Welcome to our monthly newsletter. Every month we create an overview of the performance of our Hodl funds, the developments within Hodl, and the latest cryptocurrency news.
March was characterized by the return of positive sentiment within the financial market. Whereas the market initially faced a strong correction driven by the possible escalation of the Russia-Ukraine conflict, it showed a strong recovery and an upward trend in the latter half of the month. The joint effort by NATO and other countries to impose firm sanctions on Russia created an interesting impasse between sellers and buyers of cryptocurrencies.
From an economic standpoint there were several sell signals influenced by the uncertainty of the war (shortage of grain) and sanctions (shortage of oil and gas). On the other side was an increasing group of buyers that bought cryptocurrencies as a safe haven to avoid sanctions and government interference in the monetary system. When the economic consequences of the conflict became clear, the market stabilized and prepared for an upward movement.
The return of the positive sentiment was led by U.S. President Joe Biden who signed the executive order concerning digital assets. The order was positively received by investors as it states that the U.S. is willing to maintain its technological leadership in the sector. However, the positive effect on Bitcoin’s price was suppressed by the uncertainty of the announced interest rate hike by the FED.
When the interest rate hike was only 0.25% instead of the expected 0.50%, the markets were relieved. Investors went risk-on and repositioned themselves in the market, leading the positive trend.
The upwards trend was further incentivized when the Luna Foundation Guard (LFG) announced the acquisition of $10B worth of Bitcoin to support their stablecoin TerraUSD (UST). Over the course of a week, the foundation increased its holdings from 10K Bitcoin to roughly 30K Bitcoin. The strong increase in demand led to a further rally in price.
The foundation is still expected to buy roughly 9 billion dollars which can relieve selling pressure and further incentivize an upcoming rally.
The adoption of cryptocurrencies is increasing and additional regulatory clarity is becoming ever more relevant. Earlier this month, the European Parliament held a vote on a draft proposal concerning the EU’s crypto bill, referred to as Markets in Crypto Assets (MiCA). The proposed draft included a possible ban on cryptocurrencies that operate on Proof-of-Work mining, such as Bitcoin and Ethereum. The proposal was denied, which was good news for Bitcoin enthusiasts.
However, on the last day of the month, there was another vote by the EU Parliament. The draft, driven by Anti Money Laundering regulation (AML), obligates all crypto service providers to identify every individual behind an unhosted wallet that interacts with them. Additionally, every transaction greater than €1,000 would need to be reported to AML authorities.
The approval of the proposal led to an instant correction in cryptocurrency markets as it defies the purpose of privacy in cryptocurrency. In the upcoming 9 to 18 months, the legislation will be further developed and it will become clear what impact this will have on cryptocurrencies and their price.
Conversely, in the U.S., president Biden’s executive order was positively received by the market. The order states that the U.S. should support innovation while mitigating the risks for consumers and businesses. At Hodl we observe an increasing adoption rate of blockchain technology within governments. Countries such as the United Arabic Emirates (Abu Dhabi and Dubai) have been attracting crypto-users and organizations with legal certainties.
Clear legislation and regulation indicates more supervision but also opens the door for regulated institutions such as asset managers, banks, insurance agencies, and pension funds to enter the cryptocurrency market. It becomes clear that the U.S. aims to stay ahead in terms of financial and technological innovation.
Despite the sharp correction at the beginning of the month, the Hodl funds have shown a strong recovery during the latter half. This has led to a positive performance of the Hodl.nl Consensus Fund, Hodl.nl Genesis Fund, and the Hodl.nl Oracle Fund of respectively +28.75%, +26.75%, and +29.87%.
Results March 2022:
Each month we highlight a cryptocurrency, this month it’s Yearn Finance (YFI).
The emergence of cryptocurrencies has made it possible to create a decentralized financial system with corresponding financial services (DeFi). The development of these services allowed users to earn returns on their investments, for example by earning interest on cryptocurrency loans. However, optimizing your returns by yourself can be very complicated and time-consuming.
Yearn Finance aims to provide ready-to-use optimized yield earning strategies for its investors through its DeFi platform. With multiple yield-earning strategies per asset, investors now only need to choose the strategy that suits them best.
This month, we welcome a new addition to the Hodl team. Content Creator Elena Chavez will be helping the marketing department with their next steps in international coverage.
Elena Chavez has joined Hodl in March after obtaining her Ph.D. in Cultural Studies at the City University of New York. Elena will aid Hodl with the creation of unique content such as Market Insights and Whitepapers. Elena has a long list of countries in which she has lived and languages that she speaks. With our sights on expansion, she is going to be a great addition to the team.
Elena: “Overall, I am thrilled at the opportunity to leverage my academic and editorial background while learning new exciting developments in the crypto industry”.
We heartily welcome our new team member!
The Swiss city of Lugano wants to adopt cryptocurrency as legal tender for taxes, goods, and services. The initiative is supported through a partnership with Tether Operations Limited, the tech company behind the largest stablecoin USDT. Tether and the city of Lugano are planning to scale the blockchain possibilities of the city and transform Lugano into a major hub for European cryptocurrency adoption.
At Hodl we have seen an increase in countries who are experiencing a positive change in the regulations of cryptocurrencies. For example in Portugal, investors can take advantage of a favorable cryptocurrency tax system and many facilities are being created for digital nomads. The expectations are that the number of countries with a positive attitude will increase over time, as no nation wants to miss out on economic advances.
Last month, the European Parliament held a vote regarding new legislation on cryptocurrencies. The draft called “MiCA” (Markets in Crypto Assets) consisted of several profound proposals. One of the included proposals made it possible to ban cryptocurrencies who make use of Proof-of-Work mining, such as Bitcoin and Ethereum. According to several parliament members, the technology is too energy consuming and should be submitted to minimum environmental sustainability standards.
We have experienced strong positive developments in the market with regard to sustainability, so the possible ban came for many as a shock. The European Parliament voted against the proposed ban of PoW, however the remaining legislation within MiCa is still topic of discussion.
U.S. investment bank Goldman Sachs has conducted the first-ever over-the-counter (OTC) transaction with cryptocurrency. It was a Bitcoin OTC transaction that was backed by Galaxy Digital, a global crypto investment firm. For the first time, Goldman Sachs did not engage a third party for this transaction, but acted as a principal itself.
We are noticing a big change in sentiment at major investment banks such as Goldman Sachs. Self-executing these transactions shows that the organization has in-house expertise and infrastructure in order to complete future transactions. Even though this was an option contract, it is a first step towards trading cryptocurrency directly. A few years ago, the event of a bank trading cryptocurrency was unimaginable. With the increased adoption we see the demand growing among these organizations.
Do Kwon, founder of Terraform Labs, has announced that the Luna Foundation Guard will acquire $10B worth of Bitcoin to support Luna’s algorithmic stablecoin “TerraUSD” (UST). An algorithmic stablecoin is a cryptocurrency which uses price stabilization algorithms to keep the value of an asset at a certain level, in this case 1 USD. We are noticing that Bitcoin is slowly growing into the role of a scarce store-of-value which can offer a stable increase in value. The adding of Bitcoin to the foundation’s reserves shows trust in the stability of the asset. However, the price of Bitcoin can be negatively impacted by the doings of the foundation, such as a surplus of Bitcoin when the foundation fails.
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