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A week dominated by macro with a weaker US CPI first sending us and other risk assets higher before giving back most of the gains again after Fed 50bps hike and concerns on future economic outlook. We are still hovering around the same tight range 17–18k BTC and continue to see heightened stress levels. Binance experience a bank run this week which lead to temporal halts of USDC withdrawals, Gemini got hacked with customer data leaked, regulators are tightening up with Canada issuing a ban on all leveraged and margin trading and more dirt is coming up from the FTX saga as the first hearings in congress began. The only ‘bright spot’ is that SBF finally got arrested and so this will hopefully accelerate the unwind of this. Enjoy reading!
Bat Tai Chi — [email protected]
SBF arrested
He got arrested in the Bahamas (finally) on request of the US with charges for wire fraud, wire fraud conspiracy, security fraud, security fraud conspiracy and money laundering. He asked for a bail but got rejected and is facing extradition now. He therefore conveniently couldn’t testify in front of congress but Forbes got a leaked document of his prepared testimony. He was planning to say again that he fucked up but meant no harm and deeply regrets signing for chapter 11 bankruptcy. The new CEO John J. Ray III did show up however and in his speech reinstated that the whole company was a complete mess and much worse than Elron or anything he had seen before. As the hearings in congress continue more and more dirt came to light. Alameda was not just getting funding from FTX customer deposits but also had an unfair trading advantage on FTX by being allowed to sidestep certain system checks to get faster order routing speed on the exchange. CFTC is now suing SBF, FTX and Alameda for violation of federal commodities law with regards to this set up. We also learned this week that The Block CEO Michael McCaffrey had received multi million $ loans from Sam without disclosing. The Block was considered one of the quality independent crypto media outlets and this obviously now put in question after the recent revelations. What is interesting though is the role of Baham regulators and how the country will come out of this whole saga. Bloomberg reported that Ryan Salame, the former co-CEO at FTX Digital Markets tipped them off about potential illegal activities as the exchange experienced the harsh bank run on the 9th of Nov.
Just hoping that with SBF now behind bars we will get a big step closer getting him out of the headlines and setting a new base for our sector to recovery. After the heat that Fidetily received for continuing their crypto product launch now many serious institutions are probably also sitting on the sidelines waiting for the dust to settle with announcements and initiative. A somewhat unfavorable time into year end I guess.
Binance Bank Run and BUSD FUD
This week the largest exchange binance came under heat. A few fingers point towards the US Anti Money Laundering Charges that Reuters reported as as a potential trigger but who knows. This not too far fetched as Kraken just got charged 360k USD for violating Iran sanctions. What we know though is that Binance experienced significant Outflows topping >3bn past few days alone. Among them are major institutions like Jump. This caused them to temporarily halt USDC withdrawals which of course sparked even more fears leading to BUSD temporarily breaking the peg.Things calmed down a bit and BUSD is now back to par after US opened and Paxos redemptions resumed but would hope they are prepared for the weekend when bank rails are shut. Now i don’t believe there is much credit risk with BUSD as its issued by Paxos and fully licenced and regulated by the NYDFS. But hear from guys at Paxos directly its a good summary why USDC withdrawals halted even without there being potential credit risk. Now the one theory that does creat potential risk for BUSD is with regards to US regulators and the fact that they potentially cut off Binance access to Paxos funds for some violation against US laws. Binance is in the bad books for a while and capitol hill is certainly not more crypto friendly now than it was before FTX. So BUSD its not risk free but its regulatory risk not credit risk I would argue. The whole bank run is a good stress test and if nothing breaks would likely have Binance come out stronger than before hopefully restoring some confidence in our industry.
This we will see more of for sure. The Australian Gov published a consultation paper this week which would lead to sweeping reforms to financial service laws and paving a way for crypto custody and licencing set ups. While the Canadian government is much quicker to action taking regulatory steps after FTX basically banning margin and leverage trading for crypto exchanges and clear separation of assets of Canadian clients and proprietary business assets. The Canadian Securities Administrators also reiterated that crypto assets are highly speculative and the Central Bank previously warned that Bitcoin and other tokens are no way to “opt out of inflation.” The tougher stances are probably also a political echo after major domestic pension funds have lost millions. Caisse de Dépôt invested $150 million into the collapsed lender Celsius, while the Ontario Teachers Pension Plan had a $95 million write off in FTX. .
For most people, for 99% of people today, asking them to hold crypto on their own, they will end up losing it […] Holing your own crypto in your wallet is not risk-free.
CZ — Changpeng Zhao — Founder of Binance
Neither Customer, nor those that access an Online Service through Customer, may use an Online Service … to mine cryptocurrency without Microsoft’s prior written approval
Microsoft’s updated universal license terms
After a very busy month, price action is consolidating. Given the nature of crypto and the tectonic shifts occurring beneath it, we do not expect this paradigm to last
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