Bitcoin goes up, Nexo charged, GBTC still wants to be an ETF, crypto exchanges struggle, FTX, Voyager – Attack of the 50 Foot Blockchain

By Amy Castor and David Gerard

“Weaseling out of issues is essential to study. It’s what separates us from the animals … besides the weasel.” — Homer Simpson

 

 

Number go up

Why is the bitcoin worth over $20,000? The reply is all the time, all the time “shenanigans.” It isn’t macroeconomic actions, regulatory bulletins, or the power of the greenback.

The bitcoin market is tiny, simply manipulated, and completely unregulated. Internal manipulations swamp all exterior indicators. [SSRN, PDF]

Bad information is the typical cause for pumps. If holders see the quantity go up, they’re much less probably to be spooked and begin heading for the exits. And this previous week has seen a flood of unhealthy information — Genesis is probably going bancrupt, DCG was hit exhausting making an attempt to cowl them, Gemini and Genesis are being sued by the SEC, and Nexo goes down exhausting.

Someone making an attempt to wreck an extended or brief margin dealer is another excuse for a pump. It usually costs less to rig the price of bitcoin than you could possibly win on a margin wager. This is once you get a chart with “Bart” formations on it.

The bitcoin worth is stored the place the massive gamers want it to be. The market is skinny and trivially manipulable with the billions of pseudo-dollars in unbacked stablecoins on unregulated offshore exchanges.

The bitcoin worth wants to be excessive sufficient so the huge boys’ loans don’t get liquidated, however low sufficient so bagholders don’t try to money out and crash the worth. It’s a tightrope.

Press and commentator narratives about wider market forces are half of the common delusion that well-behaved markets are pure. They usually are not. We’ve had almost a century of a correctly regulated US inventory market, for instance. It’s not a wilderness, it’s a carefully-tended backyard.

But folks,  even finance journalists who ought to completely know higher, assume that well-behaved markets are regular, and that you could discuss all markets like you’ll be able to these few markets.

Bitcoin is completely not the similar type of creature — it’s a pile of manipulated trash the place worth discovery occurs in unregulated offshore casinos which might be underneath actually no guidelines besides “don’t spook the suckers.”

FTX was a great labored instance. These exchanges mess with costs and front-run their very own prospects every time they’ll get away with it. Binance has been caught doing this a complete lot too.

Organic curiosity in bitcoin is still minimal. It’s not the greenback, it’s not rates of interest — it’s shenanigans.

We’re fairly certain the quantity will return down once more — in case you purchased in under $21,000, you might have considered trying to money out whilst you can. You can already see bobbles in the chart the place bagholders tried to money out the place they may.

 

Coinbase BTC-USD. Note the dip round 09:00 UTC 14 January, as somebody tries to money out.

 

Nexo bust: prices laid

Following a raid on their office in Sofia, Bulgaria, 4 folks from London-based crypto lender Nexo — together with founders Antoni Trenchev and Kosta Kanchev — have been charged.

Nexo is alleged to have operated as an organized crime group since 2018, understanding of Bulgaria, the UK, Switzerland, and the Cayman Islands.

Allegations embrace cash laundering, offering banking companies with out the required licensing, tax crimes, pc crimes, and breaking worldwide sanctions. [Capital, in Bulgarian; Bloomberg]

Two of these charged usually are not in Bulgaria — these would be Trenchev and Kanchev, who had been final sighted in Dubai.

Investigators checked out 4 million transactions and located sanctions violations — transactions for Hamas, transactions for the Russian crypto alternate Hydra, and transactions with the Iranian crypto alternate Nobitex.

Customers still can entry Nexo —7% of all property had been withdrawn in the 24 hours after the raids, in accordance to Nexo’s each day Armanino attestation. Either that or it’s simply the insiders draining the alternate and exit-scamming, of course. [Armanino]

Nexo actually doesn’t have that a lot in liquid property. If you don’t depend Nexo’s inside loyalty factors $NEXO as property, then they’re simply bancrupt. We anticipate withdrawals will be lower off quickly.

There are additionally allegations of political corruption involving Nexo. Trenchev used to be a Member of Parliament and still has heaps of contacts.

Nexo denies all the things. They declare they’re the goal of a politically motivated marketing campaign forward of the early elections in Bulgaria and are threatening to sue the Bulgarian authorities. According to Nexo, the authorities simply needed to “destroy and loot a affluent enterprise.” [Bulgarian Telegraph Agency, in Bulgarian]

Container drivers

Digital Currency Group’s Grayscale is still pushing for GBTC to turn out to be a correct two-way ETF.

GBTC is one-way — you place in cash or bitcoins, you get GBTC shares, and you can’t change those back into bitcoins.

The SEC rejected Grayscale’s ETF application in June 2022, as Grayscale had failed to tackle considerations round market manipulation (as we describe above) — the similar cause the SEC has rejected each bitcoin ETF proposal to this point.

Grayscale petitioned to problem the SEC’s choice with the U.S. Court of Appeals for the District of Columbia Circuit. In December, the SEC filed a response.

Grayscale filed a reply to the SEC on January 13. Grayscale spends 41 pages saying that if the CME futures bought an ETF, then bitcoins at spot market worth ought to get an ETF — the similar arguments it made the first time. This transient is pounding the desk, quite than the details or the regulation. [Grayscale, PDF]

Grayscale has lengthy promised GBTC holders that GBTC would convert to an ETF. Suing the SEC was a means to redirect their prospects’ ire towards the regulator.

GBTC is presently buying and selling at a 36% low cost on its underlying bitcoins. In December, it was buying and selling at a 48% low cost. GBTC ought to all the time have been nugatory, however now it’s obviously clearly nugatory.

