How the ETFs Made TradFi Move at the Speed of Crypto 💨
Weekly News Recap: 💸 ShapeShift's $275K SEC fine resolution, 📉 Binance.US's compliance woes, ✈️ Do Kwon set for South Korea extradition, 📜 DCG's fight against "baseless" NYAG lawsuit, and more!
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In this episode of Unchained, Eric Balchunas from Bloomberg Intelligence offers his analysis on the explosive entrance of Bitcoin ETFs into the market.
Just two months post-launch, these ETFs have not only exceeded expectations but have also signaled a significant shift in traditional finance's pace, now mirroring the rapidity of cryptocurrency movements.
Balchunas sheds light on why he believes BlackRock's Bitcoin ETF may outperform its peers and expresses skepticism about the future success of spot Ether ETFs. Diving into the evolution of these digital asset funds, he highlights the unique moment they represent in the financial landscape.
He said, "Bitcoin ETFs will always be around just like gold ETFs are, but it's, you only get this sort of shining welcome to ETFs moment once where you break through."
Listen to the episode on Apple Podcasts, Spotify, Fountain, Overcast, Podcast Addict, Pocket Casts, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. Or watch it on YouTube.
Weekly News Recap
ShapeShift Agrees to a $275,000 SEC Settlement Over Unregistered Securities Charges
ShapeShift, a firm founded by Erik Voorhees, has agreed to pay a $275,000 fine to the U.S. Securities and Exchange Commission (SEC) to resolve allegations that it operated as an unregistered securities dealer. The SEC's cease-and-desist order highlights that ShapeShift offered crypto assets that were deemed investment contracts and thus classified as securities, referencing the criteria established by the 1946 Howey test.
This settlement includes a commitment from ShapeShift to refrain from future violations of securities regulations.
The controversy stems from ShapeShift's operations between July 2017 and November 2019, before it ceased its direct crypto asset exchange services in 2021.
SEC Commissioners Hester Peirce and Mark Uyeda criticized the vague nature of the ShapeShift settlement, highlighting regulatory uncertainty in the crypto sector. “In sum, ShapeShift is in trouble because the Commission, nearly 10 years after ShapeShift’s platform started trading and more than three years after it changed its business model, now contends that some unidentified number of the 79 crypto assets it traded between 2014 and 2021 were investment contracts without explaining why,” the two Commissioners said.
Speaking of settlements, BlockFi is on the verge of resolving its disputes with FTX and Alameda Research through an "in principle" settlement valued at $874.5 million. The agreement, pending judicial approval, would allow BlockFi to recover claims against the two entities, facilitating a second interim distribution to its creditors. FTX, in turn, will retract its claims against BlockFi, marking a significant step towards concluding the bankruptcy proceedings of these crypto giants.
Binance.US Faces SEC Pressure and Operational Decline
The SEC has raised concerns over Binance.US's compliance with a consent order, focusing on whether the U.S. customer funds are properly safeguarded from access by global employees. Despite Binance.US asserting its adherence to regulations, the SEC questioned the sufficiency of their evidence regarding control over customer assets.
This dispute unfolds as Binance.US reports severe operational setbacks, including a 75% revenue drop and over two-thirds of staff layoffs following the SEC's lawsuit. The action has led to asset withdrawals and challenges in maintaining banking relationships, casting a shadow over the company's future viability amidst ongoing legal scrutiny.
Meanwhile, the Nigerian House of Representatives Committee on Financial Crimes summoned Binance CEO Richard Teng to appear before it amid a probe following the detention of two executives.
Do Kwon Set for Extradition to South Korea After Montenegro Court Decision
Do Kwon, the co-founder of Terraform Labs, is set to be extradited to South Korea. This decision by the High Court of Montenegro comes after a nuanced legal battle between the United States and South Korea over Kwon's extradition, ultimately favoring his return to his native country. The Court of Appeals recently overturned a prior ruling for extradition to the U.S., leading to this latest decision. Kwon faces serious charges in both countries, including securities fraud by the U.S. SEC and criminal charges by the Department of Justice, in addition to charges in South Korea related to the fallout of TerraUSD and Luna, a $45 billion collapse that led to the crypto winter beginning in 2022.
