First Mover Asia: Bitcoin Surpasses $31,000; Crypto Carbon Trading Races to Clean Up the Deed

Carbon credit protocols have had a tough time in recent months, but have been working to improve their operation; Bitcoin posted its biggest one-day gain in more than two months on Monday.

Hello. Here is what happens:

Price: Bitcoin jumps over 7%, and some crypto market analysts wonder if the bottom has been reached.

Insights: Crypto-carbon trading companies seek to solve the problems that plague them.

Technician Opinion: BTC remains in a choppy trading range with limited upside.

Prices

Bitcoin (BTC): $31,646 +8.4%

Ether (ETH): $1,990 +11%

The biggest winners

Asset Teleprinter Returnal DACS sector
gimbal ADA +17.8% Smart contract platform
internet computer PCI +15.7% Computing
Chain link LINK +12.2% Computing

The biggest losers

There are no losers in CoinDesk 20 today.

Bitcoin Posts Biggest Daily Price Rise in Two Months as Cryptocurrency Markets Broadly Rally

Traditional markets were mostly closed in the United States on Monday for a holiday, but bitcoin (BTC) did not rest.

The biggest cryptocurrency jumped more than 7% to around $31,500, its biggest gain since March 9.

The sudden rise came as bitcoin had just ended a record nine-week losing streak that saw the price drop to around $29,400 from $37,600.

Now crypto analysts are starting to wonder if the market is finding a bottom after the last downdraft.

According to blockchain analytics firm Glassnode, the recent selling pressure may be easing. “Price action appears to have bottomed out at the moment,” Glassnode wrote in its Uncharted newsletter on Monday.

Almost all major cryptocurrencies were in the green, with Cardano’s ADA gaining around 17% and leading the CoinDesk 20.

Markets

(Most traditional markets were closed in the United States on Monday for a public holiday.)

Knowledge

Crypto Carbon Credit Protocols Seek Improvement

Like everything in cryptocurrency, blockchain-based carbon credit protocols have struggled over the past quarter. They’re under the same market pressure as the rest of the industry, which has been struggling to regain its footing since Terra’s collapse.

But the sector’s challenges are not only related to market dynamics. It is also facing internal reckoning after questions emerged about the quality of credits traded inside Basic Carbon Tokens (BCTs) issued on the Toucan Protocol, which led Verra, a hybrid standards agency and a responsible registry of carbon credits, to take a hard look at the practice.

In April, researchers from Carbon Plan, a California-based climate data nonprofit, published an article titled “Zombies on the Blockchain,” which described how about 28% of verified carbon units (VCUs) were trading BCT on the Toucan protocol. and via carbon trading, KlimaDao came from “zombie projects”.

“Toucan appears to be generating entirely new demand for long-neglected credits that have seen little to no demand in recent years,” the researchers wrote. “When the cryptocurrency market places greater value on BCT and KLIMA tokens, these products can revive once-defunct offset projects. »

CarbonPlan points out in its article that carbon credits under Article 6 of the Paris Agreement prohibit the trading of credits from carbon offset projects registered before January 1, 2013. Yet these older projects are actively traded. on the Toucan Protocol and were always tokenized. until November 2021.

“Rather than eliminating supply from the voluntary market, however, zombie projects show that BCTs are bringing out new offers – not in the form of new projects, but old credits that were previously unable to to find buyers,” the CarbonPlan researchers said. wrote. “Thanks to demand from blockchain buyers, however, these shoddy credits have found new life. »

Apart from the question of “zombie projects”, the other problem with these projects is structural. The industry has commodified what are called “retired” credits.

When companies want to offset their emissions, they use this process to buy credits and take them out of the market. In turn, they receive a receipt which forms the basis of their published carbon offset and BCT tokens.

In an interview with S&P Global, Robin Vix, Verra’s chief legal, policy and markets officer, called the whole process “mind frying” as the company plans to disconnect the Toucan protocol from buying retired credits.

“Verra will prohibit, with immediate effect, the practice of creating instruments or tokens based on retired credits on the grounds that the deed of retirement is widely understood to refer to the consumption of the environmental benefits of credit,” the statement reads. Will see.

Vix told S&P Global that Verra will begin reviewing stakeholder requests for retired carbon credits and block anything it suspects is associated with tokenization.

“Carbon credits themselves are intangible abstract things based on counterfactuals of things you can’t actually see – emissions. And then crypto is another layer of abstraction on top of that,” Vix said.

But all of this is not to say that Verra is totally against tokenization and carbon credit trading or that Toucan is unaware of the arrangement’s structural flaws.

Verra said she was exploring ways to “lock in” current — not withdrawn — carbon credits so they can be tied to Toucan or other trades.

“The initial thinking is that the best way to achieve this is for these tokens to be linked in some way to living credits and not withdrawn so that the environmental benefits have not yet been used,” said Rix told S&P Global. “In other words, if you buy tokens or coins, you always know that the underlying [offset] is there. »

In an interview with CoinDesk, Rob Schmitt, one of Toucan’s lead developers, emphasized that it’s not about Verra blocking tokenization; on the contrary, Verra simply wants to improve the process.

Schmitt said the transition and trading of retired carbon credits was not ideal, but just a first step. Once Verra introduces the ability to freeze credits, it would mean that credits could be sent bi-directionally from off-chain Toucan, creating price parity.

“It will be very positive for on-chain markets,” he said. ”

Schmitt is also aware of the Carbon Plan article on zombies. He points to a Toucan article titled “Raising Standards in the On-Chain Carbon Market” which outlines the protocol’s filtering plan to only offer credits that are less than 10 years old.

“The obsession with age is not necessarily what is correct here… if you took climate action one year, it’s the same action the next year. It will be no different,” he said. “The problem with these credits is that it is doubtful that these projects needed the financing of carbon credits to start.

“But it’s a problem we inherited from Vera. »

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