Converting GBTC into an ETF would assist carry the GBTC worth in keeping with the worth of bitcoin. And DGC may revenue from all these GBTC shares they’ve gathered in buybacks.

Grayscale may additionally liquidate GBTC and provides everybody again the bitcoins. But they aren’t required to — they usually accumulate a whopping 2% annual administration payment on the 635,000 BTC of their belief — that’s over $200 million a yr.

Of course, if DCG subsidiaries go broke enough, then DCG might be compelled to liquidate GBTC anyway.

FTX

The US Trustee is deeply displeased with FTX wanting to retain Sullivan & Cromwell as lead counsel in the chapter. One of S&C’s duties would be to lead investigations into FTX, and the Trustee wants that dealt with by an examiner, who would be a disinterested social gathering. John Jay Ray III himself known as FTX a “crime scene”! And Sections 1106 and 1107 of the Bankruptcy Code particularly preclude debtors from investigating themselves. The Trustee additionally worries about conflicts of curiosity, and it’s not solely clear how S&C bought the job. [Objection, PDF]

S&C’s appointment has additionally been questioned by 4 US Senators, who despatched a letter to Judge Michael Dorsey. “Significant questions on the agency’s involvement in the operations of FTX stay unanswered,” they wrote. In a listening to final week, Judge Dorsey known as the letter “inappropriate” and stated it might don’t have any bearing on the case. [FT]

In Sam Bankman-Fried’s rambling blog post on the collapse of FTX, S&C was one of the many teams that Sam blames. He additionally stated that S&C was FTX US’s major regulation agency prior to the chapter.

S&C deny this. In a January 10 assertion, the agency stated it “by no means served as major exterior counsel to any FTX entity. The agency had a restricted and largely transactional relationship with FTX and sure associates prior to the chapter, as is frequent, and is disinterested as required by the chapter code.” [WSJ]

Brett Harrison, former president of FTX US, confesses all! Specifically, that he did nothing incorrect. In 49 tweets, he talks about how his September 2022 departure from FTX US wasn’t sudden however had been coming for months. He calls Sam Bankman-Fried “insecure” and “prideful.” He says that the “multi-billion greenback fraud” was “held intently” by the FTX inside circle — and never by anybody at FTX US. Particularly not him. [Twitter, archive]

Harrison was not so eager on partaking with anybody who requested the extraordinarily apparent questions. He blocked anybody who requested about that point final yr when Harrison falsely claimed that prospects with {dollars} at FTX US had been protected by FDIC and SIPC insurance coverage. The FDIC named Harrison personally of their stop and desist order. “I’ve discovered it’s not possible to have a great religion or fact-based dialogue about that on this app,” Harrison tweeted. [Twitter]

Since December, Harrison has been making an attempt to drum up funds for a crypto software program firm. After Harrison’s prolonged tweet thread, Anthony Scaramucci introduced he was investing in Harrison’s firm. [Bloomberg]

Voyager and Binance: life in Chapter 11

Here’s the order permitting the Asset Purchase Agreement for Binance US to purchase out Voyager Digital to proceed. [Doc 860, PDF; Reuters]

Binance is shopping for Voyager property for $1.022 billion, the truthful market worth of the crypto — Binance pays $20 million in precise money, and the relaxation is taken on as liabilities to prospects. Creditors get credit score at Binance US for 51% of what Voyager owed them pre-bankruptcy. The deal has to go creditor and regulatory muster first. If the Binance sale doesn’t undergo, Voyager’s solely remaining possibility is Chapter 7 liquidation.

Looking at the numbers, they don’t add up — there’s no means that Binance US may cowl liabilities to all the Voyager account holders, even at a reduction. Several of the US regulators who objected to the sale additionally identified that Binance US clearly couldn’t afford this.

Binance US is infamous for taking folks’s crypto and never giving it again. We know a number of individuals who’ve been despatched via an countless Know-Your-Customer loop — the place Binance repeatedly calls for identification it already has once you strive to withdraw — and by no means managed to get their crypto again out.

The Binance plan for Voyager prospects can’t probably contain letting them get their cryptos out afterward, even six months down the line.

Exchanges are having a nasty time

Huobi Korea is separating from the troubled Huobi Global. Huobi Korea Chairman Jo Guk-Bong will be shopping for out Huobi founder Leon Lin. The Korean operation can even change its title. [News1, in Korean]

Coinbase is laying  off one other 950 employees after an anticipated up to $500 million loss for This fall 2022. Some groups will be lower solely. They don’t say which of them, although. [8-K; Coinbase]

Crypto.com has laid off one other 20% of employees, in utterly “unforeseeable” circumstances. If they actually didn’t see this coming, they need to most likely sign up to get our emails. [Crypto.com]

Blockchain.com has laid off 28% of employees — 110 workers. “The crypto ecosystem is dealing with vital headwinds” — there’s no contemporary cash coming in. [CoinDesk]

Binance is bleeding property. Customers withdrew $12 billion in crypto in the 60 days up to the finish of December — 1 / 4 of their claimed holding. [Fortune]

The collapse of FTX took out Australian alternate Digital Surge, “which had marketed itself to retirees via platforms similar to ESuperFund.” Ouch. [Financial Review]

Distressed Indian alternate Vauld bought screwed over when Terra-Luna and 3AC collapsed — as a result of they’d been buying and selling with buyer funds. They (*50*). Vauld refused the supply — they accurately thought Nexo was not solvent and wouldn’t be good for the cash. Even in the event that they didn’t determine on Nexo getting busted. [The Block]

Two of the AAX exchange exit scammers had been arrested in Hong Kong — an allegedly-former worker and a guide. Police imagine the “mastermind” skipped the nation with the keys to $30 million in cryptos. [SCMP]



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