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Ethereum: The final test before the merge

Test networks continue to rehearse Ethereum's move to a proof-of-stake algorithm. On 6 July, the merge of two chains was tested in Sepolia, and now it's dress rehearsal time in Goerli. If you don't look at the temporary disabling of a third of the validators who hadn't installed the latest updates, the test was a success.

Ethereum's final transition to PoS is a step closer. Still, the anticipated move date has traditionally been pushed back: The complexity bomb has been delayed for another two months, and the project website has extended the timeline to Q4.



Meanwhile, 74,000 users have already staked 13 million ETH for passive income. The amount now equals $14bn or 11% of the network's total capitalisation.



Because stacking coins involves freezing them until the network actually moves, and because you have to stack them in blocks of 32 ETH to generate revenue, third-party services have become very popular. Lido is a leader among them. It significantly lowers the entry threshold for passive income and currently offers a 4% annual return for staking. Moreover, the service provides stETH instead of ETH, which can be used in staking or exchanged for other coins.

Lido's convenience has led to the service currently providing 32% of total frozen ETH. However, it does have a lot of borrowed funds since Lido used a number of investment projects, including the infamous 3AC. The lack of liquidity caused stETH to drop against ETH.



Due to some projects' high interdependence, a further breakaway of stETH, which has a capitalisation of $4.5 billion, from ETH could lead to a chain of liquidations and further pressure on the cryptocurrency market.



For example, one stETH to ETH exchanger, Aave, announced in June three potential steps to mitigate risks: Freezing stETH transactions, increasing the liquidation threshold to 90% and suspending loans in ETH. And Curve's large pool of 465,000 stETH has only 172,000 ETH left.

Lido is a big market player, and its problems are hard to ignore. Ethereum's rapid transition to PoS and the subsequent unlocking of ETH 2.0 could save the situation because it could encourage developers to be more proactive.


StormGain Analytical Team
(crypto trading, exchange and storage platform)

[stormgain]

Ethereum Classic surges 2.5 times in a fortnight on merger news

Ethereum Classic evolved from the Ethereum hardfork and is the parent branch. Because of the upcoming offspring's move to PoS, ETC is rising in value as the migration of miners will take it to a new level of reliability.



Ethereum (ETH) was the first full-fledged blockchain to support smart contracts, leading to rapid growth in the number of crypto projects. In 2016, The DAO crowdfunding platform was launched, making it the largest project in history. It was a decentralised, autonomous organisation that allowed participants to come together to work on different ideas and receive funding from around the world. In just a few months of operation, The DAO has raised $150 million.

On the technical side, the platform had a number of shortcomings. Taking advantage of the vulnerability, an attacker stole more than a third of the funds raised in June 2016. Vitalik Buterin has hardforked and "rolled back" the blockchain to prevent a hacker from using the money.

The majority supported such an action, but some disapproved. Interference with the blockchain violates the key tenet of decentralisation, i.e., "code is law", so a number of developers have remained faithful to the original branch, called Ethereum Classic (ETC) as of 2016.

ETC hasn't been widely used, and many predicted its demise, but with ETH's move to PoS ("The Merge"), it may get a second wind.



Ethereum's strength is its support for smart contracts and its high degree of decentralisation. The latter is provided by miners scattered around the world. With the move to PoS, the need for miners will become obsolete. For many, this means increased network centralisation and higher risks. The move itself can cause a lot of unforeseen mistakes. For the same reason, developers have pushed back the final merger date year after year, running one test after another.

The next most-profitable coin to mine on the Ethash algorithm is ETC. The migration of miners will add to the network's credibility and attractiveness as a base blockchain for young crypto projects.



On 14 July, Ethereum developer Tim Beiko proposed that 19 September be adopted as a tentative date for the merger, with the rest of the conference participants supporting him. In a fortnight, ETC's price has increased 2.5 times, and the network's hash rate has jumped by 22%.


StormGain Analytics Team
(crypto trading, exchange and storage platform)

[stormgain]

Crypto adoption is growing in Brazil

In Brazil, the Crypto Regulation Bill approved by the Senate Committee on Economic Affairs awaits a fall vote on the Senate floor. However, Brazilians can already purchase digital assets from local financial institutions, as demand for cryptocurrency far exceeds forecasts.

