Arthur Hayes on How to Prepare 🇺🇸
Weekly News Recap: 🔥 Optimism grant controversy, 💸 FTX's $228M Bybit win, 🚀 MicroStrategy’s $42B Bitcoin push, 🪙 Reddit’s crypto sell-off, and more!
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How Arthur Hayes Has Prepared His Portfolio for the Elections
Arthur Hayes discusses how the upcoming U.S. presidential elections could impact the crypto markets, from Bitcoin’s performance to altcoin rotation, and why he thinks SOL is the “high-beta Bitcoin” for election trades.
As the 2024 U.S. election draws near, the crypto market is buzzing with speculation on what’s next. Arthur Hayes, co-founder of BitMEX, joins Unchained to discuss how Bitcoin and altcoins might react depending on who wins. Hayes shares his insights on election trade strategies, from the importance of sticking to the majors to his preference for Solana over Ethereum in the short term.
He also dives into whether Trump will fulfill his promises to the crypto community and drops a banger explanation on what could be the next Federal Reserve move. (Hint: it’s not about interest rates.)
Plus, Unchained reporter Veronica Irwin joins the show to discuss her latest scoops on Stand With Crypto’s scoring system and SEC Commissioner Hester Peirce’s stance on whether she would want to become Chair of the agency in replacement of Gary Gensler.
Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Podcast Addict, Pocket Casts, Amazon Music, or on your favorite podcast platform.
Weekly News Recap
Optimism’s Grants Sparks Debate
Crypto exchange Kraken’s recent decision to build a layer 2 network, Ink, using Optimism’s OP Stack has ignited controversy following a CoinDesk report revealing the significant financial incentive behind the move. CoinDesk’s scoop revealed that Kraken received a substantial grant from the Optimism Foundation—25 million OP tokens, currently valued at $42.5 million—giving it a significant financial incentive to join Optimism’s Ethereum-linked "Superchain." The grant, part of a structured release tied to transaction milestones, has led to questions within the crypto community about whether such incentives compromise the decentralization of the layer-2 ecosystem.
Optimism’s Chief Growth Officer Ryan Wyatt defended the grants as essential to fostering development, writing that “The Collective is not going to stop investing in developers.” However, critics argued that financial inducements to major firms such as Kraken and Coinbase, the latter of which launched its own layer 2 Base last year, risk tipping the ecosystem toward centralized control.
Related projects are also tapping into Optimism’s resources. Bitcoin-based layer 2 BOB, which aims to integrate Bitcoin with Ethereum, received an OP grant of around $870,000 to join the Superchain. Similarly, Swell, which had initially planned to build on Polygon, is now developing a rollup on the OP Stack, though it is not confirmed if it was incentivized by a grant from the Optimism Foundation.
Former FTX Exec Nishad Singh Avoids Prison
Nishad Singh, FTX’s ex-head of engineering, has been sentenced to three years of supervised release, avoiding prison after cooperating extensively in the high-profile case against FTX founder Sam Bankman-Fried. Singh, who pleaded guilty to six charges in February 2023, including conspiracy and wire fraud, provided detailed testimony that aided prosecutions of Bankman-Fried and other FTX figures. His cooperation was praised by Judge Lewis Kaplan, who noted that Singh's actions helped the government uncover unknown details of FTX’s financial misconduct.
The court recognized Singh’s remorse and family support, with over 20 relatives in attendance. Despite facing potential decades-long sentencing guidelines, Singh’s extensive cooperation and his “limited” early involvement in FTX’s collapse weighed in his favor, leading to the court’s leniency.
DWF Labs Fires Partner Amid Drink-Spiking Allegations
Crypto trading firm DWF Labs has terminated a partner after allegations surfaced that the individual spiked a woman’s drink at a Hong Kong bar. The incident came to light last week when an X user, @hananotsorry, posted claims that a DWF Labs partner had drugged her, reportedly with video evidence. DWF responded swiftly, issuing a statement that described the allegations as “deeply concerning” and announcing the partner’s immediate dismissal from all management and operational roles.
The company, which is currently conducting its own investigation, emphasized its commitment to “transparency and upholding the highest ethical standards.” The press release further underscored DWF’s core values of “integrity, respect, and accountability,” noting that it would not condone any behavior contrary to those principles. Hong Kong police have been notified about the incident, though neither the individual’s name nor any additional details were disclosed by DWF Labs.
Reddit Sells Off Majority of Crypto Holdings
In a recent SEC filing, Reddit disclosed it had sold the bulk of its cryptocurrency holdings in the third quarter, liquidating bitcoin and ether previously held “for treasury purposes.” While Reddit hasn’t detailed the total amount of the proceeds, the sale occurred before October’s significant bitcoin rally, when prices remained between $54,000 and $73,000. The move signals a shift as Reddit had been an early adopter of crypto initiatives, using Ethereum-based Polygon to power virtual collectibles.
While Reddit continues to hold some Ethereum and Polygon assets, mainly from avatar sales, it said that future crypto investments would require board approval.
Consensys, dYdX, and Kraken Announce Layoffs
Crypto giants Consensys, dYdX and Kraken all announced significant layoffs this week. Consensys, the Ethereum infrastructure firm behind MetaMask and Infura, disclosed it had cut its workforce by 20%, attributing the move to broader economic pressures and regulatory hurdles. “The macroeconomic environment… has created challenges for our industry,” the company stated, emphasizing the need to streamline operations for long-term sustainability.
