Data from CryptoCompare shows that the price of Bitcoin plunged over the week from around $43,000 to a low just above $34,000 before it started recovering. The cryptocurrency’s price dropped over several factors.
Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, moved in a similar way, dropping from more than $3,200 to a $2,200 low amid a wider cryptocurrency market rout.
Cryptocurrency prices were affected over the week by macroeconomic factors including rising tensions between NATO and Russia over Ukraine and a steep rising in inflation, which is expected to lead the US Federal Reserve to raise interest rates. While these factors influenced crypto prices throughout the week, a plunge was seen after the central bank of Russia proposed that crypto mining and trading should be outlawed.
While the proposal would see owning crypto to still be allowed, it negatively impacted the market. In a report titled “Cryptocurrencies: trends, risks, measures”, Elizaveta Danilova, the director of the Bank of Russia’s Financial Stability Department, noted cryptocurrencies were volatile and regularly used in illegal activities. As a result, the central bank is looking to build on its existing ban on cryptocurrency use for payments, which was signed into law in July 2021.
The bank has already barred mutual funds from investing in digital assets, and is now looking to introduce a punishment for those buying or selling goods, services and labour by Russian individuals and businesses, the report suggests.
It was seemingly the straw that broke the camel’s back in a week that saw one of the most popular cryptocurrency exchanges, Crypto.com, get hacked for an estimated $15 million.
Over the week, Crypto.com suspended withdrawals on its platform over reports of “unauthorised activity”, before requiring users to sign back into their accounts and reset their two-factor authentication.
Its CEO, Kris Marszalek, later confirmed that 400 accounts were hacked after several layers of the exchange’s security were breached. After the breaches were detected, Crypto.com quickly halted withdrawals and went “back online in about 13 to 14 hours” after fixing the issue. Per the CEO, all affected user accounts “were reimbursed so there was no loss of customer funds”.
He added that “given the scale of the business, these numbers are not particularly material and customer funds were not at risk”. On-chain data suggests the lost $15 million in ETH were laundered via Tornado Cash.
Not every headline was negative over the week, however. The mayor of Rio de Janeiro, the financial heart of Brazil, revealed he is planning on allocating one per cent of the city’s treasury reserves to buy cryptocurrency, a move that would make Rio de Janeiro the first Brazilian city to buy BTC and potentially other crypto assets.
Moreover, Walmart is seemingly venturing into the metaverse with its own cryptocurrency and collection of non-fungible tokens (NFTs). The firm filed several new trademarks that indicate it’s looking to sell virtual goods, including electronics, home decorations, toys, and others, along with a cryptocurrency and NFTs.
Token burns grow stronger
Token burns have grown stronger this week. Burning tokens is a way to permanently remove them from circulation, often by sending them to an address that no one controls, and is seen as a way to make assets more scarce in the space, and thus more valuable.
Crypto exchange Binance implemented its first Binance Coin (BNB) auto-burn program last quarter, effectively removing over 1.6 million BNB tokens worth $750 million from circulation this week.
The new auto burn program determines the number of BNB that’s set to be burned using a formula based on the total number of blocks produced on the Binance Smart Chain and BNB’s average dollar-denominated price during the quarter.
The system moves away from Binance’s previous token burn methodology, which was based on revenue generated from the Binance centralised exchange.
On top of that, the Polygon network implemented Ethereum Improvement Proposal (EIP) 1559, which brings a burning mechanism to the blockchain for its native MATIC token, as well as better fee visibility.
EIP-1559 went live on the Ethereum mainnet in August of last year through the London hard fork. This removed the first-price auction as the main mechanism for transaction fee calculation, instead of using a base fee for transactions to be included in the next block and a priority fee for faster processing. The base fee changes based on network congestion and is burned.
MATIC is expected to become a deflationary token with EIP-1559, losing 0.27% of its circulating supply every year according to calculations. MATIC has a fixed supply of 10 billion, with 6.8 billion currently in circulation.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
Featured image via Unsplash.