U.S. Government Releases Roadmap To Mitigate Crypto Risk For Investors

The U.S. government is set to tighten regulations to mitigate the growing risks associated with the crypto industry. This development comes after increased scrutiny following the collapse of FTX and Terra Luna in 2022. 

In a press release on January 27, the White House put forward a comprehensive roadmap designed to protect investors and hold bad actors accountable. The roadmap highlighted several measures for more effective regulations in the crypto industry. 

A Two-Pronged Approach By U.S. Government

The U.S. government revealed that it had spent the past two years identifying the risks of cryptocurrency and finding ways to mitigate them. To ensure these measures are implemented, the White House intends to utilize a two-pronged approach. 

Firstly, the U.S. government has developed a framework for individuals and organizations to safely and responsibly develop digital assets. This includes addressing the risks they pose as well as highlighting poor practices within the crypto industry. 

Secondly, agencies have been mandated to increase enforcement and develop new regulations where needed. While there’s an increase in public awareness programs designed to help consumers understand the risks of buying cryptocurrencies. 

Related Reading: US Federal Regulators Warn About Crypto Activities

The White House also pointed out that Congress had a major role in expanding regulators’ powers and passing transparency laws for cryptocurrency companies. It also warned about passing legislation that would reverse the current gains and tie cryptocurrency with the U.S. financial system. 

In addition, the government intends to commit significant resources toward digital assets research and development, and this would help technologies power digital currencies and protect investors by default.  

Crypto Industry Still Reeling From FTX Collapse

The crypto industry is still recovering from the bearish markets resulting from several CeFi platforms’ high-profile collapses. 3AC, Voyager, BlockFi, and FTX were among the top platforms to file for bankruptcy, with the quartet holding more than $100 billion in assets. 

The nature of FTX collapse brought about increased scrutiny of the crypto industry. Congress testimonials exposed the risk-averse nature of crypto companies’ executives as details emerged that Sam Bankman-Fried misused clients’ funds through his trading firm Alameda Research. 

The ripple effect was massive as several individuals and firms exposed to the platform suffered huge losses, with some companies forced to shut down. These events caused concerns and reactions from within and outside the crypto space. It is, therefore, unsurprising that the U.S. government is looking to tighten its grip on regulations. 

Related Reading: Crypto-Friendly Bank Silvergate Suspends Dividend Payouts

Months after the FTX crash, there’s still increased skepticism about the crypto industry. There’s an increase in the amount of bitcoin withdrawn from exchanges, and earlier this month crypto bank, Silvergate revealed that clients withdrew almost $8 billion of their crypto deposits. 

Featured image from Pixabay, chart from TradingView.com

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Former FTX Boss Sam Bankman-Fried Using Privacy Messaging App Signal

Federal prosecutors of the Southern District of New York overseeing the current case against Sam Bankman-Fried, the disgraced founder and former CEO of FTX, want the court to impose tighter bail conditions on the defendant.

SBF Using Signal

Based on their investigations, they discovered that Sam Bankman-Fried, also known as SBF, had messaged the general counsel of FTX US via Signal. 

Signal is a messaging app similar to WhatsApp. The platform offers instant messaging across platforms, allowing people to communicate privately. Signal creators’ primary focus is on security and privacy. The application is run as a non-profit managed by a foundation. Over 40 million people use it, and per court filings, SBF is one of them.

Investigators said messages sent to the general counsel of FTX US, an individual who can be a potential witness in the ongoing criminal case against SBF, were “suggestive of an effort to influence a witness’ potential testimony.” 

On January 15, SBF, prosecutors say, messaged the general counsel asking if they could “reconnect” and “if there’s a way for (for them) to have a constructive relationship, use each other as resources.”

Investigators claim these messages are concerning because, considering the nature of the current investigation, the general counsel might have access to information that might help indict the defendant. 

For his action, federal prosecutors are asking the overseeing judge to prevent SBF from communicating with former employees and to stop using Signal. His continued communication would be contrary to the bail terms.

Even in his house arrest, the former CEO continues to receive visitors. For instance, there are reports that author Michael Lewis visited SBF. He is writing a book about the crypto entrepreneur.

