Crypto Chronicle - 18/10/23
Welcome to the thirteenth edition of the Crypto Chronicle, brought to you by Imperial Wealth.
You can listen to todays episode here.
Crypto News
Trial Reveals Caroline Ellison’s Accusations Against Sam Bankman-Fried: Allegations of FTX User Funds Misuse and Presidential Aspirations, Co-Founder Wang Addresses Plea Negotiations
During the criminal trial of Sam “SBF” Bankman-Fried, the former CEO of FTX, his ex-business partner and romantic partner, Caroline Ellison, testified to engaging in fraudulent activities while working at Alameda under SBF’s leadership.
She attributed the mishandling of FTX user funds, totalling around $14 billion, to SBF, alleging he established the systems allowing Alameda to appropriate the funds.
Their relationship forms a key element in the case against SBF, who faces charges for directing Alameda to access FTX user funds without consent, using them for various purposes.
Ellison’s and other insiders’ testimony led to plea agreements with U.S. authorities.
SBF has pleaded not guilty, and the defence seeks to shift some blame onto Ellison.
Caroline Ellison Reveals FTX’s Closing Stages, Including SBF’s Proposal to Sell Equity to Saudi Crown Prince, Alleged Bribes to Chinese Officials, Getting Regulators to Crack Down on Binance
Caroline Ellison’s second day of testimony in the Sam Bankman-Fried trial revealed critical events leading to the anticipated FTX crisis in November 2022.
A market downturn in May prompted lenders to demand millions in loan repayments in June, causing significant stress. Genesis Capital, one of the lenders, recalled $500 million in loans.
Alameda Research held over $13 billion in debt with FTX and over $1.3 billion in open-term loans. Ellison testified that Bankman-Fried instructed her to find “alternative ways” to present Alameda’s financial status to lenders.
There was concern that Genesis might recall all loans if they knew the true financial situation, potentially harming Alameda’s reputation.
Ellison also mentioned a $150 million payment FTX allegedly made to a Chinese official in 2021 to release frozen funds, although this allegation isn’t part of the U.S. trial. Bankman-Fried’s crisis management included seeking capital from Saudi Crown Prince Mohammed bin Salman, among other measures, including getting regulators to crack down on Binance.
Did SBF Actually Employ FTX Traders’ Bitcoin to Maintain BTC Price Below $20,000? Did he prevent Bitcoin from reaching $100,000 in the Bull Run?
In 2021, Bitcoin didn’t reach $100,000, potentially due to allegations that the now-defunct FTX exchange consistently sold Bitcoin, as per a CoinTelegraph report.
Joe Burnett, a senior product marketing manager at Unchained, suggested on X (formerly Twitter) that FTX executives may have suppressed BTC’s price.
The trial of former FTX CEO Sam “SBF” Bankman-Fried has revealed potential market manipulation. Testimony from Caroline Ellison, former CEO of Alameda Research, indicated that Bankman-Fried asked her to sell BTC using FTX customer funds, despite lacking authorisation.
Burnett expressed concerns that these actions could have negatively impacted the entire Bitcoin bull market. BTC did reach $69,000 during the 2021 bull market, but earlier predictions were much higher.
Binance Halts Hamas-Linked Accounts Following Israeli Request
Binance has frozen accounts associated with Hamas militants at the request of Israeli law enforcement.
The freeze specifically targets Hamas and doesn’t affect regular Palestinian civilian accounts.
Yi He, Binance’s co-founder, explained that Hamas is designated a terrorist organisation by the United Nations, obliging institutions to cooperate with freeze requests. This action is not within Binance’s discretion.
The exchange has no authority to reject such requests.
Israeli officials claim the frozen accounts were used by terrorists to collect war-related funds via social media. In response, the Israeli Web3 community initiated “Crypto Aid Israel,” a charity campaign receiving nearly $50,000 in cryptocurrency donations.
Read more here: https://imperialwealth.com/news/binance-halts-hamas-linked-accounts-following-israeli-request
SEC in the US Elects Not to Appeal Against Court’s Grayscale Bitcoin ETF Ruling
The U.S. Securities and Exchange Commission (SEC) has chosen not to challenge a recent court ruling that deemed their rejection of Grayscale Investments’ spot bitcoin exchange-traded fund (ETF) application “arbitrary and capricious.”