For example, Nubank, a digital bank that has 47 million customers in Brazil, launched Bitcoin and Ethereum trading on its Nucrypto platform in June of this year. The service is operated in partnership with Paxos and had a goal of attracting 1 million users by the end of the year, which it achieved in just one month.



Competition in the Brazilian crypto market is getting tougher. In addition to Nucrypto, the Mexican crypto exchange Bitso has also hit the one-million-users mark, and market leader Mercado Bitcoin has 5 million users. Fearing that it will get left behind, Santander, one of the top five banks in Brazil, also announced that it is launching a crypto platform in the coming months.

Crypto adoption is growing in South America by leaps and bounds. El Salvador has made Bitcoin legal tender, and this has played a key role in the shift in sentiment. In a recent interview with Bloomberg, Finance Minister Alejandro Zelaya spoke of the benefits of the move. Bitcoin adoption has been beneficial to El Salvador's unbanked population and also attracted tourism and investment.



South Americans are looking to crypto as a way to escape high inflation. In Argentina, for example, inflation has reached 64%. When paid for in Argentine pesos, Bitcoin is more expensive than it was a year ago.



The situation is so dire that the transfer of Giuliano Galoppo from Club Atlético Banfield to São Paulo was made in USDC stablecoins. This is the first time that this has happened in Argentina, but most likely not the last. Because of high inflation, players are being forced to renegotiate contracts constantly.

As a result, Argentina has one of the highest levels of acceptance of cryptocurrency in the world. At the end of 2021, 21% of citizens were using or owned cryptocurrency. In Brazil, inflation currently stands at 12%. If the economic environment worsens, crypto adoption will get an additional boost.


StormGain Analytics Team (https://stormgain.com/)
(crypto trading, exchange and storage platform)

[stormgain]

StormGain takes home two prestigious industry awards for 2022

Trading awards season is upon us, and StormGain is proud to announce that it has just been awarded not one but two trophies from finance and trading industry publications. These are ‘Best Trading Platform’ from the European CEO Awards 2022, and ‘Best Crypto Platform’ from World Finance Awards 2022.

The European CEO Awards rank the best CEOs and companies in the following categories: trading, finance, business, consultancy and outsourcing, technology, and lifestyle. World Finance is an international business publication that counts many key decision makers among its subscribers. Each year, it holds the World Finance Forex Awards to highlight the market leaders and innovators in the trading world.

“We are overjoyed to receive both of these accolades from respected authorities in the finance industry”, said StormGain CEO Alex Althausen. “We set out to build an easy-to-use, world-class crypto trading platform that would work for everyone, beginner and expert alike, in any market conditions. And I’m happy to say that throughout 2022, we remain committed to providing the best product for our clients, rolling out new features, and improving the user experience to make sure they can make the most from their trades.”

StormGain racks up more awards

StormGain is no stranger to industry honours, having garnered praise from finance publications and professional organisations for the app’s ease of use, consumer-friendly fees, and innovative features. Previous prizes in the StormGain trophy cabinet include:

●    ‘Best Trading Platform’ (2022) from AIBC
●    Ultimate Fintech’s ‘Best Cryptocurrency Broker’ (2021)
●    World Finance’s ‘Best Crypto Broker’ (2021)
●    European CEO’s ‘Best Trading Platform’ (2021)
●    The European’s ‘Cryptocurrency Trading and Exchange Platform of the year’ (2020)

Why choose StormGain?

With over 1 million users around the world, StormGain continues to win fans among retail traders and industry veterans alike. Features that elevate StormGain above the competition include a built-in Bitcoin miner that rewards clients with free BTC just for spending time on the platform, favorable interest rates on crypto holdings, and a profit-sharing model that makes trading fairer for everyone by only applying commissions on profitable trades. StormGain offers 60+ crypto instruments via web platform or mobile app, including Bitcoin (BTC), Ethereum (ETH), and the most promising altcoins as well as tokenised stocks and indices for a diverse portfolio. Not a StormGain user yet? Register in just a few seconds (https://stormgain.com/easy-start) and try the demo account to see what this award-winning crypto platform can do for you!

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The storm isn't over: More shocks await markets

July ended on a positive note, with Bitcoin recording its best monthly gain since November 2021 and crypto funds showing their best investment inflows since early 2022. But markets remain tense, and some experts predict the strongest shocks in 50 years.

Bitcoin recovered 16.8% in July, making its best gain since November 2021.



