Bisonai DeFi Digest
A weekly crypto briefing brought to you by Bisonai! We collate the most newsworthy stories of the week from a variety of credible sources such as Blockworks, Coindesk and many more.
- Portugal may be no longer a taxfree crypto haven
- Terraform Labs — Terra 2 Soon?
- a16z (Andreessen Horowitz) releases its State of Crypto report for 2022
- 44 countries and central banks meet in El Salvador to discuss Bitcoin
- Is the bottom in or not?
Portugal may be no longer a taxfree crypto haven
Portugal has been a tax-free destination for many seeking to keep their capital gains tax for several years. As many countries and regions such as California have increased their tax on residents, many savvy crypto investors have flocked to the Western European nation over the years in order to get more from their investments. In regards to individuals, Portugal sees cryptocurrencies as actual currencies — not investments so are therefore not taxed. Businesses on the other hand are taxed.
According to The Block Crypto, Portugal’s finance minister Fernando Medina said that crypto assets will be subject to taxation in the near future. Now with Portugal seeking advice from other countries to inform their legislative changes, it appears that the country won’t remain the ‘bitcoin haven’ that it has enjoyed. We will continue to follow this story.
Terraform Labs — Terra 2 Soon?
The collapse of #Terra Luna is undoubtedly one of the largest stories in crypto to date. Having its critics, the previously top 10 projects picked up enormous traction having come from obscurity to being a major player with their $UST stable coin. We previously wrote a blog about how we thought it had the potential to dominate with its investment in #Bitcoin to protect its peg. However, others saw this as its downfall — when the company began protecting its peg with other assets, it was essentially not behaving strictly as an algorithmic stablecoin any longer.
Not without their critics, however, many of the commentaries about how the project could indeed fail were met with backlash not only from investors but also from Terra themselves. Terraform Lab’s outspoken CEO Do Kwon was interviewed in early May and was quoted as saying:
“95% [of coins] are going to die, but there’s also entertainment in watching [them] die too.”
Ironically, both Luna and UST are down 99.9% and have wiped around $US60 billion from the crypto market, not including other projects that were negatively affected by the crash.
The company has now revealed a new ‘revival plan’ this week in order to preserve the Terra ecosystem by essentially forking the chain and offering to mint new Luna tokens for holders of UST. Now that the revival plans are being voted on, it is also being criticized by Binance’s CZ, whose company lost millions in the crash, as well as #Ethereum’s Vitalik Buterin. The Terralabs foundation has lost over 80,000 bitcoin whilst trying to defend the peg and now has a paltry 313 bitcoins left.
In admist the voting for the fork, Kwon and team has been requested but the Korean parliament to appear at a hearing regarding the incident and a Gangnam based law firm LKB & Partners has filed a lawsuit on behalf of ordinary investors.
a16z (Andreessen Horowitz) releases its State of Crypto report for 2022
US based venture capital firm Andreessen Horowitz published their first State of Crypto report this week. The firm, headed by Marc Andreessen, cofounder of the now defunt popular browser Netscape Navigator has been one of the largest investors in cryptocurrency projects over the last several years. In 2021 they started a crypto fund worth US$2.2 billion, at the time the worlds largest.
The a16z report discusses Ethereum’s dominance, Web3s growth and potential to give artists and content creators more recompense, other layer1 blockchains and the rise of Ethereum layer2s and the rise of DeFi.
There is no denying Ethereum’s first-mover advantage and its dominance in the layer1 space. However, that could also be a double-edged sword that locks out many retail users who are unwilling to spend hundreds of dollars for a simple transaction, whereas users of other blockchains pay little in comparison. The report showed a 7 day average of transaction fees paid by users for some of the most popular layer1s — Ethereum being $15.2m in fees whereas #Solana was $62k.
The report also covered #DeFi, after NFTs is undoubtedly one of crypto’s killer apps and has real potential to change the world of finance and more. Until the beginning of the pandemic in 2020, DeFi was relatively unknown except that outside of niche crypto circles, however after blowing up in the ‘DeFi summer’ of 2020, the sector of crypto is continuing to rise and interestingly, according to the to a16z report, DeFi as a sector is the 31st largest US bank by total assets under management. We are still in the very early days of crypto, #web3 and DeFi.
You can download the entire State of Crypto 2022 report here.
