Crypto News Bites 2022/12/15
50bps hike, terminal rate 5.1% / Gemini data breach / White House no response to returning SBF's $5.2m donation / CORZ +70% / PayPal & MetaMask
Top News Summaries
50bps rate hike, Powell says 5.1% terminal rate but markets not buying it.
Core Scientific stock jumps 70%
Gemini allegedly suffers client data breach.
Australian crypto framework in 2023. US crypto AML. White House does not respond to whether they will return $5.2m political donation from SBF.
TEPCO to use excess energy for crypto & AI. PayPal teams up with MetaMask.
More details, news and analysis below! Also follow me on Twitter!
Market Overview
50bps interest rate hike as expected, ending a streak of four straight 75bps rate hikes, but all markets faded as the Federal Reserve marked the terminal rate at 5.1% higher than expected, and Powell demanded substantially more evidence that inflation is under control before pivoting. Markets pricing in highest probability of two 25bps hikes for Feb & Mar FOMC then holding that level until a cut in Nov, which to me means the market expects the economy to deteriorate so much between now and Q2 that the Fed cannot reach that terminal 5.1% rate.
In the latest sign of the difficulties BTC miners are facing, Nasdaq warned BTC mining farm Bitfarms BITF 0.00%↑ that their share price has traded below $1 for 30 consecutive days. It needs to trade above $1 for at least 10 consecutive days anytime before June 2023.
BTC miner CleanSpark CLSK 0.00%↑ reported $42m net loss in their latest quarterly earnings report, worse than the $15m estimate. This doesn’t even include the market impact from FTX’s bankruptcy.
Core Scientific CORZ 0.00%↑ however jumped almost 70% as one if its creditors B.Riley offers $72m in financing, providing 2 years of runway, saying bankruptcy is not necessary.
Hashrate has a great analysis of BTC miners no longer having an outsized impact on BTC market. They account for up to 4% of circulating supply, and this year their aggressive selling didn’t even make up for more than 1% of BTC’s total spot volume.
Stablecoin Wars
Crypto exchange Binance auto converts any USDC stablecoin deposits into Binance’s stablecoin BUSD as mentioned yesterday. Given the fear after Binance halted USDC withdrawals which have since resumed, the issuer of BUSD Paxos issued a statement explaining how BUSD is compliant with the NY regulator on the Ethereum blockchain. They also provided links to show the backing of BUSD that is wrapped on other blockchains (think of it as locked on one chain and issued on another chain). Good to see the transparency allowing anybody to check the reserves. Don’t trust, verify.
Tether also released a statement regarding the backing of their stablecoin USDT, planning to reduce secured loans to zero in 2023. The doubt surrounding USDT is hard to dispel as there is no way for the public to verify their statements.
After the Binance withdrawal scare yesterday, the market cap of BUSD fell by $3b, which almost perfectly matches the increase in the market cap of USDC. These top 3 stablecoins USDT, USDC and BUSD collectively account for $130b which is currently a bit over 14% of the total crypto market cap and is now a critical part of the whole ecosystem. The increased transparency by the issuers is a welcome sign, as a collapse in any one of them would have even bigger effects on crypto in my view than the FTX bankruptcy.
Centralized Finance (CeFi)
Crypto exchange Gemini allegedly suffered a data breach and 5.7m account were leaked.
In the wake of FTX’s bankruptcy, like other centralized exchanges (CEXs) Deribit has also published their proof of reserves. They go one step further to explain how users can verify their own assets.
Crypto exchange Coinbase's COIN 0.00%↑ prime broker platform has received two System and Organization Control (SOC) attestation reports that verify that an organization follows industry best practices. The problem with CeFi, similar to USDT above, is that it requires a third party to provide assurance, instead of letting users verify it themselves.
Legal/Regulation
US Senators to introduce digital assets Anti-Money Laundering bill. The proposal brings Know-Your-Customer rules to more than exchanges, reaching wallet providers and crypto miners.
Australian 'token mapping' consultation paper to release in early 2023.
Another consequence of FTX’s bankruptcy, the White House dodged questions on whether the Biden administration will return $5.2m political donations they received from FTX’s arrested CEO SBF.
Adoption
Tokyo Electric Power Grid TEPCO 9501.JP, a major electricity utility company in Japan, is working with crypto mining rig manufacturer TRIPLE-1 to use excess power for crypto mining and artificial intelligence computation.
The Netherlands is the most metaverse-ready country in a new survey by Uswitch, which looked at a combination of broadband speeds, broadband prices, number of blockchain startups and high technology exports.
PayPal working with crypto wallet MetaMask to offer easy way to buy crypto. Another data point for adoption. Great to see more on & off ramps (fiat to crypto & vice versa) directly into defi, without having to trust CEXs.
Anything gamefi (games + decentralized finance) is adoption in my mind. Illuvium ILV, one of the ‘triple A’ level games that I’ve been following, looks more like a game I would pay to play than the previous batch of blockchain games which touts play to earn. Private Beta was released. Disclaimer: I bought… and held… from Aug last year since I wanted to play the game. Was not an investment but in my mind the price to be able to play the game later on. Well lesson learned - I could have played the game for much cheaper!
Other News
MetaMask Institutional, Cobo and Gnosis DAO team up for soulbound token (SBT) project Evolution, to cater to users’ developing digital identities. This could create another level of exclusivity not achievable by a standard NFT.
Former CEO of Twitter Jack Dorsey promoting the idea of a decentralized Twitter, free from corporate or government control. He shared the GitHub link to an open protocol that is currently being built.
Brain-fried Trader Gyoza from staying up for FOMC & World Cup.
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 peaked & potential slowing of Fed rate hikes / Russia Ukraine war may be thawing / China reopening from zero-Covid policy
Tokens Mentioned Today
BTC ETH USDC USDT BUSD ILV