March Newsletter
Image by Jason Lajara
FAL Consulting
FAL Consulting is a cryptocurrency consulting company. We provide a wide variety of services related to cryptocurrency and blockchain. You can find a full breakdown of our services at cryptofal.com.
About the Newsletter
The FAL Cryptocurrency Newsletter is a monthly newsletter that focuses on the monthly highlights throughout the cryptocurrency and financial technology (FinTech) industries.
Coins to Follow
Bitcoin
Bitcoin is the first cryptocurrency and the largest by market cap. Created in 2009, Bitcoin has grown astronomically since its launch and continues to lead the cryptocurrency industry while also often dictating overall cryptocurrency market movement. It also established the norm of using blockchain as a public ledger for tracking cryptocurrency transactions, providing a revolutionary level of transparency that the broader financial system has lacked.
Following volatility in global markets caused by geopolitical conflicts, BTC has had a fairly volatile month. After testing resistance in the middle of the month, BTC was unable to break it and would slowly follow global markets down to test support after developments in Ukraine. This led the vast majority of crypto markets downward, into the red.
On the technical side, BTC tested support ranges twice over the past month and a half or so and has held pretty strongly after testing a second time. This is a great sign as global markets still struggle with issues of volatility. The MACD is making an attempt at swinging upwards and so is the MFI.
It should be noted that BTC’s movement will likely be influenced by geopolitical developments in the coming weeks.
Ethereum
Ethereum is the second-largest cryptocurrency by market cap. It’s known for being the first cryptocurrency to introduce smart contract capabilities on its blockchain, setting the precedent for ecosystem coins into the future. As the most actively used blockchain, Ethereum has established itself as the largest ecosystem coin by market cap. Many other tokens are based on the ERC-20 protocol on Ethereum’s network.
Ethereum was also hit hard, however, it was able to hold a higher support range than BTC’s which is a great sign for the altcoin market. That being said, it was still strongly affected by geopolitical developments as well as BTC’s price action.
The MACD is making an attempt at trending upwards, and the MFI is as well, however its uptrend seems to be slower than BTC’s. Volume has slowly been increasing over the past week or so.
Luna
Terra Luna is a blockchain protocol that creates a variety of stablecoins that are coined to a variety of fiat-based currencies from the USD to the Korean won, to the Mongolian tugrik. Terra has its own blockchain and these stablecoins, as well as their own native token LUNA, is built onto it. LUNA is the governance token used to make decisions for the community and it is used to back the stablecoins and maintain their stability.
Recently, Luna Foundation Guard raised $1 billion for a Bitcoin-denominated reserve as an additional layer of security for UST. The funding round was led by Jump Crypto and Three Arrows Capital. This is a significant fundamental development that has had a strong influence on price action and is a further hedge for the UST stablecoin to rely on for stability.
On the technical side of things though, we are looking to see if it’s able to maintain this type of strength at these price levels. The MACD has swung up strongly and the MFI has as well, now in overbought territory. It wouldn’t be surprising if we see a bit of a short-term dip in the coming days or weeks. That being said, it will be interesting to see where and if higher support is found.
Elrond
EGLD is a governance token on Elrond’s native blockchain on a proof of secured stake protocol. The Elrond blockchain also allows for the execution of smart contracts as well, with the roadmap and technical aspects of an ecosystem coin. With sharding technology, Elrond is able to scale more efficiently than other blockchain protocols/tokens by processing up to 260,000 per second. This helps for fast, and cheap transactions. This coupled with the ability of governance allows for the token holders to have a direct say in the happenings of the network.
The Elrond protocol is introducing a new feature called metabonding. According to a blog post on Elrond’s site:
“Metabonding is a Web3 bonding fire, and will become the golden standard for community building. This will be the front-page to the Elrond builders scene.
Projects building on Elrond will be able to establish a long term commitment with the most hardcore community members, by distributing ~10% of their token supply to EGLD stakers and LKMEX stakers, over the course of 2 years.”
This could be significant for creating a crowdfunding-friendly platform. This is big fundamental development for Elrond, and could likely play an influence in price action. This feature will be live on March 15th.
On the technical side of things, Elrond has had a strong consolidation pattern in this range since the middle of January. The MFI is currently trending upwards strongly and the MACD is trending upwards as well.
