There were two huge crypto news stories this week: One, Coinbase revealed in a series of tweets by its CEO Brian Armstrong and in a blog post by chief legal officer Paul Grewal, that the US Securities and Exchange Commission told the US's largest crypto exchange that it would sue Coinbase if it launched a lending product called Coinbase Lend. (SEC chair Gary Gensler is photographed above.)
Another huge bit of crypto news this week was the adoption of Bitcoin as legal tender by the country of El Salvador--a first across the globe. However, even pro-Bitcoiners take issue with how that is being executed.
I cover both these issues on my podcast/video show, Unchained, with guest Ephrat Livni, a Dealbook business and policy reporter at The New York Times. Be sure to check that out. Also, here are the other top crypto news stories of the week.
Uniswap Labs, the developer behind the biggest decentralized exchange, Uniswap (whose unicorn logo is pictured above), is reportedly being investigated by the US Securities and Exchange Commission.
The Wall Street Journal initially broke the story, citing sources familiar with the matter. According to the report, the SEC is probing into how investors use the trading platform, which has $6.5 billion in value locked, and how the exchange has marketed itself. The regulator has not yet issued subpoenas and is only requesting that developers voluntarily supply information.
Jake Chervinsky, general counsel at Compound Labs, noted:
In addition to Uniswap, the SEC’s division of enforcement has also sent letters to multiple crypto startups in an effort to start understanding the crypto lending space. That, plus the SEC’s Wells notice to Coinbase about its Lend product, could indicate the regulator is setting its sights on lending.
After staying above $50,000 for the 48 hours prior, Bitcoin dropped 10% on Tuesday, its largest dip since May. At one point, the digital currency fell below $40,000 on the crypto exchange Huobi, marking the low point for Bitcoin across major exchanges during Tuesday morning’s flash crash. Data from Coinbase shows the daily low for BTC bottoming out at $42,830, while bitcoin plummeted down to $39,818 on Huobi.
Bitcoin was far from the only crypto to experience a dip. The total cryptocurrency market cap fell to a low of $1.95 trillion Tuesday, plummeting $400 million, or 17%, between midnight and 10 am. According to The Block’s Larry Cermak:
Data from Blockware Intelligence shows that a total of $3.22 billion in long liquidations cascaded across the futures market on Tuesday, wiping out a total of $4.4 billion in Bitcoin futures open interest. Notably, Bitcoin supply held by both strong hands and short-term investors increased during the dip, and exchange inflows and outflows remained somewhat steady. Based on the on-chain numbers, Blockware analyst Will Clemente concluded, “this wipeout was almost completely fuelled by over-leverage in the system.” Adding, “Broader market dynamics have only increased, the bull market is not over. Remember we had 8 20%+ pullbacks from March 2020 to March 2021. I don’t see anything to be concerned about.”
Speaking of a bull market, the British banking giant Standard Chartered released a crypto report on Tuesday, revealing a very optimistic outlook for both Bitcoin and Ethereum. The bank values bitcoin in the price range from $50,000-$175,000 in the long term and ether at a range of $26,000-$35,000. At current prices, Standard Chartered expects bitcoin to 3x and ether to 10x.
On Wednesday, the Ukrainian Parliament passed a law that would legalize and regulate digital assets. Previously, in Ukraine, cryptocurrencies existed in a legislative grey area, as it was neither legal nor forbidden to own crypto assets within the country. If signed by President Volodymyr Zelensky, the law will protect crypto holders and exchange platforms from fraud.
In contrast to El Salvador, which made Bitcoin legal tender, virtual assets cannot be used as payment or exchange. Instead, the bill allows crypto businesses to officially work in Ukraine and pay taxes.
On August 27th, Vine co-founder Dom Hofmann dropped a 7,778-piece NFT collection of randomized adventurer gear. The NFTs, which Hofmann refers to as bags, each contain eight lines of text describing equipment (Loot) for a supposed adventurer. From that string of text, the idea is for developers to develop games around the Loot, interpreting and including the Loot characteristics however they wish.
The bags were quickly snatched up and hoarded, with only 2,400 accounts getting the initial mint. At publishing time, Loot’s price floor is 8 ETH -- over $25,000. Last Friday, for everyone who missed out on Loot 1.0, Dom dropped an additional 1.3 million bags of Loot in a project the community has dubbed “More Loot,” which is free to mint, minus the gas fees. The project has a dynamic supply, increasing at a tenth of Ethreum’s block rate, allowing the Loot metaverse to expand with Ethereum, if it sustains its current popularity.