Digital Currency Group Challenges NYAG Lawsuit as "Baseless"
Digital Currency Group (DCG) and its CEO, Barry Silbert, have filed a motion to dismiss what they call a "baseless" lawsuit brought by the New York Attorney General Letitia James. The lawsuit, initiated in October 2023 and expanded last month, accuses DCG and its subsidiary Genesis Global Capital of defrauding investors of $3 billion, particularly in connection with the collapse of crypto firm Three Arrows Capital and crypto exchange FTX. The investors were tied to Gemini Earn, a partnership between Genesis and the crypto exchange Gemini, as well as those invested directly with Genesis.
In its motion, DCG vehemently denied the fraud accusations, describing them as "a thin web of baseless innuendo, blatant mischaracterizations, and unsupported conclusory statements."
Crypto's Influence Expands: From Political PACs to Meme Coin Mania
Crypto political action committees (PACs) like Fairshake have demonstrated some clout in recent congressional primaries, particularly targeting and contributing to the defeat of U.S. Rep. Katie Porter in California. Their strategic spending, exceeding $13 million across several key races, underscores the crypto industry's intent to shape political landscapes to favor the regulation of digital assets. Josh Vlasto, a spokesperson for these PACs, declared, "The crypto voter is here," emphasizing the industry's intent to be a significant political player in the 2024 elections.
Simultaneously, the market is buzzing with the rise of meme coins based on political figures, notably a token named Jeo Boden, inspired by and misspelling the name of U.S. President Joe Biden, which surged by 830% in trading volume on Wednesday. Political meme coins reflect the speculative and volatile nature of the crypto market and showcase the often whimsical side of crypto investments.
MicroStrategy Remains Ever Faithful to Bitcoin Despite Historic Miner Sell-off
In the week that bitcoin hit all time highs, MicroStrategy has increased its convertible debt offering to $700 million, aiming to acquire more bitcoin. This move, announced by the company that was founded by staunch bitcoin advocate Michael Saylor, indicates a strong belief in the future value of bitcoin, despite recent market fluctuations. The conversion price of these notes is set at a 42.5% premium to the stock's last close, reflecting confidence in the asset's value growth. MicroStrategy's already has a stockpile of around 193,000 BTC.
This week the market also absorbed the move of $69 million worth of bitcoin, mined in 2010, to Coinbase, likely for sale. This action by one of the earliest bitcoin miners coincided with bitcoin reaching a new all-time high. Analysts suggest this large-scale sell-off, indicative of long-term holders cashing out, contributed to an 8.5% market dip and triggered over $1 billion in leveraged position liquidations on platforms like Binance.
Wormhole Airdrop Sparks Community Concerns Over Fairness
Wormhole, a token bridging platform, is set to airdrop 617 million W tokens to 397,704 wallets, stirring debates over allocation fairness by its community. The distribution, aimed at rewarding users of Wormhole ecosystem applications and its Discord and NFT communities, has left some users dissatisfied, claiming discrepancies in the allocation process. While the platform has launched an eligibility tracker, issues with Ethereum Virtual Machine (EVM) wallet connections have been reported. Despite these challenges, some users have expressed frustration over perceived inequities, with concerns over the criteria used to determine allocations, leading to calls for greater transparency and fairness in future distributions.
Coinbase Glitches Amid Bitcoin's Surge
As Bitcoin reached a new high, some Coinbase users encountered a concerning issue for the second time in two weeks—zero account balances displayed on the platform.
This glitch, amid an increase in bitcoin trading activity, prompted an official response from Coinbase, assuring users of the safety of their funds despite the apparent account discrepancies. The company acknowledged the problems, including increased latency and intermittent display errors, while working on improvements. Coinbase CEO Brian Armstrong previously linked similar disruptions to a "large surge of traffic," reflecting the platform's struggle to handle spikes in user activity during bullish market conditions.
Tether's Market Cap Surges to $100 Billion Amid Crypto Bull Run
Tether (USDT), the leading stablecoin globally, has reached a new milestone by surpassing a $100 billion market capitalization for the first time. This growth, including an increase of $10 billion in market value since December, is attributed to rising optimism in the market, particularly the recent surge in Bitcoin prices.
Uniswap's UNI Token Soars 20% on Revenue-Sharing Proposal Enthusiasm
Uniswap's governance token, UNI, experienced a notable 20% increase in value as the decentralized finance (DeFi) platform's proposal for a revenue sharing mechanism for token holders nears approval. The anticipation has elevated UNI's price to its highest in 26 months, outperforming broader market trends and showcasing strong investor confidence in the proposed governance overhaul. The initiative, poised for an on-chain vote, promises substantial annual dividends to UNI holders, potentially setting a precedent for similar mechanisms across other DeFi protocols while navigating regulatory considerations.