Celo
Celo is a blockchain protocol that has two tokens that are native to its blockchain. Its blockchain allows for the programming of decentralized applications within its ecosystem. Celo is its governance token that allows users and holders to have a say in community decisions. It is a layer-1 blockchain protocol that aims to provide an easy-to-use mobile experience for anyone with a phone number. Celo uses your phone number as your public key for sending and receiving transactions.
The Espresso hard fork is occurring on Celo on March 8th. This will make Celo “fully compatible with the latest upgrades to the Ethereum network.” This could have an effect on price action.
On the technical side of things, Celo has been in a fairly strong downtrend since the new year. The MFI has crossed back out of oversold territory and is trending upwards. The MACD is preparing to swing upwards as well.
Features
Using Cryptocurrency as Legal Tender
by FAL Editorial Team
Cryptocurrencies such as Bitcoin and Ethereum have had a massive impact on global financial markets. From cryptocurrency-oriented institutional solutions to cryptocurrencies being used as investment tools by retail traders, crypto has definitely disrupted the financial world.
One of the largest disruptions for this is cryptocurrencies being made legal tender in some countries. This has resulted in certain cryptocurrencies such as BTC having to be legally accepted as a means of payment. This is a controversial move that has incurred praise from the cryptocurrency community, but widespread condemnation from traditional financial institutions and governments.
One of the main reasons financial institutions and governments have condemned the idea of using cryptocurrencies as legal tender is volatility. From the US Government to the International Monetary Fund, they’ve all voiced opinions stating as to how this could result in widespread economic instability within those countries if/when they make certain cryptocurrencies legal tender.
Proponents of cryptocurrencies being used as legal tender believe it could provide developing nations with an opportunity to become part of a global economy that the traditional financial world left them out of. These proponents also hope that as cryptocurrencies become more widespread, the users in these developing nations will have access to a rapidly appreciating asset class.
From an objective standpoint, there are both legitimate concerns with making crypto legal tender. but there are also some potential benefits. The safest, and most effective answer likely falls somewhere in between the two.
Volatility is something that is not new to the cryptocurrency space and will likely continue as the asset class continues to mature. This is something that even the staunchest supporters of cryptocurrency can readily admit. With this being said, it’s understood that a stable currency is often a quality of a good currency, as it helps establish norms in pricing for goods and the cost of living. It also helps establish norms for trading between other currencies, economies, and assets.
Cryptocurrencies like Bitcoin, Ethereum, and Cardano have fluctuating values that can be influenced by a wide variety of factors. This creates an issue for countries trying to use cryptocurrency as a means of legal tender or treasury. Without some sort of non-fluctuating tender, it will be difficult to develop fair prices for goods, wages, and more. Fortunately, there are potential solutions to this volatility.
For means of legal tender, there could be a variety of ways that could use cryptocurrency or blockchain solutions while still providing a more stable economy. Since the cryptocurrency market often moves together it can be difficult for those holding it for transaction purposes even when more than one currency is accepted. Stable coins pegged to the price of a stable fiat currency could be an option for those needing to keep a steady value of their assets.
These tokens being able to be legal tender could give citizens the choice and option to gain exposure to assets that actively gain (or lose) value, while also having a certain portion that maintains a specific value. After all, this is just diversification. While the best solutions would likely be more complex in order to onboard more traditional financial systems and institutional systems as well, this could be a solution to the volatility for retail users.
Institutions, governments, and corporate treasuries will likely take a less risky approach. Instead of putting most of their capital in fluctuating assets, they could limit their exposure by placing some of their capital into stable tokens as well, and then continue to profit off that through decentralized (or centralized) lending protocols. This keeps their capital at a stable value while also making a profit off of lending that stable asset.
This is a very simplistic solution that would likely require even more complex nuances to achieve properly, but there are clear benefits to holding assets that grow in value and assets that maintain stability. A fine balance of both can help ensure there are stable funds there when needed, but exposure to growth-based assets could also help them outpace inflation.
In times of volatility, having a variety of assets that can be used as legal tender would be beneficial. When the more volatile assets are having more extreme days in price action, the more stable solutions could be a better option. And on days where those assets are less volatile, payment may be able to be made in a non-stablecoin cryptocurrency without having to directly transfer it into a stablecoin solution.
