Decentral Block Post

It is becoming increasingly challenging to support a bullish short-term view for cryptocurrencies as the total crypto market capitalization has been below $1.4 trillion for the past 146 days. Furthermore, a descending channel initiated in late July has limited the upside after two strong rejections.

The 1% weekly negative performance in cryptocurrency markets was accompanied by stagnation in the S&P 500 stock market index, which remained basically flat at 3,650. Uncertainty continues to limit the eventual recovery as worsening global economic conditions have caused trans-Pacific shipping rates to plunge 75% versus the previous year, forcing ocean carriers to cancel dozens of sailings.

Conflicting macroeconomic signals limit risk market upside

From one side, the global macroeconomic scenario improved after the United Kingdom's government reverted plans to cut income taxes on Oct. 3. On the other hand, investors' fear increased as global investment bank Credit Suisse's credit default swaps reached their highest level on Oct. 3. Such instruments allow investors to protect against default, and their cost surpassed levels seen at the height of the 2008 financial crisis.

Below is a list of the winners and losers of the crypto market capitalization's 1% loss to $935 billion. Bitcoin (BTC) stood out with a 1% gain, which led its dominance rate to hit 41.5%, the highest since Aug. 5.

Quant (QNT) jumped 15% on speculation that its interoperable blockchain protocol would find adoption across governmental and regulatory bodies.

XRP is hoping that the token could see a massive price rally in 2022 based off the fingers-crossed assumption that Ripple will win its long-running legal battle against the U.S. Securities and Exchange Commission (SEC).

Hinman documents to save XRP bulls?

On Sept. 29, the district court judge in the case, Judge Analisa Torres, ordered the commission to release the documents penned by William Hinman, the former director of the corporation finance division at the SEC. 

Hinman may have written about Ether (ETH), the native token of the Ethereum blockchain, not being a security in the concealed documents, believes Ripple. That is primarily because Hinman had proclaimed the same in his speech at the Yahoo Finance All Markets Summit in June 2018.

Ripple's defense could use Hinman's writing as evidence that its blockchain's native token, XRP, should not be treated as a security, opposite to what the SEC claims in the lawsuit filed in December 2020.

XRP has since been ousted from many regulated crypto exchanges, including Coinbase and Bitstamp. As a result, it is now among the only top cryptocurrencies that have neither reclaimed nor established a record high during the 2020–2021 crypto market boom, reflecting caution from investors.

A quick response from a number of blockchain security companies has helped facilitate the return of around 70% of the $23 million exploit of decentralized exchange (DEX) aggregator Transit Swap.

The DEX aggregator lost the funds after a hacker exploited an internal bug on a swap contract on Oct. 1, leading to a quick response from Transit Finance team along with security companies Peckshield, SlowMist, Bitrace and TokenPocket, who were able to quickly work out the hacker’s IP, email address and associated-on chain addresses.

It appears these efforts have already born fruit, as less than 24 hours after the hack, Transit Finance noted that “with joint efforts of all parties” the hacker has returned 70% of the stolen assets to two addresses, equating to roughly $16.2 million.

These funds came in the form of 3,180 Ether (ETH) ($4.2 million), 1,500 Binance-Peg ETH and ($2 million) and 50,000 BNB ($14.2 million), according to BscScan and EtherScan.

In the most recent update, Transit Finance stated that “the project team is rushing to collect the specific data of the stolen users and formulate a specific return plan” but also remains focused on retrieving the final 30% of stolen funds.

The United States equities markets have been under a firm bear grip for a large part of the year. The S&P 500 and the Nasdaq Composite have declined for three quarters in a row, a first since 2009. There was no respite in selling in September and the Dow Jones Industrial Average is on track to record its worst September since 2002. These figures outline the kind of carnage that exists in the equities market.

Compared to these disappointing figures, Bitcoin (BTC) and select altcoins have not given up much ground in September. This is the first sign that selling could be drying up at lower levels and long-term investors may have started bottom fishing.

In the final quarter of the year, investors will continue to focus on the inflation data. Any indication of inflation topping could bring about a sharp recovery in risk assets, but if inflation remains stubbornly high, then a round of sell-offs could follow.

