| One way or another, FTX seems to always get its way.
Back in July, bankrupt crypto lender Voyager rejected FTX’s buyout offer. Now, just two months later, Voyager is announcing an FTX buyout.
So, what changed?
How We Got Here
If you had forgotten how Voyager and other crypto lenders got into such a pickle, here’s a quick recap: - 1991: Do Kwon, the founder of the stablecoin Terra, is born.
- Early 2000s: Su Zhu and Kyle Davies, founders of crypto hedge fund 3 Arrows Capital (3ac), become high-school friends.
- 2020: The Fed turns on the money printer to fight against Covid-19, sparking a crypto bull run.
- 2020 – Early 2022: The bull run nets Luna and 3ac billions of dollars.
- March 2022: The Fed begins raising rates to combat record inflation.
- May 2022: Terra, now worth ~$30 billion, collapses.
- June 2022: Under intense pressure from the market downturn and strapped for cash after the Terra collapse, 3ac folds.
- July 2022: Slumping asset prices and a lost $665 million loan to 3ac force Voyager to declare chapter-11 bankruptcy.
It is at this point that FTX made its offer to Voyager. We covered the initial offer and Voyager’s reaction in depth in our original story coverage, but the gist is that Voyager declined because they thought it was a lowball offer.
Instead of accepting the offer, Voyager chose bankruptcy and an auction process. Turns out that was a wise decision.
After several bidding rounds, Voyager accepted a bid from FTX of $1.4 billion. Under the terms of the deal, FTX acquires all of Voyager’s digital assets. Furthermore, Voyager’s customers will be able to recoup their losses and, importantly for FTX, have the option of starting trading accounts on FTX.
Overall, it looks like a win for all parties involved. Voyager got the buyout amount they desired. FTX gets the new customers they desire. And the customers get compensated for their losses.
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The Great Crypto CEO Resignation |
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| There’s a mass exodus taking place in crypto.
No, we’re not talking about money. That ship sailed months ago. We’re talking about CEOs.
In just the last month, CEOs of five major crypto companies have stepped down: What in the world is going on?
Well, there are a few possible explanations. - This may be just a coincidence. One or two companies changing CEOs wouldn’t catch anybody’s eye. The only reason we’re talking about this is that it’s all happening at once. Maybe this is just a whole bunch of nothing.
- Another explanation would be that this is a fallout from the bear market. We know this is the case with Celsius and Genesis, as both absorbed heavy losses due to bad loans. But it doesn’t fit with Kraken, FTX, and Alameda, as all have been doing fine during the bear market.
- The most conspiratorial explanation, and the most fun, is that they all know something. Maybe they’ve caught wind that the government is about to crush crypto. Perhaps they know a terrible recession is about to hit. Maybe it’s something else entirely. If this turns out to be true (which no evidence supports), Lord, have mercy on us.
The overwhelmingly most likely explanation is that this is just a coincidence. Crypto’s been around for a while, and these CEOs were part of the original generation. Many of them talk of being burned out. It just so happens they all got burned out at the same time.
Or did they…
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Ripple Lawsuit Coming To A Close |
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| A potential landmark case with the SEC could soon be settled.
The two-year odyssey of Ripple (XRP) vs. the SEC is barreling toward its conclusion, as both parties filed a motion on September 13th requesting a summary judgment.
In many ways, the fate of crypto hangs in the balance.
The Lawsuit
The lawsuit began all the way back in December 2020, when the SEC sued Ripple for hosting an illegal securities offering. To the SEC, XRP passes the Howey test and thus is a security. If this is true, the SEC would be wholly justified to regulate Ripple as it sees fit.
Ripple vehemently disagrees. They see this as nothing more than an SEC witch-hunt and have spent more than $100 million on their legal defense to prove it. For Ripple, this is a case not just for them but for all of crypto. A last stand, if you will.
The Consequences
Although we hope the Judge will side with Ripple, we have no idea what will ultimately happen. What we do know, however, is the fallout from the possible outcomes.
Should Ripple win, it would be a big win for crypto. It would weaken the SEC’s argument that crypto tokens are securities and embolden other crypto projects to fight back against SEC lawsuits, as there would be a precedent for them to base their arguments on. Suddenly, SEC regulation becomes a lot less scary.
The opposite is true if the SEC wins. In that case, they would have a precedent with which to sue other crypto projects, and this precedent would make it much more challenging to fight back. All of crypto would instantly be within their reach.
Not what you want to see as a crypto investor.
In any case, we don’t recommend you try trading XRP off legal updates, even as it rockets up on the news of the impending judgment. Crypto is still in a bear market, and nobody knows how the case will turn out. If Ripple loses, you don’t want to get stuck holding a bag of XRP in a poor-liquidity market.
Do yourself a favor and root Ripple on from the sidelines.
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Stablecoin Regulation Is On The Way |
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| Stablecoins, tokens pegged to an external value (most often $1), are undoubtedly the crypto use-case that has most caught on. The ability to transact freely and securely appeals to many, which is reflected in stablecoins’ enormous $151 billion market size.
Unfortunately, regulators have circled around stablecoins since Terra’s collapse. Now, a draft bill that would regulate stablecoins is percolating in Congress.
But is this bill worth worrying about?
No More Terras
It is natural to assume the worst whenever you hear about a bill looking to regulate crypto. Fortunately, this bill is more nuanced than simply find and kill all stablecoins.
The bill zeroes in on “endogenously collateralized stablecoins.” Endogenously collateralized is just fancy wording for a stablecoin backed by an asset in its own ecosystem.
The fear with stablecoins designed this way is the possibility of a “death spiral,” in which a drop in the price of one asset directly leads to a decline in the other asset’s price. This then spirals downward until both tokens are in the grave.
Terra famously fell due to a death spiral.
We have to agree with Congress here that it is a good idea to try to avoid such disasters in the future.
Highly Liquid Assets
Here is where the stablecoin bill becomes more difficult to interpret.
Instead of endogenous collateralization, the bill requires stablecoins to be fully backed by “cash or highly liquid assets.”
The cash side is easy to understand and already applies to the largest stablecoins. The three largest stablecoins, USDC, USDT, and BUSD, are all backed by cash and currently represent 91% of the stablecoin market. For all intents and purposes, the bill has no effect on 91% of the stablecoin market.
But what about the other 9%? That 9% is occupied by decentralized stablecoins such as FRAX and DAI, which are collateralized by crypto tokens. Does ETH and BTC count as “highly liquid assets”? If so, then everything is fine. If not, then the bill likely kills any possibility of a decentralized stablecoin in the future.
This uncertainty will need to be answered before we can render a definitive judgment on the bill.
Should You Be Worried?
The short answer is no, you should not be worried about this bill right now.
Bills take a looong time to become law. Most never even get close. The bill is just a draft right now and has many edits and reviews to go through before it reaches the President’s desk. Hopefully, by that point, the bad parts of the bill will be long gone.
However, if the bill becomes law in its current state, then yes, you should be worried. Inventing a decentralized stablecoin under such unclear guidelines would be extremely challenging. If stablecoins are only allowed to exist when backed by dollars, then instead of DeFi, we’ll have FedFi.
Overall, the bill has many things to like and some to dislike. Let’s hope the growing crypto lobby can straighten it all out before it becomes law.
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