The Collapse Of FTX

SBF managed FTX, an exchange that was at one point one of the most liquid in the world, only after Binance and Coinbase, since launch. However, it later emerged that through Alameda Research, SBF was misusing user funds to recklessly trade, invest in crypto projects, and donate to U.S. political parties.

Falling crypto prices also accelerated the collapse.

Following the collapse of FTX and the revelation of the extent of SBF’s misappropriation, U.S. authorities are charging the 30-year-old with, among others, money laundering, fraud, and campaign finance violation.  

SBF is out on a $250 million bond and has pleaded not guilty to all the charges against him. Apart from the various interviews he did earlier before his arrest, it has emerged that the former CEO has begun mounting a defense of his own. Recently, it was revealed that he had been laying out his turn of events leading to the collapse of FTX on Substack, a media platform.

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Crypto-Friendly Bank Silvergate Suspends Dividend Payouts

Silvergate, a California-based crypto bank whose shares are listed on the New York Stock Exchange, is suspending dividend payout to remain highly liquid as the digital currency market tries to pull itself out of the liquidity crisis of 2022.

In a press release on January 27, Silvergate, a state-chartered bank that went public in 2019, said it would suspend dividend payout on its “5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A” to preserve capital. 

Focus On Liquidity

The crypto bank said its primary focus is maintaining a highly liquid balance sheet with a strong capital position. This will give it an advantage as it navigates the high volatility in crypto. The move means the crypto bank will have more capital than customers’ digital assets.

The bank’s board of directors will re-evaluate the payments of quarterly dividends depending on market conditions evolve. 

There was no official comment from any of Silvergate’s executives.

The high volatility in crypto saw prices peak at around $70,000 in November 2021 before plunging to $15,300 in November 2022.

Losses were due to several macroeconomic factors and crypto-related events. The shift in monetary policy saw central banks hike interest rates to tame runaway inflation. 

In return, this change saw capital flow in the other direction, away from what investors would ordinarily label as “risky”, including crypto and stocks, to safe havens like bonds and gold. 

Silvergate Forced To Take Bold Steps 

The collapse of several CeFi platforms, first 3AC, Voyager, and BlockFi, before FTX said it was halting withdrawals and eventually filing for Chapter 11 bankruptcy protection, broke the markets. In the aftermath, crypto assets capitulated, with Bitcoin sinking to 2022 lows. 

At one time, FTX was valued at over $32 billion. It later emerged that Sam Bankman-Fried misappropriated clients’ funds through the exchange’s related trading firm, Alameda Research.

The risk to safety from investors spilled over to Silvergate, stretching the crypto bank. On January 17, Silvergate posted its financial statements with the United States Securities and Exchange Commission (SEC), saying they posted a loss of $949 million in 2022. This was a sharp reversal in fortunes considering the bank made $75.5 million in profits in 2021. 

Early this month, Silvergate clients withdrew almost $8 billion of their crypto deposits. Reports indicate that roughly 66% of the bank’s clients pulled out their coins in the last three months of the year. Subsequently, the bank was forced to sell $5.2 billion of its assets to cover costs and remain liquid amid the industry’s rapid changes.  

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Does the Crypto Market Have The Strength To Break To The Upside? QCP Capital Weighs In

The conditions of the cryptocurrency market have changed drastically; according to an analysis by QCP Capital, the options market in its current state makes the crypto industry look like a major crisis, such as the shutdown of crypto exchange FTX after filing for bankruptcy, never happened.

Trading desk QCP Capital published observations on the crypto industry, revealing some key points to consider for the coming months.

The Crypto Market Comes Back To Life

QCP’s analysis points out that Bitcoin (BTC) risk reversals have been trading in positive territory over the past week, which tells us that calls (buys) have been more expensive than puts (sells) since 2021 across multiple tenors.

This is unusual for the sector as BTC typically has a persistent put skew, mainly due to miner/treasury hedging activity. The chart below depicts this market behavior and the bullish sentiment impacting the options sector.

Put skew drives the price of puts higher and calls lower. This difference in pricing between options is called skew and, under normal circumstances, puts trade with higher volatility than calls precisely because investors are hedging some of their bullish positions.

