The gloves are off. The SEC has sued both Binance and Coinbase in a single week. And listed several major protocols as securities. This is the biggest fight Crypto has ever seen.
Here’s what we got today:
- SEC’s Suing Spree. Gary’s taking on the entire industry.
- Reasons to believe. Why a Bull market is inevitable.
- A Hidden Money Printer? An introduction to Telegram Trading Bots.
- Around the Web. Autopools are live, Apple’s VR headset is unveiled, RocketPool on zkSync Era, and more.
Here’s your Edge 🗡️!
“Narratives and emotions drive the market in the short term. Fundamentals and truth drive it in the long run.”
🧑⚖️ SEC’s Suing Spree
SEC is on a legal rampage. This week it sued Binance and Coinbase for violating federal securities law.
The following are charged: Binance Holdings, BAM Trading Services, and Changpeng Zhao. Here’s a list of violations:
- Failure to register as a broker.
- Failure to register as an exchange.
- Failure to register as a clearing agency.
- Binance commingled funds.
- Inflating Binance.US’ trading volume by a CZ-owned and operated entity.
- Offered unregistered securities to the public through BNB token & BUSD.
- CZ was “secretly” controlling Binance.US, when it was supposed to be a separate entity.
- Binance allowed U.S. citizens and U.S residents to trade on its platform, despite saying it didn’t.
The SEC has also asked the court to freeze assets related to Binance US-based customers. They argue that, considering Binance’s track record, a quick freeze is a necessary step.
In response to these allegations, users have withdrawn around $1.9 billion in the past 7 days.
The charges against Binance were supported with evidence that painted a negative picture of Binance. According to the suit, Binance’s Chief Compliance Officer said in 2018 that “we are operating as a fking unlicensed securities exchange in the USA“.
Coinbase was charged for operating as an unregistered broker, exchange, and clearing agency. The SEC highlighted Coinbase’s Prime, Wallet, Staking products, and the tokens it lists, as areas where it violated federal securities laws.
Interestingly, the SEC also included major tokens like Solana (SOL), Polygon (MATIC), and Cardano (ADA) in the list of tokens they claimed as securities. Axie Infinity (AXS), Chiliz (CHZ), and Filecoin (FIL) are other examples from that long list.
Coinbase responded that its business model got tacit approval from the SEC when the agency approved its IPO.
They also criticized the SEC’s enforcement-only approach. Coinbase had previously sued the SEC to force them to provide regulatory clarity.
Edgy’s Take: There’s a big difference between the cases against Binance and Coinbase. Coinbase’s case focuses on what is or is not a security.
In contrast, Binance is facing allegations of fraud. And the SEC seems to have some evidence pointing to that. So we’ll see what happens.
Even if the case against Binance is valid, the SEC is not acting in the best interest of the crypto industry. There’s no clear regulatory framework for U.S. Crypto companies to work from.
Oh yea fun fact! Gary Gensler applied to serve as an advisor for Binance in 2019 before becoming SEC chair. Kinda sus.
The big theory: This is all to cut off oxygen to Crypto companies so they can eventually introduce their own central bank digital currencies. Complete transparency and power over every U.S. dollar transaction.
How You Can Help: If you want to fight back, you can donate to Coin Center. If you’re American, call or contact your local representatives.
🐂 Why I Remain Bullish
It has been over 1.5 years since the previous cycle’s top. And there hasn’t been a bull market quite like this one.
Terra Luna collapsed. Then FTX collapsed. And now the SEC is suing everyone. It can be tough to remain hopeful if this is your first bear market. This is my 3rd bear market, so I know how excruciating it can be.
Despite this, I remain in this space and know another Bull run is inevitable.
#1 History Rhymes
The Bitcoin Halving Cycles has been a reliable indicator of crypto bull runs. Bitcoin Halving is the 50% reduction of BTC emissions every four years. This supply reduction is the catalyst for a prolonged bull market.
The next Bitcoin halving is expected in May 2024.
Keep in mind that the previous cycles were during periods of quantitive easing. We don’t know what the macro environment will be like next year.
#2 The Money Printer Will Turn Back on
The U.S. is drowning in debt. It’s around ~$32 trillion and not slowing down anytime soon. Last week, the House and Senate approved a bill to raise the debt ceiling.
The bill will defer the federal debt limit for two years. This allows the government to borrow unlimited sums necessary to pay its obligations.
As the interest rates rise, so does the interest payments required. This has become unsustainable.
There’s only one way out. Sooner or later, the money printers will turn on.
Inflation’s high. The cost of living is insane. The average person will be more risk on. And some of that liquidity will come on the chain.
Besides the money printers, around $128.4 billion in stablecoins are eager to be deployed.
#3 Product-Market Fit is Happening
In the past cycles, we weren’t sure if we had found a product-market fit for cryptocurrencies. Now, we have established several sectors and killer applications. Adoption and on-chain metrics are pumping up.
