Wild Swings, El Salvador, NFTs, the SEC. What a week...

“Exponential growth” seems to lack the strength to define crypto advancement in general. This week has been a historic one for the technology and everything it touches.

In the NFT space, we have seen record numbers and this is just the start. August was the best month ever, topping $5 billion in sale volume. Leading the pack, we have the BAYC (Bored Ape Yacht Club) collection which launched the Mutant Ape Yacht Club concept on august 28th a collection of a maximum of 20,000 Mutant Apes. These are created either by introducing a Bored Ape to the Mutant Serum or minting a Mutant Ape during the public sale. But as we can see on the image below, courtesy of DappRadar, cryptopunks are still getting the highest bids.

The NBA superstar Stephen Curry has been asking for crypto advice on twitter and we now see him flexing a BAYC on his social media account.

We definitely expect to see many other ballers come into the game and flex on-line, which is where now most of flexing and showing off takes place anyway. Why show off your new car or gear to a few hundred of people, when millions can see your NFTs online.

• 💸 OpenSea, the most popular NFT marketplace, saw more than $3 billion in NFT sales volume just during the month of August.

• 🎨 Christie’s will support ETH bidding in upcoming Art Blocks curated actions.

• 🐈 The pop start Doja Cat enters the NFT market with new “Planet Doja” collection

• 🎞️  Sotheby’s film NFT “In the Mood for Love” to be sold at auction

• 👗 Dolce & Gabbana reveals NFT Collection

• 🔖 Vogue Singapore debuts September issue cover as NFT

• 🏈 NFL temporarily prohibits teams from selling NFTs and crypto sponsorships

These are just some of the headlines that we read daily in this crazy NFT space. Every industry and company will be entering the space by either commercializing existing projects as NFTs or by creating new ones. Also, the most powerful brands have their eyes of the web3.0 and the metaverse in order to NFT anything possible and monetize. We can definitely say that:

Coinbase battle with the SEC

The largest US crypto exchange has received notice of a possible enforcement action from the SEC related to its interest-earning product called Coinbase Lend. This is a not a new practice and Coinbase is not and will not be the only platform to allow lending to ear interest and borrowing crypto. CEO Brian Armstrong said in a series of tweets that when he traveled to Washington, D.C. in May, the SEC “refused” to meet with him.

The product in question is billed as allowing users to earn a 4% annual percentage yield on a so-called stablecoin (USD Coin) by allowing Coinbase to lend those funds to verified borrowers. Coinbase backs USD Coin and guarantees that it can always be redeemed for $1. High interest accounts have become popular among crypto users, with companies like BlockFi and Gemini similarly offering a high yield on stablecoin and other cryptocurrency balances. (source)

The conversation on twitter has been heating up with many industry players giving their opinion and demanding that the SEC regulates this the best way possible without taking sides or benefiting any party or industry in particular. The government and its agencies need to better understand how innovation works and foment it accordingly and properly. We will definitely continue doing our research and informing you.

Market Drop

This week crypto market capitalization dropped -20% from $2.37T to $1.97T in barely 12 hours. It quickly after recovered to around $2.0T, so the plunge accounts so far for about -15% this week. The price fall affected Bitcoin and Ethereum similarly. 

BTC graph (09/04 to 09/10)

Despite some news attributing the price crash to a “buy the rumor, sell the news” strategy due to El Salvador’s law, the data shows that the market was heavily leveraged and some market sell orders unleashed liquidations on long orders and on futures derivatives markets, which increased the price fall considerably. 

According to Bybit liquidation data, more than $3B has been liquidated in derivatives positions, more than 92% being long positions. Most of those $3B were in Bitcoin ($1.42B), while the other liquidations were notably in Ethereum ($949M) and Ripple ($225M). This is the biggest number of liquidations since the May 19 crash.

Many traders and investors took the advantage to buy Bitcoin and send it from centralized exchange to wallet addresses, which supposedly minimizes further selling pressure since the coins need to be located in exchange addresses for them to be able to be sold.

Historically, September has been the month with the worst returns on average for the crypto markets. Overall, this data analysis teaches the lesson that the derivatives market continues to rule the price action for the crypto markets. 

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🇸🇻  “Bitcoin and El Salvador”

This is a an added section to talk about the adoption of Bitcoin in El Salvador, a bit of their economic history, and how the Central American nation fared with the adoption during the first few days.

🇸🇻 In 2001, Francisco Flores, then president of El Salvador, made the decision to replace the "Colón" with the US dollar. This was an abrupt decision which destabilized the economy of the country and of its people. From one day to the next, the people were forced to convert the value of the Colón, which they were used to using as a monetary unit since 1892, to the value of the Dollar in order to carry out their daily transactions.

About 90% of the population was completely against that decision, but Salvadorians were completely powerless against it. Obviously, as time went by, the country's financial system settled and its people got used to using the dollar.

Two decades later, Nayim Bukele, already known as one of the most progressive presidents in the world, has adopted Bitcoin as legal currency in El Salvador. The difference is that as of September 7, 2021, Bitcoin will be able to coexist with the Dollar that circulates as the national currency and it will not completely replaced it.

The Salvadoran president and his team have created a digital wallet called Chivo, which is be available for download on cell phones in the country so that people can start sending, receiving, and storing their bitcoins. Also, they will displace 200 ATMs that will allow the purchase of bitcoins, the conversion of BTC to dollars and allow other crypto transactions. As an incentive, the government has given $ 30.00 Dollars to each downloaded and activated wallet.

This technological feat of creation and distribution of wallets and ATMs cost around 250 million dollars, something that has infuriated more than 70% of the inhabitants. Many have taken to the streets to protest this adoption and what the nation is spending to carry it out.

President Bukele has bought around 550 Bitcoins with an average value of $ 25 Million to date. He aims to make this investment part of the country's national reserve, something that citizens are not very happy with either.

During September 7th, the first day of adoption, the value of Bitcoin plummeted 12%, a slide that cannot be attributed to El Salvador. Many other reasons have created this drop, but obviously, those who have disagreed with this decision and those who do not like cryptocurrencies at all celebrate it and point the finger of blame at the president. But Nayim Bukele responded by buying more bitcoins for his domestic reserves and taking advantage of the price drop.

He added that his goal is for El Salvador to become the Singapore of Latin America.

There are many things in favor and others that do not favor the country so much as far as this adoption is concerned.

On the one hand, mining; The process by which new bitcoins are put into circulation requires a lot of electrical energy to be carried out. Something that has caused much criticism around the world for global warming and pollutant emissions. El Salvador, which has 6 million habitants, has two large volcanoes that could be used to create thermoelectric energy and power various bitcoin mines. Something that remains to be seen but if it is successful, it could attract foreign investment.

And on the other hand, the International Monetary Fund, a specialized agency of the United Nations system established in 1945 to help stimulate the proper functioning of the world economy, has increased the risk of doing business with El Salvador, especially due to volatility and decentralization of the adopted cryptocurrency, putting the country's debt as Junk debt..

It will be very interesting if countries like Cuba, which are already preparing strategies for the possible adoption of Bitcoin, follow the course of El Salvador thus unleashing a global trend.

We will keep you informed. Thanks!!!

📰 Related News:

• Cuba recognizes payments in bitcoin and cryptocurrencies on the island.

• Ukraine legalizes cryptocurrency payments

• These are the countries in the world that use the most cryptocurrencies

• El Salvador loads on BTC for its reserves.

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