For the trading desk, this means that the sentiment in the cryptocurrency market has shifted from bearish to bullish, a culmination of what has been happening in the macro market and the slight recovery in the economy.

Bulls Might Get Their Hearts Broken On Valentines Day

Ethereum’s (ETH) implied volatility (IV), which represents the expected volatility of a stock or currency over the option’s life, has fallen, indicating complacency as the market prices out fears of a price collapse, according to the analysis.

The enthusiasm in the market can be measured by the amount of “fear of missing out” (FOMO) that has set in, with many chasing prices and the top by buying high delta calls and going long in the spot market over the past week.

With the upcoming “Big Bad” Federal Open Market Committee (FOMC) meeting, the trading desk expects the market to be more cautious and conservative.

According to QCP, the following potentially problematic date will be February 14th, when the following CPI report will occur, which can potentially “break the heart of the bulls.”

For QCP, this is the same scenario the market experienced in December. Similarly, the price may experience a topside breakout characterized by a highly sharp and violent movement.

Bitcoin is currently trading at $23,200 and seems to be paving the way for the conquest of new levels. It has gained 0.7% in the last 24 hours and 10.3% in the last seven days. Bitcoin is trying to break the next obstacle represented by the $24,400 level.

Ethereum is trading at $1600, up 0.3% in the last 24 hours, with sideways price action. The next resistance wall is at $1,691, a zone the bulls have not visited since September 2022. Ethereum has gained 3.8% in the last seven days.

Cover image from Unsplash, charts from Tradingview.

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U.S. Institutions Are Driving Bitcoin Prices, Matrixport Research

Bitcoin prices have been on the rise in the last couple of weeks and the digital asset has been able to return to its November 2022 levels. This has been a much-needed boost for the market during this time, but an unexpected investor group is reportedly driving the price of the cryptocurrency.

Bitcoin Surges Are Happening During U.S. Hours

In a new Matrixport report that was shared with NewsBTC via email, U.S. institutional investors are driving the recent price increase of bitcoin. The report notes that over the course of January, the digital asset is already up over 40% but more than 35% of those increases have happened during U.S. trading hours. As such, the research report concludes that U.S. investors are driving the price.

Matrixport explains the reasoning behind this by saying that when an asset performs so well during U.S. hours, especially one that trades for 24 hours, it shows that institutional investors are buying the asset. However, when it does well during Asian hours, then it means that Asian retail investors are buying it.

The most significant movements have happened during this time and the trend lines show very strong similarity to Bitcoin’s movements to this point. But even more interesting is the fact that the data shows that U.S.-based investors are responsible for 85% of the total BTC buying that is happening currently.

What Is Driving These U.S.-Based Investors?

As the Matrixport report notes, U.S.-based investors have been encouraged by the inflation slow-down. It has put individual and institutional investors in positions where they believe they can take more risks. Hence, there is a marked increase in their exposure to risk assets such as bitcoin.

Furthermore, the report points to the possibility of more rallies given the fact that inflation is expected to keep falling. “This could set up the crypto market for a mid-month rally, every month and turn into a trend where we see a strong rally from mid-month onwards with some consolidation towards the end of the month as traders take profit and miners sell calls.”

This is also good news for altcoins as Matrixport notes that historically, money flowing into bitcoin will eventually spread out into other digital assets. So this could mean that the market has not seen the last of the altcoin rally once these institutional investors begin spreading out their investments.

BTC is currently trading at $22,959 at the time of this writing. The coin is seeing small gains of 0.06% in the last 24 hours but on a seven-day rolling basis, the digital asset is still doing quite well with 9.45% gains.

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Bitcoin Exchange Outflows Reach Highest Value Since FTX Crash, Bullish?

On-chain data shows Bitcoin exchanges have registered the most significant outflows since the collapse of the crypto exchange FTX back in November.

Related Reading: Bitcoin Investors Turn Greedy For First Time Since March 2022

Bitcoin Exchange Netflow Shows Deep Negative Values

As an analyst in a CryptoQuant post pointed out, around 7,000 coins have left the exchange in this latest spike. The relevant indicator here is the “all exchanges netflow,” which measures the net amount of Bitcoin exiting or entering into the wallets of all centralized exchanges. The metric’s value is calculated by taking the difference between the inflows (the coins going in) and the outflows (the coins moving out).