Stablecoins are probably the most successful crypto application. We weren’t even sure if it would’ve worked out in the last bear market. Still, the current market cap of stables is over $127 billion.
As the loss of trust in governments increases, people will learn the value of sovereign money.
Ethereum has established itself as a settlement layer for dApps and Layer 2s. It made around $448 million in the last month alone. It is now ultra-sound money, meaning more ETH is burned rather than issued. I believe the ~5% rate from staking ETH will become more attractive as the yield on treasury bonds will lower.
Other promising areas include GameFi and Real World Assets.
Most of the wealth in the world is locked up with the boomers. As they get up there in age and pass off, the younger generations will inherit the wealth. And, well…younger generations tend to like Crypto.
Anyways, none of this is financial advice. I have no idea when the next bull run is. But I am positioning myself as there will be significant action in 2024/2025.
🤖 The Unseen World of Telegram Trading Bots
Telegram / Discord trading bots are gigantic money printers.
And nobody is talking about them. Maestro, a leading telegram trading bot, made around $5.8 million in May 2023 alone. This was mainly on top of the memecoin run we had.
Let’s dive into the world of Telegram trading bots.
What are Telegram Trading Bots? They allow users to trade from telegram. You don’t have to go to an exchange to buy or sell Crypto.
There are a variety of trading bots. Sometimes, you can connect to your trading account on centralized exchanges. In others, you’ll be using your wallet for trading. Some bots use centralized exchanges for liquidity, while others tap into DEXes like Unisawp.
They also have a wide range of features to choose from. Basic functionalities like buy, sell, and withdraw will be included in all bots. Advanced features include:
- Portfolio management
- Long and short strategies.
- Provide technical indicators
- And more.
How do these bots make money? Subscription fees are the primary source of revenue. The bot devs will charge users a monthly fee to access their software. The fees vary depending on the features and performance of the bot. Devs can also choose a one-time fee instead of an ongoing subscription.
One more revenue source: they can take a percentage of every transaction a user makes. For example, Maestro takes 1% of every buy/sell order.
A unique selling point of these bots is their integration with telegram signal groups. Crypto signals basically buy or sell calls provided by influencers. Trading bots can be configured to act on these signals automatically.
What are the downsides? Rugpulls / exploits. You’re giving the bots private keys or API keys to exchanges to execute these days. So, users will have to trust these bots. And remember, bots can get hacked.
Edgy’s Take: It’s always interesting to see new product/market fits in the space, especially ones that generate revenue. I won’t be using one anytime soon due to security concerns. This is a narrative I’ll be paying close attention to.
🚀 DeFi Catalysts
RocketPool announced the integration of $rETH into zkSync Era. This will give users faster and cheaper access to rETH. And tap into the zk-narrative when it comes.
TraderJoe released a new product called AutoPools. They make it easy for users to provide liquidity to architectures using Concentrated liquidity.
Y2K Finance’s version 2 is now live. They have already become the go-to place for insurance for the stablecoin peg.
SWIFT, the main messaging network for international payments, works with Chainlink on tokenized asset settlement experiments. Any positive news can be a catalyst.
Aave is proposing to deploy $GHO stablecoin on the Ethereum mainnet. This is the final community discussion. It’ll be launched with a borrowing cap of $100M.
Abracadabra integrated $MIM with LayerZero. $MIM is now a multichain stablecoin that follows the Ominichain Fungible Token (OFT) Standard.
Level Finance has taken $LVL tokens to Arbitrum. $750k of DAO-owned LVL/USDT liquidity has migrated to TraderJoe on Arbitrum using LayerZero.
🌎 What’s Happening?
📰 Industry News
Apple unveiled its VR headset on Monday. As we discussed in the last newsletter, many metaverse related coins have increased.
Ordinal Labs introduced the BRC-30 standard. It tries to improve BRC-20 by adding a staking functionality to the token in Bitcoin.
JP Morgan has partnered with 6 Indian banks to introduce a blockchain-based platform enabling interbank settlement of U.S. dollar transactions.
Members of Congress introduced a discussion draft for the Digital Asset Market Structure Bill. It is intended as a statutory framework for crypto regulation.
Elon Musk is accused of insider trading by a group of Dogecoin investors. They have filed a class action lawsuit against him.
Optimism deployed its long-awaited Bedrock upgrade successfully. It is a modular architecture that lays the groundwork for their Superchain future.
Circle is launching $USDC on Arbitrum natively. Over time, the current bridged $USDC will be replaced by the native $USDC.
Gemini is seeking an exchange license in the United Arab Emirates. The US’s hostility and lack of regulatory clarity are part of the reason.
Centrifuge, a real-world asset (RWA) protocol, launched Centrifuge Prime. It’s a platform for DAOs seeking to manage a portfolio of RWAs.
Arbitrum stopped processing transactions for 1 hour yesterday. Its sequencer ran out of funds for gas. It shows the single point of failure common to current rollups.