Luke Conway

<div id="highlights-block_61e889eac96b6" class="highlights">
 <ul>
 <li>Bitcoin, ether and other cryptos had a rocky day but later rallied as well, with bitcoin retaking $40,000</li>
 <li>The Nasdaq jumped late in the session, ending the day up 3.7% while the Dow increased 1.55%</li>
 </ul>
 
</div>



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After much anticipation, the Fed finally <a href="https://cms.blockworks.co/fed-raises-interest-rates-a-quarter-percentage-point/" target="_blank" rel="noreferrer noopener">announced</a> a rate hike of 0.25% Wednesday. The increase was in line with expectations, but the market's initial reaction was negative. Fed Chair Jerome Powell's opening statement acknowledged inflation well above the target range, blaming supply chain constraints.



"Inflation remains well above our longer-run goal of 2 percent," <a href="https://www.federalreserve.gov/live-broadcast.htm" target="_blank" rel="noreferrer noopener">Powell said</a>. "Aggregate demand is strong, and bottlenecks and supply constraints are limiting how quickly production can respond."



"We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation."



Today's Federal Open Markets Committee (FOMC) meeting is the first of eight this year, Powell said, and the Fed plans to increase rates on a meeting-by-meeting basis.



While equities experienced a dip immediately following the rate hike, they later rallied, with the S&amp;P 500 posting a 2.24% gain on the day. The Nasdaq jumped late in the session, ending the day up 3.7% while the Dow increased 1.55%.


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Signaling that investors were divided on the rate change's potential impact on crypto markets, bitcoin had a bumpy day leading up to the rate hike, but it ended stock trading hours up 5.19%. Bitcoin has recently seen a series of higher lows and lower highs, suggesting a large volatile move up or down is on the horizon.



Aave, a decentralized finance platform that allows crypto lending and borrowing, was crypto’s biggest gainer of the day among the top 100 coins by market capitalization, with a 15.24% jump.


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<h3 class="wp-block-heading">Top stories</h3>



<a href="https://cms.blockworks.co/new-digital-asset-manager-files-for-first-etf/" target="_blank" rel="noreferrer noopener">Story</a>: New Digital Asset Manager Files for First ETFHire 600 New Employees



<ul><li>Digital Funds founder Michael Willis said he expects digital assets to “replace the financial legacy system”</li><li>The company plans to file for a spot bitcoin ETF and other crypto-focused products</li></ul>



<a href="https://cms.blockworks.co/fed-raises-interest-rates-a-quarter-percentage-point/" target="_blank" rel="noreferrer noopener">Story</a>: Fed Raises Interest Rates a Quarter Percentage Point



<ul><li>The central bank signaled seven more rate hikes this year</li><li>Inflation is not likely to decline until the middle of 2022, Powell said</li></ul>



<a href="https://cms.blockworks.co/hsbc-buys-virtual-real-estate-in-sandbox-metaverse/" target="_blank" rel="noreferrer noopener">Story</a>: HSBC Buys Virtual Real Estate in Sandbox Metaverse



<ul><li>”The metaverse is how people will experience Web3 [and] the next generation of the Internet,” HSBC’s Suresh Balaji said</li><li>Rival megabank JPMorgan unveiled a virtual lounge last month in blockchain-based world Decentraland</li></ul>



<a href="https://cms.blockworks.co/the-y-combinator-of-web3-attracts-record-number-of-dao-startups/" target="_blank" rel="noreferrer noopener">Story</a>: The Y Combinator of Web3 Attracts Record Number of DAO Startups



<ul><li>“It looks like [the vast majority of] FAANG engineers and Web3 founders [want] to build in DAO tooling,” Alliance’s Qiao Wang told Blockworks</li><li>Ink Finance, specifically, facilitates mergers and acquisitions for DAOs</li></ul>



<h3 class="wp-block-heading">Going forward</h3>



The looming initial rate hike has finally passed, leaving investors sighing in relief that markets were largely up. But the conflict in Ukraine and its implications for broader geopolitics will continue to cause market uncertainty. Investors should assume volatility is a mainstay in the current market dynamic.



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Market Wrap: BTC, Stocks Rally in Late Session Following Fed’s Rate Increase

<div id="highlights-block_61e889eac96b6" class="highlights">
 <ul>
 <li>Investors may expect a largely dovish stance from the Fed following its initial rate hike, causing markets to jump</li>
 <li>Bitcoin remained flat while major altcoins, such as ether and sol, saw a jump of around 2% or more</li>
 </ul>
 
</div>



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Bitcoin remained flat Tuesday while other cryptocurrencies and equities rose despite the likelihood of pending Federal Reserve rate hikes and a worsening conflict in Ukraine.



