Fear and Greed: Deribit exploit shocker; Dapper Labs slashes staff; Hong Kong’s crypto hub push

Crypto’s intense, mood-swinging news year rolls on. Bearish bites are probably just in the lead today, unfortunately, with a hack on the Deribit crypto exchange and Dapper Labs staff cuts causing some angst.

Not to mention the market-roiling US Federal Reserve’s string-pulling ways, of course. But as always, there’s a bit of column A (fear-inducing news) and column B to examine.

Hand up, we definitely have a tendency to lean towards the positive crypto narratives in Coinhead, and that’s because we do have belief in the best parts of the sector long term. That said, the gloomy macro climate is still undeniably grey.

A quick check on the crypto market’s popular sentiment tracker – the Crypto Fear & Greed Index:

Post FOMC meeting, the latest Fed 75bps hike, and the pivot-killing rhetoric from Jerome Powell, it’s actually a little surprising to see the index holding pretty much steady.

We’ll check in on it in another 24 hours, but the fact it hasn’t dipped back into “Extreme Fear”, where it was recently languishing for several weeks, is at least a somewhat encouraging sign.

It’s not as if we’re not seeing bearish takes on Crypto Twitter, we absolutely are. Here’s one, from Vailshire Capital hedge fund founder Jeff Ross:

But, for good measure, here’s a counter narrative from the widely followed Dutch analyst Michaël van de Poppe:

The Crypto Twitter we look at it is constantly divided, with probably a leaning towards the bears at present. What’s keeping them crapping in the woods just lately, then? Some freshly laid news items coming up…

‘Fear’

• Yet another concerning crypto-related exploit has ensued in what’s already the worst-ever year for crypto exploits. The Panama-based crypto exchange Deribit has announced it’s halted withdrawals after hackers pocketed US$28 million in Bitcoin (BTC), Ethereum L(ETH), and the stablecoin USDC.

Crypto-related hacks are always concerning, this one especially so because Deribit is a widely used crypto futures and options exchange – the largest when it comes to Bitcoin, according to news site Bitcoin.com.

It’s important to note, though, that it’s not a blockchain that’s been hacked here – and in fact, that’s generally speaking a near-impossible feat. It was a “hot wallet” breach on the exchange’s platform.

Hot wallets are crypto wallets that are accessible online and are used to process withdrawals quickly. They’re high risk when used as storage facilities, however, as their private keys are essentially stored online.

To be safe, they should really only be used to transfer digital currencies, keeping the crypto you don’t plan to use in cold storage, such as a hardware wallet (e.g. Ledger or Trezor).

Deribit has since assured users they’re in a “financially sound position” and that its reserves cover the loss without affecting its insurance fund.

As reported by Decrypt, this news follows reports that NBA Top Shot, which has overall been a highly successful NFT market for Dapper Labs’ over the past year and a half, hit a near two-year low for monthly sales.

• Following last week’s news that the world’s largest Bitcoin mining firm, Core Scientific, is facing potential bankruptcy, another player in this field – Argo Blockchain – has also revealed financial woes.

Shares in Argo (listed on the London Stock Exchange and Nasdaq) plunged earlier this week after the company disclosed that a planned £24 million fundraise will no longer take place.

“While Argo is exploring other financing opportunities, there can be no assurance that any definitive agreements will be signed or that any transactions will be consummated,” reads the company’s statement.

“Should Argo be unsuccessful in completing any further financing, Argo would become cash flow negative in the near term and would need to curtail or cease operations,” it continued.

‘Greed’

Time for the other side of the coin. And if it’s not exactly “greed”-inducing per se, then it’s at least some better news to finish on.

• eToro analyst Simon Peters reminded us via email just now of something possibly flying under the radar amid all the Fed news kerfuffle.

And that’s a Hong Kong government push to turn that influential jurisdiction into a crypto hub.

“The Hong Kong Government has issued a policy statement on digital assets in the region, u-turning on previous skepticism toward the sector and launching a consultation on improving the regulatory environment,” noted Peters.

Hong Kong appears to have “done a full 180” on crypto assets, says the analyst, now describing them as part of “a vibrant sector and ecosystem” while outlining plans to create risk management controls and promote sustainable innovation.

And it’s not alone in “changing its tune to a more melodious rhythm with crypto”, Peters soundly notes.

“The EU, UK, US and other regions are all forging ahead with proactive and conciliatory regulatory frameworks for crypto. It is a potentially exciting time for the sector, which once properly codified, can provide enhanced reassurance to users and businesses while promoting innovation and growth.”