Market wrap-up April

Welcome to our first monthly market wrap-up. In this space we will comment on developments in the DeFi world that caught our attention. So besides the big movers and shakers stories, do also expect some opinions on emerging developments in the crypto space.  

Crypto Asset Conference 2022 in Frankfurt

April started off with the #CAC22A in Frankfurt – the first major conference after the widespread lift of COVID restrictions across Europe. With over 300 people attending in person, at times over 1,000 livestream participants and a fantastic mood across the board, this conference was a great start into Q2 2022. Three major takeaways: 

  1. The potential EU regulation on “unhosted wallets” is seen as an inconvenience by most market participants. That’s it. Things will be handled. 
  2. Tighter regulation might acutally pave the way for increased institutional engagement in the Crypto space, particularly in DeFi.  
  3. Many TradFi companies are starting to look into Crypto and DeFi business opportunities. Especially banks, insurance companies and (traditional) exchanges seem to be among the “early” adopters.

Transition to ETH 2.0

In mid April the news struck, that “The Merge” would be delayed until Q3/Q4 2022. Yes, this was disappointing, but anyone who ever witnessed or was even part of a team executing an IT systems upgrade within a larger organization will know how many things can and will go wrong in such a process. And that’s usually “just” installing off-the-shelf updates in an existing environment. To make it more blunt: When your everyday IT system update is a commercial flight from Heathrow to Frankfurt, the ETH 2.0 upgrade is more like Apollo 11. If that does not ring a bell, have a look here.

So all fingers crossed, we will see The Merge later this year, as this will vastly decrease Ethereum’s energy consumption. This is not only desirable per se (with energy prices going through the roof since Russia’s war on Ukraine) but will also end the long discussions around Ethereum’s huge energy consumption. To be precise, the transition to proof-of-stake (PoS) will save more than 99.9% of the energy required under the current Ethereum version with its proof-of-work (PoW) consensus mechanism:

UST now 3rd largest Stablecoin by Market Cap 

Stable coins continue to become the backbone of the DeFi world. While Tether (USDT) and USD Coin (USDC) remain the unrivalled no. 1 and no. 2 coins, respectively, TerraUSD (UST) is now the 3rd largest stable coin by market cap. With a total of USD 18.3bn (as of April 26, 2022), it left Binance USD (BUSD) behind. BUSD has a market cap of USD 17.7bn.

While this is certainly great news for LUNA token holders, who benefited from huge gains  (+440% over one year), the systemic risk of the underlying USD-peg algorithm seems to grow with the rising market cap. Luna Foundation Guard seem to be fully aware of this and added another USD 100m worth of BTC to its reserve assets on April 13, bringing its total BTC holdings to 42,400 (c. USD 1.8bn). It’s certainly worth to watch the developments in UST very closely.