Although we are entering what is traditionally a quiet time of the year, the crypto world is still going through important changes in terms of market dynamics and regulation. Here are three key developments that emerged this week:
- The EU regulator is upping the ante on crypto regulation
- Ether flips bitcoin in options markets
- Aave stablecoin is a natural progression
ESMA is stepping up the pace of crypto regulation preparations
The European Securities and Markets Authority (ESMA) has asked companies to provide trading data on crypto asset transactions, including spot trades and derivative products. This is not unexpected in the context of recently adopted legislation at EU level, but is certainly evidence that the regulator is now starting to flex its muscles.
In principle, this is not a bad thing. The DeFi and broader crypto space has been under significant pressure over the past few months due to market downturns. As this causes some less stable projects to fail, the sector is coming under closer scrutiny, which is to be welcomed.
Of course, there are limits to the balance of power in regulatory oversight, but overall it’s a good thing for businesses, consumers, and investors looking to capitalize on the opportunities in this space. We are at a really important tipping point where the addition of regulatory oversight will provide important confidence and reassurance that DeFi has an exciting long-term future.
Ether Flips Bitcoin Options – Full Flip Ahead?
Discussion of the merger taking place has sparked much speculation as to whether Ether – the Ethereum network’s native token – is capable of overturning Bitcoin in terms of market cap and token price.
According to reports in various media outlets, Ether has actually flipped Bitcoin in certain options trading markets for the first time ever. But while both tokens actually represent crypto numbers one and two respectively, they both exist as quite different things, making comparison not easy.
For his part, Ether is being watched extremely closely as The Merge approaches. Moving from proof-of-work to proof-of-stake protocols at this scale could mean nothing short of ground tremors. Ethereum as a network and platform is very influential, so the ripple effect in DeFi and crypto more broadly should not be underestimated.
However, as the DeFi space grows and evolves every day, Ethereum is just one of many options for users, investors, and businesses. As the sector works to emerge stronger than ever from the current challenging climate, we will see some real winners emerge and competition remain robust.
Aave stablecoin is a natural progression
The Aave DAO has approved the launch of a stablecoin called GHO for the record. It’s a positive democratic development and a natural progression for the platform.
The stablecoin market is a growing area, both in terms of market cap and influence in the crypto-asset and DeFi arena. Stablecoins offer users important ramps of entry, so it is not surprising that the space is growing exponentially. Interoperability between DeFi and TradFi is also becoming increasingly important, with stablecoins being the best solution for this.
As DeFi continues to evolve, this will only grow. Over the longer term, we see the two spaces becoming so entangled that the point at which TradFi ends and DeFi begins will be quite difficult to pinpoint. The pivot for this will be stablecoins.
Aave’s stablecoin is backed by a basket of crypto assets, which is especially important in the current environment, which has seen some stablecoin algorithmic failures. Ultimately, projects like Aave are only as strong as their technology, so building a resilient and sustainable stablecoin is key here.