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Crypto Trades Sideways as Health of US Economy is Questioned
There are mixed feelings about the US Economy currently.
On one side, the US dollar gained terrain against six major currencies, marking a three-week high. These positive gains came against the backdrop of relatively strong data on the US manufacturing and construction sectors.
On the other hand, Fitch decided to downgrade the US Government credit rating from AAA to AA+, citing probable fiscal challenges over the next three years.
The decision was (not surprisingly) met with criticism from the US Government, with Treasury Secretary Janet Yellen terming it ”'arbitrary and based on outdated data”.
SEC Back on the Heels of Crypto
In earlier letters, we've stated again and again the likelihood of the SEC's crusade against crypto to continue and this the SEC allegedly communicated to Coinbase that all other assets than BTC were to be considered securities.
The story does not appear all too credible although Brian Armstrong himself made comments to the Financial Times.
Amidst this development, the SEC has also sued Richard Heart and 'three unincorporated entities that he controls, Hex, PulseChain, and PulseX,' for raising over $1 billion by offering unregistered crypto asset securities.
DeFi Security in Question
The security of the DeFi ecosystem has once again come into question following the exploit of Curve Finance, one of the pioneer DeFi protocols, resulting in an estimated $47 million in losses withdrawn from several pools.
While the damage has since been contained, there is still a looming risk arising from Curve's founder, Michael Egorov's $100 million CRV-backed loan that could potentially be liquidated should the underlying collateral fall significantly in value.
Crypto VC Behavior Of 2023: Weathering The Winter
The crypto VC landscape has continued to face headwinds this year, with more investors shying away from the digital asset industry. In our latest research piece, we highlight some of the major trends, including where VCs are investing funds and which projects are attracting capital, among other behaviors. For more context, check out the full article here.
Tether Holdings Limited, the issuer of the USDT stablecoin, reported a Q2 profit of $850 million, resulting in total excess reserves of $3.3 billion. According to a spokesperson for Tether, "The $850 million represents the retained profits of this quarter, which have contributed to increasing Tether's excess reserves. It's basically additional capital sitting in the company to further strengthen Tether.”
Sequoia Capital recently made adjustments to its cryptocurrency fund, reducing its size from $585 million to $200 million. This decision comes amidst a liquidity crunch and a strategic pivot towards smaller players in the crypto market. The move was aimed at better reflecting the changing market conditions and aligning the fund's strategy with the evolving landscape of the cryptocurrency industry.
Defunct crypto exchange FTX has put forth a proposal to categorize its creditors into distinct classes of claimants, while also presenting an option for one class of claimants to potentially relaunch the FTX exchange with the involvement of third-party investors, provided the group reaches an agreement.