Here’s what happened in blockchain and crypto this week.
Cryptoasset prices ended the week lower, with bitcoin seeing one of the largest selloffs in recent weeks amid global macro headwinds, a hawkish U.S. Federal Reserve and weak crypto earnings reports. Wednesday’s release of the July FOMC meeting minutes reaffirmed the Fed’s position to raise interest rates and hold them at elevated levels to bring down inflation. Meanwhile, the fallout from the recent Celsius and Three Arrows Capital bankruptcies continues to weigh on both bitcoin and ASIC prices in light of potential sell pressure and forced liquidations from insolvent firms and miners.
As for publicly listed crypto firms, all eyes were on the earnings season this week. Bitcoin mining rig maker Canaan’s cautious outlook is a bellwether of current and future challenges faced by the bitcoin mining industry. The Beijing-based firm whose shares trade on the NASDAQ said tougher market conditions will hurt its financial performance in the coming months after a difficult second quarter. The assessment is probably based on the fact that many miners are sitting on large idle ASIC inventories and have future deliveries on the way. Many debt-squeezed or unprofitable miners are unlikely to make final payments to take delivery. Others, including Celsius, may liquidate their mining rigs.
On the mining front, Bitfarms posted $142 million in net losses in 2Q22 and a 5% jump in revenue. It is also worth noting that the company is pushing the delivery of some of its miners to next year. After delaying its 2Q22 earnings report to evaluate the extent to which recent events have reduced the value of its assets, Riot Blockchain also reported earnings. The company recorded $349.1 million in impairment charges to goodwill in the recent quarter, tied to its acquisitions of miner Whinstone U.S. and electrical equipment provider ESS Metron. Last week, U.S. mining peer Marathon Digital also announced impairment charges to the tune of $127.6 million due to the decline in the prices of digital currencies.
While ETH also ended the week lower, the bullish narrative around Ethereum and its forthcoming Merge to proof-of-stake (PoS) remains intact, with the ETH/BTC ratio hovering at an 8-month high. After last week’s successful merge of Ethereum’s Goerli testnet – the third and final test environment network to move from proof-of-work to proof-of-stake, the Ethereum Merge now has a tentative date around September 16. The impact of the Merge is also reflected in recent trading volumes. For example, open interest of ETH options recently surpassed BTC open interest for the first time and has exceeded $8 billion hitting a new all-time high, according to The Block Research’s data dashboard.
The global cryptoasset market capitalization currently amounts to $1.08 trillion – down from $1.19 trillion since Friday last week, with bitcoin accounting for 38%. Among the Top 30 cryptoassets by market cap, Bitfinex’s Leo Token (LEO) outperformed, gaining roughly 12.5% over the week. During the same period, the price of bitcoin (BTC) fell by 10.8% to $21,371 while the price of ether (ETH) decreased by 9.7% to $1,698. The total value locked (TVL) in DeFi sits at $61.9 billion – down from $68 billion last week – with Ethereum accounting for about 59% of TVL.
This Week’s Headlines
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Manuel Trojovsky, Head of Crypto Investments & Research
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