All Been Crypto — Week 4 Mar 2022

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Coinmonks

5 min readMar 4, 2022

Crypto markets are back to 2tr seeming shrugging off last week’s sell off in lockstep with equity markets. Despite the rebound we see BTC dominance continue to rise now back above 41%. Basis trade remains flat and CME was even trading above Binance for the first time since 2020, appetite for leverage remains low. There were a few headlines on NFTs although some projects also put off launch in the current environment as well as on continuous institutional adoption. The main event that is driving markets, narrative and regulatory outlook though is the war in Ukraine and so this weekly is going to be slightly different focusing mostly on this one topic. The situation is complex and fast moving but it’s extremely important and so i’ll try my best to decipher what happened over the past week and how this impacts our asset class in particular.

Bat Tai Chi — btc21@mail.com

HEADLINES:

War in Ukraine and what it means for Crypto

I wana be upfront, war is always bad. It destroys economic activity and costs lives so i do understand that talking about the impact on crypto might sound cynical to some, especially while the conflict is still ongoing. This however, is a crypto weekly and I do remain hopeful that our technology and asset class will help avoid such conflicts in future.

So let’s take a step back, and break this down. First is the war itself on the ground and then there are the economic ramifications of the war. We are going to focus on the later part and particularly how crypto can and already is solving some of the issues arising (and also raising new ones). The west imposed heavy sanctions on Russia including freezing of central bank foreign reserves and kicking Russian banks off from SWIFT. This caused the the Ruble to tumble 30% and unsurprisingly lead to many Russians desperately trying to get ‘hard money’. Long lines at Banks and spikes in BTC volumes — the same also happening in Ukraine. We remember both Russia and Ukraine legalized crypto in the weeks leading up to the conflict. There is now the fear that, as politico calls it, a crypto-sized hole in U.S. sanctions waters down the effects. OFAC’s rules do not single out crypto assets, but do reiterate BIden’s executive order, which establishes that digital transactions circumventing the rules are prohibited. NYT echoing this argument and the importance of including cutting crypto rails to avoid sanctions while Blockchain Association argues that use of crypto at scale is not feasible for Russia. The debate is out there. Many fear that it will lead to more tough regulation and restrictions.The WSJ also had a good article on how the debate might be ill directed though as all of these financial sanctions might only be short term effective. They argue Russia’s reserves aren’t really money but natural resources and the weaponization of the dollar could actually lead to de-dollarization in the medium/longer term — an argument for embracing crypto?

On the ground in the Ukraine we have to deal with more pressing issues though. With active combat ongoing obviously infrastructure and financial rails have been impacted. In order to better secure internet access Elon donated satellite internet Starlink to the Ukrainian government. Because payment rails are also impacted and slow Ukrainian gov has started accepting donations in crypto. This turned out to be extremely successful and they raised more than 54mn so far. Mostly in BTC ETH and a sizable junk in DOT (5.4mn from Gavin Wood himself). What sparked part of the success was the announcement of an airdrop to donors which then got scratched later in favor of NFTs. And then there’s DAO’s as well that are raising money — UkraineDAO is the most high profile one. They managed to raise 6m via an NFT sale of the Ukrainian flag. The last angle I want to touch upon is how crypto exchanges even in the US refuse to implement blanket bans on Russian citizens. I think it’s important to differentiate between the Russian government and its people. For sanctions targeting the Kremlin and powerful oligarchs the blockchain with its transparency can actually help monitor flows while at the same time access to crypto can potentially alleviate some of the pressure on ordinary Russians due to the Rubles rapid inflation.

Pixelmon’s $70M NFT Rug — Hype, Bad Art, Deception

More of a symbolic example of the many bad low effort projects out there that are still getting funded. Like many projects they promised the moon but the initial drop was such low effort that the face began to crumble. Pixelmon, an NFT gaming project that sold $71.4 million worth of NFTs at the start of the month, has been accused of pulling the rug on its buyers. The project’s substandard art and use of development funds to buy blue chip NFTs have generated a backlash against Pixelmon creator Martin van Blerk. NFT’s are down almost 90% from mint.

Citadel hints at Crypto

Company founder Ken Griffin has backtracked on his anti-crypto stance and wants his firm to offer digital assets to its clients this year. Speaking on Bloomberg Wealth with David Rubenstein, Citadel founder Ken Griffin commented on the current state of markets in light of recent geopolitical conflicts, stating that they are at a “very volatile inflection point.”
When the interview turned to digital assets, Griffin, who has previously warned the younger generation away from them and said “there’s no need for cryptocurrencies,” revealed that the firm would be engaging in crypto asset markets this year.

QUOTES:

It’s fair to assume that over the months to come, you will see us engage in making markets in cryptocurrencies

Citadel CEO, Ken Griffin

[The Ukraine-Russia conflict] underscored the need for Congressional action on digital finance including cryptocurrencies

Fed Chair, Jermoe Powell

I’m asking all major crypto exchanges to block addresses of Russian users. It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users

Vice Prime Minister of Ukraine, Mykhailo Fedorov

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