All Been Crypto — Week 10 May 2024
What a week we are back in green crypto market cap at 2.5tn and with BTC at 63k +7% WoW with ETH +2% flat at 3k. Main gainers were AI tokens like RNDR, AKT, WLD all up 20–45% while on the other side we had CORE and Wormhole down -10–14%. Hong Kong was hosting Bitcoin Asia this week and a lot of announcements around fundraising were made from ZMK 5mm, Botanix Labs 8.5mm and Arch Labs 7mm. We also saw Trump trouting bullish on crypto at his NFT rally officially making it a partisan topic in this presidential election. Binace raised flags on DWF and on their own internal practises, Robin Hood got an SEC Wells Notice, Bybit allowing USDe as collateral now and Vitalik got another EIP for us. All the while Greyscale raising some eyebrows with their withdrawal of the ETH Futures ETF filing. Enjoy reading!
Bat Tai Chi — btc21@mail.com
HEADLINES:
Binance fired surveillance lead after DWF allegations
WSJ reported Binance fired its top investigator after they alleged DWF Labs or 300mm wash trading in 2023. A bit of context Binance relies on VIP customers for two-thirds of the platform’s total trading volume. Investigators took out the Tron Foundation last summer. The monitoring team also recommended removing DWF. The head of Binance VIP complained. Binance’s compliance department believed that there was insufficient evidence, and believed that the head of the monitoring team worked closely with DWF’s competitors and fired him. Binance investigators found that DWF manipulated the price of YGG and at least six other tokens and conducted more than $300 million in wash trading in 2023. DWF sold nearly 5 million tokens in two batches near the peak. Binance stated that the false transactions discovered by the monitoring team were proprietary transactions and did not constitute manipulation. Binance also believed that the head of the monitoring team cooperated too closely with DWF’s competitors on the case, which created fraud. DWF denied the allegations. Quite a juicy story as market manipulation, wash trading and those type of transactions are very common on crypto exchanges, we learned from Do Kwon trials about Jumps involvement in Terra and while no faults there on their side so claims DWF Labs in this case. We can see the story as nothing to see here and just some Binance internal politics showing the power the VIP team has over others or an indication of how deep the divide runs on what appropriate market behavior is from liquidity providers. There is now doubt (in my opinion) that these type of trading activity happens on many CEX and potentially on Binance as well but I believe they are really trying to clean up the image and it’s unlikely going forward this would be allowed. DWF is also no small player so clearly having some influence in the industry. Wondering if we will ever find out what really happened.
SEC sends Wells Notice to Robin Hood
Another Crypto broker that has allegedly violated SEC securities rules, well this time it’s the crypto arm of a traditional broker. Robin Hood Crypto received a Wells notice from SEC this week letting many speculate that Gary is just going rogue against anyone who lists tokens outside of Bitcoin. This one is even more worrying because it obviously serves as a ‘scare’ tactic and Robin Hood is clearly one of the most regulation cautious of the platforms available in the US. They have to coz their core business is on traditional assets and so being compliant and with adequate licenses is part of their usual operations. They even delisted SOL and a few other tokens after SEC came for Coinbase and Binance (see ABC 9 June 2023). We don’t know yet what they have been alleged for but it certainly has a chilling effect, although the pace at which SEC is firing them out recently they probably have less of that than they used to. And the Debt Box fiasco (see ABC 22 March) further shoot trust in the good faith of the SEC.
Bybit integrates USDe as collateral
We continue to build up systemic risk. USDe with is Ethena’s ‘stabelcoin’ that derives its peg from the basis trade can now be utilized as collateral for guess what the basis trade on Bybit. If this makes you worried that the collateral for a perp position is the basis trade on another exchange you are certainly not alone but hey we are in a bull market why don’t we just continue lego risk on top of each other until something breaks? Probably Ethena will even do some of their own basis trade hedging on Bybit now so you can take the opposite side of your trade synthetically with your collateral. Yields for USDe are still quite elevated on pendle and 400mm cap is filled.
Vitalk poposes EIP 7702
Vitalik introduced EIP 7702 this week as an upgrade of the currently debated EIP-3074. It aims to enhance the functionality of Ethereum’s externally owned accounts (EOAs). EIP-7702 intends to temporarily integrate smart contract capabilities into EOAs, this would allow for new specific use cases like 3rd party payment for gas and opened up the design space much wider. EOAs, controlled by private keys, possess limited functionalities and security features, limiting their use in more intricate transactions typically handled by smart contracts.
QUOTES:
The field of crypto assets, without prejudging any one of them, many of those tokens are securities under the law of the land as interpreted by the U.S. Supreme Court. So we follow that law, and you, the investors, are not getting the required or needed disclosures about those assets
Gary Gensler — SEC Chairman
I’ll be temporarily reducing my role as a public face for Eclipse. It isn’t fair for the team at Eclipse, our investors, or our ecosystem of developers to have this situation weighing on their reputations
Neel Somani — Eclipse Founder
After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business
Dan Gallagher — Chief Legal, Compliance and Corporate Affairs Officer at Robinhood Markets