<meta charset="utf-8">Fed Chair Jerome Powell is scheduled to speak Wednesday after the regulator unveils its next move on interest rates.



The Fed is expected to raise interest rates by a quarter percent in its first increase since 2018. Earlier this month, Powell <a href="https://www.youtube.com/watch?v=0iKuhpwa0PE" target="_blank" rel="noreferrer noopener">testified before Congress</a>, saying "I’m inclined to propose and support a 25 basis point rate hike." 



The central bank is "prepared to move more aggressively by raising the federal funds rate by more than 25 basis points," he added in regard to the rapidly rising inflation.



But the ongoing situation in Ukraine and its effect on the market may push the Fed to be less aggressive with rates to avoid recession. Investors may expect the Fed to remain largely dovish after its initial rate hike, which could explain Tuesday's jump in stocks.



All major US indices were up on the day, with the S&amp;P 500 rising 2.14% and the Nasdaq and Dow rising 3.16% and 1.82%, respectively.


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Bitcoin has slowly consolidated over the last few weeks, forming higher lows — but also lower highs. The most popular cryptoasset is likely due for a large spike in either direction. Bitcoin ended stock trading Tuesday down by 0.39%, with ether pushed 1.96% higher.



The Graph, an indexing protocol for querying Ethereum and other networks, was crypto’s biggest gainer of the day among the top 100 coins by market capitalization, with an 18.34% pop.


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<h3 class="wp-block-heading">Top stories</h3>



<a href="https://cms.blockworks.co/consensys-plans-to-redesign-metamask-and-hire-600-new-employees/" target="_blank" rel="noreferrer noopener">Story</a>: ConsenSys Plans To ‘Redesign’ MetaMask and Hire 600 New Employees



<ul><li>MetaMask eclipsed 30 million monthly active users in January</li><li>Proceeds from the round, led by ParaFi Capital, will be converted to ether</li></ul>



<a href="https://cms.blockworks.co/hashdex-set-to-launch-web3-etf-in-brazil-on-march-30/" target="_blank" rel="noreferrer noopener">Story</a>: Hashdex Set To Launch Web3 ETF in Brazil on March 30



<ul><li>The fund will allocate to digital assets native to smart contract blockchains such as Ethereum, Cardano and Solana</li><li>Hashdex has more than 250,000 investors in its products globally</li></ul>



<a href="https://cms.blockworks.co/binance-us-inches-closer-to-approval-in-all-50-states/" target="_blank" rel="noreferrer noopener">Story</a>: Binance.US Inches Closer to Approval in All 50 States



<ul><li>Binance.US is now available in Louisiana, making the exchange accessible in 45 states</li><li>Different states require different licenses from various regulatory agencies, making approval a lengthy process, Binance.US said</li></ul>



<a href="https://cms.blockworks.co/el-salvadors-volcano-bond-could-launch-this-week/" target="_blank" rel="noreferrer noopener">Story</a>: El Salvador’s ‘Volcano Bond’ Could Launch This Week



<ul><li>The so-called “volcano bonds” would be the first bitcoin-backed bonds issued by a country</li><li>The International Monetary Fund has urged El Salvador to remove bitcoin as legal tender, citing volatility and additional risk for the country’s citizens</li></ul>



<h3 class="wp-block-heading">Going forward</h3>



Investors should be prepared for Wednesday's rate hike announcement and Fed Chair Powell's speech, which are likely to move markets. The unfolding situation in Ukraine and its geopolitical implications are also straining on markets, leading to further uncertainty and volatility. 



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Market Wrap: Stocks, Altcoins Rise Despite Rate Hikes and Ukraine Conflict

Sebastian Sinclair

<div id="highlights-block_6226827b5bc47" class="highlights">
 <ul>
 <li>Coinbase said it has blocked the accounts and has shared the blocked addresses with the US government</li>
 <li>The exchange said it is working with authorities to monitor sanctions lists and screen individuals demonstrating &#8220;high-risk&#8221; behavior</li>
 </ul>
 
</div>



Coinbase has blocked 25,000 wallets addresses linked to what the cryptocurrency exchange believes are Russian individuals and entities engaged in illegal activity.



According to a blog post on Monday, Coinbase&#8217;s Chief Legal Officer Paul Grewal said many of the accounts had been identified through the exchange&#8217;s own &#8220;proactive&#8221; investigations.



