GM everyone.
We start the new week with no shortage of crypto drama, beginning with a potentially serious development incoming…
There could be volatility on the way, and it’s the result of a delayed aftershock from everyone’s favorite imploded crypto platform: FTX.
Strap in for possible turbulence, as we dive into the news and explore how even from beyond the crypto grave, FTX might affect your holdings.
Here’s what’s in today’s issue:
- Sam shares his thoughts on FTX’s upcoming asset liquidation, Vitalik being hacked, the CFTC targeting DeFi, the SEC vs Ripple battle & Ripple acquiring Fortress.
- This week on chain.
- This week’s trending coins by Rebecca.
Thanks to Radix for sponsoring today’s newsletter.
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FTX Asset Liquidation Incoming?
SBF is behind bars and 2022’s FTX-triggered market crashes are fading into the past like a bad dream, so you might have been sipping zen-like on a matcha latte thinking it was all plain sailing from here.
Well, think again, because the fallout from SBF’s Adderall-addled antics may not be over just yet. Earlier this month it was reported that an FTX wallet shifted around $10 million of tokens in preparation–it was speculated–for selling.
And prior to that, on August 23rd, Galaxy Digital (which is managing FTX’s crypto holdings) filed a motion with the Delaware Bankruptcy Court seeking authorization for plans to sell off FTX’s digital assets as part of bankruptcy proceedings.
That motion is going before the court on September 13th, and if approved, the plan allows for up to $200 million of assets to be sold each week, with total crypto assets available for stakeholder recovery valued, as of April, at $4.3 billion.
The biggest single holding is SOL, although a significant amount of that SOL appears to be locked, in which case it cannot be immediately sold.
Also, as well as selling assets, the plans allow for the hedging of BTC and ETH (through options contracts, for example), and for the staking of assets where possible. And it should also be kept in mind that the purpose is to mitigate market risk and maximize the value of any holdings, which requires avoiding a price crash.
Still though, it’s another disruptive factor in the mix at a time when trading volumes are low, so volatility is possible.
Vitalik Hacked, CryptoPunks Stolen
Proving that even the most extremely tech-capable among us are vulnerable to security flaws, Ethereum head honcho Vitalik Buterin had his X account compromised last Saturday.
Scammers who gained control of Vitalik’s socials posted a fake offer from Consensys to mint a free NFT, and victims subsequently connected their wallets and gave the permissions needed for assets to be drained.
Remarkably, one of the victims was the also-very-tech-savvy BokkyPooBah (yes, that is exactly the kind of name tech-savvy crypto people use), who had two CryptoPunks stolen, including the absolute NFT grail that is Punk #3983.
And if you were wondering how much #3983 is worth, it’s already been sold for 155 ETH.
Total losses across all victims of the scam are currently estimated at approaching 700 ETH, and are a stark reminder of how important it is to be security conscious at all times. Please keep in mind that you should:
- NEVER click on unannounced crypto or NFT offers. Unless hacked, legit accounts don’t post these kinds of offers.
- USE Revoke.cash to revoke wallet permissions. Do this when you no longer use a dApp, and as a periodic measure. Revoke also has a browser extension security feature.
- USE a burner wallet that does not contain expensive assets, especially for connecting to new dApps that you’re experimenting with.
- USE a cold wallet when you want to hold expensive assets long-term.
- USE extensions such as Pocket Universe or Wallet Guard to identify and protect against malicious transactions.
CFTC Targets DeFi
We all know the SEC is the current arch-nemesis of crypto, but the CFTC (Commodity Futures Trading Commission) has decided to get in on the action too, targeting three DeFi operations with allegations of illegal digital assets derivatives trading, and–in two cases–not identifying users in compliance with parts of the Bank Secrecy Act.
From a CFTC press release
The DeFi protocols in question are Opyn, ZeroEx, and Deridex, and all three have been issued fines ($250,000, $200,000, and $100,000, respectively), and ordered to cease and desist from as-charged activities that violate the Commodity Exchange Act and CFTC regulations.