Of course, there are some legitimate concerns with instituting a nationwide onboarding and educational process for this to work. First of all, there would need to be some type of payment platform that could easily facilitate all of these types of payments. On top of this, there would need to be some type of educational program teaching residents how to operate this platform and how to use it responsibly (off-ramping risk via stablecoins, etc.).
Without it being on a single platform coupled with a vast educational system as to how to use this new tech, it would likely struggle to take off initially and could leave people feeling left out of the economic system. This also could be an issue for any. competing fiat currency which would likely struggle significantly as the population learns the benefits of blockchain-oriented solutions. This is why the US government will always accept tax payments in USD, because it forces assets into USD, which forces it further into circulation.
With more rural countries, or countries with less technological infrastructure, this model of crypto-based-payments-only could pose a legitimate challenge. If they don’t have access to the internet, this would (in theory) disconnect them from their economy as well.
There’s also the more hybrid option which is likely more realistic. Where cryptocurrencies exist as tender alongside fiat currencies. This ensures that those who want exposure to this new asset class can get it, and use it to spend, while also including those who wish to use the more traditional financial system. This also helps countries who do not have access to the internet wherever they go. This ensures that countries without
While this could be a legitimate solution in larger economies, it may be hard for smaller economies to have crypto competing with their fiat currencies.
Not only would they likely struggle with a succinct onboarding process for the cryptocurrency aspect, but the competition could cause volatility in their currency’s value (even though it’s meant to be stable). If they were able to create an onboarding process that could allow for multiple types of payments on one platform, it’s very likely that their educational outreach would struggle, especially so, in countries with isolated populations.
As we can see, there are some legitimate logistical issues that may arise during a full transition into cryptocurrency. While it’s not impossible, to truly make it accessible to all, there are some legitimate societal issues that would need to be addressed. Without access to the internet, it could be a struggle for some to gain access to this new financial system. And if there isn’t wide educational outreach, it could leave out many who lack the knowledge needed to navigate these challenges.
However, there are also undeniable benefits to moving to a blockchain-oriented economic system. As leaders in the space, we just need to ensure that this potential transition is as positive for as many people as possible.
Revolving Door Between Crypto and Washington
by Crista Yamasaki
A report released Wednesday from the Tech Transparency Project (TTP), run by the watchdog group Campaign for Accountability, has revealed that some 235 officials from government and national political campaigns have either left public service and joined the cryptocurrency industry or the reverse.
On the same day, information on this “revolving door” has been referenced in articles from both Bloomberg and the Washington Post. The aim of the TTP report is to shed light on a burgeoning industry and its connections, however, the report and subsequent articles are misleading in their assessment and overstate the significance of the data.
The report relies on information compiled from a number of public employee records. The list gives the name of the employee, employer (government and private), tenure, title, and source. Had the entire sample size of 235 officials swapped sectors over the past year, it may have been significant in showing how quickly crypto was moving to influence policy, but this is not the case.
Under closer inspection, many changed professions during the last decade, with some showing multiple-year gaps between jobs. Among the 235 listed, only 7 had returned to their sector of origin. Labeling this a “hiring binge,” when presented with this information, changes the overall narrative. The change in profession for this group was neither sudden nor in patterns. Despite their hard work and the services done in the past to highlight unethical practices, the TTP managed only to fuel a fire being stoked by misconstrued notions.
It’s not unwise to monitor the crypto industry, which has grown in both popularity and controversy over the past few years. An influx of novice investors has highlighted the need to provide some oversight and legal definition of the space. Those alarmed at the TTP report most likely have a limited understanding of the crypto industry overall. While their agenda was to highlight the hand crypto lobbyists might have in shaping future laws and regulations, it’s difficult to imagine why TTP wouldn't cover the growing and established revolving door between Washington and finance.
It stands to reason that Wall Street’s dominance of the finance world has been challenged by the crypto industry, thus few would benefit more from stricter regulatory measures to stunt its growth. It’s no secret that the finance world benefits from the considerable influence cultivated in and among Washington’s institutions. The fact that a mere 35 bankers and one Wall Street executive went to prison for their part in the subprime loan crisis since 2008 is as clear an indicator as any that the reach of the Justice Department in high profile white-collar crimes has severely weakened over the past few decades.
