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As the stock market hit new lows for the year, the correlation in the cryptocurrency market has been as strong as it has been in recent months. After the blow from the Earth crash last month, the market has really taken off this week. So let’s first answer the question that surely interests Rivemont Crypto Fund investors the most. More than half of the positions were sold as the support broke at $ 28,500, avoiding a significant portion of the pullback. At the time of publication of these lines, the fund is 65% in cash.

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After going public less than a year ago, Coinbase announced it was cutting 18% of its workforce, noting that economic conditions are “changing rapidly” and that the world appears to be in recession. CEO Brian Armstrong said the company grew too fast at the start of the expansion period. “Now it is clear to me that we have hired in excess,” he wrote him. Its competitor is no exception to the trend, cutting 5% of the company’s staff. In fact, the Gemini, Bitso, and Buenkit exchanges have all made such announcements in the past week.

Beyond the very difficult week in the markets, is unquestionably the decision of the cryptocurrency lending platform Celsius of June 12, which announced the suspension of all withdrawals on its lending platform, citing “extreme market conditions” and the need to “stabilize liquidity”, which caught the eye. Within hours of the announcement, the native Celsius CEL token dropped 70% in one. CEL’s downward spiral occurred in a gigantic meltdown that saw total cryptocurrency market capitalization plummet to less than trillion, more than two-thirds of its all-time high of $ 3 trillion, while that bitcoin dropped to levels that didn’t. they saw each other from 2020.

We recall that the Caisse de Dépôt du Québec had invested 150 million dollars from the public sock in the Celsius network, then citing the search for diamonds in the rough, and refusing out of the way direct investments in bitcoin. They are words that are about to age as well as milk …

What exactly happens? The short-term cause of the Celsius problems appears to be Lido’s Staked Ether (stETH), a token linked to Ethereum’s ETH. stETH represents ETH locked on-chain in Ethereum 2.0, a chain parallel to the main Ethereum blockchain that will eventually combine with the main Ethereum network in an event known as a merger, bringing the network of a consensus mechanism proof of work to a mechanism proof of participation. On decentralized financial platforms, stETH is often used as collateral to borrow ETH. The problem is that stETH has recently lost its connection with ETH, threatening these positions. With holders selling and the merger date still uncertain, there is now strong selling pressure on stETH. However, in an effort to deliver on the platform’s return promises to users, the Celsius platform has locked in a lot of capital in stETH, so a loss of peg stETH could cause a wave of redemptions, triggering a liquidity crisis.

Meanwhile, a lot of money has left Celsius. During the first half of 2022, the total amount of digital assets locked in the protocol grew from approximately $ 24 billion to $ 12 billion. The biggest problem with Celsius’s operations was that there was mounting evidence that the company was taking extreme risks with user funds that often couldn’t be quantified properly. Celsius is at risk of a margin call of 17,900 wBTC (Bitcoin wrapped on the ETH network). The liquidation price level was $ 20,272 before Celsius filled the vault with additional collateral, pushing the liquidation price to $ 18,300. The main problem is that this level of liquidation is completely transparent and opportunistic speculators could sell indiscriminately to force Celsius to sell …

Meanwhile, after freezing withdrawals on Sunday, the company reportedly turned to restructuring lawyers. First, Celsius is looking for funding opportunities from investors, but the New Jersey-based company isn’t ruling out other solutions, including financial restructuring, according to the WSJ report. The company finally broke its silence yesterday, simply mentioning via Twitter that the company “is working as quickly as possible and will share information as soon as it is appropriate. Acting in the interest of our community remains our top priority.”

A new example of the important lesson in the industry. If they’re not your keys, they’re not your tokens. Note that at the same time, TRON’s algorithmic stable token, the USDD, also lost its peg to the US dollar this week and is trading at $ 0.97 per dollar. In short, the incredible uncertainty generated by all these circumstances adds to an already strong downward pressure with the term recession only vaguely mentioned. It appears that a gigantic wave of liquidation of marginal positions is almost inevitable.

MicroStrategy today loses over $ 1 billion on its corporate bitcoin reserve bet. Many fear the company may face a margin call itself, which could add 129,218 BTC of selling pressure on the markets. However, Michael Saylor has lost none of his confidence in the digital asset and positioning of his company. “When MicroStrategy adopted a Bitcoin strategy, it anticipated volatility and structured its balance sheet so it could continue #HODL in the face of adversity.” he said on Twitter. He exposed contingency plans, noting that even if all available BTC were to be pledged as collateral for the loan, implying a BTC price below $ 3,600, the March 2020 low, the available liquidity pool would not stop there. . “It’s just FUD,” he told the mainstream media in a subsequent interview on the matter. “We started with $ 5 billion of collateral, we borrowed $ 200 million against that collateral, which is a 4% loan-to-value ratio. If bitcoin was down 95% from that figure, we would have to provide additional guarantees. ”He also qualified the issuance of any required margin calls as“ nothing ”.

Is the worst now behind for bitcoin? No one can say without a doubt, but there are several reasons to believe it. First, the price is currently below the 200-week moving average, an area that has historically served as support and where the price has never stayed below for long.

We also need to remember that despite the current decline, bitcoin’s value proposition only continues to improve. As Anthony Pompliano recalls in this excellent letter, The hash rate of the bitcoin network has more than quadrupled in the past three years. It continues to hit record highs today, proving the network has never been safer.

If we look at the distribution of on-chain bitcoin, we see that wallet addresses containing 0.01 bitcoin, 0.1 bitcoin and 1 bitcoin continue to reach all-time highs. He adds the interesting statistic that: “Another view is the cost base for long and short term holders (measured by 155 days of detention). You can see here that Will Clemente pointed out that these two metrics are close to the intersection, indicating that the long-term holders are in a dominant position: the cost base of the long-term holders is increasing while the term of the short-term holders term decreases. If this persists and the STH breaks below the LTH, it has historically marked generational buying opportunities for bitcoin. We are approaching. ”

Most long-term holders could also finally break bitcoin’s stock market correlation and finally allow it to shine as a hedge asset in an inflationary environment, something it has so far failed to achieve.

Soon, all markets await the US Fed meeting. It is certain that an increase will be announced this afternoon, but how high will it be? For once, there is no consensus. Will worrying inflation data released on Friday push for a 50-point hike higher than expected? Markets appear to be expecting a 75-point hike, while some analysts believe a 100-point hike is absolutely necessary right now. In short, here’s another day that could shine.

This article was brought to you by Fonds Rivemont. The Rivemont cryptocurrency fund is the first and only actively managed cryptocurrency fund in Canada. Suitable for RRSP and TFSA. Accredited investors can find out more here.

Disclaimer: This column does not necessarily reflect the opinion of CryptonewsFR and does not constitute investment advice or trading instructions..

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