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First Mover Asia: Crypto’s Institutional Future May Be Incompatible With Litecoin’s Privacy Protecting Features; Bitcoin Falls

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·7 min read
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Don't miss CoinDesk's Consensus 2022, the must-attend crypto & blockchain festival experience of the year in Austin, TX this June 9-12.

Good morning. Here’s what’s happening:

Prices: Bitcoin and most major altcoins spent much of Wednesday in the red.

Insights: South Korean exchanges are delisting litecoin.

Technician's take (Editor's Note): Technician's Take is on hiatus today.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.

Prices

Bitcoin (BTC): $30,285 -2.5%

Ether (ETH): $1,798 -0.01%

Biggest Gainers

Asset

Ticker

Returns

DACS Sector

Algorand

ALGO

+4.4%

Smart Contract Platform

Cardano

ADA

+4.2%

Smart Contract Platform

Chainlink

LINK

+2.1%

Computing

Biggest Losers

Asset

Ticker

Returns

DACS Sector

Cosmos

ATOM

−4.9%

Smart Contract Platform

Internet Computer

ICP

−4.2%

Computing

Litecoin

LTC

−3.1%

Currency

Bitcoin, Ether and Most Other Major Cryptos See Red

Home, home in the range...

Bitcoin remained close to the middle of the price range it has been occupying for much of the past month since the collapse of the terraUSD stablecoin (UST) and the LUNA token that supported it.

The largest cryptocurrency by market capitalization was recently trading at $30,300, down roughly 2.5% over the past 24 hours. Ether, the second-largest crypto by market cap, was changing hands at about $1,800, about flat over the same period. Most other major cryptos spent much of their day in the red with DOT and AVAX recently down over 3% and SOL declining more than 2%. LINK was among the winners, rising approximately 2%.

Crypto prices, which have largely correlated to stocks, dovetailed again with major indices. The S&P 500 fell about 1%, while the Dow Jones Industrial Average and tech heavy Nasdaq declined a little bit less as investors continued their watchful waiting for clearer indications on the direction of inflation and the economy.

This week's signs have been decidedly negative with the World Bank cutting its forecast for economic growth this year from 4.1% to 2.9% amid fears of stagflation – a toxic combination of slowing growth and rising prices – pessimistic inflationary comments by U.S. Treasury Secretary Janet Yellen at a Senate Finance Committee hearing, and a profit warning by Target that sent retail stock prices tumbling Tuesday. Meanwhile, the fallout from Russia's invasion of Ukraine continued with the price of Brent crude oil, a widely regarded measure of energy markets, soaring above $122, up nearly 60% since the start of the year.

Cryptos have struggled against this wider backdrop and because of brewing uncertainties in the space, including not only the Terra debacle but regulatory uncertainty and problems with other protocols.

"BTC fundamentals are intact, but without regulatory clarity, which is coming, we may stay range-bound, "3iQ Digital Asset's Head of Research Mark Connors wrote to CoinDesk.

Connors also noted the failure of the Ethereum 2.0 migration as a testnet to occur. "In our opinion, proof-of-stake may be a 2023 reality, so not constructive for ether," he wrote.

Markets

S&P 500: 4,115 -1%

DJIA: 32,910 -0.8%

Nasdaq: 12,086 -0.7%

Gold: $1,852 -0.03%

Insights

Major Korean Exchanges Are Delisting Litecoin

The last time Litecoin was relevant was when it was the subject of a fake news release about a partnership with Walmart.

But Litecoin finds itself in the news again as major Korean exchanges are delisting its LTC token because of privacy upgrades involving the MimbleWimble protocol, designed to make transactions confidential and virtually untraceable.

Korea’s largest exchanges cite the nation's law on the "Reporting and Use of Specific Financial Transaction Information" as the reason they need to de-list the tokens, but this isn't a Korea-specific thing. Korea's law was designed to align with the Financial Action Task Force's (FATF) travel rule, a set of anti-money laundering standards adopted by regulators and financial institutions worldwide that requires the collection of customer data around transactions. Every major economy understands this and has implemented similar rules.

Rules like this are the only reason institutions can even think about adopting crypto. For institutions, compliance is key, and they need to stay miles away from anything that even smells like money laundering.