Moreover, the true revolving door that exists between finance and Washington is a much stronger and more obvious relationship than that with crypto. Even now, an investigation into the Treasury Department's key policy positions exemplifies how ties between government and finance remain formidable.
Reports like those from the TTP that misconstrued and take an ill-informed stance on crypto indicate how many parties across a plethora of ideologies view the industry and its products as a threat. The key difference is who each party is aiming to protect. There is no wrong in creating a transparent environment for individuals to invest, but there are other parties with power and influence invested in seeing crypto remain the niche community it once was.
Risk Management in Crypto
by Mike Vescera
When investing your hard-earned dollars into any market, whether it be crypto, stocks, or forex, doing your own due diligence is the most important thing. The saying goes “ the higher the risk, the higher the reward” and while that is true it does not mean that you should be going for all or nothing.
Risk is something that you can and should control based on your skill level and risk tolerance. You can do basic things like setting your trading goals and parameters for yourself, but you still need to do your own research and be as careful as possible. The crypto world is tough to understand when it comes to technology so it makes it a lot easier for hackers that know what they are doing to separate you from your money.
The best way to mitigate risk is by diversifying your portfolio by not having all of your eggs in one basket. Although it should also be noted that the entire cryptocurrency market moves in correlation to Bitcoin. If Bitcoin is up the market, in general, is usually up as well, and the same works the other way. With total market corrections like we have seen recently just being diversified will not save you.
The next part of risk management is knowing when and where to take profits so you are not paralyzed with fear. You do not want to sell when the market is red unless you really need the money for real-world issues, that is when you want to buy more if possible. You need to make your trades with conviction.
Let's say that you have a portfolio of Bitcoin, Ethereum, Cardano, Solana, and Avalanche. You can make a list from high to low on which ones you have the most conviction in or feel the most confident in. This way when the markets are in free fall you can trade out of the token you have the least conviction in and put that money in the one you have the highest.
The idea is that if you have the most conviction in Ethereum its price will not drop in price as much as whichever you are the least confident in. Now when the market has bottomed and seems to be coming back around you can move that money back into that play or just leave it in your best play. Be sure of yourself and do not let emotions get involved in your trades.
Not everyone can look at the charts all day and some people even enjoy sleeping at night even though we know that the crypto markets never sleep. Staying in a trade overnight can be dangerous so you would want to have a stop loss set on your trade. This allows you to go to bed knowing that if BTC drops it will sell automatically at a given price and mitigate your losses. The only issue with that is that this feature is not yet available on all crypto exchanges since it is still early in the development of their operations.
The best you can do on Coinbase, for example, is set a limit sell or a limit buys, but you can not do them at the same time. It is either one or the other. That is not a bad thing but it does not allow you to cover yourself on both ends. One strategy you can use is to simply not stay in a trade overnight; however, that may lead to having to take a loss on the trade for the day which may not be ideal. You never know when a black swan event is going to happen —especially when there is another side of the world that is starting their day when ours is ending.
Even though the technology behind cryptocurrencies is exciting and innovative, it is still new. Just like anything else that is new, there are risks involved especially when it also involves you investing your hard-earned money. As the space matures, some of these risks will be mitigated and some will be eliminated completely. Until then every measure that can be taken in terms of security should be taken.
Research before investing, do not put money into something because it is the hot topic on social media and invest with goals as well as conviction. If you are not sure of something do not waste your money on it. As long as you know and trust where the future of technology is going you will be ok in the long run.
Last Week in Crypto
by Kevin Edell
War in Europe Spooks Markets
Global financial markets were shaken this week as Russia launched a military assault on Ukraine. Several financial sectors were negatively affected by the build-up of tensions leading up to the invasion on Thursday morning including several major equity indices, commodities, and cryptocurrencies. Market sentiment was generally low as investors feared that the conflict would be exacerbated if the European Union and the United States were to become more directly involved, but news of the Western nation’s increased sanctions and lack of direct involvement in the war has calmed financial markets for the time being.