Meanwhile, crypto derivatives exchange dYdX took more drastic measures, laying off 35% of its workforce as CEO Antonio Juliano cited the need to make a strategic pivot. “The company we’ve built is different from the company dYdX must be,” Juliano noted. The reduction comes as dYdX faces rising competition, particularly from rival Hyperliquid, which has surpassed dYdX in total value locked.
Moreover, major crypto exchange Kraken, also laid off 15% of its workforce and announced a new co-CEO, aiming for a leaner structure after reporting organizational challenges tied to its $1 billion revenue growth as a remote company.
Tapioca DAO Strikes Back
Decentralized finance protocol Tapioca DAO has made waves this week by successfully executing a counter-exploit to retrieve $2.7 million in stolen funds from a hacker. This bold move came after a $4.7 million breach that saw the hacker siphon millions of TAP tokens, causing the token’s value to plummet by 96% and leaving investors reeling. According to a post-mortem report, Tapioca’s security team used a carefully timed exploit to recover 996 Ether (worth approximately $2.7 million) before the hacker could fully launder the funds.
The report attributes the initial breach to a North Korean hacking group that targeted a Tapioca DAO engineer with malware in a social engineering attack. Though the protocol still faces a 45% overall loss from the incident, the counter-hack is a rare but successful example of turning the tables on attackers in the DeFi space.
Coinbase Launches ‘Based Agent’ for Rapid AI-Driven Crypto Automation
Coinbase has unveiled "Based Agent," a new tool enabling developers to create AI-powered crypto agents in under three minutes, marking a significant step toward integrating artificial intelligence with blockchain operations. Announced by developer Lincoln Murr, Based Agent runs on Coinbase’s layer-2 network, Base, and is powered by technologies from OpenAI and Replit. With API keys from Coinbase and OpenAI, developers can quickly deploy customizable AI agents that manage on-chain tasks, including trading, staking, and interacting with smart contracts.
FTX Secures $228 Million Settlement With Bybit
Bankrupt crypto exchange FTX has reached a $228 million settlement with Bybit, advancing its efforts to reimburse customers impacted by its 2022 collapse. The settlement allows FTX to reclaim $175 million in digital assets from Bybit and secure an additional $53 million from the sale of BIT tokens to Bybit’s investment arm, Mirana Corp. The agreement, which includes dropping ongoing litigation by FTX against Bybit, recovers nearly all of FTX's targeted funds.
FTX’s court-approved repayment plan aims to distribute $12.6 billion to customers, with initial payments expected within 60 days of the effective date.
DeFi Education Fund Challenges SEC’s ‘Regulation by Enforcement’
The DeFi Education Fund (DEF) has filed a new brief in its lawsuit against the SEC, asserting that the agency’s approach to regulating crypto projects, particularly airdrops, exceeds the agency’s legal rights. In the brief, filed alongside apparel brand Beba, DEF argues that the SEC’s repeated enforcement actions amount to an unapproved policy on digital assets, violating the Administrative Procedure Act (APA). The APA requires formal notice and commentary, a process DEF claims the SEC bypassed.
Coinbase, Coin Center, the Blockchain Association, and several crypto VC firms have filed amicus briefs in support of the DEF’s stance. In those briefs, Coinbase emphasized the agency’s “conflicting statements” on digital assets, while Coin Center argued for the DEF’s legitimacy in representing crypto developers facing regulatory uncertainty.
MicroStrategy Unveils Ambitious Plan to Expand Bitcoin Holdings
MicroStrategy announced plans to raise $42 billion over the next three years in order to buy additional bitcoin under its “21/21 Plan,” with $21 billion raised via equity offerings and $21 billion through the sale of fixed-income securities. The capital raises and purchases will serve to bolster MicroStrategy’s position as the world’s largest corporate holder of the cryptocurrency. As of September 30, the company held 252,220 bitcoins, valued at around $16 billion.
The firm also reported a year-to-date “BTC Yield” of 17.8% and expanded its bitcoin holdings by 11% in Q3. Despite reporting lower-than-expected revenues of $116 million, CEO Phong Le affirmed the company’s commitment to driving shareholder value through strategic digital asset investments.
Circle Increases USDC Redemption Fees
Stablecoin issuer Circle has raised redemption fees for its USDC stablecoin, marking the second fee hike this year. According to a Bloomberg report, USDC holders will now pay tiered fees, with redemptions over $2 million incurring 0.03% to 0.06% fees, depending on the amount. This increase follows the introduction of a tiered redemption plan in February, aimed at streamlining cash-out processes but with added costs for larger transactions.
Phantom Wallet Faces Outage During GRASS Token Airdrop Frenzy
Solana’s popular Phantom wallet experienced a nearly three-hour outage on Monday, coinciding with a high-demand airdrop of GRASS tokens. Phantom’s backend issue, which caused inaccurate balance displays for some users, began just six minutes after the GRASS airdrop launched. Phantom confirmed on X that services were restored, adding that the team would continue monitoring the situation.
The outage occurred as users flocked to claim 100 million GRASS tokens, which were distributed to participants monetizing unused internet bandwidth through the Grass platform.
