June Newsletter
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.
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 This Month
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.
Bitcoin has been struggling as it follows the bearish sentiment in fiat markets. It’s currently testing a range of support that we have not seen since last year. The MFI is bordering oversold territory and is attempting to swing upwards. It remains to be seen whether it will be able to continue this trend. The MACD is trending downwards, however, it looks like it could be attempting to stage an upswing soon on the weekly candle chart. We shouldn’t be surprised if we continue to see the fiat markets influence BTC and crypto markets.
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. 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.
While Ethereum’s merge was pushed back to later in the summer, it’s still making progress towards that goal. Its testnet will be running the merge for the first time. This will be the first time that testnet node operators get to attempt the merge. Successful implementation of this could be a good sign for the project and could indicate that the ETH merge is still likely to occur in Q3. It will be interesting to see whether or not the results of this affect price action as well.
The MFI on ETH’s daily chart is currently trending neutrally near oversold territory. It’s likely that this could continue, especially as volatility continues in fiat and crypto markets. The MACD is slowly trending downwards on its momentum waves as its EMA lines trend upwards slightly. This is a strong range of support that we haven’t seen Ethereum touch since last year. It could be a great sign for longer-term price action if ETH is able to maintain this support.
Cardano
Cardano is a layer-2 proof-of-stake blockchain protocol. It is an ecosystem token with the ability to host smart contracts, as well as other tokens and decentralized applications in its ecosystem. Since it’s a layer-2 ecosystem protocol, it’s been often thought of as one of Ethereum’s closest decentralized competitors.
Founded on peer-reviewed research and material, ADA has one of the highest percentages of its circulating supply staked. This helps improve network security as well as decentralization. Cardano, “exists to redistribute power from unaccountable structures to the margins - to individuals - and be an enabling force for positive change and progress,” according to its website.
Cardano has had an interesting month as it recently just surpassed five million NFTs on its network. This coupled with the highly-anticipated Vasil hard fork has a lot of eyes on the project. This Vasil hard fork is expected to lower transaction costs across Cardano’s network even further. This could help with scaling concerns as the network’s usage continues to increase.
The MFI on Cardano’s daily chart seems to be trending upwards and could likely continue. The EMA lines on the MACD are trending upwards strongly as the momentum waves move fairly neutrally. Currently, ADA is consolidating pretty strongly in this range and it remains to be seen whether it will be able to break former support-turned-resistance.
Monero
Monero is the largest privacy token by market cap. While other blockchains have public, transparent blockchain explorers where a variety of information can be found, as a privacy token, Monero hides this information. This helps maintain the privacy of all parties involved in the usage of tokens and blockchain. The default for Monero is anonymity. Neither the sender, the receiver, nor the amount of the transaction will be public information. This ensures that issues such as blacklisted coins or addresses aren’t an issue for the Monero protocol.
Monero’s tail emission functionality is something that seems to be rooted in continuing to incentivize miners in order to maintain the decentralization and security of the network. It ensures that a minimum fixed fee will always be rewarded to miners. This ensures that the block reward will never truly reach zero. Monero discussed this in an interesting Twitter thread here.
Monero is currently testing an area of resistance that used to be support, however it could be possible that we test downward once more before it breaks through. The MFI is bordering overbought territory and trending downwards. The MACD is trending downwards on its momentum waves and its EMA waves look like they could start to turn downwards as well.
Stellar
The XLM token is based on the Stellar blockchain. It is a decentralized blockchain protocol and open-source network. You’re able to create, trade, and transfer digital versions of a variety of types of money. It helps act as an efficient intersection between global financial systems and assets. Stellar touts low fees and a swap on its native wallet. XLM is the Stellar Foundation’s official native token on the Stellar Network. Stellar boasts a wide array of partnerships, acquisitions, and services built on its network.
MoneyGram and Stellar are now working to institute USDC-based remittance payments. This is a huge deal as Stellar’s blockchain is notorious for its quick transactions and cheap fees. They are also looking at a functionality that would provide conversions to fiat currencies. This could be a huge deal for the Stellar Network as their technology has now acted as potential competitor to traditional remittance services.
