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Why does the crypto community oppose Worldcoin?

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In this week’s crypto highlights, we explore the price movements of BTC, MKR, XLM, and DOGE. Additionally, this recap includes other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

Worldcoin sparked active discussions amid the WLD token launch

Let’s begin with quite an eye-opening (literally!) drama, and one of the main conversations in the crypto village this week — Worldcoin.

What is Worldcoin?

On July 24, Sam Altman’s crypto project, Worldcoin, announced its official launch, and the release of the WLD native token. Sam Altman is also the CEO of OpenAI, the company behind ChatGPT. Worldcoin’s core product, the World ID protocol, is based on zero-knowledge (ZK) proofs, and aims to establish a secure digital identity for individuals.&

Worldcoin developers envision World ID working like a digital passport, certifying that the person using it is real, without sacrificing their privacy. Users wishing to receive a World ID must personally undergo a biometric screening, which includes a face and iris scan using one of the Worldcoin Orbs (screening devices), located in various parts of the world. In addition to biometric data, users can use a phone number to verify their identity. Once a user has a World ID, they can download the app to claim WLD tokens.

Worldcoin shares the belief that the advancement of artificial intelligence (AI) will blur the lines between humans and machines, posing significant challenges in distinguishing between the two. Worldcoin also recognizes the potential threat of bots endangering human utility. To counteract this, they advocate for the implementation of a universal basic income to safeguard human livelihoods.

Crypto community reaction

Reaction to the Worldcoin release was predominantly negative, especially among crypto enthusiasts. Critics gave voice to privacy risks and labeled Worldcoin’s verification approach as “Orwellian.” Ethereum co-founder Vitalik Buterin published a blog post detailing his concerns about Worldcoin’s vision. Although Buterin stated that so-called “proof of personhood” protocols could become valuable in the future, he also argued that the Worldcoin system has potential issues with privacy, accessibility, centralization, and security.

Others accused Worldcoin of exploiting users in developing countries. In April 2022, MIT Technology Review found the firm deployed “deceptive marketing practices to collect personal data,” giving IOUs for WLD tokens “worth up to $25” to people in various African and Asian countries. At that time, WLD tokens were not released, raising questions about the value of these IOUs as well. In total, Worldcoin claims that it already has over two million users.

In addition, the project was criticized for its tokenomics. WLD supply will be capped at 10 billion tokens for 15 years. Although 75% of the token supply will go to the community, the existing WLD circulation supply is 1%, which may create significant initial centralization issues.

First results

The WNT token was listed on a variety of centralized and decentralized exchanges, reaching a more than $350 million market cap on the release date. However, after significant criticism, the WNT token lost almost 45% of its value within a few days.&

On July 25, the U.K. data watchdog said it is inquiring into the project, hinting that the collection of personal data was questionable. On July 26, Cointelegraph reported that Worldcoin is struggling to find new customers, with an estimated number of new sign ups around 1,000 within the first days of the release. Amid discussions of fallen interest in Worldcoin, Sam Altman shared a video that shows people in Japan lined up to give away their iris scans in exchange for WLD tokens.

Busy crypto regulation week in the U.S.

This week, U.S. officials took a major step toward providing more regulatory clarity in the local crypto space.

On July 19, U.S. Senate lawmakers proposed a new bill that would place stringent anti-money laundering (AML) requirements on decentralized finance (DeFi) protocols. If this bill becomes law, DeFi protocols would be mandated to implement bank-like controls on their user base.

In addition, on July 21, U.S. House Republicans published an act, which aims to create new definitions and exemptions for digital assets, as well as set a registration process for crypto intermediaries with the SEC and CFTC. This bill passed the Congressional Committee on July 26.

One of its components is a process for blockchains to be recognized as decentralized, with the SEC given the chance to contest claims made by token issuers. Consequently, projects will be required to submit information to the SEC, including annual and semi-annual financial details, until the regulatory authorities verify the project’s decentralized status. Once certified as decentralized, the token would be reclassified as a commodity.

Another bill that was passed this week is the Blockchain Regulatory Certainty Act, which “specifically deals with what blockchain-related entities qualify as money transmitters” in the U.S.

The SEC hinted at an appeal in the XRP case

On July 21, the U.S. Securities and Exchange Commission (SEC) added new documents to its lawsuit against Terraform Labs and its CEO, Do Kwon. The agency asked the judge to disregard a portion of the recent decision made in the Ripple lawsuit. This move came in response to a filing from Terraform’s legal team, who asserted that the Ripple rulings bolstered their own argument and supported their plea to have the lawsuit dismissed.

In filed documents, the SEC argued that the recent XRP ruling was flawed and could be subject to appeal due to what they considered “baseless requirements” applied to the Howey test. The SEC’s lawyers criticized the legal reasoning behind the decision, stating that it was in conflict with fundamental principles of securities laws.

The next day, Coinbase’s Chief Legal Officer Paul Grewal said that “hammers only see nails,” regarding the SEC response. On July 26, Stuart Alderoty, Ripple’s Chief Legal Officer, said that an appeal by the SEC could see Ripple consolidate its victory over the regulator even further.

