This Week in Coins: Bitcoin and Ethereum Drop By Double Digits

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

It was a very red week for crypto, with most leading cryptocurrencies depreciating  over the seven days as heavyweights like Bitcoin and Ethereum posted double-digit percentage losses by the weekend. 

Bitcoin is currently down 13% and sells for $21,309, according to data from CoinMarketCap.

Ethereum, the world’s second largest cryptocurrency by market capitalization, tumbled almost 18% to hit $1,635 at the time of writing. 

Ethereum’s massive downturn comes in spite of a run of good news in recent weeks.

For the last few weeks, Ethereum’s price has been gently boosted by anticipation of its upcoming “merge” upgrade, when the network is expected to transition from the energy-intensive proof-of-work (PoW) consensus mechanism, to the 99.95% greener proof-of-stake (PoS) mechanism. 

In a Wednesday note to investors, banking giant JPMorgan said that Ethereum’s merge will be good for Coinbase. The crypto exchange holds a 15% market share of Ethereum’s assets and offers an Ethereum staking service for institutions. JPMorgan expects these will give the exchange a competitive edge after the merge. 

In another bullish sign for the network, Ethereum Name Service (ENS) registrations have doubled in the last four months. The news reflects a greater demand for .ENS domain names, which are a more wieldy alternative to the string of random numbers and letters that typically make up a crypto wallet. 

Nearly every leading cryptocurrency enters this weekend about 20% down from the last. Solana fell 21% to $36, Polkadot dropped by 22% and currently sells for $7.42, Cardano sank 19% to 46 cents, Avalanche shrank 23% to $23, Polygon fell 21% to 80 cents, Uniswap dropped 21% to $7.18, and Ethereum Classic dropped 24% to $34. 

Bitcoin miners post losses

On Monday, publicly traded Bitcoin mining company Bitfarms posted a $142 million loss in the second quarter due to rising energy prices. 

During the quarter, the Quebec-based company sold 3,357 Bitcoin for $69.3 million, to help pay off a loan from Mike Novogratz’s Galaxy Digital. By the end of June, the company held 3,144 BTC worth approximately $62 million, it said in a U.S. Securities and Exchange Commission filing.

Bitfarms isn’t the only crypto mining company that’s posted losses recently. Last month, Argo Blockchain PLC became the most recent Bitcoin mining company to have sold more Bitcoin than it mined in a month. As of the second week of July, it had an outstanding balance of $22 million on a Bitcoin-backed Galaxy Digital loan. 

Data by Arcane Research revealed that publicly-traded Bitcoin miners, like Marathon Digital and Riot Blockchain, sold more Bitcoin than they mined back in May—a huge change from the first four months of the year, when miners sold just 30% of their earnings.

The recent combination of rising energy prices and a crypto bear market have negatively impacted the mining industry. 

Holdnaut and Celsius

On Tuesday, beleaguered Singaporean crypto lender Hodlnaut applied for judicial management in a bid to buy more time to recover from recent liquidity troubles, which a fortnight ago led to a decision to freeze customer crypto withdrawals

The application, which was officially filed on August 13, prevents the firm from having to sell its assets to make up for any shortfall. It will also ensure that an independent third party replaces Hodlnaut’s directors to manage the company and oversee affairs, while temporarily pausing legal claims against the firm.

By Friday, Holdnaut announced that it was cutting 80% of its staff, roughly 40 people, “to reduce the company’s expenditure.” The company is currently also fielding pending proceedings with the Singapore Attorney-General and the Singapore police force. 

On Wednesday, Celsius, another victim of the recent spate of bankruptcies, got approval from a New York bankruptcy judge to sell Bitcoin generated from its Celsius Mining subsidiary in order to pay back creditors. On July 14, a day after the parent company filed for bankruptcy, the Bitcoin mining operation also filed for bankruptcy.

At the start of the bankruptcy proceedings in July, Celsius was given approval to spend $5 million to jumpstart Celsius Mining, a move which drew criticism from the U.S. Department of Justice and the creditor committee, although the latter have since dropped their objections.

The Fed issues crypto bank guidelines

On Tuesday, the United States Federal Reserve released new guidelines for crypto banks. While the actual 49-page ‘Final Guidance’ mentions the word “cryptocurrency” only once, the subtext clearly invokes crypto.

The guidelines give directions for “institutions offering new types of financial products or with novel charters” to be granted so-called “master accounts,” a key financial status that allows for direct payments with, and access to, the Federal Reserve. All federally chartered banks possess a master account.

 

Luis Carlos Reyes, the director of Colombia’s tax and customs agency, DIAN, told Semana magazine on Monday that the South American nation’s new government would look to create “a digital currency” that would make “transactions easier for the consumer.” 

Many took Reyes’s words as a hint that a central bank digital currency version of the Colombian peso may be in the works.

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