Crypto Weekly: Navigating the rumor-mill

The crypto-market went up on Amazon rumors, down on denial
Last week, Amazon posted a job opening for a digital currency and blockchain product lead. This fueled speculation that Amazon is working either on its own token or looking to accept cryptocurrencies as payment. To top it all off, the UK-based newspaper City A.M. published a story yesterday quoting an anonymous source claiming that Amazon is ‘definitely’ working on letting customers pay with Bitcoin by year-end, and in the future, possibly other cryptocurrencies as well. Additionally, the insider claimed that Amazon is also working on its own native token for its ecosystem. Not surprisingly, the crypto-market was keen on the plan, sending Bitcoin up by 15% to over $40,000, causing short positions worth nearly $900 million to be liquidated. After the stock market closed in the US yesterday, Amazon denied the claim via a spokesperson, who said: “Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true.” The denial immediately sent Bitcoin down by 7%, while other major cryptocurrencies tumbled between 5% and 10%. The crypto-space has always been a place filled with rumors impacting the market rather significantly, as the market is very easily influenced by word of mouth. As an investor in the space, it is important to not get carried away. This is not the first time the market has been impacted by rumors of this nature – and it will certainly not be the last.

Goldman Sachs has filed for a DeFi ETF
Goldman Sachs filed yesterday for an exchange-traded fund (ETF) focused on decentralized finance companies – also known as DeFi. The filing comes after the investment bank has made its entry into the crypto-market this year by reportedly launching a cryptocurrency trading desk, and clearing and settling cryptocurrency exchange-traded products (ETPs) for hedge funds in Europe. Even though the new ETF has been launched with the intent to allow clients to gain exposure to DeFi-related companies, there is not really much DeFi exposure in the ETF. By looking at the filing, it says the ETF will closely track the Solactive Decentralized Finance and Blockchain Index. However, the top components of this index are Nokia, Facebook, Alphabet, and Fujitsu along with other companies like Cisco, Visa, IBM, and Microsoft. These are not exactly companies with significant exposure nor products related to DeFi. The headline of this story is misleading in suggesting that this Goldman Sachs ETF would directly hold cryptocurrencies and tokens related to DeFi. Still, it is perhaps a modest beginning from Goldman Sachs to facilitate an ETF that holds physical DeFi cryptocurrencies and tokens down the road.

Binance and FTX to limit leverage to 20 times
In general, cryptocurrency futures exchanges have been notoriously known for letting traders trade with extremely high leverage, and even often letting more inexperienced retail traders trade with extraordinarily high leverage. Maybe this is coming to an end. The largest and second-largest cryptocurrency futures exchange measured on open interest, Binance, and FTX, have lowered the maximum leveraged allowed on their futures to 20 times, down from up to 125 and 101 times, respectively. According to both companies, it has been done to encourage responsible trading. FTX’s founder and CEO, Sam Bankman-Fried said on Twitter following the announcement that he does not think the extremely high leverage is an important part of the crypto-ecosystem, and in some cases, it is not a healthy part of it. He added that the average leverage used on FTX is around two times, meaning hardly any traders use leverage above 20 times. However, the leverage limitation from both exchanges fuels speculation on whether it is to please regulators. For the past couple of months, especially Binance has faced regulatory headwinds by regulators worldwide on different issues not specifically related to their leverage allowance. Nevertheless, regulators are most likely not happy with the high leverage allowance for trading cryptocurrency futures, given the trading limits traditional financial brokers require, especially for retail traders. Therefore, this may have contributed to the Binance and FTX exchanges lowering their leverage limits.