It was a wild week in crypto, with bitcoin hitting a new all-time high of $66,909, according to CoinMarketCap, and ether reaching $4,155.99, a breath away from its all-time high of $4,168.70.
On my podcast, Unchained, I discuss what led to the rising price with PlanB, the pseudonymous institutional-investor-turned-Bitcoin-investor famous for his stock-to-flow model that has helped him predict the price of bitcoin. Back in June, he tweeted that the floor of bitcoin in October would be $63,000, which has so far been borne out.
Check out the full episode to hear what factors led to Bitcoin's price rise this week -- and read more on this week's news to see what other factors led to this bullish week.
On Tuesday, the ProShares’ Bitcoin Strategy ETF went live, becoming the first bitcoin futures ETF to launch in the US. Trading under the ticker BITO on the New York Stock Exchange, the listing of BITO marked a significant milestone for the crypto industry, which has been attempting to get a Bitcoin-linked ETF approved by the US Securities and Exchange Commission since 2013.
The fund tracks Chicago Mercantile Exchange (CME) bitcoin futures, allowing investors to gain exposure to BTC by speculating on the future price rather than purchasing the underlying crypto asset itself. For now, a spot Bitcoin ETF, which would give direct exposure to bitcoin the asset, has yet to be approved by the SEC.
Based on BITO’s performance over the first few days of trading, investors seem fine with purchasing the Bitcoin-adjacent investment fund. BITO saw nearly $1 billion of trading volume on Tuesday, enough to make it the second-largest first day of trading for a US ETF, according to Bloomberg’s Eric Balchunas. Even more impressively, after closing on Wednesday afternoon, BITO assets totaled $1.1 billion, making it the fastest ETF ever to reach $1 billion. In what Balchunas described as a “poetically apropos” moment, BITO broke $GLD’s 18-year-old record of hitting $1 billion in assets in three days.
BITO is trading so well, however, that Bloomberg reports it is likely to breach the limit on the number of futures contracts CME will permit it to hold. QUOTE “After two days trading BITO owns early 1,900 contracts for October, and CME rules cap the number of front-month contacts one entity can own to 2,000.” What could help the situation is the next news item:
With the SEC’s approval of ProShares’ bitcoin futures ETF, institutions are flocking to get similar products to market.
Notably, the SEC approved two additional bitcoin futures ETFs to be issued by Valkyrie and VanEck, respectively. According to filings, VanEck’s Bitcoin Strategy ETF is set to go live after October 23rd -- meaning it will most likely go live via the New York Stock Exchange on Monday, October 25th. Valkyrie also gained approval and will list on Nasdaq as soon as the 23rd -- when this podcast goes live.
Amusingly, Valkyrie initially filed under the ticker BTFD, which, for those of you who spend hours on Crypto Twitter, will know means “buy the f***ing dip.” However, the company ended up changing the ticker to BTF.
ETFs are not the only way to get into the bitcoin futures game. On Wednesday, Cboe, where over $75 billion in US equities are traded daily, announced the acquisition of ErisX, a digital asset exchange that offers spot and futures products. Under the new deal, ErisX will be rebranded to Cboe Digital.
Ed Tilly, chairman, president and CEO of Cboe Global Markets, said: "We believe our acquisition of ErisX, coupled with broad industry participation and support, will help us bring the regulatory framework, transparency, infrastructure, and data solutions of traditional markets to the digital asset space.”
This is Cboe’s second foray into bitcoin futures, as the exchange previously offered BTC futures from 2017- 2019.
Last Friday, the Commodity Futures Trading Commission (CFTC) announced the simultaneous filing and settlement of charges against Tether and Bitfinex for $42.5 million total. The regulator penalized the stablecoin issuer $41 million for “making untrue or misleading statements and omissions” in connection to the backing of USDT, the largest stablecoin by market cap. iFinex was fined $1.5 million for the misdeeds of Bitfinex, such as operating a futures commission merchant (FCM) without the CFTC’s permission and engaging in “illegal, off-exchange retail commodity transactions.”
Acting Chairman Rostin Behnam said, “This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace.”
In a conversation with The Block, Stuart Hoegner, Bitfinex’s general counsel, explained that what sparked the enforcement actions occurred during a “markedly different time in our ecosystem.” Hoegner went on to add that “there is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times.”
In related news, Celsius CEO Alex Mashinsky told the Financial Times this week that Tether has begun loaning USDT against cryptocurrencies like Bitcoin and Ethereum as collateral. “If you give them enough collateral, liquid collateral, Bitcoin, Ethereum and so on . . . they will mint tether against it,” said Mashinksy.
Decrypt points out that this conflicts with Tether’s legal terms, which states: “Tether will not issue Tether Tokens for consideration consisting of the Digital Tokens (for example, bitcoin); only money will be accepted upon issuance.”
