First Mover Asia: DeFi’s resilience during the market slowdown; Bitcoin slumps near $20k

DeFi apps have avoided any massive on-chain liquidations, surprises or smart contract failures, even as crypto markets have shed value.

Good morning. Here’s what’s happening:

Prices: Bitcoin loses its bounce to drop below $20,000 before regaining ground; other major cryptos decline.

Insights: DeFi keeps its head up in the current crypto whirlwind.

Prices

Bitcoin (BTC): $20,079 -2.3%

Ether (ETH): $1,057 -5.6%

Biggest Gainers

Biggest Losers

Bitcoin Loses Its Bounce

So much for good things.

Bitcoin ended a three-day run of price increases on Wednesday, sinking below the $20,000 threshold it surpassed two days earlier before regaining this perch later in the afternoon.

The largest cryptocurrency by market capitalization was recently trading at about $20,100, down more than 2% over the past 24 hours. The decline came just two days after bitcoin cracked $21,000 as investors swooped in following a weekend dip, and amid a brief lull in the crypto calamities that have afflicted the industry in recent weeks.

Ether, the second-largest crypto by market cap, was recently changing hands at approximately $1,050, down over 5% in the past 24 hours. Other major cryptos were well into the red with troubled crypto lending platform Celsius (CEL) off by as much as over 20% and WAVES down 13%.

Investors once again shied away from riskier assets while digesting the latest inflation remarks by Federal Reserve Chairman Jerome Powell, who testified to the Senate Banking Committee that the U.S. might not avert a recession as the Fed continues its current monetary hawkishness. In separate commentaries, the CEO of Deutsche Bank and analysts from Citigroup predicted a 50% likelihood of recession. Fed critics have maintained that the bank waited too long to boost interest rates, forcing it to adopt the harsh measures that seem likely to spur economic contraction.

“It would have been better if the Fed took ‘transient’ inflation seriously earlier this year instead of downplaying it," Mark Lurie, CEO of crypto software provider Shipyard Software, wrote. "But at this point, the Fed is doing the right thing by raising interest rates – inflation is public enemy #1."

"The downside is that it’s too late now to do so painlessly, and Powell is likely again downplaying the risk of a recession. It’s probably already here. This bodes poorly for crypto short term. Investors who may have bought the BTC dip earlier in the week may be realizing there will not be a quick recovery, driving today’s slow drop back to $20K."

Crypto news was more nuanced on Wednesday than during recent months, when the daily drumbeat of industry mishaps and mini crises weighed on prices. On the upside, the Monetary Authority of Singapore (MAS) granted in-principle digital token payment licenses to crypto exchange Crypto.com and two other companies. The licenses will enable the three firms to offer services in the country, which has upped its scrutiny of crypto assets in recent months.

Later in the day, Jon Cunliffe, deputy governor of financial stability at the Bank of England, struck an upbeat note in a speech at the Point Zero conference in Zurich, saying that crypto technology's ability to eliminate middlemen in financial trading shouldn't lead to the kind of risk shortfalls that caused the 2008 financial meltdown. Cunliffe expressed faith in crypto, saying the technology will outlive current volatility, just as the internet economy ultimately overcame the dot-com crash of 2001. His comments came little over a week after BOE governor Andrew Bailey reiterated his stance that cryptocurrencies have "no intrinsic value."

Elsewhere, Australian bitcoin miner Iris Energy (IRIS) increased its hashrate estimate to 4.3 exahash/second (EH/s) for the year.

Voyager Digital (VOYG) shares fell more than 60% after the crypto broker disclosed its exposure to beleaguered hedge fund Three Arrows Capital (3AC) and said it may issue a "notice of default" to the crypto fund if it fails to make a loan repayment. Voyager's exposure to 3AC consists of 15,250 bitcoins ($370 million) and $350 million USDC, the company said in a statement Wednesday.

Shares of crypto exchange Coinbase, which have received a monthslong battering during the crypto crash, fell nearly 10% to close just under $52, near their all-time low.

Yet Lurie of Shipyard Software said optimistically that the recent crypto downturn was a sign of crypto's maturation.

"The more sensitive it is to macro conditions, the more proof there is that it’s taken seriously as an asset class part of a professionally balanced portfolio," he said. "That’s a positive sign long term.”

Markets

S&P 500: 3,759 -0.1%

DJIA: 30,483 -0.1%

Nasdaq: 11,053 -0.1%

Gold: $1,838 +0.3%