Cryptocurrency funds experienced an inflow of $474 million.



In predicting the end of the crypto winter, some analysts refer to the Puell Multiple and the return of the market price above the realised price. The realised price shows the average cost of the last coin move. As many coins remain idle after purchase, the figure differs from the market value. The current realised price of Bitcoin is $21,800.



The return of the market price to above the realised price is the result of the end of a bearish market. The investor trap lies in Bitcoin taking an average of 197 days to form a bottom. Too little time has passed for the current break in the realised price to be called a bullish signal.

Network metrics also confirm this. In particular, demand for Bitcoin transactions remains low, and the number of active addresses continues to decline. The trend is typical for a bear market.



The tense macroeconomic environment is the main reason for the lack of positivity. We have previously covered why the US Federal Reserve has significant influence over financial markets, including the cryptocurrency market.

The regulator's actions were criticised the other day by John Cochrane, professor of economics at Stanford University. In his view, the Fed should raise rates to 10%-12% to curb inflation. The rate currently stands at 2.5%. According to Cochrane, tax, fiscal and monetary policies have lost touch with reality, and the Fed hopes inflation will stop on its own.

The same assessment was made by Jim Rogers, who co-founded the Quantum Fund with George Soros. According to the veteran investor, the "worst bear market in [his] memory" is coming. US public debt is growing at a stunning rate, and the dollar's role as the world's reserve currency is weakening because of aggressive international policies. Many stocks and financial assets will drop by 70%-90%.



If the Fed decides to stop price rises, it'll have to raise interest rates significantly. Inflation in the US is now at 9.1%, and the Personal Consumption Expenditure Price Index has already reached 1983 levels. If decisive actions are taken, Bitcoin will continue to consolidate at around $20,000.


StormGain Analytics Team (https://stormgain.com/)
(crypto trading, exchange and storage platform)

[stormgain]

Solana collapses on hacking news

Over 8,000 wallets are compromised, with cumulative losses exceeding $8 million. Users are advised to transfer funds to a cold wallet and not to click on suspicious links. SOL has dropped 7% in 10 hours, and the attack continues.



At this point, it's unclear exactly how the attacker did it. Users on social media report that the Phantom and Slope hot wallets are especially at risk. A hacker was able to sign transactions on behalf of the owners, possibly resulting from an attack on the supply chain of a trusted third-party service.

The Phantom team says that the problem is unlikely to be related to the security of their wallet.



A user nicknamed Paladin points out that the problem is either related to Phantom or the popular NFT marketplace Magic Eden, which is also on Solana. The attacker withdrew $6 million in the first 10 minutes, with the largest loss from one address reaching $500k in USDC.

Another user nicknamed ZachXBT said the attack was planned, as the associated wallet remained idle for 7 months after initial funding.



As there has been no official response so far, one can only speculate as to how the breach occurred. The overall situation for the Ethereum Killer is negative, especially with the discovery of a vulnerability in the popular Phantom wallet.



Some analytical agencies consider Solana to be the most decentralised of its peers, but following frequent failures and the recent hacks the network could drop out of the top 10.


StormGain Analytics Team (https://stormgain.com/)
(crypto trading, exchange and storage platform)

[stormgain]

BTC hits $24K, altcoins recover amidst recession uncertainty

Bitcoin (BTC) held its ground over the weekend, staying above $23K and even hitting $24K Monday morning, while many major altcoins also enjoyed modest price increases across the board. On Friday, the original cryptocurrency fell below $30K following surprisingly positive news from the US Department of Labour, which reported unexpectedly strong employment growth, with 528,000 new jobs added to their statistics. Many who believed that the world's largest economy was on the brink of a long-term recession or asset crash may have to hold their breath and wait for further indicators, such as the next CPI figures or confirmation about further interest rate hikes.



Meanwhile, Bitcoin and other digital assets have rallied amidst these positive economic indicators. This performance correlates with a broader trend in the global stock market, further demonstrating that cryptocurrency is no longer an outsider but part of the mainstream equities market economy.

BTC's monthly relative strength index (RSI) indicates a balance between buyers and sellers, with a potential bullish breakout above $24,600. Ethereum (ETH), the second-largest cryptocurrency by market cap, is trading at around $1,770, having gained about $100 over the weekend. Analysts have noted that ETH appears to be following a classic bullish reversal pattern, with a potential 10% rally predicted for August. Other major altcoins also enjoyed a boost in price, including Theta (THETA) and Avalanche (AVAX), up around 7% and 6%, respectively.