Let’s study the charts of the S&P 500 index, the U.S. dollar index (DXY) and the major cryptocurrencies to determine if a recovery is on the cards.

SPX

The S&P 500 index (SPX) has been under intense selling pressure for the past few days but the bulls have held their ground. This indicates that bulls are buying the dips near 3,636.

Crypto lending firm Nexo (NEXO) risks losing half of its valuation by the end of 2022 as doubts about its potential insolvency grow in the market.

Is Nexo too centralized?

For the unversed: eight U.S. states filed a cease-and-desist order against Nexo on Sep. 26, alleging that the firm offers unregistered securities to investors without alerting them about the risks of the financial products.

In particular, the regulators in the state of Kentucky accused Nexo of being insolvent, noting that without its namesake native token, NEXO, the firm's "liabilities would exceed its assets." As of July 31, Nexo had 959,089,286 NEXO in its reserves. That's 95.9% of all tokens in existence.

"This is a big, big, big problem because a very basic market analysis demonstrates that Nexo would be unable to monetize a significant chunk of these tokens," noted @MikeBurgersburg, an independent market analyst and author of the Dirty Bubble Media Substack, adding:

"Given that fact, the true value of the $NEXO tokens on Nexo’s balance sheet is likely close to $0."

JPMorgan Chase's CEO Jamie Dimon feels threatened by how the crypto space is disrupting the payment systems, stated the Shark Tank host and multi-millionaire venture capitalist Kevin O’Leary speaking at a Converge22 panel on Sept 28. 

O'Leary made his remarks after Dimon declared himself as a “major skeptic” on "crypto tokens, which you call currency, like Bitcoin," referring to them as "decentralized Ponzi schemes" in his testimony to the United States Congress last week.

Still on the panel, O'Leary explained that friction is one of the major problems in the traditional financial system and, plus, it's how banks profit on transaction fees, adding that stablecoins could lead to a reduction in fees throughout the world. He stated:

"This isn't about speculation on asset price. This is about reducing the fees of how the world's economies work, more transparent, more productive, completely auditable, regulated, but less expensive. So, does Jamie Dimon feel threatened? You are damn right, he does. That is a big part of how he makes money." 

Regarding the regulatory environment in the US, the venture capitalist explained that sovereign wealth and pension funds are waiting for regulation before adding digital assets to their portfolios, noting that:

The assets of crypto brokerage firm Voyager Digital would face a drastically different fate if FTX did not win the bid, claimed a spokesperson of Wave Financial while speaking to Cointelegraph. The spokesperson arguin that better bids were on the table, but they "were passed over for strictly cash offers."

Wave, an SEC-registered digital asset management company with over $1 billion in assets under management (AUM), participated in the auction process, bidding a slightly lower amount than FTX for the assets. FTX secured the winning bid with an amount of $1.4 billion, which must now be approved by the U.S. Bankruptcy Court.

Wave defended its proposal as the only one seeking to maintain the Voyager brand and create a new exchange model that caters to the crypto community, regardless of the financial difference in the bid.

Related: FTX US wins auction for Voyager Digital’s assets

In particular, Wave's proposal sought to "restore value in the VGX token via new and improved utility, saving $200M worth of funds and redistributing assets back to existing Voyager customers," and "extend a revenue share program to depositors through the new exchange model, driven by the liquidity and community of leading layer-1 protocols who joined as investors and minority owners." A Wave's spokesperson also noted that:

The S&P 500 fell for six days in a row and made a new year-to-date low on Sept. 27, but Bitcoin (BTC) maintained its outperformance and stayed well above its June low. This could be a positive sign because markets that show strength on the way down are the ones that outperform in the event of a recovery.

The United States equities markets rebounded sharply on Sept. 28 after the Bank of England announced a bond-buying program and the U.S. Treasury yields pulled back from multi-year highs. As this occurred, strong buying in Bitcoin took place, but BTC was unable to break above its overhead resistance.

A ray of hope for cryptocurrency traders is that October has historically been a strong month for Bitcoin. Barring 2014 and 2018, Bitcoin has managed a positive close in October every year since 2013, according to data from Coinglass.

Although history favors a bounce in October, traders should be careful because the macroeconomic situation is unprecedented and remains a challenge.

