Good news came from Brazil on the last day of November. Brazil passed legislation to accept cryptocurrencies as a payment method. It doesn’t mean that Bitcoin or any other major cryptocurrency will be legal tender in Brazil, but if you use cryptocurrency to make a payment, it will be legally accepted and accountable. In short, banks can offer you rewards in cryptocurrencies, or airlines will offer cryptocurrencies instead of miles. This law opens the doors of the crypto markets for Brazilian institutions. Companies can accept crypto as payment and create crypto-incentivizing campaigns.
Crypto markets are facing a systemic risk since the Luna crash in May. The Luna tragedy caused millions of people to lose their savings. We can explain why Luna affected the Bitcoin price in short. Luna was issuing UST stablecoins (its price was pegged to the US dollar) by holding Bitcoins as collateral. It was believed that the umbrella foundation of the Luna blockchain network was holding Bitcoins in reserves to provide protection against an unexpected event. And when the unexpected event finally happened, the Luna Foundation guard started selling Bitcoin reserves and triggered a hysteric sell-off. Thousands of Bitcoins worth more than a billion dollars returned back to the market and increased supply.
Luna crash wiped out $60 billion from the market and left many high-leverage crypto lending platforms vulnerable behind. Crypto investors have changed their standings and become more conservative about buying new coins and tokens. Crypto finance companies started to downsize their balances and operations since then. But it was not easy to slow down the aggressive growth policies that started and worked well during the bull market.
The Luna crash was just an ignite for the death spiral in the crypto market. Crypto lending platform Celsius Network which has raised $850 Million in funding rounds has announced that they halted withdrawals and then declared bankruptcy soon after. The same news came first from Voyager and then Three Arrow Capital (3AC).
There have been many other smaller-cap crypto platforms declaring bankruptcy Since the Luna crash. But the FTX’s collapse was different because the FTX was one of the world’s largest cryptocurrency exchanges.. FTX and its sister company Alameda were seen as heroes and they already saved some other crypto companies during the crypto winter. Everything started with a tweet from Binance’s CEO & Founder CZ. CZ claimed that FTX’s CEO was lobbying on crypto regulations for his benefit and against other players in the market.
Just one tweet from the crypto world’s king was enough to trigger a bank run. People started to withdraw their funds from the FTX exchange and FTX halted withdrawals soon. Bitcoin price dropped again. Fear, uncertainty, and doubt (FUD) level on the market has risen to new highs, greed and fear index once again bottomed on the extreme fear side.
BlockFi was one of the biggest crypto borrowing & lending companies in the States and declared bankruptcy on November 27th. It is exposed that the company had a large exposure to FTX company. Dominos are falling one after another. We don’t know if the BlockFi was the last domino or if there will be others declaring bankruptcy. The one thing we can know for sure is «Not your keys, Not your coins!» It is better to stay away from custodial exchanges.
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