The move is part of a wider response to the invasion of Ukraine by Russia, the exchange said. The addresses have been shared with the US government to &#8220;further support sanctions enforcement.&#8221;



<blockquote class="wp-block-quote">&#8220;Sanctions play a vital role in promoting national security and deterring unlawful aggression, and Coinbase fully supports these efforts by government authorities,&#8221; the post said.</blockquote>



The move comes days after Coinbase CEO Brian Armstrong said in a <a href="https://twitter.com/brian_armstrong/status/1499622118224392195?s=20&amp;t=8S8A3UaVzTgvFIsN58Cf9w" target="_blank" rel="noreferrer noopener">tweet</a> last Wednesday his company didn&#8217;t think there is a &#8220;high risk&#8221; of Russian oligarchs using crypto to avoid sanctions.



&#8220;Because it is an open ledger, trying to sneak lots of money through crypto would be more traceable than using US dollars cash, art, gold, or other assets,&#8221; Armstrong said.



Exchanges in the US and abroad have agreed to follow sanctions orders but have <a href="https://cms.blockworks.co/crypto-is-a-lifeline-for-russian-citizens-coinbase-ceo-says/" target="_blank" rel="noreferrer noopener">refused to blanket-ban</a> Russians on the basis of their nationality as a response to the ongoing Ukrainian-Russian conflict.



The Russian military moved into Ukrainian territory Feb. 24 under the orders of President Vladimir Putin after weeks of encirclement and warning from US intelligence. The conflict has sparked a humanitarian crisis and drawn condemnation from Western powers — including sweeping sanctions designed to cripple Russia&#8217;s economy.



Under that guidance, Coinbase said it is proactively blocking access to sanctioned actors during the onboarding of new user signups by checking accounts against a list of sanctioned individuals and entities. The exchange also said it is detecting attempts to evade sanctions through an updated list it uses for screening.



<h3 class="wp-block-heading">Crypto is transparent by nature</h3>



Coinbase said that crypto naturally deterred common approaches to sanctions evasion and pointed to fiat currency, laundered through traditional financial institutions, as the most common way to get around them.



It also pointed to countries like Iran using shell companies to exploit the financial system and evade sanctions.



&#8220;An entire money laundering industry has emerged to hide assets in ordinary fiat currency using these techniques,&#8221; the exchange said.



By contrast, crypto and digital asset transactions are &#8220;traceable, permanent and public&#8221; and &#8220;enhance&#8221; Coinbase&#8217;s ability to &#8220;detect and deter&#8221; evasion when compared to the traditional financial system, it said.



Coinbase has come under fire in the past, particularly from the digital rights group Electronic Frontier Foundation in 2020 over how the exchange manages requests by law enforcement for users&#8217; private financial data.



&#8220;We believe we can balance these interests by continuing to support law enforcement efforts while promoting policy frameworks that respect individual privacy,&#8221; Coinbase said.



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Coinbase Blocks 25,000 Accounts Linked to Russia To ‘Support’ Sanctions

<div id="highlights-block_62200f71c9e13" class="highlights">
 <ul>
 <li>Democrats in the US are seeking answers from the Department of the Treasury over its effectiveness to monitor Russian evasion of sanctions using crypto</li>
 <li>Questions come as bitcoin&#8217;s rise against the ruble has skyrocketed in recent days</li>
 </ul>
 
</div>



Four Democratic Senators have asked the Treasury to define its strategy for monitoring and enforcing crypto sanctions compliance following concerns Russia may be using digital assets to evade its economic penalties.



In a <a href="https://www.warren.senate.gov/imo/media/doc/2022.03.01%20Letter%20to%20Treasury%20re%20OFAC%20crypto%20sanctions%20enforcement.pdf" target="_blank" rel="noreferrer noopener">letter</a> penned to Treasury Secretary Janet Yellen on Wednesday, Senators Elizabeth Warren, Mark Warner, Sherrod Brown and Jack Reed voiced their concerns that &#8220;criminals&#8221; and &#8220;rogue states&#8221; are using crypto as a &#8220;new means to hide cross-border transactions for nefarious purposes.&#8221;



The crisis in Ukraine has all but reenergized the US&#8217;s efforts to crack down on what it perceives as criminal-related crypto activity.



<blockquote class="wp-block-quote">&#8220;Concerns have become even more urgent given the sanctions imposed on Russia after its invasion of Ukraine and reports that Russian entities are preparing to blunt some of the worst effects of the sanctions that have been levied on the country by using the array of “cryptocurrency-related tools as its disposal,&#8221; the letter said.</blockquote>



The Treasury defines sanctions as <a href="https://home.treasury.gov/system/files/136/Treasury-2021-sanctions-review.pdf" target="_blank" rel="noreferrer noopener">economic and financial tools</a> of &#8220;first resort&#8221; used to address a number of threats to national security, foreign policy and the economic health of the US.



