Crypto Wire-Bitcoin’s latest drop

Aug 23 - Cautious investors don't want crypto. Crypto markets dropped sharply towards the end of last week, leaving analysts and investors looking to traditional financial markets for an explanation. Here’s what you need to know:

1. From stocks to bitcoin, soaring US yields cast shadow over risk asset rally

2. Why PayPal’s stablecoin is likely to succeed where Facebook’s Libra failed

3. Bitcoin drops to new two-month low as world markets sell off Bitcoin’s latest drop Bitcoin has fallen sharply, dropping to as low as $25,350 on Tuesday. On Thursday last week, it fell 7.2%, its biggest single-day drop since Nov. 9 2022, which was the day it became clear that Binance wasn’t going to rescue FTX. Now, crypto is caught up in what analysts call a broader “risk-off” move in financial markets, as increased expectations that the U.S. Federal Reserve will leave interest rates higher for longer has caused U.S. Treasury yields to rise over the last month or so, eventually hitting their highest levels since 2007. Rising yields hurt riskier assets, so small companies that burn through investor cash and speculative assets like cryptocurrencies – which conversely did well when rates were low and borrowing was cheap – have been particularly hard hit. But it can’t all be blamed on rates. Analysts also suggested (1) a lack of retail investor interest in crypto at the moment (2) a Wall Street Journal report that Elon Musk’s SpaceX had sold its bitcoin holdings after writing down the value by $373 million (3) low volatility in crypto markets and (4) hopes that the SEC would approve a spot bitcoin ETF starting to fade. Speaking of risk, a report from the Bank of International Settlements found that in developing economies crypto assets have not only failed to deliver on their promises but are also adding to financial risks there. Crypto assets have the “illusory appeal” of being a quick and solution for financial problems, especially in emerging markets, but "have so far not reduced but rather amplified the financial risks in less developed economies," the report said. Meanwhile, Sam Bankman-Fried’s lawyer said he is “subsisting on bread and water” because the jail where he is being held has not given him the vegan diet he asked for. His lawyer said a lack of adequate food and medication at the notorious jail (see last week’s story on that here) makes it harder for Bankman-Fried to prepare for his upcoming fraud trial. Crypto Essentials

* SBF’s prep time: Bankman-Fried’s got an “extraordinary volume” of evidence to review before his trial in October, his lawyers say.

* Coinbase’s win: The U.S. exchange got permission to sell futures on cryptocurrencies to U.S. retail customers.

* PayPal’s pause: PayPal will stop selling crypto to UK customers as it tries to comply with new marketing rules.

* Changes at Circle: Coinbase said it will buy a stake in the company behind USDC, Circle Internet Financial, and shut down the separate body that used to jointly manage it.

* Titan settles: A New York investment adviser agreed to pay over $1 million to settle SEC charges that it misled investors about how clients’ crypto assets were performing, Crypto Graph The crypto derivatives market is currently dominated by offshore exchanges, mainly Binance, and it has shrunk this year as crypto volumes fall. But some are hoping that Coinbase’s approval to sell cryptocurrency futures to amateur investors in the U.S. could revive it.

Click here to read this week’s Cryptoverse column. What I'm reading

* When Facebook tried to launch a global stablecoin in 2019, it failed. But PayPal’s stablecoin plans could prove successful, policy experts say, as lawmakers understand stablecoins better now.

* Reuters opinion columnist Anita Ramaswamy says that, even though stablecoins are benefiting from clearer regulation, they’re still far from delivering on their promise of transforming finance. Here’s why.

* A Dutch payments processor, Adyen, shocked markets when its shares plunged nearly 40% in a single day after weak earnings. Analysts say its valuation had been far too high, which raises questions for the rest of fintech.

(Reporting by Elizabeth Howcroft Editing by Mark Potter)