Market performance over the week will likely be affected by further global economic indicators as news starts to roll in. Keep an eye out for new figures related to inflation, interest rates, equities and crypto market activity.


StormGain Analytics Team
(crypto trading, exchange and storage platform)

[stormgain]

Solana is recovering after a vulnerability was found in a third-party service

For Solana users, the last 24 hours have been full of anxiety, as social media was flooded with posts about blockchain-based wallets being hacked and no official comments being given. Phantom and Slope wallet users most frequently reported losing money, which was initially perceived as a problem with the network. Later on, it turned out that no one among those who had lost funds had generated a seed phrase using Phantom.



Solana's investigation found that the exploit compromised private keys generated by Slope. A Slope spokesman first told reporters that the service didn't store any personal data on a centralised service but later admitted the statement was incorrect.



According to Phantom's developers, the exploit is probably due to a lack of security in the Slope account import/export service, so a number of users have accused Slope of storing keys on a centralised service in plain text.

The audit company Zellic conducted its own investigation and got to the bottom of the leak, concluding that the Slope team hadn't properly configured the Sentry service, making the keys available to intruders.



After getting to the bottom of the circumstances surrounding the data leak, Slope's developers suggested that customers create a new wallet to transfer funds by generating a different unique phrase. Moreover, the Phantom team advised users to urgently transfer funds to a wallet not affiliated with Slope.



Slope-affiliated accounts that haven't updated their keys are still at risk of attack, with the number of affected individuals rising to 9,000. However, it's a small share of the total number of Solana-based wallets, which numbers 25 million. SOL recovered from yesterday's shocks as the risk of blockchain problems retreated.


StormGain Analytics Team (https://stormgain.com/)
(crypto trading, exchange and storage platform)

[stormgain]

Market anxiety sees crypto and equities slump ahead of CPI figures

Uncertainty sent risky assets tumbling Wednesday morning as investors held off on trading, waiting on the news of the US consumer price index (CPI), which came later that day.

Bitcoin's (BTC) recent rally past $24K has subsided, with the original cryptocurrency trading just above $23K on Wednesday, down more than 3% in the 24 hours prior.



Bitcoin's market cap share has hit a new six-month low, giving ground to the second-largest cryptocurrency by market cap, Ethereum (ETH), which had enjoyed a two-month high price point on Monday. However, Ethereum's price also plunged mid-week, dropping below $1,700, down almost 4% from Tuesday.

Altcoins across the board followed the trend of the two biggest cryptos, with a general market slump across digital assets from Tuesday to Wednesday. Stellar (XLM) was down almost 7%, and Solana (SOL) dropped around 6%. Filecoin (FIL) tumbled by over 11%.

The crypto market pullback could be seen as a lower support test after last week's support-resistance flip. In the long-term view, the top cryptocurrencies are still trading comfortably within their multi-week ranges.

Digital assets generally followed equity markets, although key tech-focused indices such as the Nasdaq and the S&P 500 dropped by only modest amounts. Investors appear to be adopting a risk-averse strategy, as shown by gold, the customary safe-haven asset, which has risen consistently since the beginning of the week.

US CPI for July 2022 came in at 8.5%. This was lower than June's 9.1% and shows that inflation is slowing. But will it be enough to prevent further interest rate hikes from the Fed? Earlier this week, Tesla CEO Elon Musk posited that the US had hit peak inflation, and any recession would be "mild to moderate". We will keep watching.


StormGain Analytics Team
(crypto trading, exchange and storage platform)

[stormgain]

Ethereum climbing ahead of Merge, altcoins stand to benefit

Ethereum (ETH) continues to climb as we reach the end of the week, surging toward the $1,900 mark for the first time in two months. At the time of writing, the second-largest cryptocurrency by market cap was trading at about $1,895. The top altcoin’s price has climbed over 85% since dropping below $1,000 in mid-June. Analysts have pointed to ETH/USD’s 50-week exponential moving average of $2,340 to predict a breakout at around $2,500.



One factor contributing to the bullish sentiment behind Ether is likely the news that the much-anticipated Merge will take place earlier than previously scheduled.

