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KuCoin leads $10M funding for Chinese yuan stablecoin issuer

Circle’s investment arm has joined a funding round for CNHC, the issuer of the eponymous stablecoin pegged to the offshore yuan.

The investment arm of major cryptocurrency exchange KuCoin is moving to support new stablecoin initiatives by backing a Chinese yuan-pegged stablecoin issuer.

KuCoin Ventures has led a $10 million investment into stablecoin issuer and blockchain-based payment service provider known as CNHC.

Announcing the news on March 16, KuCoin Ventures said that the funding round included some prominent industry investors, including KuCoin’s investor IDG Capital and Circle Ventures, the investment arm of the USD Coin (USDC) issuer, Circle.

KuCoin chief investment officer and KuCoin Ventures lead Justin Chou told Cointelegraph that the new investment in CNHC is the first time for KuCoin Ventures to invest in a stablecoin-related project.

“KuCoin is always interested in building a stronger infrastructure for the financial system,” Chou said, adding that the world is likely to see more real world asset-backed stablecoins in the near future. He added:

“To ensure stability of the financial market, stablecoin designers need to find a balance between overcollateralization and efficiency. We are happy to see more algorithm-based stablecoins but they need to prove their resiliency."

The investment​​ into CNHC reflects KuCoin Ventures' strategy of backing the Web3 infrastructure in the Asia-Pacific region, Chou said. According to the announcement, KuCoin Ventures also invested $10 million in China’s blockchain project Conflux in early 2022. Chou noted that Hong Kong has a well-established traditional finance ecosystem and has a “real opportunity at becoming the new crypto center of the world” with new regulations and policy for digital assets.

CNHC co-founder Joy Cham told Cointelegraph that the platform launched its offshore yuan-pegged stablecoin CNHC about two years ago. He described the stablecoin as a “more akin to a house settlement tool” referring to CNHC’s limited exposure. According to data from CoinMarketCap, the CNHC stablecoin is only listed on one centralized exchange, TruBit Pro Exchange.

“It will be listed in more centralized and decentralized exchanges in the near future,” Cham added.

The exec also noted that CNHC currently supports settlement service in other major stablecoins, including Tether (USDT) and USD Coin (USDC). Cham also noted that the firm has had some impact due to the recent banking crisis involving Silicon Valley Bank and Silvergate. “Some of the banks are our partners that help us to settle USD, but there’s other banking partners so service is still ongoing,” Cham said.

Related: Do Kwon had the right idea, banks are risk to fiat-backed stablecoins — CZ

On the other hand, KuCoin has had no impact due to those issues as it has no exposure to SVB, Silvergate or Signature Bank, KuCoin CEO Johnny Lyu told Cointelegraph.

“However, the whole market is exposed at varying degrees to USDC and USDT,” Lyu said, adding that removal of crypto from traditional banking could cause “long-lasting implications on the industry.” The CEO stated:

"Bitcoin was born after ‘Lehman Brothers’ yet still grew to mass adoption with about 420 million global users. The recent shutdowns of financial institutions may be the opportunity for crypto to reach mass adoption.”

The news comes amid KuCoin facing a lawsuit in the United States due to alleged violations of offering crypto trading services in New York. In a complaint filed on March 9, New York state Attorney General Letitia James argued that KuCoin violated securities law due to offering to sell and purchase cryptocurrencies that are “commodities and securities” without registration.

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‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

Total crypto market cap takes another hit, but traders remain neutral

The total crypto market cap is at risk of falling below $825 billion, but data shows traders actively adding to their longs and shorts.

The total cryptocurrency market capitalization dropped 8.1% in the past two days after failing to break the $880 billion resistance on Dec. 14. 

The rejection did not invalidate the 4-week-long ascending channel, but a weekly close below $825 billion will confirm a shift to the lower band and reduce the support level to $790 billion.

Total crypto market cap in USD, 12-hour. Source: TradingView

The overall investor sentiment toward the market remains bearish, and year-to-date losses amount to 66%. Despite this, Bitcoin (BTC) price dropped a mere 2% on the week, down to the $16,800 level at 17:00 UTC on Dec. 16.

