Last week, the digital asset market experienced an unexpected surge, with Bitcoin (BTC) leading the way with an impressive 12% daily gain on Tuesday. This was the first time BTC had increased by double digits within a day since September 2022.
What’s more peculiar is that last week was an objectively bearish week, with the release of the January inflation reading (CPI) coming in a bit more steamy than analysts expected, which sent risk assets down across the board. Yet BTC rebounded quickly to most people’s surprise.
This is an interesting behavior as it shows some potential decoupling of financial conditions of crypto from monetary policy, and hints at some bipolarity in the current market.
Crypto Lens: Layer 2 Solutions and Virtual Machines
The STX token and the Filecoin token, FIL, have been experiencing an upswing in value, as the arrival of the Ordinals protocol and the launch of the Filecoin Virtual Machine (FVM) have caused investors to take note.
The Ordinals protocol has introduced a new narrative of non-fungible tokens (NFTs) and smart contracts on the Bitcoin blockchain, while the FVM will enable developers to design decentralized applications on the Filecoin network.
This news has driven a surge of interest in these two tokens, as investors look to capitalize on the new opportunities they provide.
Industry Shakers
- Hong Kong Proposes Rules for Crypto Trading Platforms
On Monday, Hong Kong proposed rules that would allow retail investors to trade certain "large-cap tokens" on licensed exchanges, in stark contrast to the crypto-related transaction ban in mainland China. This more relaxed regulatory environment for cryptocurrencies will likely create an opportunity for Chinese-founded Web3 companies in exile to return closer to their home. And while the U.S. government continues to implement regulations on the crypto industry, Hong Kong could emerge as a new hub for the virtual asset industry.
- Many Existing Stablecoins Won’t Meet Forthcoming Global Standards: FSB
Stablecoins have come under heavy scrutiny over the past month, with the SEC issuing a Wells Notice to Paxos, the issuer of the BUSD stablecoin. In more recent developments, the Financial Stability Board (FSB) - through its chair Klaas Knot - said that most of the existing stablecoins are unlikely to meet the forthcoming global standards. These recommendations will focus on strengthening the governance frameworks, redemption rights, and stabilization mechanisms for stablecoins.
- Bank of Japan to pilot digital yen in April
The Bank of Japan (BOJ) has announced that it will launch a pilot program in April to explore the possibility of issuing a digital currency, the "digital yen". This marks more than two years since the BOJ first began investigating this space with its central bank digital currency (CBDC) proof of concept experiment in October 2020. The pilot program will be used to develop a system for testing, which will be composed of a central system, intermediary network systems, intermediary systems, and endpoint devices all connected in one structure.
- SEC Cracks Down on Do Kwon and Terraform Labs
Last week, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Terraform Labs, a Singapore-based crypto company, and its CEO Do Kwon, in the U.S. District Court for the Southern District of New York. The SEC alleged that the defendants committed securities fraud to the tune of several billions of dollars. They were accused of violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act. The charges come almost one year after the downfall of Terra Luna, which was a $60 billion ecosystem at the time of its collapse.