All three platforms have been cooperative and agreed to settle charges, but there were dissenting opinions within the regulator itself, with CFTC Commissioner Summer K Mersinger publishing an official statement voicing concern that the CFTC was shutting down innovation. Mersinger also emphasized the importance of clear rule-making rather than enforcement.
From a CFTC dissenting statement
SEC Sticks to its Guns Against Ripple
As well as the CFTC, the SEC has also (as always) been in the crypto headlines, with the agency not backing down from its apparently never-ending dispute with Ripple Labs. Just to recap:
- Ripple Labs won a partial victory when it was judged that XRP tokens are not, in and of themselves, securities.
- The SEC appealed on various grounds, including that there is a “controlling question of law”, and “substantial ground for difference of opinion”.
- Ripple opposed that appeal, disagreeing with the SEC’s reasoning.
So far, so back-and-forth, and the SEC has now flipped the ball back over the net in Ripple’s direction with a filing stating that an appeal is appropriate, partly because the Judge’s findings raised “knotty legal problems”.
Presumably now it’s Ripple’s turn to disagree with that, after which the SEC will–excuse me while I check this legal tome–ok, got it, then the SEC will disagree with Ripple.
Congressman Emmer Takes on SEC Chair Gensler
In other SEC-related developments, Congressman Tom Emmer, who is supportive of the crypto industry, last week took to X to explain that SEC Chair Gary Gensler has “abused his authority”, and called for Congress “to restrict Chair Gensler from further weaponizing taxpayer dollars.”
To this end, Emmer will sponsor a bill amendment that would prevent the SEC from using funds for digital asset enforcement without first putting in place clear rules and regulations.
Ripple to Acquire Fortress
When it’s not grappling with the SEC, Ripple is busy expanding its empire, and last Friday announced the acquisition of crypto infrastructure provider Fortress Trust, which it had already been invested in since Fortress’ 2022 seed round.
This comes not long after Ripple’s acquisition of crypto custody specialist Metaco (also this year), and provides Ripple with a Nevada Trust regulatory license. Ripple will also invest in parent company Fortress Blockchain Technologies and FortressPay, all with a focus on using blockchains to provide enterprise and B2B payment services.
Centered around B2B utility, and linked also to CBDCs, Ripple comes across as different to the rest of crypto, but what are your views on Ripple and XRP? Do you hold XRP in your portfolio, and how are you expecting it to perform in the next bull run? And is Ripple really in the clear from the SEC? Reply to this email and tell us what you think.
Thanks to Phemex for sponsoring today’s newsletter.
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Bitcoin price activity has lacked volatility recently, and looking at what’s happening in terms of activity on the Bitcoin network, it’s a similar story as a quiet period continues.
Total transfer volume on Bitcoin is currently sitting at around $2.63 billion a day, and to put that in context, around the high points of the bull market in 2021, transfer volume hit a peak of $13.1 billion.
That works out at around an 80% decline, and we’re currently still just a little off the cycle low of $1.97 billion, back in January this year.
However, we also can find the opposite trend when it comes to the number of transactions taking place, with the figure rising significantly in May and–taking into account some ups and downs along the way–remaining elevated now.
These factors taken together–lower total volumes along with more transactions–indicate that the network is being used, but to move smaller amounts of BTC.
A sign of things to come if BTC achieves daily-use adoption, or a temporary trend as this subdued part of the cycle plays out? That remains to be seen.
As crypto headlines report on spot ETH ETF applications being filed with the SEC, we can see a knock-on effect on the price of the Grayscale Ethereum Trust, even as the price of ETH itself registers no gains.
While the discount between Grayscale ETH and the underlying asset had already been narrowing following BlackRock’s spot BTC ETF application, from -56% to -36%, after Ark Invest filed for that spot ETH ETF last week, the gap narrowed further, to around -25%.
Grayscale Ethereum Trust
Meanwhile, over on the new Layer 1 network Sui, there are positive indicators, as initial impressive gains in TVL are being largely sustained. At the same time, daily active addresses have fluctuated, but appear to level off repeatedly at around 100K, suggesting that there’s a solid base from which to grow.