A far different scenario emerged for altcoins which are being pressured by pending regulation and fears that major exchanges and miners could be insolvent . This explains why the total market capitalization had dropped by 4.7% since Dec. 9.

According to court documents filed on Dec. 15, a United States Trustee announced the committee responsible for part of FTX's bankruptcy proceedings. Among those is Wintermute Asia, a leading market maker and GGC International, an affiliate of the troubled lending platform Genesis. Investors remain in the dark about who the biggest creditors from the failed FTX exchange group are and this is fueling speculation that contagion could continue to spread.

On Dec. 15, The central bank of the Netherlands issued a warning to investors using KuCoin, saying the exchange was operating without legal registration. De Nederlandsche Bank added that the crypto firm was "illegally offering services" and "illegally offering custodian wallets" for users.

Adding to the drama, on Dec. 16, Mazars Group, a company known for its proof-of-reserve audit services for crypto companies, reportedly removed recent documents that detail exchange audits from its website. The firm was previously appointed as an official auditor for Binance's proof-of-reserve updates, a movement that was followed by Kucoin and Crypto.com.

The Bitcoin mining sector has also suffered due to the strong correction in cryptocurrency prices and rising energy costs. Publicly-listed miner Core Scientific was offered a $72 million contingent emergency credit line to avoid bankruptcy. The financial lender requires suspension of all payments to Core Scientific's equipment lenders while Bitcoin remains below $18,500.

The 4.7% weekly drop in total market capitalization was impacted mainly by Ether's (ETH) 5.4% negative price move and BNB, which traded down 15.1%. Consequently, the bearish sentiment significantly impacted altcoins, with 14 of the top 80 coins dropping 12% or more in the period.

Weekly winners and losers among the top 80 coins. Source: Nomics

The Open Network (TON) gained 30% after Telegram launched bidding for anonymous phone numbers sold for TON tokens.

Bitcoin SV (BSV) rallied 11.7% after Craig Wright, the self-proclaimed Satoshi Nakamoto and leader of the altcoin project, appealed to his loss in Norway courts.

Trust Wallet (TWT) saw a 27.2% correction after its parent company (Binance) faced $1.9 billion in withdrawals in 24 hours.

Leverage demand is balanced between bulls and bears

Currently, data shows demand for leverage is split between bulls and bears.

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Perpetual futures accumulated 7-day funding rate on Dec. 16. Source: Coinglass

The 7-day funding rate was near zero for Bitcoin and altcoins, meaning the data points to a balanced demand between leverage longs (buyers) and shorts (sellers) in the period.

Traders should also analyze the options markets to understand whether whales and arbitrage desks have placed higher bets on bullish or bearish strategies.

The options put/call volume reflects a neutral market

Traders can gauge the market's overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A 0.70 put-to-call ratio indicates that put options open interest lag the more bullish calls by 30% and this is bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be deemed bearish.

BTC options volume put-to-call ratio. Source: laevitas.ch

Even though Bitcoin's price failed to break the $18,000 resistance on Dec. 14, there was no excessive demand for downside protection using options. More precisely, the indicator has been below 1.00, so slightly optimistic, since Dec. 12.

Presently, the put-to-call volume ratio stands near 0.88 because the options market is more strongly populated by neutral-to-bullish strategies which favors call (buy) options by 12%.

Derivatives markets are neutral, but the newsflow is negative

Despite the substantial weekly price decline in a handful of altcoins and the 4.7% drop in total market capitalization, derivatives metrics reflect no signs of panic.

There has been a balanced demand for longs and shorts using futures contracts. As a result, the BTC options risk assessment metric remains favorable even after Bitcoin's 8.5% correction following the $18,370 high on Dec. 14.

Ultimately, bulls should not expect the $825 billion market capitalization to hold, which does not necessarily mean an immediate retest of the $790 billion support.

Currently, the lower band of the ascending channel continues to exert upward pressure, but the newsflow looks favorable for bears.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

‘Surgical removal’ of crypto will only weaken USD dominance, commentators say