Several core developers agreed on a Thursday call on a tentative early date for the Merge: Thursday the 15th of September, 2022. This eagerly awaited event should see the Ethereum blockchain transition from a proof-of-work (PoW) consensus model to proof-of-stake (PoS). This should make the Ethereum network more scalable, energy efficient, and environmentally friendly.

Volatility should be expected for Ethereum before, during, and after the Merge date. A likely fork is something to watch out for, with die-hard PoW proponents splitting off the current version of ETH (known as ETHW) and network users being compensated with free tokens.

Ethereum isn’t the only altcoin that could get a value boost from the Merge. Crypto projects that facilitate ETH staking, could also stand to benefit. Lido DAO (LDO) is one such platform, with its token soaring by over 200% over the last month following Ethereum’s PoS announcement. Ethereum Classic (ETC) has had a similar trajectory since the Merge news, possibly because investors expect demand from miners who do not wish to use PoS.


StormGain Analytics Team
(crypto trading, exchange and storage platform)

[stormgain]

Ethereum overtakes Bitcoin in 2022 due to the September 'Merge'

The cryptocurrency community is preparing for a grandiose event: the departure of the leading altcoin from miners in favour of validators. After developers approved September as the closest date for the move, Ethereum jumped 65% in 30 days and surpassed Bitcoin in terms of growth in 2022.



In the derivatives market, open interest in Ethereum has overtaken Bitcoin for the first time in history, and derivatives traders are betting on the altcoin rising to at least $2,200.



The transition from the PoW (Proof-of-Work) algorithm to a PoS (Proof-of-Ownership) algorithm is called 'The Merge' because all key network parameters will be moved to the test chain that is being developed in parallel.



To stimulate the merge, a difficulty bomb will be activated in the PoW chain, causing it to die off naturally. The difficulty bomb exponentially increases the complexity of mining, making it increasingly less profitable.

Miners will have to migrate to other networks to generate earnings, such as Ethereum Classic. However, not everyone agrees with such a role. For example, Chandler Guo, a major Chinese miner, suggested they could clone Ethereum by creating the ETHPOW token. Some crypto exchanges have already supported this idea by issuing relevant futures. These include Poloniex, MEXC and BitMEX, while Binance has said that it may support the fork.

ETHPOW only has a chance if it is picked up by a sizeable share of miners. Many people doubt the expediency of further forking chains since there is already a parent chain on PoW, Ethereum Classic. In addition, the leading stablecoin operators, Tether and Circle, have officially announced that they'll only support the PoS chain.



Despite the imminent suspension of mining, miners are in no hurry to leave Ethereum. Thanks to the latest price increase, mining yields rose from $0.014 per MH/s in July to $0.028 per MH/s in mid-August. For example, Bitmain's latest E9 generates about $65 per day in revenue and reaches self-sufficiency in 6-8 months.

Developers have designated 19 September as the soft deadline for the transition to PoS. If all goes well, Ethereum will continue to strengthen against Bitcoin.


StormGain Analytics Team (https://stormgain.com/)
(crypto trading, exchange and storage platform)

[stormgain]

Bitcoin: Investors are rushing to lock in profits

The cryptocurrency market is seeing a slight recovery, with Bitcoin climbing to $25,000 by the end of July after a month of consolidation around the $20,000 level. Short-term holders (STH) who managed to buy the coin at a low price increased their total supply to 330,000  BTC.



As per the chart, supply extremes in this group often correspond to price highs or lows, confirming the psychological significance of the $20,000-$25,000 level.

But STHs weren't the only ones to take advantage of the slight rise in price to lock in profits. Cryptocurrency funds showed small outflows, with Bitcoin leading the way with a one-week loss of $21 million. Some institutional investors aren't waiting around to play the long game.



And their fears are well-founded as the macroeconomic environment remains tense. Meanwhile, in its latest growth phase, Bitcoin broke its correlation with stock markets by performing weakly.



The reason lies in the ongoing investment crisis in the cryptocurrency market. Investors pumped up the CEL token in August, expecting that Celsius, the largest crypto fund, would be able to emerge from the crisis. They quadrupled its price in a fortnight.



However, the updated bankruptcy report shows that instead of a $1.2 billion deficit, the hole in the company's balance sheet is $3 billion. This makes it less likely that investors, including various crypto projects, will get their money back. Mutual debts will lead to a series of bankruptcies, and new coins will be dumped onto the market with the expectation of paying off some of the liabilities.



