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Tom Rodgers
Tom Rodgers Head of Research
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ETC Group Crypto Minutes Week #8

Ukraine legalises Bitcoin, while US states compete to make Bitcoin legal tender and offer hundreds of millions of dollars in tax breaks for Bitcoin mining. Despite Europe facing down its worst crisis in years, and markets stuttering, the regulatory picture looks highly positive for crypto.

Ukraine legalises Bitcoin

Just days ago, Ukraine made the historic decision to legalise Bitcoin and cryptocurrencies.

On 17 February 2022 the Ukrainian Parliament passed a bill to legalise the sector, which has for many years — as in many countries — been operating in a legal grey area, with no explicit support from government.

Now the sector has legal certainty and businesses including cryptocurrency exchanges, custody providers and blockchain infrastructure companies can grow unabated without fear of facing pushback from either banking or governmental authorities.

Mykhailo Federov, the Minister for Digital Transformation, made the announcement on Twitter, noting that Ukraine is already in the top five countries for crypto adoption, adding that the bill

will legalize crypto exchanges and cryptocurrencies, and Ukrainians [can now] protect their assets from possible abuse or fraud.

The country was also making the required changes to tax and civil codes "for a full-fledged market of virtual assets", Federov said in comments reported by Bloomberg.

In its 2021 Global Crypto Adoption Index, market analysts Chainalysis ranked Ukraine fourth globally behind Pakistan, India and Vietnam. That research measures the volume and value of cryptocurrencies traded in various countries worldwide.


The New York Times reported in November last year that the Eastern European country already trades a higher volume of cryptocurrency transactions than fiat (state-backed) currency.

Rather than making Bitcoin legal tender, as in El Salvador in September 2021, Ukraine has instead rolled out the red carpet to its burgeoning tech sector.

The IT sector is blossoming in hubs like Kyiv and the country is home to 200,000+ software developers, up from 74,000 five years ago, all keen to expend their talent on building the next generation of blockchain technologies.

And reports now suggest that tech companies in Ukraine are preparing for the worst in the face of Russian aggression, including paying their employees in crypto in case they are not able to access the country’s banking system. In this way, we have a live use case for cryptocurrencies.

Legal tender? US states rush to attract Bitcoiners and miners with hundreds of millions in tax breaks

In late January, President Joe Biden ordered federal agencies to look urgently into the risks and opportunities of cryptocurrencies. The Executive Order — expected as soon as this week — will direct a range of agencies including the Departments of State, Justice, Homeland Security and the Treasury to study cryptocurrency and central bank digital currency (CBDC), producing a framework for US crypto regulation. 

At a state level, legislators are rushing to get ahead of any federal mandates. Earlier this month, a bipartisan group of US House lawmakers reintroduced the Virtual Currency Tax Fairness Act as an amendment to the IRS tax authority’s revised tax code.

Representatives Suzan DelBene, a Washington Democrat, David Schweikert, a Republican from Arizona, Darren Soto, a Florida Democrat and Minnesotan Republican Tom Emmer put forward the bill, saying it would simplify the burden on consumers by protecting them from having to report crypto transactions of less than $200.

US states are vying to attract Bitcoin miners and holders with swathes of tax incentives for the growing industry. Each has received scores of crypto companies rushing to leave China since the country’s crackdown on mining in May 2021 and its official ban making cryptocurrency transactions illegal in September 2021.

At the time, China accounted for more than 60% of the world’s Bitcoin mining. Today it is effectively zero, with the US by far the largest beneficiary.


On 17 February 2022, five state lawmakers in Georgia proposed legislation in House Bill 1342 that would exempt commercial cryptocurrency miners from state taxes. The legislation would amend the state code so that industrial-scale Bitcoin miners operating in colocation data centres of at least 75,000sq ft (~7,000sq m) would not have to pay sales or use taxes on their electricity usage.

