Welcome to The Wise Guy,
Where we take cryptocurrency seriously, but we also know how to have a good time.
That’s why we’ve curated the crème de la crème from not one, not two, but FIVE newsletters.
MilkRoad, Defiant, Messari, Bankless, and CoinDesk Node.
Defiant’s Top Story
Polygon Aims for Q4 Token Migration, Increasing Competition in Layer 2 Scaling
Polygon, one of the leading Layer 2 scaling solutions for Ethereum, has set its sights on completing the migration of its native token, MATIC, before the end of the year. This move is part of Polygon’s ambitious 2.0 overhaul, which aims to introduce a new token called POL and establish it as the network’s staking token across its ecosystem. Additionally, Polygon plans to launch a new staking layer to further enhance scalability for its networks.
The competition among Layer 2 teams to scale Ethereum has reached a fever pitch. With players like Matter Labs, Base, Arbitrum, Optimism, Starknet, and Polygon at the forefront, the race to provide innovative solutions for Ethereum’s scalability challenges is intense. By targeting a Q4 token migration, Polygon hopes to position itself favorably with its PoS Chain and ZkEVM integration.
Aave v2 Faces Liquidation Trouble Due to Scarcity of ZRX
Aave v2, a popular decentralized lending and borrowing platform, is currently dealing with the potential liquidation of a $2.5 million loan that is backed by ZRX tokens. However, ZRX liquidity on-chain is extremely scarce, making it unlikely that anyone would want to liquidate the position. This situation poses a threat to the Aave protocol, as it may result in bad debt.
To mitigate the risks associated with bad debt, Aave has implemented a plan to sell AAVE tokens that users have staked in its safety module. By taking this proactive step, Aave aims to address potential losses incurred by the protocol. Last year, Aave faced $1.6 million in bad debt, leading to the freezing of illiquid markets, including ZRX.
CFTC’s Recent Enforcement Action Challenges DeFi Foundations
The recent enforcement action by the U.S. Commodity Futures Trading Commission (CFTC) against three decentralized derivatives exchanges (DEXes) has caused ripples throughout the DeFi ecosystem. Opyn, ZeroEx, and Deridex were fined six-figure amounts and instructed to cease servicing users based in the United States. This development has raised concerns and highlighted contradictions in the CFTC’s regulatory approach to crypto.
Marisa Coppel of the Blockchain Association points out the inconsistencies in the CFTC’s actions, questioning their regulatory stance. On the other hand, Chris Perkins of the Global Markets Advisory Committee believes that these enforcement actions signal the imminent arrival of regulatory clarity in the United States. The impact of this regulatory intervention on the DeFi industry will likely be closely monitored by market participants.
Opinion: A Shifting Crypto Landscape with Regulatory Challenges
As the crypto space continues to evolve, regulatory hurdles are becoming increasingly apparent. While enforcement actions like those taken by the CFTC may signal regulatory progress, the lack of consistent approaches across different agencies and jurisdictions raises concerns and highlights the need for clarity. The widespread adoption and development of crypto-powered solutions can greatly benefit from a regulatory framework that strikes a balance between innovation and consumer protection.
The ongoing token migration by Polygon and the liquidity challenges faced by Aave are indicative of the complex dynamics within the crypto ecosystem. As market participants navigate these challenges, the need for proactive dialogue between regulators, industry stakeholders, and users becomes paramount. This dialogue will shape the crypto landscape of the future, fostering an environment that promotes innovation, investor confidence, and ultimately, the long-term growth of the industry.
Messari’s Desk
The House of Representatives has taken a keen interest in digital dollars, while the Senate seems less enthusiastic about passing crypto-related bills that promote innovation. Here are the top developments from this week on Capitol Hill:
CBDC Anti-Surveillance State Act
House Majority Whip Tom Emmer, backed by more than 50 cosponsors, reintroduced the CBDC Anti-Surveillance State Act.
This bill aims to prevent the Federal Reserve from issuing a Central Bank Digital Currency (CBDC) directly or indirectly to individuals or using it to implement monetary policy.
It clarifies that privately issued stablecoins, which preserve privacy protections similar to physical currency, would not be affected.
ECASH Act and Digital Dollar Caucus: Rep. Stephen Lynch introduced the ECASH Act, directing the Treasury (not the Fed) to develop and deploy an electronic version of the U.S. dollar called “e-cash.” This legislation emphasizes preserving privacy, anonymity, and minimal transactional data generation, similar to physical cash. Rep. Lynch also announced the formation of the Congressional Digital Dollar Caucus to facilitate discussions and education on the development of a U.S. digital dollar.
