Crypto reacts to global market stress

Crypto reacts to global market stress

Crypto and stocks slid early this week amid fears about China’s property market and the U.S.’s debt-ceiling deadlock. [Bloomberg via Getty Images]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Crypto reacts to global market stress. How Monday’s economic jitters impacted the crypto market.

Music streaming meets blockchain tech. Audius is bringing crypto technology to musicians and fans.

The week in numbers. Breaking down crypto’s most significant figures of the week.

Market Update

Crypto and stock markets sink over Evergrande default fears and U.S. debt-ceiling stalemate

This week, a cloud of ominous news settled over global markets, which saw some of the biggest losses since spring. On Monday, amid fears that Chinese real estate giant Evergrande could default to the tune of $300 billion and concerns that the U.S. could miss its looming debt-ceiling deadline, both the crypto and stock markets fell: BTC and ETH slipped about 10% and the S&P 500 fell nearly 2%. (While the stock market was mixed on Tuesday, BTC continued to fall.) Let’s take a closer look.

  • For two decades, Evergrande had been China’s top real estate developer, presiding over the biggest building boom in history. The firm’s debt crisis sparked economic fears of a global “contagion” — were it to fail, it could trigger cascading global consequences. Hong Kong’s Hang Seng Index dropped 3%, inspiring some comparisons to the collapse of Lehman Brothers in 2008. (Not everyone agreed that the comparison was appropriate.)

  • Nervous investors have also been looking for clues from the Federal Reserve (which began a two-day meeting on Tuesday) about when and how it will begin tapering its monthly $120 billion purchases of government bonds, which has been a major part of the COVID-era stimulus response.     

  • Meanwhile, Treasury Secretary Janet Yellen warned of “economic catastrophe” if the U.S. fails to raise its debt limit before next week’s deadline. In a Wall Street Journal op-ed, Yellen implored Congress to act, urging that “[defaulting] would likely precipitate a historic financial crisis.” Her plea comes as the government’s debt, as a percentage of GDP, has reached the highest level ever recorded.

Why it matters… Investors have plenty to worry about, from Congress’s game of debt-ceiling chicken to cold weather returning with COVID-19 nowhere near under control. But long-view optimists might find a glimmer of hope from the last time markets were this unsettled. From February to March 2020, as markets first reacted to the pandemic, the S&P 500 fell nearly 30% while BTC dropped 50%. Since March 2020? The S&P 500 is up nearly 90% and Bitcoin more than 600% — even accounting for this week’s declines.

Chain Reaction

How blockchain-based music apps could change the music industry

Yesterday, Universal Music Group — the biggest of the three major music-label conglomerates — went public at a valuation close to $53 billion. The IPO was a powerful demonstration of the benefits music-biz giants have reaped from the streaming era. But for artists, the picture is a lot murkier. According to Audius — a blockchain-based streaming platform backed by Pusha T, Katy Perry, Nas, and other stars — just 12% of the $43 billion in revenue generated by the music industry in 2017 went to artists. Audius and a crop of other crypto music platforms aim to change that paradigm. Here’s how: 

  • Audius is a free, decentralized streaming service and one of the most popular non-finance blockchain applications, with around six million users. The platform uses a token called AUDIO for a variety of purposes, from staking to rewarding artists based on the engagement of their fans. Holders can also get access to exclusive content and vote on protocol upgrades. Eventually, 90% of AUDIO tokens will be distributed to artists.

  • Audius recently made a deal with TikTok, allowing its roughly 100,000 artists to upload music to the social network with one click — popular Audius acts include Disclosure, Skrillex, and Steve Aoki. The vast majority of TikTok’s billion users say the video platform is the primary way they discover new music, which explains its ability to vault previously unknown artists like Lil Nas X into viral mega-fame. 

  • Audius isn’t the only decentralized music app gaining traction. Catalog, which bills itself as a blockchain-based version of Bandcamp, has paid out $213,234 to around 100 acts, as of last month. And Songcamp, an experimental blockchain-based “songwriting camp,” allows for collective online collaboration, including tools to help acts fund their projects and distribute them across the internet. 

Why it matters… Many of crypto’s most popular evolutions, like DeFi, have related directly to finance. But Audius users don’t even need to know what crypto is to use the app (which is available via Apple’s App Store and Google Play) — pointing to the potential for crypto-powered, community-governed protocols to transform the entertainment industry by giving both artists and fans a stake.

Numbers to Know

$105.6 billion

Total value of cryptocurrency received by countries in Africa between July 2020 and June 2021, according to blockchain data firm Chainalysis — which also notes the region’s crypto market has grown over 1,200% by “value received” in the last year. 

$5.38 million

Amount earned by artist Monica Rizzolli in less than an hour after selling all 1,024 pieces in her “Fragments of an Infinite Field” collection via the NFT-platform Art Blocks. Each unique piece in the series is created by a computer using an algorithm she wrote — a technique known as generative art. 

300,000 ETH

Amount the Ethereum network has “burned” — or permanently removed from circulation — since August’s EIP-1559 upgrade. EIP-1559 changed the way miners get paid for verifying transactions, with the intention of making “gas” (transaction fees) more predictable.

86%

Percent of institutional investors who say digital assets are “appealing” according to a survey conducted by Fidelity Digital Assets. Also worth noting: 52% of those surveyed already invest in digital assets.

50 

Number of bitcoin ATMs El Salvador has installed in U.S. cities to facilitate commission-free remittances (a.k.a. sending money back home to friends and family). Earlier this month, the Central American nation became the first to make BTC legal tender — in part, according to Salvadoran president Nayib Bukele, to save some of the $400 million each year that was going to wire fees. 

17 hours

Duration of the Solana network’s outage last week. The Ethereum competitor has seen a surge in users in recent weeks, drawn to its low fees and speedy transactions for DeFi and NFT applications. The Solana foundation described the outage as, “in effect, a denial of service attack” — triggered by a wave of “bot-generated” transactions.

Token Trivia

Who invented Ethereum?

A

Satoshi Nakamoto

B

Elon Musk

C

We still don’t know

D

Vitalik Buterin

Find the answer below.

Trivia Answer

D

Vitalik Buterin