This development comes after the D.C. Circuit Court of Appeals in August declared that the SEC’s denial of Grayscale’s request to convert the Grayscale Bitcoin Trust (GBTC) into an ETF lacked validity, highlighting the need for consistent treatment of similar cases.
The SEC’s decision not to appeal now sets the stage for the agency to reconsider Grayscale’s application. Grayscale has long argued that an ETF conversion would eliminate the discount that GBTC has been trading at relative to its bitcoin holdings since February 2021. This discount, once as high as 50%, has now decreased to around 17%.
Additionally, other major asset managers, including BlackRock, Fidelity, and Invesco, have similar spot Bitcoin ETF applications awaiting SEC review, with decisions expected by next year.
Coinbase Persists in Urging SEC to Address Crypto Rulemaking Petition
Coinbase’s Chief Legal Officer, Paul Grewal, has renewed his request for a mandamus to compel the SEC to address the company’s crypto rulemaking petition.
Coinbase is intensifying its efforts to secure a court order that pushes the SEC to respond within 30 days, as the SEC’s previous response lacked clarity and was seen as bureaucratic posturing.
In July 2022, Coinbase initially submitted its rulemaking petition to have the SEC establish regulations for the crypto market.
Nine months later, they filed a mandamus petition to force the SEC into providing a definitive response.
The SEC has rejected Coinbase’s claims and requested a 120-day extension for a response, indicating a possible reply by late October or early November.
Misinformation About BlackRock ETF Approval Sparks Bitcoin Surge, Causing Ripples in Crypto Markets
Cryptocurrency news platform Cointelegraph mistakenly reported that the SEC had approved BlackRock’s Bitcoin ETF, leading to a 10% Bitcoin price surge, despite no official confirmation.
Fox News and BlackRock confirmed the news was false, causing Cointelegraph to issue an apology, citing a breach in its editorial procedure for social media posts.
Meanwhile, BlackRock, Invesco, and Fidelity, among other companies, continue their efforts to launch a US spot Bitcoin ETF, with over ten applications pending.
Analysts believe approval could boost the market, as it hasn’t yet priced in this development.
Read more here: https://imperialwealth.com/news/misinformation-about-blackrock-etf-approval-sparks-bitcoin-surge-causing-ripples-in-crypto-markets
Australian Treasury Suggests Regulatory Oversight for Crypto Exchanges, Excludes Tokens
The Australian Treasury has proposed a regulatory framework for the cryptocurrency industry, focusing on exchanges and service providers rather than individual tokens.
The framework may require crypto exchanges to obtain financial services licences from local regulators. It aims to address consumer protection while fostering innovation in the digital asset sector.
The proposal has received mixed reactions from Australian exchanges, with some appreciating the thoughtful approach, while others feel it is attempting to fit crypto within existing financial service regulations.
The Treasury is seeking feedback on these proposals, with submissions due by December 1, 2023. The legal status of these proposals remains uncertain.
Read more here: https://imperialwealth.com/news/australian-treasury-suggests-regulatory-oversight-for-crypto-exchanges-excludes-tokens
Australian Cryptocurrency Exchanges Approach the New Licensing System With Measured Hopefulness
Australian cryptocurrency exchanges generally support the Treasury’s proposal to bring them under the financial services licensing framework.
However, concerns exist that this could overly regulate the industry. Australian Treasury Assistant Stephen Jones emphasised three key objectives in the new regulatory framework at the Crypto Summit: fostering growth, providing clarity to cryptocurrency service providers, and protecting consumers.
Caroline Bowler, CEO of BTC Markets, sees this as a positive step for the industry’s future, while Adrian Przelozny, CEO of Independent Reserve, believes it will boost investment and consumer protection.
Despite concerns, the proposal is seen as a necessary step to provide certainty and align with global standards.
RBA Expresses Willingness to Explore CBDC as the Future of Currency in Australia
The Reserve Bank of Australia (RBA) is exploring the possibility of introducing a central bank digital currency (CBDC) to modernise the monetary system.