You may also remember a recent burst of excitement around social crypto platform Friend.tech, followed by a lull, but it looks now as though interest is picking up again.
There’s been a burst of bullish sentiment around the platform, particularly among early users (which, arguably, is everyone currently using it) as data revealed that TVL had risen past the $20 million mark.
And looking at the charts showing transactions and active buyers and sellers, we can see a smoothly curved upturn taking shape after the drop following the initial burst of hype.
Could Friend.tech possibly have longer-term adoption potential? At the moment, it looks worth keeping tabs on.
Prior to Friend Tech grabbing the limited pool of attention currently available in crypto land, it was AI, and AI tokens, that were getting people fired up, but if we take a look at how some of those tokens are performing now, it’s apparent that last month saw subdued levels of trading.
This is fairly typical of how crypto attention ebbs and flows, but in the case of AI, there’s little doubt that it’s a truly transformative technology.
That doesn’t mean that every AI-related token is also going to stick around, but it’s reasonable to expect that there’ll be further AI excitement in future, and so AI-affiliated tokens have plenty of potential.
And aside from AI, if you’re curious about smaller projects that have been picking up growth, then you might want to take a look at Liquid Collective. It’s an ETH liquid staking protocol, and it’s seen escalating growth since August, with deposits rising in that period from just over $5 million, to almost $30 million.
Here are my key takeaways from the trends this week and it’s been a week of events, launches, and hacks.
- Poolz Finance is a launchpad that’s announced it doesn’t have any future inflation or dilution as all the seed and private rounds were already distributed. And 80% of the POOLX circulation supply is currently locked up.
- Solana is a Layer-1 blockchain that’s launched its next hackathon running from September 6 to October 15. The SOL token has also seen a massive sell-off with initial speculation it was FTX wallets.
- Gala is a play-to-earn (P2E) gaming ecosystem that’s published an update on its legal issue after the co-founders sued each other alleging corporate waste and a $130M theft.
- Bella Protocol is a DeFi platform that’s announced the launch of two new pools on Bella LP Farm.
- Pepe is a memecoin that’s seen its old telegram group hacked and is no longer in the team’s control. The hacker has used the group to push scams and launch other coins.
- The Sandbox is a blockchain-based gaming company that’s hosted a Web3 showcase during Korea Blockchain Week. The team is also getting ready for the Token2049 event on September 13-14.
- Perpetual Protocol is a decentralized perpetual contract protocol that’s seen its native token PERP skyrocket 90% in a 48-hour period. However, it’s unclear why the token surged.
- Sei is a brand-new Layer-1 built using the Cosmos SDK that’s launching its first incubator program and has also announced its latest liquidity partnership with DV Chain.
- Moonbeam is an on-ramp to Polkadot that’s launched a delegation campaign to enlist new community delegates.
- Polygon is an Ethereum side chain that’s grown its daily active users by 26% in the past two weeks despite the MATIC token price declining. The network has also completed its first major upgrade of its zkEVM mainnet beta.
- Unibot is an automatic trading platform for Uniswap that’s launched a strategic partnership and integration with OKX Web3 allowing users to make swaps using their preferred tokens, such as ETH or USDC.
- Sui is a Layer-1 blockchain that’s become the fastest-growing non-EVM chain in terms of Total Value Locked (TVL) over the past 30 days, according to DeFi Llama. The Sui team is also in Singapore for a bunch of crypto and blockchain events.
- Ethereum has seen co-founder Vitalik Buterin’s X (Twitter) account hacked and over $700K has been drained from victim’s wallets. The hacker has used a malicious link promoting a free NFT to scam users.
- Hedera is a crypto which uses hashgraph consensus that’s seen its HBAR token decline in price during September since its substantial token unlock of 1.5 billion tokens hit the market.
- Vulcan Forged is a blockchain game studio that’s been revealed as a top-4 finalist on the new crypto TV show, The Next Crypto Gem.
Thank you so much for your support, and I truly hope that today’s issue will give you insights needed to help you master your wealth.
If you are reading this it means you are on the free version of the Wealth Mastery Investor Report, which is great for news and tips on the crypto markets.
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