Following Russia&#8217;s invasion of Ukraine, the West has imposed economic restrictions on the former Soviet state, hoping to apply enough pressure elicit a ceasefire and troop withdrawal.



Sanctions, while not yet fully implemented, are already sending shockwaves across the global financial ecosystem with some assets fairing better than others.



As a result, Russia&#8217;s largest lender, Sberbank, lost 95% of its value on the London stock exchange on Wednesday following a run on deposits. Other London-listed stocks, including Lukoil, Novatek and Rosneft, also suffered significant hits. Russia&#8217;s ruble collapsed and is now trading at less than a penny ($0.0098).



In anticipation of the senators concerns, Jake Chervinsky, head of policy at the Blockchain Association, a Washington-based industry group, <a href="https://twitter.com/jchervinsky/status/1498786025438650369" target="_blank" rel="noreferrer noopener">took to Twitter</a> to argue that crypto cannot be used to mitigate sanctions.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ Russia can&#39;t &amp; won&#39;t use crypto to evade sanctions. Concerns about crypto&#39;s use for sanctions evasion are totally unfounded. They fundamentally misunderstand: &#8211; how sanctions work &#8211; how crypto markets work &#8211; how Putin is actually trying to mitigate sanctions I&#39;ll explain 🧵&mdash; Jake Chervinsky (@jchervinsky) <a href="https://twitter.com/jchervinsky/status/1498786025438650369?ref_src=twsrc%5Etfw">March 1, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In particular, he wrote, &#8220;US persons around the world are cutting ties with Russian [Specially Designated Nationals And Blocked Persons] right now, regardless of what payment systems they were using previously.&#8221;



<blockquote class="wp-block-quote">&#8220;There&#8217;s zero reason to think crypto&#8217;s existence will convince any of them to willfully violate sanctions laws, risking fines &amp; jail time.&#8221;</blockquote>



Meanwhile, crypto is <a href="https://cms.blockworks.co/market-wrap-bitcoin-eth-see-massive-pump-as-russian-ruble-crumbles/" target="_blank" rel="noreferrer noopener">reported</a> to have responded favorably to affected Russian oligarchs and businesses seeking financial shelter.



&#8220;Trading volumes between the Russian ruble and Bitcoin have spiked to their highest level since May 2021 in recent days following the wave of sanctions announcements,&#8221; the senators said in their letter.



<h3 class="wp-block-heading">Democrats request more from crypto community </h3>



The letter also provides specific examples of what the US sees as the crypto community&#8217;s disregard for financial law. 



One such instance includes mining company Marathon Digital&#8217;s refusal and then backflip in May over its decision to process transactions from wallets listed on the Office of Foreign Assets Control&#8217;s (OFAC) Specially Designated Nationals and Blocked Persons List.



OFAC is the Treasury&#8217;s financial intelligence and enforcement agency focused on issuing and enforcing sanctions based on US foreign policy and national security objectives.



Another instance included the mention of DeFi and its use of smart contracts, that seek to supplant brokers, banks and financial intermediaries, as a growing threat to financial stability and sanctions controls.



&#8220;The cryptocurrency industry may not be fulfilling its responsibility to comply with US sanctions,&#8221; the letter reads. &#8220;<a href="https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf" target="_blank" rel="noreferrer noopener">OFAC’s October guidance</a> notes that many “members of the virtual currency industry implement OFAC sanctions policies and procedures months, or even years, after commencing operations.&#8221;



As such, the four Democrats said they are seeking information from the Treasury over measures the department is intending to take in relation to the OFAC&#8217;s guidance to enforce sanctions compliance by crypto participants.



Questions were also put forth by the senators to the Treasury including how OFAC works with foreign governments to ensure crypto does not avoid sanctions, challenges faced by the agency under the October guidance and how many times self-disclosed sanctions violations have occurred.



A further two questions were asked relating to how DeFi&#8217;s (decentralized finance) growth has contributed to &#8220;maligned actors'&#8221; ability to avoid sanctions and the agency&#8217;s capacity to enforce them as well as what further legal tools and funding are required to avoid Russia&#8217;s evasions.



The senators are requesting a response to their questions along with information by no later than March 23.