This fact gives some analysts reason to predict a new wave of Bitcoin declines. On 14 August, gold evangelist Peter Schiff predicted a move below $10,000. However, in 2019, he also predicted that Bitcoin would never reach $50,000.

Now, a lot depends on what regulators do. China has already backtracked, as higher interest rates have led to an economic slowdown. Some experts predict the Fed will follow this path by the end of 2022. Loosening its grip will lead to a return of demand for high-risk assets and the rise of Bitcoin.


StormGain Analytics Team (https://stormgain.com/)
(crypto trading, exchange and storage platform)

[stormgain]

Ethereum Foundation: Switching to PoS won't reduce fees

Given various misconceptions circulating, Ethereum developers have issued a clarification on its upcoming 'Merge'. A soft deadline has been set for 19 September, with most of the improvements coming in future updates.



Power consumption

Miners are currently responsible for decentralisation and collecting transactions into blocks. Due to their growing number and the evolution of equipment, there's a continuous increase in mining difficulty, leading to ever more energy-consuming PoW-based networks. Last year, Elon Musk suspended the sale of Tesla for Bitcoin, claiming it wasn't environmentally friendly.

While a miner's success in calculating a hash function is directly related to their equipment's capacity, a validator's reward is related to the amount staked. With Ethereum moving to PoS, the developers claim that the network's power consumption will be reduced by 99.95%. This parameter will change right after the merger, but the other features will have to wait.

Fees

The main sore point for users is fees at times of peak network loads. Since the average speed is 13 transactions per second (TPS), users are forced to increase the tip amount to miners so that their transfer can be processed as quickly as possible. At times, it costs over $50 for a transaction to be processed.



The Merge won't affect fees, as the network speed will be 12 TPS, which is only a bit better than the previous figure. Fees will be greatly impacted by future updates and the introduction of sharding, which is a method of dividing the network into autonomous segments (shards) that will process transactions independently. Sharding is expected to be implemented within a year of switching to PoS, with transaction speeds exceeding 50,000 TPS.

Unlocking ETH

For passive income and participation in staking, validators lock in ETH, which can be extracted much later in the Merge. As of now, the total amount locked in is 13.3 million ETH (~$24.7 billion), which is over 10% of the network's capitalisation.



These funds will be unlocked after the Shanghai update, which is expected to occur 6 to 12 months after the Merge. But even with the advent of the security update, the speed at which validators can withdraw locked ETH will be limited. Tips will be available right away.



For the crypto community, the leading altcoin's change of consensus algorithm is a historic event. If it's successful, some experts predict Ethereum will overcome Bitcoin in the overall rankings in the long term. The ETH/BTC pair rose by 44% after 19 September was set as the final date.


StormGain Analytics Team (https://stormgain.com/)
(cryptocurrency trading, exchange and storage platform)

[stormgain]

Another shake-up in the stablecoin market

The stable coin market continues to experience fever due to the failure of some projects. Last week aUSD was compromised, and this week HUSD, the cryptocurrency exchange token Huobi, lost its link to the US dollar. Amid a tough macroeconomic environment, falling cryptocurrency market capitalisation and the bankruptcy of a few cryptocurrency funds, users are trying to identify the most wealthy stablecoin to save money.



aUSD, the Acala Network's stablecoin, is used in the decentralised finance sector (DeFi) interconnect applications and is based on the Polkadot blockchain. aUSD is a decentralised algorithmic stablecoin with redundant collateral. In other words, to get 1 aUSD, the user must lock $1.5 in another cryptocurrency. If the frozen coins fall in value, a forced reverse conversion takes place. This maintains the necessary reserve to ensure that the stablecoin is tied to the US dollar.



On 14 August, the hacker managed to mint $1.2 billion without using reserves. The Acala team quickly discovered the problem and put the network into maintenance mode. This allowed the attacker's addresses to be identified and the stolen funds to be frozen, but also temporarily halted all online transactions. But users were left confused, as the speed of response doesn't correlate well with the notion of decentralisation and the team's claims of "resistance to censorship".

As a result of the attack and the declining credibility of the project, the amount of blocked funds in Acala halved to 191 aUSD in a few days and continues to decline. The stablecoin's value hasn't recovered yet.