Shortly after Loot’s successful launch, Bloot, Based Loot, dropped a parody of the text-based NFT collection. Instead of containing items like “‘Light’s Tear’ heavy boots of protection,” Bloot added a bit of color to its bags, with items like the “‘ERC-20 Poor’ Maxi Skirt of Rugging.” Bloot quickly caught on and ranks as the 7th most popular NFT project over the past week by volume.
The Loot copycats did not stop there. On Saturday, two text-based NFT projects, titled “the Completely Pointless NFT collection” and “FIRST, a collection of 5,000 algorithmically generated satirical “first-ever” honorific NFTs,” combined to raise over 390 ETH (~$1 million) for charity thanks to the new NFT fad.
After hitting $100 less than two weeks ago, Solana’s native token, SOL, has exploded above $200, marking an 80% gain over the past seven days.
During SOL’s rapid ascent, the token leapfrogged two crypto OG’s, DOGE and XRP, and now sits as the sixth-largest coin by market capitalization. At a $60 billion market cap, SOL is approximately a $9 billion, or 13%, increase away from passing both USDT and BNB to move into fourth place.
Cracking the top three, however, will be more difficult, as Cardano’s ADA token has a $20 billion market cap advantage, while Ethereum and Bitcoin stand head and shoulders above the rest of the market at $400 billion and $850 billion, respectively.
On Monday, FTX launched a new NFT product that allows customers to mint directly onto the exchange. According to CEO Sam Bankman-Fried, each NFT will be cross-chain compatible with both Ethereum and Solana. For now, the NFTs can only be sold through the FTX marketplace, though a withdrawal feature will be live in a few weeks. FTX charges a hefty spread on its new product, taking 5% from the buyer and 5% from the seller on each sale.
In related news, less than 24 hours after NBA superstar Steph Curry tweeted:
FTX announced that Curry would be joining the exchange as a Global Ambassador. Curry will be joining other sports stars, including Tom Brady and Trevor Lawrence, as FTX partners.
Brady also tweeted out this excellent FTX ad this week:
In related exchange news, Binance.US announced that Brian Shroder, a former Ant Group and Uber exec, will take on the role of President.
On Thursday, Mastercard announced its acquisition of CipherTrace, a blockchain analytics firm specializing in finding illicit transactions. [Disclosure: CipherTrace is a previous sponsor of the show.] With the purchase, Mastercard will now be able to track over 900 cryptocurrencies. In a press release, Ajay Bhalla, president of Cyber and Intelligence at Mastercard, said, “With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this.”
The news comes a few months after Mastercard said it would begin piloting the use of USDC as a bridge between crypto spenders and cash-loving merchants. Mastercard intends to let merchants accept crypto by year’s end.
Brian Quintenz, who spent his last day as a CFTC commissioner at the end of August, is joining the crypto wing of the VC firm a16z. During Brian’s stint at the CFTC, spanning from 2017 to August 2021, he was known for being pro-crypto, advocating for a light regulatory touch on the burgeoning industry.
In a blog post, Andreessen Horowitz’s general partner Katie Haun wrote: "We are grateful that Brian is joining the team to help in our work of translating crypto for the policy community, and translating policy for the crypto community."
The Sevens NFT collection, a much anticipated Ethereum NFT drop, suffered a minting mishap that resulted in one user scoring 15% of the 7,000 NFTs while the rest of the community engaged in gas fee wars. Essentially, Ethereum user 1ethSHOP found a vulnerability in the Sevens’ smart contract, allowing him to sidestep the limiter mechanism and mint 1,000 NFTs using an miner-extractable value bribe.
According to a blog post from The Sevens, 1ethSHOP spent over 500 ETH, or well above $1 million, to pull off the maneuver. However, as a fan of the project, 1ethSHOP has offered to return half of his NFTs to the official marketplace for The Sevens team to redistribute as they see fit.
At publishing time, no decision has been made on how to distribute the recently returned NFTs.
In other NFT news, this time in reference to a more successful sale, a collection of 101 Bored Ape Yacht Club NFTs sold for $24.39 million on Thursday in an auction at Sotheby’s, outperforming even the most optimistic estimates. Sotheby’s also sold a collection of 101 Bored Ape Kennel Club NFTs for $1.835 million.
Fun Bits
Atoms, a shoe company, has partnered with the Human Rights Foundation and Morgan Creek’s Anthony Pompliano to release the Model 000, a Bitcoin-themed shoe.
Atom's Model 000 Bitcoin shoe
The stylish piece of footwear is almost entirely black, with only a splash of orange depicting the Bitcoin logo on the outside of the shoe and 21,000,000 printed on the sole. The bottom of the shoe is adorned with “we are all satoshi.”
According to the website, Atoms started accepting BTC last year. A majority of the profits will go to the Human Rights Foundation’s Bitcoin Development Fund. The sneakers are available for pre-order until September 29th.
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