In Q2, we’re seeing a number of significant themes emerge as various fundamental forces shape the commercial and investment climate. To begin with, the recent Russian military invasion of Ukraine and the associated sanctions have had a significant influence on prices and economic growth.
Meanwhile, China’s response to its Covid-19 outbreak has played a substantial role in shaping the current global market. This crisis has significantly impacted the global economy by slowing down the world’s second-largest economy.
And finally, the market has recognized that the Federal Reserve has shifted to a more hawkish policy stance. Market participants now expect a new estimate of the year-end Fed funds target of 2.85%, up from 0.80% at the end of last year and 2.40% at the end of March.
The increase in expected interest rates reflects the Fed’s aggressive attitude toward monetary policy. Many economists predict that the Feds will gradually reduce its massive balance sheet. The US dollar, on the other hand, started this week on a strong note, with many investors keeping an eye on the midweek conclusion of the Federal Reserve’s latest policy meeting. The next FOMC gathering is scheduled for May 3rd, 2022. Speculations are already mounting over whether or not the Fed will raise interest rates, and market watchers are carefully monitoring every development to glean any clues about the Fed’s intentions. In addition to this central bank activity, other key factors such as economic data and geopolitical developments will continue to impact the direction of financial markets in the coming days.
Altogether, the interrelated economic forces have created a challenging and unpredictable market outlook ahead. However, it is too soon to tell how this volatile trading environment will play out in the days ahead. As for now, market participants should remain cautious as they digest all relevant information.
The weekend did not provide the life that the crypto market has been searching for, it was particularly disappointing for BTC/USD as the pair dropped below $38K before slightly rebounding back to the higher range of $38K Monday morning. Altcoins fared even worse as ETH plummet to lows of $2700 before recovering to $2800 price levels.
Nevertheless, some analysts are confident that the market has found a bottom and that a strong rebound is on the horizon. Only time will tell if this is indeed the case. Until then, traders will continue to watch closely as this volatile market evolves and hopefully recovers from its current slump.
Daily headlines continue to underline that institutional interest in the crypto space remains supported.
Goldman Sachs has announced last week its new offering of crypto-backed loans. The move comes as the value of Bitcoin dropped below $50,000 for the first time since March, and other digital assets have seen sizeable corrections as well. While some investors have been spooked by the recent dip, others see it as an opportunity to buy into what is still a very new and attractively priced asset class.
Goldman’s entrance into the space is yet another sign that mainstream financial institutions are taking cryptocurrency seriously and are here to stay for the long term. This continued institutional interest should help to provide support for the market and pave the way for a strong recovery in the months ahead.
2022 FOMC Meeting Calendar
- May 3-4
- June 14-15
- July 26-27
- September 20-21
- November 1-2
- December 13-14
Here is what Investors should know in the Regulations space
In the rapidly evolving world of crypto and blockchain technology, regulatory issues are always top of mind of industry practitioners. This is understandable given that there are many complex legal and policy challenges facing cryptocurrency and blockchain companies. Some of the most pressing regulatory topics include market oversight, consumer protection, taxation, and AML/KYC.
In recent news, there have been a number of important developments regarding these regulatory issues.
For instance, on May 2nd, 2022, India declared its CERT as the National Agency for cyber security including crypto assets. CERT now has the authority to investigate suspicious bodies and illegal activities within the crypto sector. Last but not least, crypto businesses operating in India must keep KYC records of financial transactions for at least five years.
On the other hand, another example of money laundering was seen in the crypto ecosystem when three Nigerian individuals were indicted for allegedly using cryptocurrency exchange platforms like Binance and Busha to acquire bitcoin valued at more than $43 million. The trio is accused of transferring an equivalent of over $215 million from Nigeria to Kenya between October and November 2020, a crime that earned them fame in the region.
Meanwhile, the government of Uzbekistan has moved to expand its crypto regulation through a decree signed by President Shavkat Mirziyoyey. The document provides definitions for terms like crypto assets, exchange, and mining, and determines the main regulatory body for the industry. The decree also requires crypto exchanges to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) norms. This is a welcome development, as it will help to legitimize the industry and attract more mainstream investors.
Altogether, the recent regulation events from India, Nigeria, and Uzbekistan illustrate the different approaches that countries are taking to the regulation of cryptocurrencies. While some nations are cracking down on illegal activity, others are working to create a more favorable environment for the development of the industry.
The DeFi market is in the midst of a correction, with the total value locked in DeFi dropping by over 18% since the beginning of the year. This is according to various data platforms that track the niche. The drop from $236 billion at the end of 2021 to $199 billion as of May 2 suggests that most big protocols and platforms have seen a sharp decline in TVL, often in the double digits.
The current downtrend in the DeFi market is curious, mainly because this sector has often been more immutable to bearish trends in the crypto space. Reasons for the sudden drop are largely unknown, though it’s speculated that a general lack of interest in riskier ventures during this time of economic instability is to blame. Additionally, the current top DeFi protocols have been underperforming compared to their earlier days, which could also play a role in the migration of funds away from this market. This includes Curve, Lido, MakerDAO, Aave, Compound, and PancakeSwap.
Whatever the case may be, it’s clear that the DeFi space is going through a rough patch. Only time will tell if this is a temporary blip or indicative of something more long-term. It is also worth noting that DeFi may still hold tremendous value as developers continue to introduce new products that enhance security and versatility for crypto users. With its decentralized architecture and emphasis on transparency, DeFi has the potential to become an essential aspect of regular cryptocurrency usage in the future.
iMining is committed to accelerating the growth of future technologies and Digital Finance.
As part of this commitment, our President and CEO Khurram Shroff was delighted to attend the DeFi Toronto meetup and serve as the event sponsor. The meetup was a great opportunity for us to chat with many innovative people in the blockchain tech space. We are always looking for ways to grow and improve and being involved in events like this helps us to stay ahead of the curve!
If you’re interested in keeping up with the latest trends in Decentralized Finance or want to learn more about this exciting area of finance, you may want to join DeFi Toronto.
DeFi Toronto group has been running since 2019 and has hosted some of the world’s top DeFi projects, including Aave, Maker DAO, dYdX, Element Finance, and many others.