Guide to surviving a crypto bear market
Crypto market sell-offs continue amid inflation fears
BTC continued its downward trend as Ethereum’s Merge saw a push into later in the year.
Cryptocurrency values continue to trend with equities as both BTC and ETH moved downward on the week. Investors are worried about rampant inflation and its effect on markets, and this week’s Consumer Price Index data confirms that inflation is at its worst since 1981. Meanwhile, in the decentralized finance space, we saw the much-anticipated Ethereum Merge delayed past June — as well as some innovative developments from NEAR Protocol and Uniswap.
Here’s everything you need to know about these stories, and more, in this week’s edition of OKX Insights’ News of the Week.
CPI print trends higher leading to further drop for BTC
The Consumer Price Index data for March was released on Tuesday and showed an 8.5% year-over-year rate increase — slightly above expectations and the highest yearly climb since 1981. As investors fear deflationary regulation will come to combat this increase, markets experienced further drops in risk-on assets. BTC fell 6.2% on Monday in anticipation of this data.
- There is a continued correlation between cryptocurrency markets and equity markets. This drop around the CPI data feels very similar to the macro-correlated selling around the Federal Open Market Committee press release earlier in April.
- While the inflation print is alarming, some government officials have predicted inflation is peaking. It will be important to observe how the markets react if we see a lower CPI print for April.
Ethereum Merge delayed into late 2022
In a tweet on Tuesday, Ethereum core developer Tim Beiko clarified that the Ethereum Merge and transition to proof-of-stake will not be happening within the next two months, and will likely come later in the year. The Ethereum Foundation has not set an exact date for this event, but users look forward to it being a catalyst for a more secure and environmentally friendly network.
- Some are disappointed, as there was speculation the Merge could be as soon as May — with successful test runs of the implementation occurring in the past few weeks.
- Proof-of-work miners will have to monitor the time frame for this transition. Once proof-of-stake is live, they will need to alter their process to continue being rewarded for securing the network.
Circle raises $400M in funding round
Circle, the issuer behind stablecoin USDC, announced a funding round Thursday led by finance giants BlackRock and Fidelity. In addition to investing, BlackRock has entered a strategic partnership with Circle with aims to “explor[e] capital market application for USDC.”
- Circle partnering with household names in traditional finance is a good sign for greater crypto adoption. Displays of confidence from familiar asset managers can make skeptics less afraid of experimenting with digital currencies.
- USDC still falls behind USDT as the number one stablecoin by market capitalization, but it will be interesting to see if these strategic raises lead to greater market share for USDC over time.
NEAR rumored to be launching an algorithmic stablecoin
Rumors have been circulating surrounding the launch of an algorithmic stablecoin on NEAR protocol modeled after the success of Terra Luna’s UST. The stablecoin was spotted being utilized on testnet for the NEAR-native decentralized exchange Ref Finance.
- Algorithmic stablecoins always come with risks of de-pegging in the event of an aggressive drop in the collateral’s value but can be great catalysts for growth.
- UST has been a favorite of stablecoin farmers since its launch, returning a market-leading 20% APY via Anchor Protocol. If NEAR’s token has similar yields, it could lead to a huge migration of capital onto the chain.
- This rumor comes on the heels of a huge raise in funding for development on NEAR. These catalysts have helped keep the price of NEAR afloat during the marketwide downswing.
Uniswap Labs announces investment arm
The team behind decentralized exchange Uniswap announced Monday that it has launched a venture capital arm to invest in other Web 3.0 companies and participate in on-chain governance. It has already taken stakes in household DeFI protocols — such as AAVE, MakerDao, Compound and LayerZero.
- The creation of an investment arm for successful crypto-native companies is a compelling trend to observe. We have seen it from others such as OpenSea ventures and Solana Ventures, and this is likely just the beginning.
- The Uniswap team has experience in issuing its own governance token, UNI, and its familiarity with on-chain governance gives it background in seeing what kind of votes can make a protocol successful.
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