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To Amy Castor When David Gerald
“Getting out of things is important to learn. That’s what distinguishes us from animals…with the exception of weasels.” — Homer Simpson
numbers go up
Why is the price of Bitcoin above $20,000? The answer is always, always “shenanigans.” It’s not about macroeconomic behavior, regulatory announcements, or dollar strength.
The Bitcoin market is small, easy to operate, and completely unregulated. Internal operations overwhelm all external indicators. [SSRN, PDF]
The usual reason for the pump is bad news. When owners see their numbers growing, they are less likely to get scared and start heading for the exit. And his week has been flooded with bad news. Genesis likely defaulted, DCG got hit hard trying to cover them, Gemini and Genesis are being sued by his SEC, and Nexo is bankrupt. difficult.
Another reason for pumps is that someone is trying to screw up long or short margin traders. In many cases, it costs less to manipulate the price of Bitcoin than it does to win a margin bet. This is when I got a chart containing the ‘Bart’ formation.
The Bitcoin price will stay where it needs to be by large players. The market is thin and easily operated with billions of pseudo-dollars in stablecoins that are not backed by unregulated offshore exchanges.
The price of Bitcoin needs to be high enough to keep Big Boy’s loan from being liquidated, but low enough to keep bag holders from trying to cash out and crash the price.
Media and commentator talk about broader market forces is part of the common delusion that well-behaved markets are natural. For example, the well-regulated US stock market has existed for almost a century. It’s not a wilderness, it’s a manicured garden.
But people assume that well-behaved markets are normal, and that they can talk about all markets as well as some of them, even financial journalists who are absolutely in the know.
Bitcoin is not exactly the same kind of creature. It’s a manipulated garbage heap where price discovery takes place in an unregulated offshore casino with literally no rules other than “don’t scare the suckers”.
FTX was a good example. These exchanges disrupt prices and prioritize their own customers whenever they can avoid it.
Organic interest in Bitcoin is still minimal. It’s not dollars, it’s not interest rates — it’s a practical joke.
I’m pretty sure the numbers will go down again — if you’re buying for less than $21,000, we recommend cashing in while you can. is already displayed.
Coinbase BTC-USD. Note that he is around 09:00 UTC on Jan 14 and someone is trying to cash.
Nexo bust: prosecution
Four people from London-based crypto lender Nexo, including founders Antoni Trenchev and Kosta Kanchev, have been charged after a raid on their offices in Sofia, Bulgaria.
Since 2018, Nexo has allegedly operated as an organized crime group operating in Bulgaria, the United Kingdom, Switzerland and the Cayman Islands.
Allegations include money laundering, providing banking services without the necessary licenses, tax crimes, computer crimes, and violations of international sanctions. [Capital, in Bulgarian; Bloomberg]
The two indicted are not in Bulgaria – Trenchev and Kanchev, who were last seen in Dubai.
Investigators investigated four million transactions and found sanctions violations, including those with Hamas, Russian crypto exchange Hydra, and Iranian crypto exchange Nobitex.
Customers continue to have access to Nexo — 7% of all assets were withdrawn 24 hours after the raid, according to Nexo’s daily Armanino testimony. Either that, or an insider is exfiltrating the exchange and doing an exit scam. [Armanino]
Nexo doesn’t have a lot of liquidity. If you don’t count Nexo’s internal loyalty points $NEXO as assets, they are simply insolvent. Withdrawals are expected to stop soon.
There are also allegations of political corruption involving Nexo. Trenchev was a former Member of Parliament and still has many contacts.
Nexo denies everything. They claim they have been targeted by a politically motivated campaign ahead of early elections in Bulgaria and have threatened to sue the Bulgarian government. and loot.” [Bulgarian Telegraph Agency, in Bulgarian]
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Digital Currency Group’s Grayscale continues to push GBTC to become a proper two-way ETF.
GBTC is a one-way street — you put money or bitcoin in, get GBTC shares, but you can’t convert them back to bitcoin.
The SEC rejected Grayscale’s ETF application in June 2022. This is because Grayscale has failed to address concerns about market manipulation (as explained above). This is the same reason the SEC has rejected all Bitcoin ETF proposals to date.
Grayscale has petitioned the Court of Appeals for the District of Columbia to challenge the SEC’s decision. In December, the SEC filed a response.
Grayscale filed a response with the SEC on January 13. Grayscale spends 41 pages stating that if CME Futures gets his ETF, then spot market price bitcoin he should get an ETF too. This is the same discussion we had in the beginning. This brief is hitting the table, not facts or laws. [Grayscale, PDF]
Grayscale has long promised GBTC holders to convert their GBTC into an ETF. Sueing the SEC was a way of directing customer anger at regulators.
GBTC is currently trading at a 36% discount to the underlying Bitcoin. It was trading at a 48% discount in December. GBTC should have always been worthless, but now it’s clearly worthless.
Converting GBTC to ETF will ensure that the GBTC price matches the Bitcoin price. And DGC will be able to profit from all of his GBTC shares accumulated through the buyback.