On 16 February 2022, the Illinois Senate Bill 3643 was introduced by Republican State Senator Sue Rezin, formally defining cryptocurrencies and cryptocurrency mining, and including crypto mining centres as “qualifying Illinois data centres”. To qualify for the tax break, existing and new businesses must first make an investment of at least $250m in the state and create no less than 20 full time jobs. Within two years, crypto mining companies must also certify that they are carbon neutral.

Both Texas and Kentucky already offer similar tax incentives to attract Bitcoin miners.

Data revealed by the largest US Bitcoin mining pool, Foundry USA, shows that New York boasts the highest hashrate in the US with 19.9%, followed by 18.7% in Kentucky, 17.3% in Georgia and 14% in Texas.


On 21 February 2022 State Senator Sydney Kamlager put forward a bill to recognise Bitcoin as a payment method for state taxes in California, while her colleagues in the House are seeking to create a bill to make Bitcoin legal tender.

It comes just weeks after Arizona State Senator Wendy Rogers submitted Bill 1341 to make Bitcoin legal tender in her own state, meaning the cryptocurrency could be used as an officially recognized payment for "any medium of exchange authorized by the US Consitution or Congress" to pay taxes, public dues and other governmental charges.

Jared Polis, the Democratic Governor of Colorado, announced on stage at an Ethereum conference in the capital Denver on 18 February that the state would accept state taxes and fees in cryptocurrency by the summer of 2022. 

He explained:

We will have a layer that accepts payment in those forms and then [convert into dollars] for budgeting and payments,

adding that

as a matter of convenience for the public, we will be accepting [crypto] first for taxes and then for many different fees and services.

In November 2018, Ohio became the first US state to legalise paying state taxes in Bitcoin.

Institutions pile into crypto as prices stutter

Institutional investors are making increasingly large long bets on cryptoassets worldwide, recent data shows.

After Bitcoin made all time high prices at $69,000 in November, market prices have been trending downwards and institutions pulled profits out of cryptocurrencies into December and early January. But along with the retrace and stabilisation in the mid-$30,000 region, there have now been five straight weeks of positive net inflows into institutional cryptoasset products, like ETC Group’s suite of physically-backed crypto ETPs.


The turnaround started when Bitcoin made a recent bottom at $33,600 in the week ending 21 January.

Investors turned net positive, pumping $14m into institutional products one week, and $19m the next. That cautious movement has now become a flood, with $75m of net inflows into cryptoasset products in the week ending 11 February. The most recent data via CoinShares shows that asset managers added more than $109m of net inflows in the week ending 18 February 2022.

Bitcoin saw the largest inflows with $89m, taking the total net inflows into exchange traded products tracking the original cryptocurrency to $178m this month alone.

Investors often want to follow the smart money and those with the deepest pockets.

And much as they may want to, some institutional investors are still barred from investing in single or mulit-asset crypto ETPs, let alone the underlying assets like Bitcoin or Ethereum. So it is no surprise to see ever more capital flowing into pure-play blockchain equities products, including ETC Group’s Digital Assets and Blockchain Equity UCITS ETF.

This low-cost index product tracks the prices of the leading cryptocurrency and blockchain businesses worldwide, including Coinbase (NASDAQ:COIN), Japan’s mega-conglomerate SBI Holdings Inc (TYO:8473) and Jack Dorsey’s blockchain-focused Block (NYSE:SQ), alongside leading US Bitcoin miners Riot Blockchain (NASDAQ:RIOT) and Marathon Digital (NASDAQ:MARA)

As CoinShares reports, in the last week:

Blockchain equities saw inflows totalling US$26m, with inflows across a broad selection of investment products.



Bitcoin had a tumultuous time in the two-week trading session, after making a recent high of $45,812, slid a total of 14% across the fortnight. Those making long bets found some solace in the fact that BTC bounced strongly above a recent low set on 4 February at $36,300, some $3,000 above the cycle bottom set on 24 January.