Could Bitcoin and altcoins close September on a strong note? Let’s study the charts of the top 10 cryptocurrencies to find out.

Guido Cannetti, an Argentinian Ultimate Fighting Championship (UFC) fighter, is now the first martial arts athlete in the country to receive 100% of his salary in stablecoins, amid rising inflation and Argentina's economic deteriorating, announced the crypto payroll company Bitwage on Monday.

Dubbed El Ninja, he returns to the Octagon on October 1st in the United States to face the local fighter Randy Costa. According to Bitwage, Guido will receive his payment in USDC stablecoin via the Stellar Network on Vibrant, a wallet application developed by the Stellar team specifically for Argentines experiencing inflation.

As per official government figures', inflation in the 12 months through August was 78.5% in the country, whereas prices in the first eight months of the year were up 56.4%. Argentina's central bank predicted a 95% inflation rate for the year, while some private analysts forecasted a 100% inflation rate in 2022.

“I am getting paid in USDC because it is safer for my future,” said Cannetti in a statement released by Bitwage, noting that stablecoins will spare him from the volatility and devaluation of local currency.

Among Argentine consumers surveyed by Americas Market Intelligence in April, 51% purchased crypto and 27% regularly bought cryptocurrencies, up from 12% adoption at the end of 2021. Inflation protection is the primary reason for 67% of respondents' purchases of cryptocurrencies.

ETHW has logged a significant price rebound despite its blockchain network, ETHPoW, suffering a smart contract hack in the first week after its launch.

Bull trap risks surround ETHW market

ETHW rebounded more than 150% eight days after the attack and traded for around $10.30 on Sept. 27.

Fundamentally, this suggests that traders ignored the hack and trusted ETHPoW's long-term viability as a blockchain project.

But from a technical perspective, the ETHW price rally has accompanied weaker trading volumes. In other words, fewer traders have been involved in the pumping of the ETHPoW token's price in the past eight days, as the Bitfinex exchange data shows in the chart below.

The growing divergence between ETHW's rising prices and falling trading volumes suggests that traders' interest in the ETHPoW token has been dwindling. In other words, ETHW's price risks a sharp correction in the coming days.

Interoperability-focused blockchain network Cosmos has dropped a new whitepaper proposing a revamped Cosmos Hub aimed at strengthening interoperability and security, along with key changes to its native ATOM token. 

The new Cosmos whitepaper was released on Monday at the Cosmoverse conference in Medellin, Colombia. The upgrades outlined in the whitepaper are still technically in “proposal” status but changes are expected to be made on-chain on Oct. 3.

Cosmos is an ecosystem of blockchains designed to scale and interoperate with each other. Cosmos Hub was the first blockchain to be built on Cosmos, which initially served as an intermediary between other interconnected blockchains.

The ATOM token is used to transact within the Cosmos ecosystem, which can also be used for governance and staking purposes.

Under the proposed changes, Cosmos will become a more interoperable, decentralized, and secure ecosystem.

The United Kingdom is in focus following the British pound’s fall to a new all-time low against the United States dollar. The sell-off was triggered by the aggressive tax cuts announced by Prime Minister Liz Truss’s government. The 10-year gilt yields have soared by 131 basis points in September, on track for its biggest monthly increase since 1957, according to Reuters.

The currency crisis and the soaring U.S dollar index (DXY) may not be good news for U.S. equities and the cryptocurrency markets. A ray of hope for Bitcoin (BTC) investors is that the pace of decline has slowed down in the past few days and the June low has not yet been re-tested.

That could be because Bitcoin’s long-term investors do not seem to be panicking. Data from on-chain analytics firm Glassnode shows that Bitcoin’s Coin Days Destroyed (CDD) metric, which gives more weightage to coins dormant for a long time, hit a new low. This indicates that coins held for the long-term “are the most dormant they have ever been.”

Could Bitcoin and altcoins continue their short-term outperformance? Let’s study the charts of the top-10 cryptocurrencies to find out.

BTC/USDT

The bulls continue to defend the $18,626 to $17,622 support zone with all their might. This is a positive sign as it shows that buyers are accumulating on dips to the support zone.