Many major banks know what happens if they get caught: fines in the billions. HSBC, Standard Chartered and others have all been hit with mega-fines for insufficient anti-money laundering controls.

Crypto’s future is in institutional adoption, but there are certain things that just won’t work. While financial privacy is important and exists in crypto via the difficulty in identifying owners being blockchain wallets, financial anonymity is where the line is drawn. Making it impossible to track transactions ensures that institutions must separate themselves from the project and play no part in it.

Certainly there are other protocols out there that are designed to obfuscate transactions. Tornado Cash comes to mind, and is often used in the same sentence as “stolen funds.” But even Tornado Cash doesn’t completely mix anonymity with freedom to transact: Wallets sanctioned by OFAC are blocked. Experts who have previously spoken to CoinDesk have said that without this happening, OFAC would be actively targeting the protocol.

Litecoin mixing anonymity with an absence of such controls is going to be a headache for exchanges that list the LTC token. Korean exchanges are said to be particularly sensitive to regulatory affairs, so it’s natural that they would delist it first. But others are sure to follow. Perhaps Binance, battling a reputational challenge as a haven for cybercrooks, will be next?

Technician's take

(Editor's Note: Technician's Take is on hiatus today)

Important events

Consensus 2022 by CoinDesk

10 a.m. HKT/SGT(2 a.m. UTC): China imports/exports (May)

10 a.m. HKT/SGT(2 a.m. UTC): China trade balance/USD (May)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Bitcoin Back Above $30K, Crypto’s Role in Russia-Ukraine Crisis, and Meme Economy Explained

Russia's invasion of Ukraine has challenged crypto exchanges on their commitment to immutable transactions. Elementus CEO and co-founder Max Galka joined "First Mover" to share his take on crypto's role in the Russia-Ukraine war. Edward Moya of Oanda shared his outlook on crypto as inflation pressures weigh on investors. Plus, "MemeAnalysis" host Chris Gabriel explained why he thinks memes are more than an internet joke. Also, Micah Johnson, a former Major League Baseball player and speaker at Consensus 2022, shared his journey into non-fungible tokens (NFT).

Headlines

Arrington Capital Launches $100M Growth Fund for Moonbeam Ecosystem: The fund, in partnership with the Moonbeam Foundation, will back new projects and protocols on the EVM-compatible Polkadot parachain.

Outgoing French Lawmaker Calls for Fossil-Based Crypto Mining Ban, DAO Legal Status: Europe needs to stop dithering and capture the crypto opportunity, Pierre Person says.

Micah Johnson: From MLB to NFT Superstar: Once of the Los Angeles Dodgers baseball team, Micah Johnson has built an entire universe around his character Aku, a young boy wearing an astronaut’s helmet. Trevor Noah, Pusha T and Tyra Banks are fans.

Galaxy Digital Leads $20M Funding Round in DeFi Firm Skolem: Skolem provides data and trade execution services for institutions to access decentralized finance markets.

Key US Senators Introduce Crypto Bill Outlining Sweeping Plan for Future Rules: Kirsten Gillibrand and Cynthia Lummis release the long-awaited strategy that favors the Commodity Futures Trading Commission as a crypto watchdog and wipes away tax worries for purchases of less than $200.

Longer reads

'I Jumped in With All 4': Legendary Cryptographer David Chaum on the Future of Web 3: The DigiCash founder has been advocating for – and building – online privacy tools for decades.

Today's crypto explainer: Staked Ether Discount After Terra Collapse a Sign of Liquidity Crunch in Crypto

Other voices: Crypto meltdown is wake-up call for many, including Congress (AP)

Said and heard

“As we think about stablecoins and this guidance, and this is something we have been working on before the events of last month, really our goal is to accomplish those things for the stablecoin market, the safety and soundness of institutions, stability of the marketplace and consumer protection." (NYDFS Superintendent Adrienne Harris to CoinDesk) ... "Although the moratorium, limited as it is, will likely discourage bitcoin miners from setting up shop in the state, it could be seen as an opportunity. During the two-year freeze, active bitcoin miners and even new businesses looking to hang their shingle can proactively go green." (CoinDesk columnist Daniel Kuhn). ... "Millions of Americans are forced to ration or go without prescription drugs because of their high cost. Yet, Congress has so far failed to pass legislation to lower drug prices." (The New York Times op-ed)