BTC/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Ethereum started the week in largely positive territory above $3,000, some 45% higher than its recent low set in late January at $2,150. The programmable money blockchain managed to hang on at this psychologically-important level for stretches of two or three days at a time, giving heart to bullish traders, before slipping towards the end of the fortnight. Still, ETH as a whole saw much less price volatility than the rest of the market, and those investing in the tech with a longer time horizon than a couple of weeks will recall its price only crossed the $3,000 mark for the first time in history in May 2021.

ETH/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Litecoin largely tracked the Bitcoin market across the trading fortnight, seeing a price bump into the $130 region and above, some 30% higher than its recent low of just under $100 in the late part of January. More bearish price action took hold in the latter part of the session as markets digested the longer-term impact of the MWEB extension block update which improves LTC’s privacy and fungibility, and traders should be watching closely to how many new tens of thousands of new users Litecoin has attracted in the weeks since. $100 appears to be the absolute lower limit that markets will allow from here.

LTC/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Bitcoin Cash started the fortnight in healthy territory in the $330 range, with $320 proving to act as support for traders in the early part of the session. Certainly the bounce from $275 as the fortnight ended represents a higher low than on 3 February, and some 6% above the $260 year-to-date bottom formed on 24 January. More technological development into Bitcoin Cash is proceeding apace to situate it as a major player in booming DeFi and NFT markets, and traders should be watching these fundamentals as they decide where to position themselves in perhaps undervalued cryptos.

BCH/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Development has been the watchword of the fortnight for Cardano, with much talk of the launch of its first decentralised apps since the highly-rated smart contract blockchain launched 2017. Bulls were disappointed to see ADA fall to its lowest point at $0.82 since the cryptoasset started trading on major exchanges in May 2021, but took a little heart from a 6% rise to end the fortnight. User growth appears strong along with soaring daily transaction volume on the blockchain and yet traders took this little into account, suggesting Charles Hoskinson’s platform could be undervalued in the below-$1 region.

ADA/USD graph
Data as of 22 February 2022 | Source: TradingView.com


The $16 to $24 region has been Polkadot’s trading range for the last few weeks, with little attention focused on the next-generation blockchain after its highly successful parachain auctions raised more than $2.5bn at the back end of 2021. More blockchains continue to be added to its stable with projects raising hundreds of millions in DOT to pay for the privilege of joining the Polkadot platform, but traders have been ignoring the asset itself. After climbing more than 43% from its recent lows at $16 to make waves in the $23 area, DOT gave up those gains to retrace back into the late teens, suggesting a strong disconnect between usage and current market value.

DOT/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Solana advocates were left a little disheartened to see the superfast smart contract blockchain trading back in the $80 region after taking off from that level at the recent market bottom of 24 January and regaining 40%+ to climb into the $120 area. A slide across the fortnight back to recent lows tracked the wider market, suggesting some opportunity for growth when more positive macro conditions return.

SOL/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Pioneering Proof of Stake blockchain Tezos continues to add high-profile partnerships with fashion multinationals like Gap for its digital asset NFTs, and became Manchester United’s sponsor this month as well as adding institutional staking as a service provider Skillz to its corporate roster of supporters. So bullish traders would be rightly annoyed to see prices climb to a recent high of $4.60, 13% above its $4.06 starting point, looking ready to make a fresh assault on $5, before slipping back towards $3. A low of $2.81 is at least some way above the recent $2.55 bottom on 24 January, providing fresh hope of a climb north from here.

XTZ/USD graph
Data as of 22 February 2022 | Source: TradingView.com


Stellar’s currency blockchain continues to provide a global and efficient system for digital asset issuance, but its market prices are not reflecting that status. Across the trading fortnight, the price of its native asset XLM peaked at $0.262 before retracing its recent steps back towards $0.20. A bounce of 8% from the low of $0.171 into the $0.185 area – again like much of the market stepping back into positive territory – to make a higher low above that market bottom of 24 January suggests traders believe there is upside potential from here.

XLM/USD graph
Data as of 22 February 2022 | Source: TradingView.com

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