When the indicator has a positive value, the inflows overwhelm the outflows, and a net number of coins are deposited to exchanges. As one of the main reasons investors deposit to exchanges is for selling purposes, this trend can have bearish implications for the price of the crypto.

On the other hand, negative values imply that a net amount of supply is currently being pulled off these platforms. Generally, holders withdraw their coins from exchanges to hold onto them for extended periods in personal wallets. Thus, such metric values can signal that investors are accumulating at the moment, which may have a bullish impact on the price.

Now, here is a chart that shows the trend in the Bitcoin all exchange’s netflow over the last few months:

As shown in the above graph, the Bitcoin exchange netflow recorded a deep negative spike during the past day. This outflow amounted to around 7,000 BTC, leaving the wallets of these platforms the largest value the metric has seen since the FTX crash back in November of last year.

From the chart, it’s apparent that the aftermath of FTX’s collapse saw some substantial outflow values. The reason behind that is that a known exchange like FTX going belly up instilled fear among investors and made them more aware of the risks of keeping their coins in centralized platforms.

Naturally, these holders fled exchanges in masses (causing the netflow to plunge into red values) so that they could store their Bitcoin in offsite wallets, the keys they own.

Interestingly, the latest negative netflow spike was recorded while Bitcoin has been observing a sharp rally. Usually, inflows are more commonly seen in periods like now, as investors rush to take some profits.

Thus, instead of making these large outflows, investors are showing signs that they are bullish on Bitcoin in the long term and feel that the current rally has more to offer still.

That would be only if these investors made the withdrawals with accumulation in mind. In the scenario that they transferred out these coins for selling through over-the-counter (OTC) deals instead, Bitcoin could instead feel a bearish impulse.

BTC Price

At the time of writing, Bitcoin is trading around $23,100, up 8% in the last week.

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Polygon (MATIC) Surges Nearly 10% As zkEVM Network Update Draws Near

Amid the ubiquitous rally in the crypto market, multiple crypto assets including MATIC have climbed higher highs, thriving to reach their peak and beyond. While the catalyst behind the rally might be unclear, Polygon’s (MATIC) bullish trend could be a part of its upcoming zkEVM Network update. As the launch draws near, investors have continued to increase in numbers pouring more funds into the asset. 

Polygon is a layer-2 scaling solution built on top of the Ethereum blockchain to improve the network’s scalability. The soon-to-be-launched zkEVM network update is just one of the plans the developers of the Polygon network have announced to enhance the layer-2 scaling solution. 

According to Polygon co-founder Sandeep Nailwal’s recent tweet, the anticipated zkEVM comes soon as the mainnet launch now has an official date which is somewhere around the corner.

Polygon (MATIC) Surges Nearly 10% In 24 hours

Over the past 24 hours, MATIC has spiked in price by 8.6%, mirroring other altcoins’ bullish trend as the global cryptocurrency market capitalization still holds steady above the previously amassed $1 trillion mark. 

The past few weeks have seen a MATIC mark an upward rally movement, especially since the beginning of the year. MATIC has moved from the $0.75 price tag seen late last year to $1.09 at the time of writing. Meanwhile, the 1-day chart still indicates more rallies as there is still liquidity at the higher highs to be taken.

Notably, MATIC is ranked the 10th most valuable cryptocurrency asset by market capitalization, according to data aggregators CoinGecko and Coinmarketcap. Polygon currently has a market cap of $9.7 billion, higher than Solana with $8.8 billion but below Dogecoin, which sits at $11.8 billion.

Though MATIC has been climbing highs since the beginning of the year, it is still far from its all-time high of $2.92, seen in 2021. With the ongoing disbelief in the crypto market among investors, it is still uncertain whether the zkEVM will be a good enough catalyst to drive its value beyond or closer to its peak.

Polygon Network User Activity Plummets

Despite MATIC’s appreciation in value, the network user activity has recorded a decline in the number of interactions. Polygon’s number of daily users started the year positively moving from roughly 404,000 seen on January 1 to 696,00 users on January 6.