HUSD, the Huobi cryptocurrency exchange stablecoin, lost its link to USD on 17 August. Before the 2021 ban on cryptocurrency transactions, Huobi was the largest operator in China. The company has since suffered a series of setbacks, revenues have declined significantly and FTX has even delisted HUSD.

Unlike aUSD, the HUSD stablecoin relies on a reserve in fiat currency. For example, in 2021, Stable Universal issuer reported that each token was backed by $1 in a bank account. However, according to Coingecko, there are currently 81.4 million coins in circulation with a capitalisation of $79.1 million. And with the HUSD price falling to 85 cents on 18 August, Huobi admitted it had a liquidity problem and began looking for a solution.



Amid ongoing problems with stablecoin, the reserves of Tether, the market leader, were once again questioned. As 1/5 are undisclosed commercial liabilities, the USDT coin lost 22% of its capitalisation after the UST (LUNA) collapse.



Tether recently announced that instead of Moore Cayman, based in the Cayman Islands, BDO Italia, Europe's largest accounting firm, will soon be certifying reserves. Reporting will be provided on a monthly basis and the share of commercial liabilities in reserves will be reduced to 1/10th.

Increased transparency of the major stablecoin will add to users' confidence in the company's trustworthiness in these challenging times. In two weeks, Tether's capitalisation grew by 2.7%.


StormGain analytics team (https://stormgain.com/)
(a platform to trade, exchange and store cryptocurrency)

[stormgain]

A hit on decentralisation: USDC loses ground

Financial regulators are increasing pressure on decentralisation, a key advantage of the cryptocurrency market. In August, the US Department of Treasury sanctioned Tornado Cash, which set a striking precedent in a move that market participants considered to be unconstitutional. Meanwhile, some crypto projects, including Circle (USDC), have shown their loyalty to the US Treasury.

Decentralisation is independence from various authorities and financial institutions. Bitcoin can't be banned because no single centre can be sanctioned, and the transactions and user funds are only an entry in a shared distributed registry.



Bitcoin and Ethereum are public blockchains with an open history and record of the entire path of the minted coin. Because publicity conflicts with the right to privacy and confidentiality, some users prefer anonymous coins or use mixers.

Tornado Cash is a mixer that breaks the connection between the sender and receiver in the Ethereum network. It's a decentralised, open-source protocol built on smart contracts. Simply put, the tool is autonomous from the creator and any organisation. Any user can employ the mixer to break the connection between the sender and receiver.



The desire to hide the transfer history doesn't mean that the funds are being used for criminal purposes. However, this argument proved insufficient. In early August, the US Treasury Department's Office of Foreign Assets Control (OFAC) division included the software code in the list of blocked persons for the first time ever. As a result, all companies subject to US jurisdiction began blocking users and accounts where at least one transfer was received using Tornado Cash (TC).

The Coin Center advocacy group is preparing a lawsuit against OFAC because the regulator "exceeded its authority" and "violated the constitutional rights of US citizens". Congressman Tom Emmer joined OFAC's criticism by writing directly to Treasury Secretary Janet Yellen. Emmer raises the following questions:

- How does the regulator see the implementation of contract control?
- What is the status of citizen-owned funds after the mixer?
- How can law-abiding citizens get their frozen funds back?
- How can impersonal smart contracts appeal an OFAC decision?

Following TC's inclusion on the sanctions list, organisations loyal to the Treasury Department began blocking users who received the involved transfers. Since a transfer can't be declined, any participant could be compromised. Justin Sun (head of TRON) was blocked on the DeFi sector's Aave platform after receiving 0.1ETH from an unknown person.

Circle (issuer of USDC) also took up the challenge, freezing 75,000 USDC in TC-related transfers. Circle could freeze the transfer of stablecoins to and from TC at the Ethereum smart contract level.

As a result, users and whales began to give up on USDC. Over the past two weeks, deposit volume on the exchanges has reached a low of March 2021, and the whales (top 1% of addresses) have dropped to a low of August 2020. The stablecoin's capitalisation fell by 3.5% to $52.3 billion over the period.



For the cryptocurrency community, blocking TC is an extremely unpleasant precedent because users are penalised not for the offence but for using a privacy tool. If US citizens use TC after the mixer's sanctioning, the penalty can result in a fine of up to $300,000 or up to 30 years of imprisonment.


StormGain analytics team (https://stormgain.com/)
(cryptocurrency trading, exchange and storage platform)