This Week in Pieces: Bitcoin, Ethereum Dip as Crypto Market Loses $58 Billion

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This week in parts. Illustration by Mitchell Preffer for Decrypt.

It was a week of overall losses, with holders of the two largest cryptocurrencies by market capitalization also affected by the price drop.

Market leader Bitcoin (BTC) has only depreciated by 6% in the past seven days and is currently changing hands at $23,136, according to CoinGecko.

Ethereum posted a slightly smaller loss of 7% over the same period to land at $1,604 at the start of the weekend.

Beyond the market leaders, it was pretty much the same story across the board.

Polygon (MATIC) posted one of the biggest declines, losing 16.7% this week to trade at $1.27 at the time of writing. MATIC began its downfall on Tuesday when news broke that Polygon Labs was laying off 100 employees (20% of its workforce) after a restructuring.

The next day, Polygon users fell prey to false rumors that the blockchain had been down for two hours.

Polygon later revealed that a few nodes on the network were temporarily out of sync, causing an independent channel explorer called Polygonscan to crash. Since Polygonscan hadn’t been updated with any new Polygon blocks or transactions for a few hours, people mistakenly thought that Polygon itself had stopped.

Litecoin (LTC), Polkadot (DOT) and Cardano (ADA) also recorded significant losses over the week, ranging from 8% to 9%.

Solana (SOL) had spent most of last November and all of December in a tailspin due to his association with leaders of the crashed FTX exchange. Since the New Year, it has managed to reverse losses, with the asset falling just 1% this week. It was trading at $22.4 at the time of writing.

The main reasons SOL managed to hold strong this week were news of the Helium Network’s upcoming migration to Solana and a marked increase in Solana NFT transaction volumes.

Similarly, the Uniswap (UNI) token has resisted the decline, losing only 1.4% over the week and currently selling at $6.61.

The token’s resilience may be due to the fact that, as of Wednesday, users of Uniswap’s NFT market can now transact with UNI and any other Ethereum-based token.

New rules proposed in Hong Kong, Canada, United States

Since the collapse of several top crypto companies last year, including Terra, Celsius, Three Arrows Capital, and FTX, crypto regulation has become a recurring topic of discussion for regulators around the world.

Regulators from Hong Kong, Canada and the United States played a central role in this week’s high-profile crypto chat.

On Monday, the Hong Kong Securities and Futures Commission (SFC) released a consultation paper proposing “allowing all types of investors, including retail investors, to access trading services provided by licensed VAs [virtual asset] trading platform operators.”

The proposal recommends that conditions be met before retail investors can trade cryptocurrencies, including knowledge and risk assessments, and potential caps on the exposure traders can get. The Commission also recommends that only “large-cap virtual assets” be eligible for regulated trading.

Hong Kong Finance Secretary Paul Chan on Wednesday called Web3 a “golden opportunity” for the special administrative region and promised to “establish and lead an VA task force [virtual assets] development, with members of the relevant political offices, financial regulators and market players, to provide recommendations on the sustainable and responsible development of the sector.

On the same day in the United States, House Republican Majority Whip Tom Emmer (R-MN) introduced a bill proposing to ban the Federal Reserve from issuing central bank digital currency (CBDC) directly to individuals, a move he said would erode Americans’ rights to financial privacy.

The CBDC Anti-Surveillance State Act would also require the US central bank to report to Congress on its experiments with digital currencies.

The following day, the Federal Reserve released a new statement reminding banks of the risks of crypto exposure. The Fed was joined in this warning by government agencies, including the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).

Across the border in Canada that day, the Canadian Securities Administrators (CSA) – made up of securities regulators from each of Canada’s 10 provinces and 3 territories – released a list of new requirements for crypto companies wishing to remain compliant.

Crypto traders in Canada are now prohibited from allowing customers to purchase or deposit “value-referenced crypto assets” (VRCA), i.e. stablecoins, without the prior written consent of the ‘ASC, which in this case means that issuers must ensure that the stablecoin is backed by fiat.

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