5 things to know in Crypto today

by Arthur · July 4, 2022

While soaring inflation is hurting US consumers and may have already forced the economy into a technical recession (which this week’s ISM data may allude to), one area of strength in the US economy has remained the labor market. In fact, the strength of the labor market (with unemployment at pre-pandemic levels) is a key reason why the Fed has been so confident that it can raise interest rates so aggressively.

In this sense, strong labor market data on Friday could be negative for risk appetite, if it increases the Fed’s tightening. This can weigh on crypto, which tends to prefer an environment with more accommodating economic conditions (although this is due to weaker growth prospects, such as during the first and a half years of the pandemic).

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FTX could buy BlockFi for up to $ 240 million

In a thread on Twitter last Friday, BlockFi CEO Zac Prince announced that the crypto-lending platform had signed a new agreement with the large global crypto exchange FTX. BlockFi secured a new $ 400 million revolving credit facility with FTX, which also gave FTX the opportunity to purchase BlockFi at a “variable price of up to $ 240 million based on performance triggers”.

Prince said BlockFi signed the agreement to “strengthen liquidity and protect client funds” in the wake of significant volatility in the crypto market. The agreement is still dependent on shareholder approval.

Elsewhere in related news, FTX CEO Sam Bankman-Fried told Bloomberg in an interview last Friday that he is open to potential acquisitions of troubled crypto miners. “There may be a really compelling opportunity for us – I definitely do not want to ignore that opportunity,” he said.

Bankman-Fried added that such acquisitions could also help curb further contagion of financial stress throughout the crypto area. “When we think of the mining industry, they play a small role in the possible spread of infection, to the extent that it is miners who took out loans with their mining rigs,” he said.

Crypto Winter: Voyager Digital, Vauld stops withdrawals, Celsius cuts 23% of employees

The major cryptocurrency broker Voyager Digital announced last Friday that it will temporarily freeze trade, new deposits, withdrawals and loyalty rewards, and join a growing group of peers who have done so. The company owed the decision that the besieged crypto hedge fund Three Arrows Capital (3AC) could not repay a significant loan.

The company’s CEO said on Twitter that the decision will give Voyager time to strengthen its balance sheet to protect assets and preserve the platform’s future. Voyager had issued a standard warning to 3AC on Wednesday.

Elsewhere, the Celsius Network crypto-lending platform is said to cut 150 jobs, about 23% of the workforce, in the midst of a restructuring of the company. The platform stopped customer withdrawals back on June 12, citing “extreme market conditions”.

Many analysts / crypto commentators believe that Celsius may be facing insolvency. The company said in a recent announcement that it was exploring options to “protect and preserve” its assets. Goldman Sachs reportedly led a $ 2 billion fundraiser to buy distressed Celsius assets, while rival crypto-lending platform Nexo has also offered to buy Celsius outright.

Meanwhile, other crypto-lending platform Vauld has just become the last major platform to stop trading and withdrawals on Monday. The company said in a blog post that it is also exploring restructuring options, having released 30% of employees last month.

Cryptoanalysts suspect that more exchanges / lending platforms will be forced to stop withdrawals and more crypto companies will be forced to cut the number of employees if the bear market in crypto prices continues to deteriorate, pushing the industry into an ever deeper recession.

KuCoin rejects rumors of imminent withdrawal

With regard to withdrawal stops, the large global crypto exchange KuCoin faced a Twitter storm over the weekend, with various well-known pseudo-anonymous accounts warning its followers to withdraw money from the exchange as soon as possible due to an impending freeze on withdrawals.

KuCoin CEO Johnny Lyu quickly took to Twitter to condemn “RD” (fear, uncertainty and doubt). According to Lyu, KuCoin has no exposure to LUNA, 3AC or Babel Finance and has not (as the rumor has it) suffered “enormous suffering” from any “coin collapse”. In addition, KuCoin has no plans to stop withdrawals, Lyu added, and everything on the stock exchange works well.

The Facebook parent company Meta Platforms announced last Friday that it will close down its Novi digital wallet payment pilot, and end the work of establishing its own stack coin called “Diem” (formerly known as libra). Facebook unveiled ambitious plans to set up its own crypto-based stablecoin payment system back in 2019, but in the midst of a strong regulatory downturn, it never gained any significant traction.