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Crypto SWOT: Billionaire Mike Novogratz says the crypto industry is in a “credit crisis”

Commentaries & Views

Strengths

  • Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Martin Shkreli, rising 714.06%.

  • Bitcoin rallied amid a broad, risk-on mood in global markets, trading above $22,000 for the first time since June 8 and testing the upper bound of the tight range where it's been stuck for the past month. Cryptocurrencies' resilience in the face of seemingly damaging news like last week's worse-than-expected U.S. inflation report adds to indications that the selloff that lopped some $2 trillion off digital assets may have run its course, writes Bloomberg.

  • Marathon Digital shares surged as much as 36% on Monday, reports Bloomberg, its biggest gain since February 2021. The move led a jump in cryptocurrency-related stocks as Bitcoin climbed above $22,000 to touch its highest level in about a month. Other crypto stocks that moved higher included Riot, Hut 8, Coinbase, and Hive Blockchain, just to name a few, the article continues.  

Weaknesses

  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was Loop X Network, down 99.96%.

  • Mike Novogratz, the billionaire investor who once called himself the "Forrest Gump of Bitcoin," said the recent turbulence in the cryptocurrency industry is a "full-fledged credit crisis" and acknowledged that he was "darn wrong" about the magnitude of the leverage in the system. "What I don't think people expected was the magnitude of losses that would show up in professional institutions' balance sheets and that caused the daisy chains of events," Novogratz said at the Bloomberg Crypto Summit Tuesday, writes Bloomberg.

  • Crypto Exchange Zipmex who operates in markets like Singapore and Thailand has halted withdrawals "until further notice" writes Bloomberg. The company cites "volatile market conditions, and the resulting financial difficulties our key business partners".

Opportunities

  • French Bank BNP Paribas is entering the crypto custody space via a partnership with Swiss digital asset safekeeping firm Metaco. Metaco, which recently inked a custody tech deal with French bank Societe Generale, is becoming the go-to provider for banks and institutions looking to enter the crypto space, according to Bloomberg.

  • Silvergate Capital Corp. said deposits from digital currency customers held steady in the second quarter, a sign that the bank and its clients are weathering the cryptocurrency rout, writes Bloomberg. Deposit resilience could help undo some of the damage suffered by some of the best-known crypto bank stocks in the first half of this year, the article explains.

  • Retail Traders, responsible for the wild price swings in everything from GameStop to Revlon have returned to another old favorite, beaten-down cryptocurrency stocks. Over the last 10 days the group has scooped up nearly $1 billion worth in shares of crypto-exposed companies, writes Bloomberg.

Threats

  • South Korean financial regulators are probing abnormal foreign-exchange transactions at some of the country's largest commercial banks for any links to money laundering or currency speculation using crypto assets. Some of the transactions involved crypto exchanges, according to a senior Financial Supervisory service official who asked not to be name due to the sensitivity of the investigation, writes Bloomberg.  

  • U.S. authorities arrested a former Coinbase Global Inc. product manager for allegedly leaking insider information to help his brother and a friend buy tokens just before they were listed on the crypto exchange. Wahi tipped off his brother Nikhil Wahi, and a friend Sameer Raminin, when tokens were about to be listed by the exchange. Nikhil Wahi and Raminin, who are also subjects of the government's investigation, allegedly used that information to trade dozens of tokens from at least June 2021 until April 2021 for a profit of more than $1 million, reports Bloomberg.  

  • South Korean prosecutors raided the home of Terraform Labs co-founder Daniel Shin, deepening a probe into allegations of illegal activity behind the collapsed stablecoin TerraUSD. A series of raids on the crypto-exchange and offices on Wednesday also included Shin's home and his payment app Chai Corp., the Seoul Southern District Prosecutors Office said, as reported by Bloomberg.
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