Additionally, on Tuesday, Hindenburg Research announced a $1 million bounty to be presented to anyone who comes forward with “undisclosed details” about Tether reserves. The research firm says it is establishing the bounty due to “doubts” regarding the legitimacy of USDT’s backing.
On Tuesday, five democratic senators, including Elizabeth Warren, sent a letter to Facebook CEO Mark Zuckerberg urging him to shut down the social media giant’s cryptocurrency projects, Novi, a digital wallet, and Diem, a stablecoin. (Disclosure: I write a Facebook Bulletin newsletter.)
In their bid to dissuade Novi and Diem from launching, the signatories cited Federal Reserve Chair Jerome Powell, Acting Comptroller of the Currency Michael Hsu, and the Financial Action Task Force as regulators who are looking into the “risks that stablecoins pose to financial stability.”
The letter came just hours after Novi, Facebook’s crypto wallet, launched a pilot in the US and Guatemala and announced a partnership with Paxos that would allow users to send and receive Paxos’ stablecoin USDP through Novi. Notably, Novi chose not to use Diem, Facebook’s digital currency project, which has hit major regulatory obstacles since being announced as Libra more than two years ago.
Warren and co. explicitly addressed the pilot program in their letter. “Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape — not only for Diem specifically, but also for stablecoins in general.”
In addition to citing concerns regarding financial stability, the senators also went after Facebook’s history of moving fast and breaking things. “Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient. We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market,” concluded the Senators.
In response, a Novi spokesperson told The Block, “We look forward to responding to the Committee’s letter.”
New York Attorney General Letitia James directed two crypto lenders to immediately cease operations within the state and three other platforms to provide information about their activities. The AG did not name the companies she is going after, though documents in the release reference both Nexo and Celsius. (Disclosure: Nexo is a previous sponsor of my shows.) However, Celsius published a blog this week claiming it “has not received a cease and desist order in NY.”
According to the New York AG’s press release, crypto lenders are facilitating “unregistered and unlawful activities” by offering interest-bearing accounts, which the regulator believes are securities. The press release states that digital asset lending platforms must register with the state’s Attorney General’s office before offering any such product to New Yorkers.
“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately,” said Attorney General James.
According to Decrypt, Polygon, a layer 2 solution for Ethereum, recently awarded a $2 million bounty to a white hat hacker -- which could be the largest such bounty ever paid. Decrypt reports that the vulnerability could have led to the loss of approximately $850 million in tokens, due to a buggy transaction channel between Polygon and Matic.
The Associated Press (AP), a collective of 1,300 newspapers and broadcasters, is partnering with blockchain data provider Chainlink to provide news and data secured through crypto technology. Starting November, the AP will leverage Chainlink smart contracts to cryptographically sign and verify data, such as election results, sports games, or the release of company financials.
On Tuesday, Twitter and Square CEO Jack Dorsey tweeted “705742.” No context. No punctuation. Just the string of six digits.
The tweet sparked a variety of speculation, with many anon crypto accounts lurking in the comments trying to ascertain the meaning of the seemingly random digits.
Luckily, a follow-up tweet by Dorsey cleared up the confusion: “off by 117,” he wrote, most likely in reference to how many blocks he was away from predicting Bitcoin’s all-time high.
By Decrypt’s math, this put Dorsey nearly 20 hours off on his prediction, as Bitcoin did not hit its new ATH above $67,000 (according to CoinGecko) until Wednesday morning.
The Sam Bankman-Fried led cryptocurrency exchange FTX announced a massive funding round on Thursday that valued the company at $25 billion.
What’s the fun part?
FTX raised exactly $420,690,000 in its series B, sourced from 69 investors -- including BlackRock and Tiger Global.
PleasrDAO, a collective of NFT owners known for making splashy digital purchases, bought “Once Upon a Time in Shaolin,” a rare physical album by Wu-Tang Clan for $4 million, according to The New York Times.
The Times says PleasrDAO purchased the album from none other than the US government after its previous owner was convicted of fraud and had his assets seized.
The album is undoubtedly a forerunner to NFTs. Wu-Tang Clan only created one copy of the album and placed stringent legal restrictions on it. For instance, the initial contract prevented the buyer from using the music commercially for 88 years.
In a blog post, PleasrDAO concluded, “We believe the next chapter in the incredible story of this album should be Web 3.0 native. Although we are bound by the legal agreement underpinning this work of art and may not be able to duplicate and share the music digitally, we firmly believe there are ways to share this musical masterpiece with the world. A lot of things in life are temporary, fleeting, impermanent. But remember this - just like our blockchain, Wu Tang is forever.”
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