In May, XLM broke below a range of support that it’s held since June of last year. It still has yet to break above this support-turned-resistance even after testing it a couple of times. It currently finds itself testing this resistance once more. The MFI is trending upwards strongly and looks like it will likely continue. The MACD is trending upwards on its EMA lines as its momentum waves remain fairly neutral.
Quelling The Doubts of Crypto Skeptics
The crypto space has grown exponentially over the past couple of years. From a market cap of around $192 billion at the beginning of 2020 to a market cap that’s consistently above $1 trillion even during extreme dips, we’ve seen the crypto markets grow at an unimaginable pace. With this exponential growth comes an often more-than-healthy dose of skepticism from both supporters and naysayers.
With that being said, the space still has yet to enter a phase of mass adoption. There are a variety of factors that could be influencing the hesitancy of individuals and companies to get involved in the cryptocurrency space. This month, we’ll be taking a bit of a look at some of the factors that could be contributing to this sense of hesitancy.
Individuals and companies often cite both similar and different reasons as to why they feel now may not be the time to get involved in crypto. Something that you’ll hear many people say is that they’re weary of the lack of regulatory clarity. Others cite the volatility of the markets and the lack of stability. Security concerns are also often raised by both veterans and newbies to the crypto industry.
Oftentimes, many of these concerns can be addressed with a bit of education, however, some of them are legitimate and if we want to see mass adoption, we’ll have to address these concerns and more.
Regulatory clarity is something that a variety of people have been asking for in regard to the crypto space. This is a concern that’s been plaguing the cryptocurrency industry since its inception. The good thing is that it seems that we could be closer than ever before to receiving regulatory clarity with the White House encouraging regulators to develop some type of guidance for investors and institutions alike.
For companies and institutions, this could provide them with the much-needed guidance for getting involved in the crypto space without incurring some sort of liability due to the lack of regulatory guides. Without regulations, many companies are hesitant to invest resources into crypto and blockchain-oriented projects due to fears of regulatory changes that could greatly affect the fate of those projects. This could also provide businesses with protections against malicious actors that take advantage of newer players in the space such as scammers, fraudsters, etc.
For individuals, this would open the door to potential protection against fraud and scams as well. It could also help steer them clear of situations where they could incur dangerous amounts of risk without having the knowledge to make a responsible decision.
As the Federal Reserve Governor said, “The main issue in crypto-asset regulation isn't how to protect sophisticated crypto-investors; it's how to protect the rest of us.”
In order to achieve regulatory clarity, regulators and crypto leaders alike are going to have to sit down and discuss how investors can be protected without stifling the growth of the space as well.
The volatility and lack of stability are other issues that you’ll hear people decry in the crypto space. Unfortunately, this issue isn’t something that will likely be solved as “quickly” as regulation. This issue will likely only be solved with time. To understand why this would take time to fix, you have to understand the different factors that contribute to the volatility of cryptocurrencies.
When you’re comparing cryptocurrencies to traditional fiat markets, you have to understand that the size of the cryptocurrency market is a fraction of the broader financial market. This means that it takes much smaller amounts of money to move the cryptocurrency market than it does with the stock market.
Also, until recently the crypto market was mainly populated with less experienced, more risk-friendly retail investors. These investors often did not employ experienced trading strategies and at earlier points, in the cryptocurrency space, you could truly see this reflected in the price action. This aspect of things has definitely improved as institutions with five-year investment plans get involved, and companies and countries start looking to gain exposure to crypto. You can even see this in price action throughout the crypto industry as the crypto markets start to correlate more closely with fiat markets.
Another reason that these swings are exacerbated in the cryptocurrency market is the presence of trading bots. Trading bots can exacerbate the movement during volatile periods, especially when coupled with massive amounts of leverage from many traders who are over-leveraged. It’s likely that we won’t see volatility start to settle until the space grows a bit more. While trading bots will likely continue to be present in crypto trading, the presence of over-leveraged traders could decrease over time as traders become more educated about the risks, and regulators and exchanges attempt to place more safeguards for traders.