RBA’s Assistant Governor Brad Jones discussed the potential benefits of digitising assets, emphasising improved efficiency, transparency, and resilience in the financial sector.
He noted that stablecoins from well-regulated institutions backed by high-quality assets could be useful for tokenised transactions, but private stablecoins lack regulatory guidance, posing risks. Jones advocated for CBDCs, citing their potential for secure transactions.
RBA is researching a retail CBDC and plans to collaborate with international partners for a wholesale CBDC pilot project to bolster Australia’s digital currency landscape.
Read more here: https://imperialwealth.com/news/rba-expresses-willingness-to-explore-cbdc-as-the-future-of-currency-in-australia
Ferrari’s to Adopt Cryptocurrency Payments in the United States
Ferrari has decided to introduce cryptocurrency payments for its luxury sports cars in response to strong market demand and dealer requests.
Enrico Galliera, Ferrari’s Chief Marketing and Commercial Officer, confirmed this move, driven by the growing interest of customers, including tech-savvy young investors, in digital currencies.
This initiative aims to expand their customer base by connecting with potential buyers who may not be traditional Ferrari clients.
While exact sales projections through cryptocurrency were not disclosed, Ferrari’s order book is fully booked until 2025.
They plan to implement cryptocurrency payments in Europe in early 2024 and expand to other crypto-friendly regions.
BitPay will ensure the legitimacy of the digital currency, preventing involvement in illicit activities or financial impropriety.
Most of Ferrari’s U.S. dealers have either enrolled or are in the process of joining this program.
Read more here: https://imperialwealth.com/news/ferraris-to-adopt-cryptocurrency-payments-in-the-united-states
Technical Analysis
Last week BTC was priced around $27.5-$27.6k in that version of the Chronicle, with todays price being $28.3k as of writing!
Much has happened since then, clearly via the fundamental news section.
Let’s firstly discuss the DXY.
After dumping last week to support, off the back of hot CPI and PPI data, the DXY put in a large bid, going back up to its downtrend line that was broken, however has so far backtested this and rejected hard (which is great for risk-on assets).
Please see the chart below:
As a result, stock markets during the dump last week flourished, then on the re-pump of the DXY have retreated, and have now made back some ground given the inverse correlation.
BTC has clearly had a mind of its own recently (like it always does), but technically, still bounced from a really strong support level.
Last week to Trading Academy members, I sent out a bullish chart suggesting this harsh sell off towards the end of the week could simply be a bullish retest of our broken downtrend, with the 50 SMA as confluence.
Please see the chart below:
This rang true, despite fundamental narratives.
Please see the chart below:
As a result, the bullish market structure of course remains and rings true!
Please see the chart below:
Now just picture the candle when the real ETF news is announced… Much FOMO!
Mining
Bitcoin in the past 8 hours has seen a great pump with the fake news. This in turn has aided in the block reward having a bit jump for a few hours. We saw block rewards of 0.5btc+ which gives some idea of what will happen when we do see a bull run.
Transactions volume spiked which in turn caused a backlog of block space thus pushing up the price for priority etc. There is not all good news, we saw difficulty spike by 6.43% yesterday, this in turn looks mainly due to limited activity on BTC transaction wise but also hashrate was also moving up sitting around 440EH which is trending up by about 5% per month.
This will continue into the halving as we see more and more people get prepared for the next run. Those who wait for more hash will pay astronomical prices come 2024-25 as price expectations keep rising and in turn will push hardware prices up. Hashrate has always been a conviction indicator for the big guys so handy to look at.
Other networks are not seeing huge movement with Litecoin and Doge remaining stable, Kaspa has had a 3% rise in difficulty while its hashrate has finally cracked 50PH which we always thought would happen eventually with profitability remaining so good on KS3 models. This price action on Kaspa has helped miners for sure.
Dash has had a 23% drop in difficulty due to its hashrate dropping by almost 40% in the past 3 weeks. Those mining with D9s are loving this! They are making around $11 per day currently which is a great get as they are very limited in availability these days.
If you are interested in these products, or any of the prior cryptocurrency services I have mentioned, feel free to book a free online consultation here!
Thank you for reading this weeks edition of the Crypto Chronicle!
We look forward to next weeks.
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