Grayscale can also liquidate GBTC and return Bitcoin to everyone. But they don’t have to – and they’re taking a whopping 2% annual maintenance fee on 635,000 BTC in their trust – which is over $200 million a year.
Of course, should DCG’s subsidiary go bankrupt, DCG may be forced to liquidate GBTC anyway.
FTX
US trustees are deeply unhappy that FTX wants to keep Sullivan & Cromwell as lead bankruptcy counsel. One of the S&C’s mandates is to lead the FTX investigation, which the Trustee wants to be handled by a disinterested party, the Examiner. John Jay Ray III himself called his FTX a “crime scene”!Also, Sections 1106 and 1107 of the Bankruptcy Code specifically prohibit debtors from investigating on their own. The Trustees are also concerned about conflicts of interest, and it is not entirely clear how S&C got the job. [Objection, PDF]
S&C’s appointment has also been questioned by four US senators who wrote to Judge Michael Dorsey. “Significant questions remain unanswered about the company’s involvement in the operation of FTX,” they wrote. Said it had nothing to do with it. [FT]
In Sam Bankman-Fried’s rambling blog post about the collapse of FTX, S&C is one of many groups Sam denounces. He also said that before bankruptcy, S&C was his FTX US’s primary law firm.
S&C denies this. In a January 10 statement, the company said, “We have never served as the primary outside counsel for any FTX entity. The company had limited and substantial business relationships with FTX and certain affiliates prior to bankruptcy.” However, this is a common occurrence and we are indifferent as required by bankruptcy law.” [WSJ]
Former FTX US President Brett Harrison Confesses Everything! Specifically, he didn’t do anything wrong. In his 49th tweet, he talks about how his departure from FTX US in September 2022 was not sudden, but has been going on for months. He calls Sam Bankman-Fried “volatile” and “prideful”. He said the “billion dollar scam” was “closely held” by FTX aides, not anyone at FTX US. Not him in particular. [Twitter, archive]
Harrison wasn’t all that enthusiastic about engaging with someone who asked a very obvious question. He blocked a person who asked about a customer Harrison had dollars on his FTX US last year when he falsely claimed that he was protected by the FDIC and SIPC insurance. personally named Harrison in the ceasefire order. “I have learned that it is impossible to have a truthful or factual discussion about this app,” Harrison said. [Twitter]
Since December, Harrison has been trying to raise money for his crypto software company. [Bloomberg]
Voyager and Binance: Life in Chapter 11
This is an order authorizing an asset purchase agreement for Binance US to acquire and continue with Voyager Digital. [Doc 860, PDF; Reuters]
Binance is buying Voyager assets for $1.022 billion. This is the fair market value of cryptocurrencies. Binance pays him $20 million in real cash and takes the rest as debt to his customers. Creditors will get credit on Binance US for his 51% of what Voyager owed before bankruptcy. Transactions must first pass through creditors and regulators. If the Binance sale does not go through, Voyager’s only option is a Chapter 7 liquidation.
Looking at the numbers, they don’t add up. There is no way Binance US can cover the debt of all Voyager account holders, even at a discount. Some of the US regulators who opposed the sale pointed out that Binance US clearly cannot afford it.
Binance US is notorious for taking people’s cryptocurrencies and not giving them back. Binance knows more than one person who went through an endless customer verification loop where they repeatedly asked for the identity verification they already had when trying to withdraw and were unable to get their crypto back.
Voyager’s Binance plan for customers doesn’t allow you to get cryptocurrency later, even after 6 months.
the exchange is out of order
Huobi Korea is splitting from troubled Huobi Global. Huobi Korea chairman Jo Guk-bong buys Huobi founder Leon Lin. The South Korean operation will also change its name. [News1, in Korean]
Coinbase lays off an additional 950 staff as it anticipates losses of up to $500 million in Q4 2022. Some teams are cut completely. But they don’t say which one. [8-K; Coinbase]
Crypto.com laid off another 20% of its staff in a completely “unpredictable” situation. If they really didn’t expect this to come, they should probably sign up to receive our emails. [Crypto.com]
Blockchain.com laid off 28% of its workforce, or 110 employees. “Cryptocurrency ecosystem faces major headwinds” — no new money coming in. [CoinDesk]
Binance is a bleeding asset. A client said he withdrew $12 billion in cryptocurrencies in his 60 days to the end of December. [Fortune]
The collapse of FTX has led to the bankruptcy of Australian exchange Digital Surge, which was “marketing to retirees through platforms such as ESuperFund.” Oh. [Financial Review]
The beleaguered Indian exchange Vault went bankrupt when Terra-Luna and 3AC collapsed. They received a takeover offer from Nexo. Vauld declined the offer — they rightly thought Nexo was insolvent and not good value for money. Even if they didn’t understand that Nexo would be arrested. [The Block]
Two of the AAX exchange exit scammers have been arrested in Hong Kong. The suspect is a former employee and consultant. Police believe the “mastermind” flew across the country with the keys to his $30 million cryptocurrency. [SCMP]
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