Crypto News Bites 2022/12/14
CPI lower than est, FOMC next / Binance halted USDC withdrawals / Apple to allow 3rd party app stores / ETH a commodity / Pantera 2023 predictions / 13% US held crypto
Top News Summaries
SBF arrested. US alleges Bahamas coordinated with FTX, in violation of US bankruptcy laws. CEO in charge of restructuring FTX, says in US House testimony: "I don’t trust a single piece of paper in this organization”
Pantera Capital’s Veradittakit’s 2023 predictions. Meanwhile, Goldman Sachs sees gold outperforming BTC. JPM says 13% Americans have held crypto.
CFTC filing says BTC, ETH & USDT are commodities.
Apple preparing to allow 3rd party app stores on the iPhone. Binance halted USDC withdrawals, doubt is an issue.
More details, news and analysis below! Also follow me on Twitter!
Market Overview
CPI 7.1% lower than expected, Core Inflation 6% also lower than expected. Right after the inflation data was released, crypto markets spiked up alongside equities, bonds, oil, gold, with the Dollar index DXY dropping below 104 for the first time since June, but all these risk assets faded afterwards.
Up next is Wednesday’s FOMC, where markets are pricing in a 80% chance of a 50bps hike after four consecutive 75bps hikes. Intense scrutiny on Fed Chairman Powell’s speech to try to determine how long and how high future rate hikes will go.
FOMC will be the last big macro event for the year. Market volumes will shrink and volatility dampens as traditional funds close their books for the year and people go on holiday… but that doesn’t need to apply to crypto! We have seen huge volatility and volumes in the past during the holiday season, and I’m not saying it will happen again but if it did I wouldn’t be surprised. Keep an eye on the crypto markets.
Crypto friendly bank Silvergate SI 0.00%↑ makes a new 2 year low during the FTX testimony. Grayscale’s Bitcoin Trust GBTC hits 48% discount to spot BTC.
Legal / Regulatory
The Commodity Futures Trading Commission CFTC said yesterday that BTC, ETH, USDT and others are defined as commodities.
In case you missed it yesterday, SBF the founder of bankrupt exchange FTX has been arrested, with the US Attorney charging him on wire fraud, securities fraud, money laundering etc. The arrest is the first in relation to FTX. In other news, an FTX filing alleges Bahamas authorities coordinated with SBF and are in violation of US bankruptcy laws. Bahamas liquidators seeking to exclude over $200m of luxury properties from the estate of FTX. FTX’s new CEO in charge of restructuring, John J Ray III, testifies in front of the US House Financial Services Committee: "I don’t trust a single piece of paper in this organization”
On the back of FTX, there will be an upcoming wave of strict regulations.
The Financial Stability Board, a global financial watchdog group, is preparing strict propositions for regulating the crypto sector in early 2023.
Canadian Securities Administrators is enforcing stricter requirements for crypto firms, banning leverage and margin trading.
Thailand’s regulator preparing stricter regulations on crypto.
Centralized Exchanges (CEX)
Crypto exchange Binance temporarily halted withdrawals of USDC stablecoin, scaring a lot of crypto users on social media. Assuming there is no tricky business like FTX/Alameda, this alone shouldn’t be a cause for concern regarding the solvency of the exchange.
Back in September Binance started to auto convert stablecoins USDC, USDP and TUSD into BUSD to improve market liquidity, which for example consolidated the liquidity of BTC/BUSD, BTC/USDC, BTC/USDP, BTC/TUSD trading pairs into just BTC/BUSD. And of course it currently pays quite well to accept fiat and collect interest, with overnight USD LIBOR rates over 3.81% annualized, while issuing a non-interest paying stablecoin like BUSD.
Because of this, Binance would probably only hold a bit of USDC for normal redemptions, and a sudden spike in redemptions most likely requires Binance to convert their BUSD into fiat, then wire fiat to Circle (the issuer of USDC) to receive USDC. Binance’s CEO CZ also tweeted that they are waiting for a bank in NY to open to convert USDC. I know I keep saying serious crypto investors should learn to self-Custody, but this amount of FUD (fear, uncertainty, doubt) on Binance seems misguided.
On-chain analytics show that total net outflows peaked at $7.1b and the panic peaked at $0.94b/hour. In the few hours since, over $1b inflows went into Binance. Now imagine your bank having to provide immediate cash and be open 24/7.
