Crypto industry recovery fund tops $2 billion as investor allocations grow
Data from CryptoCompare shows that the price of Bitcoin started last week around the $16,000 mark and quickly plunged to a $15,500 low before it recovered. BTC traded around $16,500 before dropping back to $16,200 over the weekend.
Ethereum’s Ether, the second-largest cryptocurrency by market cap, traded in a similar way, starting the week at $1,150 and plunging to a $1,050 low before surging to $1,200, where it spent most of the week. Over the weekend, ETH dropped to $1,150.
Headlines in the cryptocurrency space this week focused on Biannce’s crypto industry recovery fund initiative, as in the wake of FTX’s collapse users’ confidence in industry platforms was severely affected, and contagion saw a number of other companies, including BlockFi and Genesis, halt withdrawals.
Binance’s crypto industry recovery fund has now grown past $2 billion after the leading cryptocurrency exchange by volume allocated another $1 billion to it. Jump Crypto, GSR, and Aptos Labs are among the prominent cryptocurrency companies joining Binance’s initiative. These other contributors, which also include Polygon Ventures, Animoca Brands, and Kronos, have committed a total of $50 million to the fund.
The recovery fund is set to be used to buy distressed crypto firms and support the industry. Binance has said it received more than 150 support applications from various companies in need.
While the recovery fund grows, lawyers representing the collapsed cryptocurrency exchange FTX have said that a “substantial amount of assets have either been stolen or are missing” at a bankruptcy hearing in federal court in Delaware.
James Bromley, a partner at the law firm Sullivan & Cromwell who is representing FTX, said at the hearing that former CEO Sam Bankman-Fried’s poor management has left lawyers with limited information on the firm’s finances.
Per his words, assets are missing after FTX faced “cyberattacks,” referring to what appears to have been a hack on the exchange the day it filed for bankruptcy. The hacker has since sold off the stolen funds to ETH, which were then converted to renBTC – a tokenised BTC token connected to Alameda.
The Digital Currency Group (DCG), a crypto conglomerate that includes Grayscale Investments, CoinDesk, and Genesis, has revealed in a letter to investors that it has $2 billion of liabilities, including a $575 million loan from Genesis Global Capital, its own subsidiary. The group has a $350 million credit facility from a group of lenders led by Eldridge Industries, and a $1.1 billion promissory note connected to the collapse of Three Arrows Capital.
In its letter to shareholders, the group’s CEO, Barry Silbert, outlined the state of the company’s lending situation. The letter reveals that Genesis lent more than half a million dollars to DCG itself, with the loan being due May 2023.
Silbert noted that the loans were made “in the ordinary course of business” and concluded DCG borrowed funds from Genesis “in the same vein as hundreds of crypto investment firms.” The CEO also said the $1.1 billion promissory note is due in June 2032, as DCG “stepped in and assumed certain liabilities from Genesis.”
62% of crypto investors increased allocations over past 12 months
Over the week, Coinbase’s 2022 Digital Assets Outlook Survey revealed that 62% of investors who are currently invested in the cryptocurrency space increased their allocations over the past 12 months, compared to 12% who decreased allocations.
The exchange added: “This is evidence that institutional investors have continued to take a long-term view of the asset class even as prices have fallen. Looking ahead, 58% of investors expect to increase their allocations over the next three years.”
The survey also revealed that 59% of investors are currently using or plan on using a buy-and-hold approach. The survey interviewed 140 institutional investors and was conducted before FTX collapsed.
Lawmakers have meanwhile sent a letter to investment giant Fidelity Investments, warning it against offering Bitcoin to its customers in the wake of the collapse of cryptocurrency exchange FTX.
Senators Elizabeth Warren of Massachusetts, Tina Smith of Minnesota and Richard Durbin of Illinois all signed the letter, which specifically asked Fidelity to drop its 401(k) Bitcoin plan. Fidelity is the largest 401(k) account provider in the United States.
The letter says the industry is “full of charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors promoting financial products with little to no transparency”.
Bank of Japan to test digital Yen
The Bank of Japan (BoJ) is set to test its central bank digital currency (CBDC) in a collaboration with three megabanks and regional banks. The pilot will start in the spring of 2023, and will see the Bank of Japan work with private banks to identify any problems with deposits and withdrawals.
The pilot’s goal will also be to check whether the CBDC can operate during natural disasters and in areas without internet access. While the Bank of Japan did not name the three megabanks involved, it’s likely it was referring to Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc.
The Bank of England’s deputy governor Jon Cunliffe said over the week that decentralised finance (DeFi) protocols do not yet produce an effective way to manage risks. Speaking to an audience at the Warwick Business School, Cunliffe said that DeFi advocates’ claim that code can manage risk is unproven.
Cunliffe compared DeFi protocols to driverless cars by saying that they were only as good as the rules, programs, and sensors that organise their operations.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.