin was last trading in the mid-$19,000s and Ethereum comfortably above $1,000.
• FTX could buy BlockFi for up to $240 million, Voyager and Vauld halt withdrawals and Meta axes digital payments plans.

Crypto Markets Quiet as US Celebrates Independence Day

Price action across the crypto space has been very tame since last Friday and things are not expected to pick up until US markets re-open on Tuesday. Markets there are shut as Americans celebrate Independence Day. Over the past three days, total cryptocurrency market capitalization has consolidated around $850 billion, with Bitcoin hovering in the mid-$19,000s and Ethereum in the mid-$1,000s.

Despite a quiet start to the week, things will get very busy later. For crypto traders, the most important event will be the release on Wednesday of what is likely to be very hawkish-sounding minutes from the Fed’s meeting last month (where they implemented the largest rate hike in 28 years of 75 bps). ISM Services PMI data released earlier in the day will also be closely scrutinized for insight as to the health of the US economy, as will the official June labor market report on Friday.

While sky-high inflation is hurting US consumers and may have already forced the economy into a technical recession (something which this week’s ISM data could allude to), one area of strength in the US economy has remained the labor market. Indeed, the strength of the labor market (with the unemployment rate hovering at pre-pandemic levels) is a key reason why the Fed has been so confident it can hike interest rates so aggressively.

In that sense, strong labor market data on Friday could be a negative for risk appetite, if it boosts Fed tightening bets. This could weigh on crypto, which tends to prefer an environment of more accommodative financial conditions (even if that is due to a weaker growth outlook, like during the first year and a half of the pandemic).

FTX Could Buy BlockFi for up to $240M

In a thread on Twitter last Friday, BlockFi CEO Zac Prince announced that the crypto lending platform had signed a new deal with major global crypto exchange FTX. BlockFi secured a new $400 million revolving credit facility with FTX, which also gave FTX the option to buy BlockFi at a “variable price of up to $240 million based on performance triggers”.

Prince said that BlockFi signed the deal in order to “bolster liquidity and protect client funds” in wake of significant crypto market volatility. The deal is still subject to shareholder approval.

Elsewhere in related news, the CEO of FTX Sam Bankman-Fried told Bloomberg in an interview last Friday that he is open to potential buy-outs of troubled crypto miners. “There might come along a really compelling opportunity for us – I definitely don’t want to discount that possibility,” he said.

Bankman-Fried added that such buy-outs could also help stem further contagion of financial stress across the crypto space. “When we think about the mining industry, they do play a little bit of role in the possible contagion spread, to the extent that there are miners that were collateralizing borrows with their mining rigs,” he said.

Crypto Winter: Voyager Digital, Vauld Halt Withdrawals, Celsius Cuts 23% of Staff

Major cryptocurrency brokerage Voyager Digital announced last Friday that it would be temporarily freezing trading, new deposits, withdrawals and loyalty rewards, joining a growing group of peers to have done so. The company blamed the decision on the failure of beleaguered crypto hedge fund Three Arrows Capital (3AC) to repay a substantial loan.

The company’s CEO said on Twitter that the decision would give Voyager time to strengthen its balance sheet in order to protect assets and preserve the future of the platform. Voyager had issued a default notice to 3AC on Wednesday.

Elsewhere, crypto lending platform Celsius Network is reportedly to cut 150 jobs, about 23% of its workforce, amid a restructuring of the company. The platform halted customer withdrawals back on 12 June citing “extreme market conditions”.

Many analysts/crypto commentators think that Celsius may face insolvency. The company said in a recent announcement that it was exploring options to “protect and preserve” its assets. Goldman Sachs was reportedly leading a $2 billion fundraising round to buy distressed Celsius assets, whilst rival crypto lending platform Nexo has also offered to buy Celsius out completely.

Meanwhile, fellow crypto lending platform Vauld has just become the latest major platform to halt trading and withdrawals on Monday. The firm said in a blog post that it is also exploring restructuring options, after letting go of 30% of its staff last month.

Crypto analysts suspect more exchanges/lending platforms will be forced to halt withdrawals and more crypto firms will be forced to cut employee numbers if the bear market in crypto prices continues to worsen, pushing the industry into an ever deeper recession.

KuCoin Denies Rumours of Imminent Withdrawal Halt

On the topic of withdrawal halts, major global crypto exchange KuCoin faced a Twitter storm over the weekend, with various well-known pseudo-anonymous accounts warning their followers to withdraw funds from the exchange as soon as possible due to an imminent withdrawal freeze.

The CEO of KuCoin Johnny Lyu quickly took to Twitter to denounce the “FUD” (fear, uncertainty and doubt). According to Lyu, KuCoin does not have any exposure to LUNA, 3AC or Babel Finance and has not (as rumored) faced “immense suffering” from any “coin collapse”. Moreover, KuCoin has no plans to halt withdrawals, Lyu added, and everything at the exchange is operating well.

Meta Ends Digital Payments Gambit, Shutters Novi

Facebook parent company Meta Platforms announced last Friday that it will close down its Novi digital wallet payment pilot, ending its push to establish its own stablecoin called “Diem” (formerly known as libra). Facebook unveiled ambitious plans to set up its own crypto-based stablecoin payments system back in 2019, but amid strong regulatory pushback, it never got any notable traction.