Global cryptocurrency markets added $13 billion last week, fueled by Chainlink, Zcash, and DASH. Top stories included ETH testnet 2.0 going live, Ethereum Classic getting breached, House members approaching the IRS regarding block reward taxes, and more.
Cryptocurrency Markets
Global cryptocurrency markets added $13 billion in value last week, fueled by various altcoins. Chainlink, Zcash, and DASH were the market outliers, with Chainlink surging +32.63%. Despite Bitcoin only seeing +1% growth last week, Bitcoins market dominance bounced off strong support at 60%, and is now hovering around 61%. With Chainlink’s +32.63% growth last week, the digital asset has now seen +337% growth over the last year, despite Zeus Capital accusing Chainlink of being a scam.
Cryptocurrency | 7 Day Performance |
Chainlink | +32.63% |
Zcash | +19.50% |
DASH | +13.53% |
XRP | +11.82% |
VeChain | +9.47% |
Top Stories
-12% Crypto Crash
Crypto markets started last week on a bearish note as the market experienced a 12% sudden drop on Sunday ( August 2nd ). During the drop, Bitcoin crashed -12% and Ethereum fell -20% in a 5-6 minute timeframe. During the carnage, Bitcoins price tanked $-1,380, sending it to $10,500 levels. The drop was fueled by nearly $1.1 billion being liquidated in the futures markets. Despite the environment, many investors saw it as a buying opportunity as markets recovered throughout the week. At the time of this report, Bitcoins price is back above $11,500.
Ethereum 2.0 Validator Testnet Now Live
ETH 2.0 coordinator Danny Ryan posted a blog post last week in which he announced testnet “Medella” launch. If Medella can prove to be stable, many people including Danny Ryan believe this could be the last test network before the introduction of ETH 2.0 mainnet. At the time of the report, Medella already had 20,753 validators and 664,096 Ethereum staked. Medalla testnet validators include Teku ( Consensys ), Prysm ( Prysmatic Labs ), Nimbus ( Status ), Lodestar ( ChainSafe Systems ), and Lighthouse ( Sigma Prime ). A member from Ethereum Foundation, Hudson Jameson stated that:
“We are experiencing first-hand how the network works with a low number of validators and how it will improve as more validators are connected. This is what test networks are for and I am excited to see how the situation develops as more people connect to the test network. That’s an exaggeration. Eth2 is coming.”
ETH Trading Volumes Surging
The Block Crypto shared research showing that trading volumes for ETH spot and futures are growing at a faster rate than Bitcoin. Many believe the catalyst is the surge in decentralized finance ( DeFi ). According to the report, ETH future volumes are three times smaller than BTC, and spot volumes are twice as small. With Bitcoins market cap being 5x of ETH, it is projected that Ethereum has more room for growth in the near term. The ETH/BTC spot volume ratio has jumped from 16% in September 2019, to around 50% in 2020.
Ethereum Classic Attacks
Ethereum Classic, the 25th largest cryptocurrency by market cap, experienced another 51% attack on Thursday. Since the hackers gained more than 51% of the total hash rate, they can now create an environment where chain history is rewritten, which results in double-spending. The Ethereum classic blockchain continues to experience troubles, coming off a similar scenario in late July. Ethereum classic traded sideways throughout the week, before dropping -10%.
House Members Approach The IRS Regarding Staking Rewards
In an August 4th letter, members of US Congress reached out to the IRS, asking for a practical approach pertaining to taxation on crypto staking rewards. Members believe that the current taxation infrastructure could be overtaxing rewards earned from crypto staking on Proof-of-stake blockchains. In the letter, the members of Congress stated that:
“We believe that taxpayers’ true gains from these tokens should indeed be taxed. However, it is possible the taxation of ‘staking’ rewards as income may overstate taxpayers’ actual gains from participating in this new technology.”
One day later, the Proof of Stake Alliance posted a response on Medium, admiring the members of Congress for their outreach to the IRS. In the Medium post, the Alliance stated that:
“We applaud Congressmen Schweikert, Foster, Emmer, and Soto for their forward-looking leadership to ensure Proof of Stake blockchains and their ecosystems aren’t unduly burdened by regulatory red tape,” said Alison Mangiero, President of TQ Tezos, a POSA member company that builds open source software and drives adoption and awareness of the Tezos protocol. “Staking rewards, similar to a farmer cultivating produce and selling it at market, should be assessed for taxation when they are sold: we don’t tax an apple when it is plucked from a tree or a tomato fresh off the vine. This letter offers a common-sense solution for the IRS to support the development of this promising new technology and encourage more Americans to participate in its growth.”
DeFi Put Contract Exploited
Decentralized finance has taken off in 2020, mostly due to the yields being earned on various DeFi lending platforms. Due to the DeFi sector being extremely young, high yields in this market can come with high risk. Decentralized options marketplace, Opyn, announced that an exploit occurred on Opyn ETH put contracts. During this process, the attack resulted in “double exercise” of oTokens and stealing collateral that was put up by the sellers of the puts. According to Opyn, they believed that 371,260 USDC was stolen from the put contracts.
This is an example where DeFi and decentralized protocols can be difficult to manage. Due to the decentralized infrastructure, Opyn could not shut off access to the contracts. Instead, they were forced to remove liquidity from ETH pools on Uniswap. During the announcement, Opyn admitted that they did not do a good job protecting their users’ funds. As the DeFi space continues to scale, it will be crucial for protocols to test their security and other internal processes. With the lack of control that decentralized protocols offer a centralized party, security will be one of the biggest obstacles to overcome.
Image Source: Pixabay
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