Cardano's (ADA) long-awaited Vasil update went live on Sept. 22, which promises to make its blockchain more scalable and cheaper than before. However, this has failed to bring bullish momentum to the ADA market.

Sell-the-news hampers Cardano

ADA's price has dropped by approximately 9.5% since the update and was changing hands for $0.43 on Sept. 26. The ADA/USD pair's drop was accompanied by a rejection candlestick on its daily price chart, confirmed by a brief rally to $0.48 on the day of the fork and a sharp correction thereafter.

ADA bulls' muted reaction to the successful Vasil update is similar to what transpired across the Ether (ETH) market after Ethereum's Merge.

In other words, a buy the rumor, sell the news event, resembling most of Cardano's previous hard forks, which have a history of preceding ADA price crashes, as shown below.

In addition, macro risks led by a very hawkish Federal Reserve also weighed down ADA's bullish expectations post-Vasil.

The market capitalization of USD Coin (USDC), a stablecoin issued by U.S.-based payment tech firm Circle, has dropped below $50 billion for the first time since January 2022.

On the weekly chart, USDC's market cap, which reflects the number of U.S. dollar-backed tokens in circulation, fell to $49.39 billion on Sep. 26, down almost 12% from its record high of $55.88 billion, established merely three months ago. 

In contrast, the market cap of Tether (USDT), which risked losing its top stablecoin position to USDC in May, crossed above $68 billion on Sep. 26, albeit still down 17.4% from its record high of $82.33 billion in May 2022.

The divergence between USDT and USDC shows investors' renewed preference for the former. Let's take a look at the factors boosting Tether as the top stablecoin.

Binance's USDC suspension

Binance, the world's largest cryptocurrency exchange by volume, announced earlier in September that it would convert its users' USDC balances for its own stablecoin, Binance USD (BUSD). The conversion will commence on Sep. 29 and does not apply to USDT.

To support the Terra community’s efforts to revive the Terra LUNA Classic (LUNC) token, crypto exchange Binance announced an off-chain burning mechanism last week. However, after receiving mixed reactions from community members, the exchange revised its burning approach. 

On Sept. 23, Binance CEO Changpeng Zhao wrote that the exchange will create an optional 1.2% tax when trading LUNC. Zhao added that they will roll out the 1.2% tax for all LUNC trading if traders who opt-in to pay the tax reach 50% of the total LUNC trading volume on the exchange, leaving the decision to users.

However, days after the post, Zhao laid out the flaws of their previous plan. Because of this, Binance announced a revised method to support the revival of LUNC. According to Zhao, the exchange will now completely burn all the trading fees that it will collect from its LUNC/BUSD and LUNC/USDT spot and margin trading pairs. The fees collected will be converted into LUNC and sent to LUNC's official burning address.

Through this, the Binance CEO believes that the exchange will be able to contribute to decreasing the supply of LUNC and be "fair" to all users.

Related: Exchanges criticized for 'nothingburger PR' posts on upcoming LUNC tax burn

Crypto exchange Coinbase has found itself in legal hot water after being accused by blockchain-based software firm Veritaseum Capital of infringing on a patent relating to its blockchain technology — and is now seeking $350 million in damages. 

According to a lawsuit filed on Thursday by U.S. law firm Brundidge & Stanger in the U.S. District Court in Delaware, Veritaseum alleges that Coinbase infringed on its cryptocurrency payment transfer technology patent, known as the “566 Patent.”

Veritaseum said the patent revolves around “novel devices, systems and methods” which enable parties to “enforce value transfer agreements” with “little or no trust” in each other, alleging Coinbase used this for many of its blockchain infrastructure services:

“Defendant’s infringing activities include but are not limited to its website [...] Coinbase Android mobile wallet [...] iOS mobile wallet [...] its Coinbase Cloud, Coinbase Commerce APIs, Query and Transact, Participate, Delegate and Validator software, Coinbase Pay, Coinbase Wallet and Coinbase Operated Public Validators.”

The law firm also explained that the patent is applicable with proof-of-stake (PoS) and proof-of-work (PoW) blockchains, which could enable the transfer of cryptocurrency payments, trading and staking services on chains supported by those consensus mechanisms.