However, today, the figure has declined more than 10%, dropping to approximately 399,000, according to data from PolygonScan. The reason behind the plummet is still unclear, as the network activity is expected to increase, given the network’s recent collaborations with multiple top companies. 

Last year, Facebook (Meta) added support for the Polygon network. In addition, the layer-2 scaling solution recently partnered with Mastercard to launch a Web3 accelerator program to bring budding musical artists into the spotlight by leveraging Web3 technology and other blockchain-based innovations.

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Bitcoin Investors Turn Greedy For First Time Since March 2022

Data shows investors in the Bitcoin market have turned greedy for the first time since March 2022, after what was the longest stretch of fear ever.

Bitcoin Fear And Greed Index Now Points At “Greed”

The “fear and greed index” is an indicator that tells us about the general sentiment among investors in the Bitcoin (as well as the wider crypto) market. To represent this sentiment, the metric uses a numeric scale that runs from 0-100.

All values below 50 imply a fearful market, while those above this threshold suggest greedy holders. Although this cutoff point might look clean in theory, in practice, the region between values of 46 and 54 is generally considered to belong to a “neutral” sentiment. Real breakouts towards fear or greed only take place when the metric crosses below or above this transition region.

There are also two other “special” sentiments: extreme greed and extreme fear. The former occurs above values of 75, while the latter happens under values of 25. The significance of these extreme sentiments is that tops and bottoms have historically tended to form when the investors have held these mentalities.

Because of this, some traders believe extreme fear periods provide ideal buying opportunities (as bottoms have taken place here), while times with extreme greed could be the best selling windows (since tops occur here).

A trading strategy called “contrarian investing” is based on a similar idea. As Warren Buffet said in his famous quote, “be fearful when others are greedy, and greedy when others are fearful.”

Now, here is how the current sentiment among Bitcoin (and wider crypto) investors looks like:

As can be seen above, the Bitcoin fear and greed index has a value of 55 right now, suggesting that the market has now properly entered into the greed zone. Before this break into the region, the sector had been in the fear region nonstop since March 2022, around ten months ago.

The below chart shows how the metric’s value has changed during the past year.

From the graph, it’s visible that the indicator had spent almost the entire past year not just in the fear zone, but actually all the way down in the extreme fear region. There was only one proper spike into greed during this period, and that was the aforementioned March 2022 instance. This previous surge had only lasted for a single day before the market became fearful again.

These continuous streaks of fear and extreme fear during the past year were both the longest runs in the history of the indicator. Greed finally returning to the Bitcoin market after all this while could mean that investors are ready to embrace some bullish action once again, which could be a positive sign for the current rally.

BTC Price

At the time of writing, Bitcoin is trading around $22,900, up 9% in the last week.

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Aave V3 Is Live On Ethereum, TVL Up 24% In One Month

Aave V3 is now live on the Ethereum mainnet. With this upgrade, WBTC, WETH, wstETH, USDC, DAI, LINK, and AAVE are the only supported assets. 

Aave V3 Improves Capital Efficiency

Stani Kulechov, the co-founder of Aave, said V3’s flexible design introduces new ways of mitigating risks, reducing gas costs, and improving capital efficiency, all while ensuring better liquidity decentralization.

Aave Protocol V3 is now live on the Ethereum market

”The most exciting aspect of V3 is its flexible design, which enables a variety of new risk mitigation features, and its improved capital efficiency & decentralized liquidity – all while reducing gas costs.” @StaniKulechov pic.twitter.com/QsSnnlhEMr

— Aave (@AaveAave) January 27, 2023

This upgrade came after the Aave community delayed the upgrade. Then, Aave developers assessed that immediately improving V2 Pools to V3 would not have yielded the desired level of compatibility with other Aave V3 pools running on Avalanche, Polygon, and Ethereum layer-2 platforms.

The current Aave V3 on Ethereum has been reworked. It is negligibly complex and more compatible with other Aave V3 pools outside of Ethereum.