Predictions
Paul Veradittakit, a General Partner at Pantera Capital, the largest crypto hedge fund by AUM, lays out his 2023 predictions, a few of which I include here:
Decentralized finance (defi) grows while centralized finance (cefi) consolidates.
Zero Knowledge (ZK) technology adoption. ZK is a method where someone can prove to another person a statement is true, without providing any additional information. Wired has a great series on YouTube explaining different concept in 5 levels of difficulty, and of course I bring this to your attention, my hungry readers, as they also have one for ZK proofs.
Institutions will tokenize real world assets (RWA). Stablecoins are currently the most popular RWA. Perhaps real estate tokenization will increase in adoption.
More companies will use blockchain data, as it is still largely untapped.
NFTs will provide holder value, such as gaming NFTs & identity NFTs.
Goldman Sachs sees gold outperforming BTC in the longer term. Hmm…
Adoption
Apple is preparing to allow third party app stores on the iPhone. Apple has only allowed users to download apps from the App Store. These plans are reportedly in response to EU’s Digital Markets Act, which requires digital gatekeepers to ensure open markets starting in 2024. Crypto Twitter expects a huge wave of crypto adoption with the release of marketplaces full of Web3 decentralized apps (dapps) on iOS.
Government adoption continues, and is inevitable.
Maybe not adoption but just lunacy? Bitcoiner implants chip into his hand to make BTC payments through the Lightning Network, a layer 2 scaling solution for BTC that makes transactions faster & cheaper.
Microsoft planned to purchase game producer Activision Blizzard, which would play a key role in the development of metaverse platforms. However the FTC seeks to block the acquisition to promote fair competition.
JPMorgan’s research shows 13% of Americans, or 43m people, have now held crypto. This number can only grow.
Follow the Money
Nillion, a platform aiming to decentralize data transfers and storage WITHOUT using blockchain, raised $20m from investors including Distributed Global, GSR, HashKey.
Dogami, a web3 game where players adopt and raise virtual dogs, raised $7m in a seed extension round from investors including XAnge, Blockchain Founders Fund, for a total $14m raise.
Sooho.io, a defi infastructure provider, raises $4.5m in a series A+ from big name South Korean investors including Woori, Samsung, LG.
Amber Group, which is cutting hundreds of staff, has bought Singapore-regulated crypto platform Sparrow Exchange.
Other News
One of the issues I have with crypto right now is that it typically does not solve real world problems. It’s why I try to have an ‘Adoption’ section on this newsletter to try to highlight benefits of crypto solutions over existing solutions. a lot of protcols are providing solutions to crypto problems. This post has a few ideas of blockchain companies trying to improve upon non-crypto specific problems, and although it could simply be an advertisement for the companies they have invested in, they are still good examples of what I hope to see more of in the future.
DIMO Network, a decentralized car data network which rewards users with their DIMO tokens for providing information to the network, has launched. “We're collecting on behalf of the owner of the vehicle with their authorization and they're excited about it,” said co-founder Chatham, “versus OEMs that are collecting that data from the vehicles kind of like through the back door and getting you to agree to the terms and agreements.”
Crypto Twitter: “No need to wait for quarterly reports when user growth is fully transparent on-chain.” Arbitrum sees continued increase in daily active users, an almost 7x increase since Jan, and more than doubling to 60k since Oct. Arbitrum has yet to release their token, so users most likely are trying different things on the blockchain in order to be eligible for a potential airdrop.
Hardware wallet Ledger has integrated DeFi portflio tracker Merlin to monitor performance metrics and profit & loss reports. Maybe I can finally retire my crypto holdings spreadsheets?
US scientists revealed a breakthrough on fusion energy in a California lab, briefly achieving a net energy gain in a fusion experiment using lasers. Probably decades away from building a power plant, but maybe it will become a reality before the last BTC is mined in 2140?
So much news, so little time.
Ongoing Trends
Bankruptcy of 2nd largest crypto exchange FTX causes contagion risks. How many funds & protocols have yet to announce their exposure? Learn to self-Custody!
Decentralization no longer just a tagline. Centralized to decentralized movement for remaining crypto traders & investors.
Global crypto adoption and increased regulation, launches of Centralized Bank Digital Currencies.
Bitcoin mining industry consolidation as margin squeezed on lower BTC prices and higher costs (electricity, funding, hashrate difficulty etc).
Macro: US CPI peaking & potential slowing of Fed rate hikes / Russia Ukraine war may be thawing / China pivoting from zero-Covid policy
Tokens Mentioned Today
BTC ETH USDC USDP TUSD BUSD AGLO DIMO