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In the midst of geopolitical and macroeconomic instability, uncertainty and permanent volatility reign in the cryptocurrency market. In general, the leading crypto assets and altcoins are not losing ground. The huge and powerful global crypto industry continues to evolve. Read about the main events in the field of digital assets and DeFi in our material.
The United Kingdom Bans Cryptocurrency ATMs
On March 14, the UK Financial Conduct Authority (FCA) declared all cryptocurrency ATMs in the country illegal and ordered them to close.
According to the FCA, no company in the UK has been licensed to install cryptocurrency ATMs. The operation of all such devices should be immediately stopped, the regulator said, warning of possible measures otherwise.
Cryptocurrency ATMs look like ordinary ATMs, they allow people to buy digital currencies using bank cards. There are currently 81 such ATMs in the UK.
The FCA warns the British that the cryptocurrency market is not regulated, therefore, it is likely that consumers will not be protected in any way if, for example, they lose money.
The regulator also published a list of companies that sell cryptocurrencies, but have not registered their business with the FCA and have not been tested for money laundering. After that, 110 companies from the list stopped selling.
European Union Rejects A Proposal To Ban Cryptomining
On March 14, the European Union (EU) a proposal to ban cryptocurrency mining within the bloc. The European Parliament Committee on Economic and Monetary Affairs voted against a bill that added a provision to limit the use of cryptocurrencies based on an energy-intensive process called Proof-of-Work (PoW).
Cryptocurrencies such as Bitcoin and Ethereum are mined using the PoW method. This algorithm involves the use of huge computing power and, consequently, high energy costs, which harms the environment and ecology. In this way, mining jeopardizes the climate goals of the EU to achieve carbon neutrality. Many countries, such as China, have sacrificed cryptocurrency mining in order to save energy. Research shows that Bitcoin mining produces the same amount of carbon dioxide every year as a country the size of Greece.
The fact that the European Union was required to ban mining based on PoW became known in January 2022. European Securities and Markets Authority (ESMA) Deputy Chairman Eric Theden noted that the regulator wants to push the industry towards a less energy-intensive method of mining cryptocurrencies – Proof-of-Stake (or staking). This algorithm differs in that it does not require large computing power and energy.
The Impact Of The Invasion Of Ukraine On Crypto Market
On February 24, with the start Russian invasion of Ukraine, Bitcoin fell by 8%, and Ethereum by almost 14%. The start of hostilities also affected major financial markets. Since then, the crypto market has been in a state of permanent volatility. As of March 14, the BTC Accumulation Trend Indicator, a new metric that tracks the movements of big players, showed that holders of the asset, who are less sensitive to price fluctuations, were still accumulating reserves. By their actions, such players emphasize confidence in BTC despite macroeconomic and geopolitical uncertainty.
Cryptocurrency proved to be a powerful weapon for Ukraine in countering the invasion of Russian troops. This may contribute to the integration of this type of asset into world markets. Such an opinion was expressed on March 14 by the founder of the ConsenSys blockchain company, one of the creators of the Ethereum blockchain, Joe Lubin. He even compared the race of countries to adopt cryptocurrencies with an arms race. According to Lyubin, cryptocurrency will be legalized in many more countries, regardless of the reaction of other states and international organizations.
"Crypto has proven a powerful weapon for Ukraine in its battle against Russia, with the crisis in Eastern Europe becoming “a point of no return” for crypto’s steady integration into global markets", ConsenSys founder Joe Lubin
Permanent Volatility Of BTC
Over the last weekend, the cryptocurrency market continued to move sideways in a narrow range amid worsening geopolitical and macroeconomic factors. On Monday morning, BTC lost 3% of the market value in a matter of hours and fell to $37.4 thousand, breaking through support at $38 thousand with one long candle. Now Bitcoin is slowly but surely recovering its position and is already stabilizing.
The main crypto market is suffering from increased volatility and will continue to suffer at least until the US Federal Reserve clarifies the further course of affairs. On-chain indicators paint a more optimistic picture. For example, over the past week, there has been a significant increase in the shock of the illiquid supply of BTC, which may indicate a coming reduction in supply. Also, the underlying price of short-term BTC holders has crossed the “rest threshold”, hinting that the accumulation phase will come to an end in the near future (possibly in the course of capitulation), after which BTC will make a significant bounce up.
The surge in volatility in the BTC spot market occurs in some “loneliness” because there is no corresponding surge in trading volume. This suggests that such strong fluctuations may be caused by speculative transactions in the derivatives market. Moreover, the number of open positions in bitcoin futures contracts increased slightly along with funding rates on major exchanges. This suggests that the $38K support and $46K resistance levels are the most closely watched by traders. Although it may be too early to try to determine the future scenario for the market. Finally, in the options market, one can observe that since the start of the conflict in Eastern Europe, the implied volatility of BTC has lagged behind its “colleague” from the commodity asset class. This points to the possibility that BTC volatility levels could rise even more in the near to medium term as risky assets correlate.
On March 9, U.S. President Joe Biden a long-awaited executive order to regulate digital assets as part of the U.S. government's initiative to coordinate a package of crypto controls. The decree is aimed at finding ways to reduce risks for both individual consumers and the financial system as a whole, as well as preventing the misuse of cryptocurrencies in criminal activities. Simply put, the document sets the tone for the regulatory directives that the crypto industry has been waiting for (and fearing) to announce for some time now. Many in the industry greeted the new decree with optimism and the hope that it will pave the way for clearer oversight principles and fairer approaches to regulating digital assets. However, other market participants expressed their concerns that the document focuses too much on strengthening the influence of the centralized US government on the CBDC (Central Bank Digital Currency), but does not set specific plans for the regulation of digital assets.
Multi-Chain Ecosystems Development
The explosive growth of low-cost, scalable L1 solutions in 2021 was a prelude to the multi-chain ecosystem trend that emerged earlier this year. Avalanche joined this trend quite recently. The project team has announced a new initiative, aptly named Avalanche Multiverse, that will see the launch of a $290 million fund to develop "subnets" within the Avalanche network.
This move is inspired by the success of the Cosmos IBC ecosystem as well as the Polkadot parachain architecture. The project aims to facilitate the development of application-specific blockchain subnets on the Avalanche network that will span decentralized finance (DeFi), game finance (GameFi), and the non-fungible token (NFT) sector.
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