HFSC Digital Dollar Hearing
The House Financial Services Subcommittee on Digital Assets held a hearing on CBDCs and stablecoins.
Key discussions revolved around the pros and cons of a government-run digital dollar versus private sector alternatives. Bipartisan agreement emerged that the Federal Reserve should not issue a retail CBDC without clear authorization from Congress. Privacy concerns, financial monitoring, and impact on monetary policy were also debated.
Senate Banking Hearing on SEC Oversight: During the Senate Banking Committee’s hearing on SEC oversight, cryptocurrencies did not receive prominent attention. Members focused more on topics such as climate disclosures, private funds, and artificial intelligence.
Senate Banking Chairman Sherrod Brown sent a letter to Treasury, SEC, and CFTC heads, emphasizing the need for better disclosures in the crypto space. He believes that applying limited disclosure requirements, as proposed by some bills in Congress, would be a mistake.
Opinion: The Digital Dollar Debate and Regulatory Priorities
In the battle between private stablecoins and a government-run digital dollar, the House appears divided along party lines, while some Democrats view a government-led solution as potentially safer and inclusive. Privacy concerns and the impact on monetary policy remain pivotal topics of discussion.
However, the Senate seems to lack an immediate focus on crypto legislation. Chair Gensler’s testimony mainly addressed issues unrelated to cryptocurrencies, indicating that major crypto legislation faces challenges in gaining traction. Senate Banking Chairman Sherrod Brown’s letter highlighting the need for better crypto disclosures suggests a stance that goes beyond the limited disclosure requirements proposed in existing bills.
Bankless’ Desk
1. FTX gets approval to sell assets
FTX received permission from a US Court in Delaware to begin liquidating its cryptocurrency assets. Galaxy Digital will be allowed to offload up to $100M of Bitcoin, Ether, and specific insider-affiliated tokens per week. To maximize the recovery proceeds, FTX is also allowed to hedge positional risk and can utilize staking solutions to earn additional yield. According to court filings, FTX held $3.4B in type “A” digital assets.
2. SEC goes after Stoner Cats
The SEC announced charges against the Stoner Cats NFT collection for conducting an unregistered offering of crypto asset securities. Stoner Cats collected $8.2M in mint fees and used the proceeds to create an animated web series. Under the settlement, Stoner Cats will pay a $1M fine and destroy any remaining NFTs in its possession. This has raised concerns among crypto participants about further regulatory headwinds for US-based projects.
3. Arbitrum partners with Espresso
Offchain Labs, the team behind Arbitrum, announced a partnership with Espresso Systems to bring shared sequencing solutions to the Arbitrum ecosystem. Their implementation will use Timeboost, a transaction ordering system proposed by Offchain Labs, to mitigate latency racing dynamics in MEV extraction on Arbitrum.
4. Binance departures keep coming
Binance.US and its CEO Brian Shroder parted ways after the exchange was forced to downsize its workforce. Approximately one-third of Binance.US staff were let go in this latest round of cuts. The departures have been ongoing since March, when Binance faced enforcement actions and charges from regulatory bodies.
5. Deutsche gets serious on crypto
Deutsche Bank announced a partnership with Taurus to establish crypto custody and asset tokenization services. This move aligns with Deutsche’s plans to offer its clients crypto custody and prime brokerage services. Other traditional financial institutions have already entered the crypto custody space, and Deutsche is joining them.
MilkRoad
Today, we’re going to discuss three reasons why the crypto markets could experience an explosive rally in the near future. And by explosive, we mean a Mentos-In-Coca-Cola-type explosion! So, let’s get into it, shall we?
REASON #3: BITCOIN HALVING EVENT
Every four years, a significant crypto event takes place known as the Bitcoin Halving. During this event, mining rewards get cut in half to slow down inflation. The next Bitcoin Halving is expected to happen in April 2024.
Why is this good news? Well, the previous three Bitcoin Halvings have been catalysts for massive crypto rallies. Just take a look at the price chart, and you’ll see that Bitcoin has experienced substantial price increases both before and after the halving events. This historical pattern gives us reason to be excited.
Milk Road Hype-Meter: 7
In summary, Bitcoin halvings have historically led to significant price rallies, bringing joy to many investors.
REASON #2: ETF APPROVAL
Several big financial firms, with trillions of dollars in assets under management, have filed for Bitcoin ETFs. This includes BlackRock, Fidelity, Franklin Templeton, Invesco, and many more.