The transition to Ethereum, expanding Aave’s presence in top blockchains, didn’t immediately affect its total value locked (TVL). Data show that it is 2% lower in the past 24 hours. However, TVL is up 24% in the last month, rising to $4.56 billion as of the time of writing on January 27, according to data streams from DeFiLlama.

Aave is now the fourth largest DeFi protocol by TVL, trailing Lido Finance, MakerDAO, and Curve. However, the dApp is the second-largest lending protocol by TVL, behind MakerDAO. By launching on Ethereum, and upgrading from the original V2, the protocol’s TVL might gradually increase over the coming weeks or months. 

This, in turn, may positively impact AAVE prices.

Aave is a decentralized money market, allowing crypto holders to actively lend and borrow various assets. Integrating V3 on Ethereum avails the protocol on six other platforms, including Avalanche, Polygon, and Harmony. Polygon is compatible with Ethereum’s virtual machine, existing as a layer-2 protocol enabling higher scalability and significantly lower trading fees.

What Aave V3 Brings 

Developers claim Aave V3 introduces various changes that, as the co-founder said, make lending and borrowing more seamless and cheaper. 

According to the protocol, this version is optimized to reduce gas costs by around 20-25% across the board. Users can also move assets across all Aave markets, irrespective of the network. By launching on Ethereum, Harmony users, for example, would be free to transfer assets and participate in Aave V3 markets on the most active platform. 

Aave V3 introduces the “Isolated Mode” where Aave governance can vote to list new tokens as isolated assets with specific debt ceilings. Aave clarifies that the debt ceiling is the maximum USD reading that a borrower’s collateral can cover. Only approved tokens, mostly stablecoins, can be borrowed in this mode.

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What Is Threshold (T) And Why Is This Lesser-Known Coin Swelling By 146%?

Last year, NUCypher and KEEP Network merged and created the Threshold Network, a decentralized organization that addresses the myriad of privacy and security concerns in the blockchain space. Its utility and governance token, T, has been on the rise since the start of 2023 as the network produced more buzz.

The coin is up 146% in the weekly, becoming the biggest gainer in the top 100 crypto list of CoinMarketCap today. 

On-Chain, Off-Chain Developments List Threshold

On January 26th, centralized exchange CoinBase announced the support for the Threshold token. This listing would enable the token to gather momentum in the retail investor space. The dev team is also focused on developing its tBTC project, a way for Bitcoin holders to use their coins on Ethereum-based DeFi.

Coinbase will add support for Audius (AUDIO) and Threshold (T) on the Ethereum network (ERC-20 token). Do not send this asset over other networks or your funds may be lost.

— Coinbase Assets (@CoinbaseAssets) January 25, 2023

According to Threshold’s blog post earlier this week, the network’s early launch of its  Bitcoin-Ethereum bridge was a response to the recent developments in the world of bridging the two major cryptocurrencies. 

A Quick Definition Of Threshold (T)

The T token is a cryptocurrency that serves multiple purposes, including making payments, influencing the direction of the project through voting, and staking for interest and other incentives.

It is one of the most significant Web3 initiatives because of the cross-chain element of the network and the privacy and access control features it employs.

Threshold is not your normal cryptocurrency, as it does not want to make its users wealthy through trading and investment, nor does it strive to ensure that transactions are completed in the quickest possible time.

Although it does not provide NFTs or a metaverse, it does come with a number of DeFi features.

What Does This Mean For Threshold (T)?

The token has reached new highs after the CoinBase listing announcement. Threshold is currently trying to break above $0.064 which it has been unsuccessful in doing so. Threshold is supported at $0.042, the same support level that has not eased the May to June crypto market crash levels. 

If the token suffers a correction phase, T might revert back $0.033 support which could possibly blunt a bearish market movement.

At the time of writing, T holders are realizing gains despite the token’s bullish momentum showing signs of easing down.

In the short to medium term, investors and traders of the token should expect volatility to enter the market if the token ends today unable to inch up to its desired targets. Meanwhile, as this scenario might play out, Bitcoin is attempting to breach the $23k resistance. 

If BTC breaches through this resistance, Threshold can rely on its somewhat high correlation with the king crypto to boost gains.

-Featured image by Aviationist

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