Crypto markets: A pause, but why?

and, Stablecoins: who makes the rules?

“Change is inevitable. Change is constant.” – Benjamin Disraeli ||

Hi everyone! I hope you’re all doing well. I’m FINALLY seeing my way through the fog of whatever had me under the weather the past few days (ugh, not fun), so I’m feeling optimistic about my battle with open tabs today. Wish me luck.

Today, I was hoping to avoid talking about markets again, but alas … I’ve been getting many questions, so I feel there are still some key aspects to address.

Also, I look at emerging arguments around stablecoin regulation – yes, that part of the crypto framework that was supposed to the easiest to agree on.

Yesterday, I was on Yahoo Finance TV, talking about crypto markets, you can see that clip here.

And the latest episode of Bits & Bips is out, with me filling in for Jeff Seyffart as host and special guest Eli Ndinga from 21 Shares. You can see that here, or listen here (Spotify link).

Programming note: this newsletter has to skip publication on Friday.

IN THIS NEWSLETTER:

• Crypto markets: A pause, but why?

• Stablecoins: who makes the rules?

If you’re not a premium subscriber, I hope you’ll consider becoming one! You get ~daily commentary on markets, tokenization, regulation and other signs that crypto IS impacting the macro landscape. As well as audio, relevant links and music recommendations ‘cos why not.

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WHAT I’M WATCHING:

Crypto markets: A pause, but why?

I was really hoping to avoid talking about markets again – three days in a row feels like too much, there’s so much else going on in the crypto/macro intersection – but I’m going to because I’m getting questions and, well, this drop was significant in terms of both numbers and set-up.

(BTC/USD chart via TradingView)

I still disagree with those that say this is largely a reaction to the Bybit hack on Friday. If anything, the incident highlights the crypto market’s resilience – Bybit was able to plug the hole with loans largely due to its size and strong reputation which, after its masterful handling of the incident, has gotten even stronger. Plus, Bybit will over time need to buy ETH in the market to repay the loans so, even if Lazarus Group sells the hoard, there will be takers.

True, had the hackers hit a smaller exchange, the market would most likely have panicked more – but also, they would probably not have been able to steal quite so much.

And, if anything, the hack strengthens rather than weakens custody procedures. What happened wasn’t a custody technology problem, it was a front-end issue, and an unwelcome reminder that even smart and experienced people need to design processes that avoid repetition and predictability. Hard, but doable.

I also disagree with those that insist this couldn’t happen with Bitcoin or some other tokens, because of the technology design. That’s unfortunate tribalism. The hackers went after human behaviour, which means that no custodian on any network can relax their guard.

Finally, I’ve seen some analysts say that the price slump in BTC and ETH is due to ETF selling, and there has been a lot of that: yesterday’s BTC spot ETFs saw the largest outflow since launch.