The situation in Ukraine grows dire as Russian troops advance on the capital city of Kyiv. The state of emergency has prompted Ukraine’s central bank to temporarily suspend the nation’s currency market and limit cash withdrawals from ATMs and banks. Ukrainians may be looking for alternative means of accessing and transporting their assets due to a notable rise in cryptocurrency transactions on Ukrainian-based exchange “Kuna”. According to analytics platform CoinGecko, the Kuna exchange saw a significant spike in trading volume on the day of the invasion, tripling from average volume readings.
Market Update - BTC
The overall cryptocurrency market capitalization is about $1.76 trillion, a -3.3% decrease from last week’s valuation of $1.82 trillion. At the time of publication, Bitcoin ($BTC) is valued at $39,113 per bitcoin with a market capitalization of $743 billion making up 42.2% of the overall market.
Bitcoin has suffered a volatile week of price action along with several other major financial sectors as part of a greater reaction to the build-up of tensions in Eastern Europe. BTC fell to an extreme low of $34,322 on Thursday as the war began to break out but quickly bounced along with several other markets to recover. It currently sits just under the $40k level that it lost on February 17th, which it now tests for the 4th time this week from the underside. For a more in-depth technical analysis, please see our report found here.
OpenSea Exploiter Steals $1.7M
A planned upgrade to the OpenSea non-fungible token (NFT) trading platform has gone awry as a malicious actor was able to deploy a phishing scheme tricking high-end NFT owners into giving their assets away. At least 17 users of the platform had their NFTs stolen, which equated to a value of about $1.7 million in $ETH. Devin Finzer, CEO of OpenSea, was quick to respond on Twitter Saturday regarding the issue.
The proposed upgrade would implement a new smart contract that would host the NFTs on the platform, bringing new features such as bulk NFT listings, more descriptive signatures, and properly assuring the expiration of inactive listings. While users were asked to migrate their listings to the new smart contract, the bad actor was able to create a fake email that was sent to various owners who unknowingly signed transactions sending their NFTs to the exploiter.
The important takeaway from this unfortunate situation is to remain ever vigilant in protecting your account security for any online platform. Always avoid clicking on any emails or links in emails that you were not expecting to receive as they could be phishing schemes as seen above. Consider changing your passwords for important accounts on a more frequent basis, and avoid using the same password for all your accounts. Security should be one of your top priorities when navigating the cryptocurrency space and protecting your valuable digital assets.
SafeMoon Scam Brings Lawsuit to Celebs
A recent class-action lawsuit has been filed against multiple celebrities who have been known to “misleadingly promote and sell the digital asset associated with SafeMoon” ($SAFE) cryptocurrency to unsuspecting investors. The lawsuit claims that the SafeMoon LLC, founder and CEO Braden John Karony, and other persons associated with the business were “marketing the token while failing to disclose their control over both the company and a significant amount of SafeMoon digital assets available for public trading.”
Among the many defendants listed in the 60-page lawsuit are Jake Paul, Nick Carter, Soulja Boy, Lil Yachty, and the YouTuber Ben Phillips who all participated in the “pump and dump” of the SafeMoon token by endorsing and using “misleading promotions” to encourage unknowing people to invest while the founders slowly sold their holdings.
Scams as big as the SafeMoon scheme serve as a lesson for all would-be investors in cryptocurrency or in any investment circle - do your own research. If the promised gains and rewards from an unregulated and unlicensed product are too good to be true, they probably are. For more information on the case be sure to read our full article found here.
El Salvador Sees Growth Post BTC Adoption
El Salvador’s bet on Bitcoin attracting foreign investment and other economic benefits to the nation could be starting to pan out. According to Salvadoran Tourism Minister Morena Valdez, tourism has increased 30% since the adoption of Bitcoin as a legal tender in September 2021. The study has also shown a significant shift in where these tourists are coming from, whereas many as 60% of the tourists are coming from the United States compared to previous studies where visitors were more likely to come from neighboring Central American nations.
Salvadoran President Nayib Bukele has also recently touted the economic growth of the nation, stating that El Salvador’s GDP grew 10.3% in 2021 and its exports grew 13% in January 2022 compared to January 2021. While not stated outright, the president did hint at the possibility that the adoption of Bitcoin could have provided the stimulus needed for the positive change in economic activity. For more information on the Central American nation’s plans to court the crypto community, please see our article found here.
Thanks for reading! For more information regarding the cryptocurrency space, please visit us at https://www.cryptofal.com/.
