A Surging Dollar Keeps Cryptos In Check

Crypto markets declined early on Monday to $914 billion of market cap versus, $934 billion, a day earlier. The Dollar’s surge, pushing the Dollar Index to a fresh 20-year high of 108.17 dragged down cryptocurrencies by more than 2 percent in the past 24 hours.

Caution ahead of the next inflation readings from the U.S., due on Wednesday and the onset of the earnings season also kept markets on tenterhook.

Bitcoin dropped 3.4 percent overnight to $20,366.91. BTC ranged between $21,131.18 and $20,395.39 in the past 24 hours.

Ethereum declined 3.2 percent to $1,137.27. Ether ranged between a high of $1,182.66 and a low of $1,139.91 in the past 24 hours.

3rd ranked Tether (USDT), traded between $0.9996 and $0.9994, and market cap stood at $66 billion.

4th ranked USDCoin (USDC), traded between $1.00 and $0.9997 in the past 24 hours.

5th ranked BNB (BNB) declined a little over 1 percent.

Binance USD (BUSD), ranked 6th overall traded between $1.00 and $0.9986.

7th ranked XRP (XRP) lost around 3.6 percent.

8th ranked Cardano (ADA), 9th ranked Solana (SOL) and 10th ranked Dogecoin (DOGE), all shed more than 5 percent in the past 24 hours.

27th ranked Monero (XMR) added more than 5 percent in the past 24 hours.

49th ranked Quant (QNT) dropped and 69th ranked STEPN (GMT) declined more than 9 percent during the same period.

The ECB has released the July edition of its macroprudential bulletin that looks at the risks and policy implications of certain crypto-asset segments, as well as the potential impact of crypto-assets on climate transition risk. The document titled “A deep dive into crypto financial risks: stablecoins, DeFi and climate transition risk” acknowledges that financial stability risks from crypto-assets are rising and could reach a systemic threshold.

The report notes that the Terra crash highlighted the stablecoins’ risk to financial stability. It states that as the largest stablecoins serve a critical function for crypto-asset markets’ liquidity, a run on or failure of one of the largest stablecoins could have contagion effects for the financial system through large-scale redemptions of reserve assets, such as government bonds or commercial paper. The report therefore recommends that appropriate regulatory, supervisory and oversight frameworks need to be implemented urgently, before stablecoins become a risk to financial stability.

DeFi, the report states is a novel way of providing financial services that eliminates traditional centralised intermediaries and relies instead on automated protocols. DeFi, the report mentions is in many ways subject to the same vulnerabilities as traditional finance, including those caused by excessive leverage and risk taking, liquidity mismatches and interconnectedness. For the said reasons, the report adds that DeFi needs to be effectively supervised and regulated.

As the functioning of certain crypto-assets (like bitcoin) uses a disproportionate amount of energy that clashes with public and private environmental policies and environmental, social and governance (ESG) objectives, the authors also believe that Government intervention is likely.

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