Read in the Digest:
- New York Fed teams up with banking giants for 12-week digital dollar pilot.
- BlockFi prepares for bankruptcy and employee lay-offs due to FTX exposure.
- Crypto and stocks react to missile strike on NATO territory – Chiliz spikes.
- Ark Invest buys 315K shares in Grayscale’s Bitcoin Trust at record discount.
- Bitcoin miner reserves fall to their lowest point as the price of BTC crashes.
New York Fed Teams up with Banking Giants for 12-Week Digital Dollar Pilot
On Tuesday, November 15th, the Federal Reserve Bank of New York announced plans to team up with global banking giants for the launch of a 12-month digital dollar pilot program on the blockchain.
The Proof of Concept digital money platform, dubbed the Regulated Liability Network (RLN), will be worked on by the likes of HBSC, Mastercard (NYSE:MA), and Wells Fargo (NYSE:WFC), alongside the New York Innovation Center (NYIC).
The group will look to use the blockchain (via distributed ledger technology) to create opportunities for improving financial settlements. The RLN will run for twelve weeks, and will only operate in U.S. dollars.
The project’s regulatory framework is exected to align with KYC. Via the RLN, participants will issue digital tokens to represent their deposits, and settle through simulated central bank reserves on a shared blockchain.
Flipsider:
- The group notes that the project is not intended to advance any specific policy outcome, nor to signal any intention by the Federal Reserve to make an imminent decision regardin CBDCs.
Why You Should Care
Although the United States is not be the first to attempt the development of such a digital currency, the project represents a significant step by one of crypto’s largest economies.
BlockFi Prepares for Bankruptcy and Employee Lay-offs Due to FTX Exposure
BlockFi, the crypto lender that received $400 million in revolving credit from the now-bankrupt crypto exchange FTX, is reportedly preparing to file for ‘Chapter 11‘ bankruptcy and employee lay-offs.
The lending platform, which last week paused withdrawals due to “significant” exposure to FTX, asking customers not to deposit any funds, has still not resumed services.
On Monday, November 14th, BlockFi acknowledged its possession of assets on the beleaguered crypto exchange, and further noted its exposure to associated corporate entity, Alameda Research.
In an email to investor, BlockFi outlined that it holds an undrawn line of credit from FTX, and other obligations owed by FTX. The company has previously taken to Twitter to announce that it was “shocked and dismayed” by the failure of FTX and Alameda.
Flipsider:
- Despite its financial woes, BlockFi has denied rumors that a majority of its assets were tied up in FTX in an email to customers.
Why You Should Care
BlockFi claims to have enough liquidity to allow it to search for alternatives, as it seeks a path out of the unfortunate situation brought on by FTX’s demise.
Crypto and Stocks React to Missile Strike on NATO Territory – Chiliz Spikes
On Tuesday, November 16th the stock market fumbled what had been three days of consecutive gains as investors reacted to a potential escalation in the ongoing Russia-Ukraine war after a rocket hit Polish borders–a NATO-allied territory.
In the aftermath of the event, the ‘S&P 500′ is down by over 2%, while the ‘Dow Jones Industrial Average‘ fell by nearly 650 points, or roughly 2%. The technology-heavy ‘Nasdaq Composite‘ experienced an even steeper decline of almost 2.5%, or 260 points.
Similarly, crypto, which has typically moved in tandem with the more volatile stocks this year, has also on the receiving end of the losses, albeit minimally. While Bitcoin (BTC) recorded fractional losses of 0.2%, the biggest blow among the top 10 cryptos by market cap was Ethereum (ETH), which has dropped 2.3% value over the last 24 hours.
The 24 hour price chart for Bitcoin (BTC). Source: CoinMarketCap
The 24 hour price chart for Ethereum (ETH). Source: CoinMarketCap
Flipsider:
- Despite the losses, Chiliz, the biggest sports-focused blockchain project on the market, has continued to rally, gaining an astonishing 18% in the last 24 hours with anticipation building for the 2022 FIFA World Cup.
The 24 hour price chart for Chiliz (CHZ). Source: CoinMarketCap
Why You Should Care
Fresh macroeconomic developments and international affairs have once again forced crypto and stocks to trade in tandem.
Ark Invest Buys 315K Shares in Grayscale’s Bitcoin Trust at Record Discount
Ark Invest, the investment management firm founded by Cathie Wood, has purchased 315,259 shares in the Grayscale Bitcoin Trust (GBTC) in a deal worth approximately $2.8 million, as share prices fell to a record discount value.
At the time of sale, the Grayscale Bitcoin Trust was trading at a historical discount of 41.69% to net asset value (NAV) due to the plummeting prices of Bitcoin witnessed last week following the collapse of FTX, one of the market’s biggest crypto exchanges.
According to a release made by the company, the GBTC shares were purchased using the ARK Next Generation Internet (ARKW) exchange-traded fund (ETF), marking the fund’s first purchase since July 2021.
Data on the Ark Invest website shows that ARKW currently holds more than six million shares in GBTC. Since the purchase, the price GBTC has recovered, and though it still operates at a discount hovering around 37.13% at the time of writing, it represents a significant improvement from last week.
Flipsider:
- Ark Invest has referred to FTX’s insolvency as one of the most damaging events in crypto history, saying it “could delay institutional crypto adoption by years.”
Why You Should Care
The purchase pursued by Ark Invest underlines the belief held by the firm, along with many institutional investors, in the prospects of Bitcoin.
Bitcoin Miner Reserves Fall to Their Lowest Point as the Price of BTC Crashes
As the price of Bitcoin (BTC) fell to its lowest point in more than two years in the wake of the collapse of FTX, miners were forced to offload their BTC, which in turn served to push their reserves to their lowest levels this year.
In the last week, Bitcoin miners have sold more than 10% of their reserves (7,700 BTC), coinciding with the drop in the price of BTC. According to Glassnode, this latest decline in miner reserves has been the sharpest experienced since September 2018.
Similarly, the “Miner Net Position Change” (or Netflow), which refers to the total number of coins that miners have deposited to or withdrawn from their wallets, jumped to 6.45k BTC per month—higher than during any of the selloffs that have occurred over the last few years.
Flipsider:
- Billionaire venture capitalist and serial blockchain investor Tim Draper opines that Bitcoin (BTC) will recover, and will eventually trade as high as $250,000.
Why You Should Care
The declining metric suggests that miners are withdrawing BTC from their reserves at the present time, which represents a bearish signal.