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US Democrats Ask Treasury What Effect Cryptoassets Have on Russian Sanctions

Michael Bodley

<div id="highlights-block_621909b75a046" class="highlights">
 <ul>
 <li>Bitcoin and ether both plunged more than 10% on Thursday before recovering to notch modest 24-hour gains</li>
 <li>Crypto funding behind the conflict raises the possibility of quicker regulation, industry participants say</li>
 </ul>
 
</div>



While the crisis in Ukraine roils global equity and digital asset markets, bitcoin and other cryptocurrencies are increasingly seen as risk assets in the eyes of institutional traders.



Recent shocks have <a href="https://cms.blockworks.co/bitcoins-plunge-on-ukraine-invasion-undermines-status-as-digital-gold/" target="_blank" rel="noreferrer noopener">hindered the premise</a> of bitcoin as digital gold, or a store of value — its standing as a bellwether investment in times of turmoil has likewise been called into question.



Bitcoin and other cryptocurrencies, including ether, plunged more than 10% Thursday as the Russian incursion into Ukraine started, before bouncing back to book modest gains on the day. Digital assets also continued to rise Friday as traders appeared to shake off the impact of medium- and longer-term implications of the invasion.



Kevin Kang, co-founder of digital asset hedge fund firm BKCoin Capital, attributed the recovery to “short covering and equities recovering earlier losses.”



Indeed, bitcoin has traded in near tandem with stocks as of late. Wary of the correlation, big-time traders have largely stayed on the sidelines of the latest market moves, according to Rance Masheck, CEO of trading platform <a href="https://www.ivestplus.com" target="_blank" rel="noreferrer noopener">iVest Plus</a>.



“Overall, [crypto] moved with the way the US market moved,” Masheck said. “Some of it came back, just like the market came back, but the big players aren’t jumping in or bailing out.”



iVest data show a decline of about 50% in bitcoin trades over $100,000 from the same time last week — plus, the firm recorded a net outflow of a modest $19 million, indicating few directional bets.&nbsp;



Bitcoin was up 9.6% in the last 24 hours as of midday Friday, while showing a weekly decline of -2.9%. Ether, meanwhile, increased 10.7% in the last day, paring week-long losses to -5.6%.&nbsp;



Volatility shows few signs of slowing.



“Historically, the day of the invasion marked a local bottom in the market as uncertainty dissipates, but there are a lot of talks about how Russia may be just starting and may go into Poland and other near NATO nations, which will put the US in a limbo,” Kang said. “There are still a lot of uncertainties in the market. We expect the volatility to continue.”&nbsp;



Brian Brooks, CEO of bitcoin mining and crypto technology company Bitfury, said bitcoin is trading as it should in a risk-off environment where investors “are going to retreat to Treasurys and cash for a short period of time.”



Other macro factors are at play behind recent market volatility, too, he said — including looming tax bills on the horizon that traders may not have budgeted for. A recent drying up of liquidity hasn’t necessarily helped matters either.



“Even though bitcoin in part has an element of store of value to it, it’s still thinly traded enough that it’s acting more like a risk asset,” Brooks said. “Other than bitcoin, the right way to think about crypto tokens is they’re risky internet stocks — and internet stocks are way down.”



Meanwhile, the growing prospect of rising interest rates in the US — expected as a means to tamp down runaway inflation — is likewise weighing on crypto markets, according to David Tawil, president of cryptocurrency hedge fund firm ProChain Capital. Ongoing supply chain jams are also roiling traditional financial instruments and digital assets, Tawil said.



“Clearly, the downdraft in the asset class has been because the dominant feature has been, essentially, a growth-tech story, a risk-on asset,” Tawil said. “Therefore, when we get into a risk-off environment, it’s going to trade down, including inflation, rising rates and now geopolitical instability.”



The Ukraine tensions also raise the possibility of sanctioned Russian oligarchs turning to crypto to transfer money as banks have cut them off, Masheck said — as well as the government itself tapping digital assets to circumvent traditional finance. It heightens the prospect of US regulators taking a faster pace as both Ukraine and <a href="https://cms.blockworks.co/as-russia-tests-digital-ruble-plans-for-broader-crypto-regulation-are-uncertain/" target="_blank" rel="noreferrer noopener">Russia</a> have moved to legalize and regulate the space.



“Obviously, those sanctions will have some level of impact, but crypto allows for a little bit of a circumvention of some of that,” he said.



Masheck and Brooks both expect bitcoin to behave less like a risk asset and lose its correlation to stocks as the asset evolves.



“As we move forward here, I think we’ll start to see more of a divergence between what US markets are doing and what’s happening in crypto,” Masheck said.



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Ukraine crisis