While cryptocurrency and blockchain can provide a unique form of security that’s different than their centralized counterparts, there’s no denying that the space is not without its security concerns. We’ve seen an uptick in hacks in the space, however, this isn’t too surprising since we’ve seen incredible growth as well.
This is why we’ve seen recent discussions of protocols going to market too fast and the benefits of taking time to develop. Charles Hoskinson, the founder of Cardano, spoke about this as Cardano had been criticized for taking its time. There definitely seems to be an understandable rush to get to market by a variety of crypto companies and protocols. However, in order to ensure the quality of the product that you’re creating, there could be a benefit to taking time to work through the issues before they arise. It will be interesting to see if this changes how development teams go about operationally.
There could be other factors that influence how secure a protocol is such as the consensus mechanism that is used, the programming language, and/or the skill of their development team (or access to resources).
While these concerns about the space are valid, it should be noted that most of them are already being worked on in the industry and beyond. While the crypto space is still in its infancy, it’s going to be interesting to see how crypto leaders continue to address these concerns.
This Week In Crypto
The crypto market is still feeling the effects of the Terra crash. More regulation is on the way, especially after recent studies show that crypto related crime rose 79% in 2021. NYS passed the bill on crypto mining; now the bill just needs to be signed by the governor of New York to be official.
Market
This week BTC rallied to highs of $32,194 on 05/31 before dropping to around $29,700 on 06/01 and is now struggling to maintain support above $29,300. The MFI is now bordering oversold territory as it seems to be settling into a neutral pattern. This could be a good sign for price action, as it could mean the MFI may prepare to trend upwards soon. The MACD is currently trending downwards on both its EMA lines as well as its momentum waves.
Crypto-related crimes rose to new heights in 2021, estimating around $14B in damages or illegal use. This is an increase of 79% from the $7.8 billion in 2020, representing only 0.15% of the 15.8 trillion in crypto transactions volumes, the lowest ever.
For comparison, in 2019 the illegitimate share of all cryptocurrency transactions volume was 3.37%, and .02% last year, with the total volume of transactions spiking by 567% from 2020 total, according to Chainalysis.
NYS passes bill on crypto mining and the creation of a crypto task force
The NYS Senate passed the bill imposing a two-year moratorium on new crypto mining firms using carbon-based energy sources. After passing the Assembly in late April and now passing the Senate, the only thing left for the bill to become law is for the NYS governor (Kathy Hochul) to sign the bill.
Bitcoin Mining Policy Being Researched By The Biden Administration
The current presidential administration is looking into regulations of proof-of-work (POW) cryptocurrencies with the goal being to curb its environmental footprint and energy consumption, according to a report from Bloomberg Law.
Terra Luna 2.0
Upon release of Terra LUNA 2.0 on 5/28/22, the price opened at just under $20 and immediately crashed to lows of $3.93 in about 5 hours.
South Korean prosecutors summoned all Terraform Labs employees to investigate whether they were aware of a potential collapse before it occurred.
After Binance listed the updated version of the token, it shot up to over $10. At the time of writing, LUNA is currently trading at $6.48.
Two of the largest exchanges are reducing their staff
Gemini announced that they cut 10% of its workforce with the main reasons being the ongoing crypto winter and current macroeconomic and geopolitical turmoil.
View full announcement on Gemini Blog
Coinbase announced that they would be extending the hiring freeze for the foreseeable future and would even be rescinding a number of accepted offers.
Coinbase will be providing some sort of severance or financial compensation package to those affected and will be giving them access to a “talent hub” that is being established. The talent hub will “allow them to opt-in to receive additional support services including job placement support, resume review, interview coaching, and access to our strong industry connections.”
View full announcement on Coinbase Blog
Robinhood announced layoffs in late April, ahead of its first-quarter earnings release.
None of our posts or newsletters are meant to be taken as financial advice.
