Inside Crypto: February Report PT. 2
February saw a rollercoaster ride for the cryptocurrency market, with Bitcoin almost hitting $25,000 before dropping immediately after. In addition to the volatile nature of the markets, this month also saw stablecoins coming under fire, and Paxos Trust had to stop the issuance of its Binance-branded stablecoin. There was also a decrease in the market value of Ethereum NFTs.
However, there is still cause for optimism as the adoption of non-fungible tokens (NFTs) continues to increase, and cryptocurrency and Web3 are increasingly entering our lives in different ways.
On Crypto News
Bitcoin was trading below $20k since November last year and finally hit the $20k mark in mid-January. And since then, it has been rallying around $25k. On February 16, bitcoin almost hit $25k for the first time since August 2022 before immediately dropping to $23k. The demand for bullish call options has surpassed that of neutral to bearish options since February 14, despite Bitcoin’s price failing to break the $25k mark.
Furthermore, on February 24, 2023, Bitcoin’s mining difficulty surpassed 40 trillion hashes for the first time, achieving an all-time high of 43,05 trillion. At block height #778,176, the second-largest jump in difficulty this year, miners have seen a 9.95% increase in complexity.
Still on Crypto
The biggest cryptocurrency exchange in the world, Binance, announced on February 6 that it would stop all USD bank account deposits and withdrawals as of February 8. The suspension was announced by Binance via Twitter, although no specific reason was given. Binance CEO Changpeng Zhao (CZ) noted that USD bank transfers are leveraged by only 0.01% of its monthly active users. A separate tweet from Binance US customer care made it clear that US users are not included in the small portion of its user base that would be affected by the delay.
Banks are also reluctant to cooperate with cryptocurrency firms because of the bankruptcy of FTX, once Binance’s biggest foreign rival, and federal regulators’ cautions against such partnerships. For instance, in response to the Federal Deposit Insurance Corporation’s declaration that banking in the cryptocurrency industry should be considered high-risk, Signature Bank has ceased processing fiat to cryptocurrency transactions worth less than $100,000.
Moving on to Stablecoins
Paxos announced on February 16 that its partnership with Binance for the BUSD-branded stablecoin had ended. As directed by the New York Department of Financial Services (NYDFS), Paxos stopped issuing new Binance USD (BUSD) tokens on February 21. However, according to Paxos Trust, BUSD and its reserves will continue to be fully supported by Paxos and redeemable by onboarded clients until at least February 2024. Users can also redeem their assets in US dollars or convert their BUSD tokens into Pax Dollar (USDP), another stablecoin issued by Paxos Trust and backed by US dollars. This move coincides with worldwide regulators’ increased scrutiny of some major stablecoins, which you will see in the next paragraph.
The Financial Stability Board (FSB) released a report on the financial stability risks of DeFi on February 16 that outlined the main vulnerabilities, transmission routes, and DeFi’s evolution. In addition, the FSB is working with international standard-setting organizations to evaluate DeFi policies across various jurisdictions to prevent the rise of risks to financial stability connected with DeFi.
The regulator speculated that the rise of stablecoins would increase the usage of DeFi solutions by both business and retail clients and make it easier to accept crypto assets as payment. However, the FSB stresses the importance of understanding the unique characteristics of various stablecoins to track the risk they pose to the cryptocurrency industry.
NFT News Around the Market
According to a recent report from DappRadar, the value of Ethereum network NFTs dropped from $9.3 billion to $3.7 billion, a 60% price decline in 202 due to the bear market. Yuga Labs’ Otherdeeds—a 200,000-piece NFT collection—saw the biggest decline in Ethereum’s NFT market cap. The collection’s value, a key component of the company’s metaverse goals, decreased by 86% to $356 million in 2022. In addition, some BAYC collections also saw a decline.
Regardless of the decline, the report pointed out that some projects introduced in 2021 and the beginning of 2022 experienced ‘substantial market cap growth’ of up to 260%. Like:
- Azuki increased by 113.89%
- Pudgy Penguins rose by 204%
- Degen Toonz by 260%.
More on NFTs
The BTC network is experiencing more on-chain activity, according to Glassnode analysts. They connected it to releasing the Ordinals NFT protocol on the bitcoin blockchain at the end of January, which bitcoin enthusiasts called an ‘assault on the network.’ On-chain Activity metrics can be used to determine whether the network effects and user base are increasing or decreasing.
Find out about the Ordinal NFT in this news.
Blur Overtakes the NFT Giant-OpenSea
More good news for the NFT market as Blur—launched in October 2022—is swiftly rising to the top of the list of NFT trading platforms. According to the on-chain data provider, Blur’s market share increased following its token AirDrop on February 14. The NFT marketplace and aggregator held 48% of the whole market’s NFT transfer volume before the BLUR token AirDrop. With a user market share of 45% versus 43% and a trade volume market share of 85% versus 10%, Blur has surpassed OpenSea. This is probably due to professional traders using wash trading to increase their allocation of token airdrops.
Cryptocurrency and Web3 Adoption Increases
According to documents posted on the European Central Bank’s (ECB) website on February 22, the ability to transfer money to friends and make online purchases should be the main priority with a digital euro. The initial use of a digital euro would be for peer-to-peer payments conducted over the internet between private individuals and for e-commerce. Later uses would include paying taxes, receiving social benefits, and purchasing in physical stores.
The ECB may issue a central bank digital currency (CBDC). Yet, the concepts are already being debated by its authorities, who point out their ‘speculative’ nature and lack of ‘any socially or economically useful purpose.’
10 Companies Collaborating to Create a Metaverse Platform
Fujitsu is cooperating with nine other companies, including Mitsubishi and global bank Mizuho, to develop Ryugukoku (TBD). This interoperable metaverse framework will be used to develop the ‘Japan Metaverse Economic Zone.’
Furthermore, the platform will feature the following:
- ‘Auto-Learning Avatars,’ which compile user data to provide a personalized metaverse experience.
- The ‘Pegasus World Kit,’ which will aid in developing gamified metaverse experiences.
- Its ‘Multi-Magic Passport,’ which will provide user identification and payment options to facilitate interoperability throughout the metaverse.
Prime Minister Fumio Kishia has been investing in digital transformation services, such as NFT and the metaverse, to incorporate Web3 technology into Japan’s national agenda.
Fashion Meets Metaverse (MVFW23)
The metaverse platform Decentraland announced its second annual Metaverse Fashion Week event, which will take place from March 28–31, in an announcement published on its website on February 27. In addition, the itinerary, lineup, and a sneak peek of some of the events users may anticipate attending were announced. Dolce & Gabbana and Tommy Hilfiger will return with new collections for the event, while Coach, Adidas, and DKNY will make their virtual debuts.
The event is being organized by Decentraland in collaboration with digital fashion startup UNXD, metaverse platform Spatial, and augmented reality company OVER, focusing this year on open metaverses and Web3 interoperability. Its ‘Future Heritage’ theme will highlight traditional fashion houses entering the Web3 space for the first time.
As the industry matures and adopts more mainstream use cases, it will be interesting to see what the future holds for the crypto space.
Summary
The market saw a rise and fall, with some winning and others losing. Despite the volatility and challenges seen in the crypto markets in February, there is still hope as technology advances and the adoption of Web3, cryptocurrency, and NFTs continues to grow in different aspects. This shows that although the markets can be volatile, they are still growing in popularity and usage. As the use of digital assets grows, we will likely see further growth in digital asset values.