44 countries and central banks meet in El Salvador to discuss Bitcoin
El Salvador rarely even registered to most people until it made headlines in 2021 by making bitcoin a national currency, alongside the US dollar. The central American country once synonymous with coffee as the world’s 4th largest exporter of beans; it is now known as the first country in the world to make bitcoin legal tender in the country. It affectionately has the nickname the Land of Volcanos, so it shouldn’t be a surprise that the country is building a ‘bitcoin city’ at the base of a volcano where they will mine bitcoin with natural volcanic energy.
The country is headed by bold President Nayib Bukele, who made the move to legislate and set in place the infrastructure for Salvadorans to use and accept bitcoin in most retail stores and online. El Salvador ranks 104 in terms of GDP and many of its citizens live abroad and send money back to the country in order to support their families and more. In 2020 alone, El Salvador received nearly $6 billion in remittances, which accounted for about 23% of its gross domestic product. By making Bitcoin legal tender with low fees over the Strike network, a layer 2 for bitcoin, Bukele anticipates that it could save people from high fees from services such as Western Union.
The bold experiment is not been lost on other countries and despite the large drawdowns in the cryptocurrency markets, this week #Bukele hosted an event with financial representatives from 44 developing economies at the Alliance for Financial Inclusion’s annual meeting. The meetings started on Monday 16 May to discuss financial inclusion, the digital economy, banking the unbanked, El Salvador’s Bitcoin rollout and its benefits in the country.
Many proponents of cryptocurrencies and bitcoin believe that DeFi and bitcoin can liberate poorer nations from depending on developed nations and the systems set in place by the IMF.
He announced on Sunday night that Paraguay, Angola, Ghana, Namibia, Uganda, Guinea, Madagascar, Haiti, Burundi, Eswatini (Swaziland), Jordan, Gambia, the Honduras, Maldives, Rwanda, Nepal, Kenya, Pakistan, Costa Rica, Ecuador, Egypt, Nigeria, Senegal, Dominica, Mauritania, Congo, Armenia, and Bangladesh would be in attendance. He later sent a tweet that the National Bank of Rwanda, Nepal Rastra Bank, Sacco Societies Regulatory Authority (SASRA), Kenya, State Bank of Pakistan, General Superintendency of Financial Entities of Costa Rica, Superintendence of the Popular and Solidarity Economy of Ecuador, and the Central Bank of El Salvador would also.
It was later announced that Central bankers from Angola, Armenia, Bangladesh, Burundi, Congo, Costa Rica, Egypt, Gambia, Ghana, India, Nambia, Senegal, Sudan, Uganda, and Zambia and 25 other developing countries would be attending. They cheekily tagged the IMF with the hashtag #probablynothing.
One of those bitcoin proponents is Peter McCormack, presenter of ‘What Bitcoin Did’, who went to El Salvador before and after the legislative change to interview locals for a recent short documentary called “Follow the Money”. In his documentary, he focused on Playa El Zonte, a unique region that sought to use bitcoin before the law came into place — it is affectionately known as ‘Bitcoin Beach’. The team behind bitcoin beach were there to help teach the bankers and delegates how they can use lightning wallets to send, receive and pay for transactions.
The event is wrapping up today, 19 May 2022 and we will keep abreast of any future developments regarding bitcoin from any of the countries in attendance.
Is the bottom in or not?
Nobody can predict with 100% certainty which way the market will go. There have been huge macro events such as inflation, recession according to Elon Musk and the Ukraine-Russia War which began on 24 February. The #1 Market Cap ranked cryptocurrency largely dominates the market and when markets tank, it is largely seen as the safest place to park money among all cryptocurrencies out there.
According to a report by Decrypt, representatives from #Huobi exchange believe that the bottom ought to be between $US20–25k and a Bitbank representative believes it could be as low at $US15k. It is worth noting that this is much lower than the low that bitcoin dropped to in May 2021. Famed author Robert Kiyosaki of Rich Dad, Poor Dad believes it is somewhere in the middle at US$17k and says that if it drops that low it is time to ‘back up the truck’ — “crashes are the best times to get rich”.
Other analysts aren’t as pessimistic about the bitcoin bottom. Lead Insights Analyst Will Clemente of Blockware Solutions said in a tweet:
“Now I believe Bitcoin is very close to a multi-generational galactical pico-bottom where I plan to allocate all of my dry powder for my grandchildren’s grandchildren.”
He went on to explain in a series of tweets how he believes due to his on-chain analysis and technical analysis that the bottom is most likely in.
Although the market and traditional markets are extremely volatile, with bitcoin closely correlated to the #Nasdaq, many investors are lumping the entire crypto market into the same category as ‘tech stocks’, which have seen massive drawdowns of late.
