CoinLoan Weekly: Fed hike fears, vibrant XRP, MiCA approval
After a buoyant climb climaxing at $20,420.51 on Thursday, October 6, BTC saw its fortunes turn. On Friday, October 7, it nosedived below $19,400 on the latest US jobs growth figures. After trading around $19,500 all weekend, the coin sank to a 7-day low of $19,202.76 late on Monday, October 10.
The Bureau of Labor Statistics report pushed the Fear and Greed Index back to 22. While hiring slowed down in September, the Fed has little leeway to soften its next rate hike. For risky assets like crypto, this means less hope for an easing of downward pressure. Meanwhile, BTC’s correlation with gold has grown slightly stronger, reflecting muted volatility.
As of this writing, BTC is trading at $19,227.36, with a 24-hour loss of -1.1% and a 7-day uptick of +0.9%.
Sticking to BTC’s course, ETH rose confidently from under $1,300 and reached a 7-day high of $1,383.46 on Thursday, October 6. The price approached $1,325 the next day and maintained the level through the weekend, save for a slight drop on Sunday, October 9. Monday, October 10, did not bring much change.
Ether showed a strong correlation with BTC. At the start of the US trading day on October 7, the rivals lost 1.7% and 1.9%, respectively, showing higher-than-average volume. Both coins stayed in a slim band through the recent spate of economic releases. On Monday, October 10, ETH and BTC mirrored traditional markets, reflecting expectations of unfavorable CPI data this week.
As of now, ETH is trading at $1,308.98, with a 24-hour slip of -0.8% and a 7-day rise of +2.4%.
XRP outperformed both coins, rising through the week. From a low of $0.453818 on Monday, October 3, it rocketed to $0.538564 on Sunday, October 9. The jobs report had little effect — on Friday, October 7, XRP briefly dipped below $0.49 and bounced back with gusto to nearly $0.52.
Ripple Lab’s recent wins against the SEC have improved investors’ spirits. High-profile supporters expect a verdict in the company’s favor, which may cause the price to go parabolic. On Monday, October 10, despite a sharp sell-off, XRP showed 30-day growth of 45%. The trading volume, still significant, trailed only BTC, ETH, and the top three stablecoins (USDT, USDC, and BUSD).
As of now, XRP is trading at $0.521156, with a 24-hour drop of -3.5% and a 7-day surge of +15.8%.
European Parliament Committee passes MiCA framework
On October 10, the Markets in Crypto Assets Regulation (MiCA) proposal, approved by the European Council, was passed by the European Parliament Committee in a landslide vote. This heralds the advent of a licensing system for crypto exchanges and assets across the 27 EU member states.
The landmark decision followed trialogue negotiations between the EU Council, the European Commission, and the European Parliament. MiCA should come into effect in 2024 following legal and linguistic checks, the Parliament’s approval of the final legal text, and its publication in the official EU journal. Here are the key takeaways.
The purpose of the proposal is to “ensure the proper supervision and monitoring of offers to the public, issuers of asset-referenced tokens should have a registered office in the Union.” It targets all cryptocurrencies and stablecoins, regardless of design, and underscores their potential “significant benefits” for retail holders and market participants.
As a comprehensive framework, the MiCA law will have a far-reaching effect on the crypto industry. Among other aspects, the proposal covers:
- AML measures
- consumer protection
- accountability of crypto businesses
Classification of cryptoassets
MiCA divides cryptoassets into three sub-categories subject to different requirements:
- electronic money tokens, or e-money (cryptoassets referencing an official currency)
- asset-referenced tokens (cryptoassets referencing another value and/or right)
- all other cryptoassets, including utility tokens
As an asset class, cryptoassets are to be supervised by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA). The proposal does not mention decentralized finance or NFTs, which could be tackled in the future.
The EBA will handle all stablecoin-related aspects of the framework. One of the most controversial points is the capping of USD-pegged stablecoins.
- To prevent large-scale incidents like the crash of TerraUSD, stablecoin issuers will have to maintain minimum liquidity and have their reserves protected against insolvency.
- Operations with large coins as means of payment within the eurozone must be limited to 1 million transactions and €200 million ($196 million) worth of daily transactions.
The limitations raise concerns from industry experts, as they would effectively ban the top three stablecoins. USDT, USDC, and BUSD account for three quarters of all crypto trade volumes, well over the proposed limits, according to a joint letter by Blockchain for Europe and the Digital Euro Association. The lobbyists have warned the legislators of “extreme short-term volatility” and “a major outflow of crypto activities outside of the EU.”
Fabian Astic, Global Head of DeFi and Digital Assets at Moody’s Investors Service, commented, “If the directive’s current wording does not change, it will significantly restrict the use of dollar-denominated stablecoins such as USD Coin, Tether, and Binance US.”
The rules may also restrain the bloc’s competitiveness and innovation potential. Yet the European Crypto Initiative remains hopeful the approach will change once the “initial fears for the EU’s financial stability and monetary sovereignty” subside.
The environmental impact assessment should consider “the principle of proportionality and the size and volume of the crypto-asset issued.” The ESMA and the EBA are to draft the technical standards concerning the content, methodologies, and indicators.
The MiCA proposal, first introduced to the European Commission in September 2020, was thrashed out with the European Parliament in June 2022. Its enactment in 2024 gives crypto businesses up to one and a half years for preparation.
On October 10, the EU Parliament also green-lighted a provisional deal on the Transfer of Funds Regulation — a framework focused on compliance standards as part of AML efforts. Like MiCA, it will apply to all EU member states if given final approval.