It’s quite amusing how these firms, which previously had reservations about crypto, are now eagerly jumping into the game. Why is this good news? Well, historically, the approval of ETFs has sparked price rallies for assets. Just look at what happened to gold when the first gold ETF was listed. It saw significant inflows, and the price of gold hit record highs. With institutions rushing to file for a Bitcoin ETF, it’s only a matter of time before one gets approved, and the bets are on BlackRock, with its impressive track record of getting ETFs approved.
Milk Road Hype-Meter: 8
With all the big players vying for a Bitcoin ETF, it feels like a launch is inevitable, and that’s something to be excited about.
REASON #1: CRYPTO’S FUNDAMENTALS
Yes, prices have decreased during this bear market. But that doesn’t necessarily mean the value of crypto has decreased. As billionaire Dharmesh Shah once said, “Valuation oscillates up and down around value.”
Prices are influenced by various factors, but they don’t always reflect the true value of an asset. Let’s take Ethereum (ETH) as an example. While its price may be down, its value has actually increased. And when we zoom out and look at the overall crypto market, we can see that despite market fluctuations, the true value of crypto has grown stronger.
CoinDesk’s Best Story
Recently, The New York Times got its hands on a collection of Bankman-Fried’s writings, supposedly penned during his house arrest. While the most intriguing parts are yet to be released – like a massive Twitter thread offering his perspective on the business failure – there are some notable quotes and details that shine a light on SBF’s mindset before and after the collapse of his crypto empire.
What stands out the most is Bankman-Fried’s seemingly unwavering refusal to take any responsibility for the whole debacle. He doesn’t even acknowledge that a staggering $8 billion mysteriously vanished or that people lost their life savings. It’s as if he’s living in a different reality and oblivious to the fact that he might end up spending the rest of his days behind bars. Instead, his main concern appears to be his fallen public persona, as if court hearings and bankruptcy processes are mere distractions from his “magnanimous, beloved statesman” image he envisioned for himself.
His own words speak volumes: “I’m broke and wearing an ankle monitor and one of the most hated people in the world. There will probably never be anything I can do to make my lifetime impact net positive.” It’s truly mind-boggling how self-involved one person can be to complain about feeling broke after causing massive losses for countless others.
It’s true that Bankman-Fried’s extravagant lifestyle crumbled alongside his company. He had a penchant for luxury real estate, private jets, and over-the-top delivery services. It’s yet another example of how his reputation as a humble billionaire driving a Corolla was nothing more than a facade. To make matters worse, he apparently had the audacity to claim, “And the truth is that I did what I thought was right.” This echoes the same “ends justify the means” mentality that got him into trouble in the first place.
Many have written about Bankman-Fried’s brand of “effective altruism” and how pursuing profit at all costs, under the guise of charitable giving, ultimately proves ineffective. A recent Bloomberg Businessweek article delves into the backgrounds of SBF’s parents, Joseph Bankman and Barbara Fried, Stanford Law School professors. They supported SBF’s rise to fame and continue to stand by him, even when he jeopardized their multi-million dollar property by violating his bail conditions.
Bankman, in particular, frequented FTX, attending what passed as board meetings for the grossly mismanaged business and providing tax advice. Apparently, he was seen as a kindly figure, responsible for interpreting his son’s hot-headed comments and acting as a sounding board for SBF’s decision-making. If SBF inherited his “business sense,” however valuable or questionable it may be, from his father, it seems he also inherited his mother’s entire ethical system.
SBF is known as a prominent consequentialist philosopher, someone who seriously ponders ethical dilemmas like the Trolley Problem. Yet, it’s perplexing how someone with such convictions fails to consider the consequences of their own actions. Were the luxurious vacation properties in the Bahamas always the ultimate goal, or was there genuine concern for making a positive impact?
Interestingly, Bankman-Fried seems to dwell on the mistakes of those around him in his private writings. Most notably, he seems to construct a narrative shifting blame onto his ex-girlfriend and ex-employee, Caroline Ellison. According to him, she oversaw a disastrous trade that led to bankruptcies at both FTX and Alameda. He claims it was her failure to hedge the hedge fund. As for the infamous “Fiat@” account used to siphon customer funds, SBF conveniently distances himself from it, placing the blame on the lawyers at Sullivan & Cromwell overseeing FTX’s bankruptcy.
Twice weekly crypto goodness, coming your way! Catch us every Monday, Tuesday and Friday. And hey, don’t forget to check us out on Wednesdays for all the latest AI news – because why limit yourself to just one kind of intelligence?