Nasdaq stops its plans for crypto custody service

The U.S. stock exchange Nasdaq abandoned the initiative to launch a platform for storing digital assets, citing the “shifting business and regulatory environment in the U.S.” The service was initially scheduled to launch in the second quarter of 2023.

However, Nasdaq CEO Adena Friedman highlighted that the company remains committed to developing the digital asset business. The exchange is working on a technology platform to “serve a larger global market,” she said.

One sentence news

  • The Wall Street Journal reported that the first trades on the Binance.US exchange might have constituted potential wash trading.
  • Kuwait’s financial regulator, Capital Markets Authority (CMA), published a circular that forbids crypto payments, investments, and mining.
  • The U.K. government rejected a proposal from a House of Commons committee to regulate crypto investments as gambling.
  • Russia banned crypto payments, and paved the way for CBDC, making the “digital ruble” a legal tender.
  • The Wormhole Foundation launched Gateway, an appchain that connects liquidity and users from more than 20 different blockchains to other Cosmos appchains.
  • Namibia approved its first crypto law, regulating the activities of virtual asset service providers (VASP).

75% of the Bitcoin supply is stockpiled by HODLers

This week Bitcoin traders were arguably more focused on macroeconomics and the Federal Reserve meeting. The Fed approved another interest rate hike of 0.25%, but it was expected. According to CME Group’s FedWatch Tool, the odds of an increase stood at almost 99% shortly before the meeting. As a result, the decision didn’t seem to have much impact on Bitcoin markets.

However, China’s Politburo reported on the country’s economic woes, which may potentially slow down local interest in digital assets. Earlier this year, analysts frequently pointed to China’s economic reopening as a significant positive force driving risk assets, including cryptocurrencies. Another bearish factor is that Bitcoin experienced outflows from digital asset funds for the first time in a month.

Glassnode reported that long-term Bitcoin holders (LTH) control 75% of the total supply, which is an all-time high. This metric has an inverse correlation with the BTC price. Typically, dramatic declines in Bitcoin supply in LTH hands corresponds with macro peaks in BTC price. In turn, an increase in LTH supply means that accumulation is still in place.

Furthermore, short-term holders become increasingly active. They are more prone to capitalize on price volatility, which may potentially increase pressure on Bitcoin markets.

Bitcoin continued experiencing low volatility accompanied by slight price decreases. This moved the asset to the 50-day SMA. Daily MACD is on the verge of moving below the zero line, while daily RSI slid to negative territory. This suggests downward movement has the potential to continue, with $28,500 as the next potential target. However, lower timeframes hint at a possible rebound. For that, the asset may first need to sustain above the 20-day EMA.

MKR price surged amid MakerDAO’s buyback program

MakerDAO’s new smart burn mechanism, which involves purchasing MKR from the market and burning it, went live last week. It started to reduce MKR supply, positively affecting the price. At the time of this writing, the MKR price increased by over 25% in a week.&

Notably, the asset continued its rally while several venture capital firms unfolded MKR. This may reduce the risks of exit strategies for MKR in the future.&

In addition, MakerDAO increased its earnings by 343% over the last three months by reducing reliance on the USDC stablecoin, and incorporating yield-generating real-world assets. All of that can potentially support the existing uptrend of the MKR price.

However, the asset reached the overbought zone, and formed a bearish divergence on a daily chart with RSI, indicating that a price correction could follow. The potential target could be the middle of the Bollinger channel on a daily chart.&

XLM continued its upward movement following the Ripple effect

While Ripple and other assets that the SEC previously labeled securities slightly dipped in price, after hints at a potential SEC appeal for the XRP ruling, XLM maintained its bullish momentum. This is noteworthy because XLM and XRP typically move in tandem, sustaining a 90% price correlation.

After XLM’s price surge followed by the XRP ruling on July 13, the asset has been consolidating in a triangle-like pattern, which resembles a pennant. Like flags, pennants hint that the following price movement could be as large as the initial flagpole. As a result, if the price breaks upward, the asset may try to move to the $0.25-$0.30 range.

However, XLM is in the most overbought zone since April 2021, according to the weekly chart. In addition, the asset is facing the 200-week SMA, which could act as a major resistance level. This suggests that the XLM rally has the potential to slow, or a price correction may follow. In the case of a triangle breakout downward, the $0.11 level could become the next potential target.

DOGE price jumped amid Twitter rebranding

On July 24, Twitter rebranded to “X,” and changed its logo. Accompanying the platform changes, Elon Musk updated the header on his own Twitter account, which now contains the Dogecoin symbol. In addition, Twitter’s Chief Executive Officer Linda Yaccarino recently confirmed an expansion into payments and financial services offered on X.

This sparked speculation that advertisers might soon be able to pay in DOGE for ads and other services on the platform. As a result, the DOGE price jumped by almost 15% in a week, moving above the 200-day SMA, and breaking the ascending channel.

Daily RSI approached the overbought zone, but the weekly one remains neutral. The recent correction was accompanied by decreased volume, hinting that bullish momentum could be still in place. However, DOGE tends to drop in price when prevailing speculation calms. This means if X’s expansion into payments doesn’t include DOGE, or there is no news about it for a prolonged period, the asset may quickly lose recent gains.&

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

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Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.


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