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Welcome to The Node. This is Daniel Kuhn and Xinyi Luo, here to take you through the latest in crypto news and why it matters. This week the newsletter will feature guest essays from CoinDesk's Crypto 2023 series – where some of the sharpest minds in crypto have made their predictions about the months and years ahead. In today’s newsletter: |
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New court documents show that FTX co-founders Sam Bankman-Fried and Gary Wang borrowed over $546 million from Alameda Research to buy an ownership stake in trading app Robinhood through a shell company. BlockFi, FTX Group and Bankman-Fried have all attempted to lay claim to these 56 million Robinhood shares, during the bankruptcy process. Meanwhile, the U.S. Department of Justice is investigating the alleged hack that drained nearly $400 million from FTX-controlled wallets in November. Finally, Bankman-Fried has a new judge after the original disclosed a potential conflict of interest. |
Bitcoin miner Argo Blockchain will avoid bankruptcy after striking a $100 million deal with Mike Novogratz-owned Galaxy Digital. The miner will sell a mining facility in Texas and take out a $30 million bridge loan. Galaxy has flexed its muscle in the bear market, having previously bought a self-custody platform from bankrupt lender Celsius for "materially less" than it initially sold for. Speaking of, DeFi-focused asset manager Midas Investments is shutting down after losing 60% of its assets under management after the collapse of FTX and Celsius. On a more positive note, Michael Saylor is still buying bitcoin – with MicroStrategy loading up on another 2,500 coins (worth ~$45 million). |
One month after cutting 30% of its global workforce, crypto exchange Kraken said it will exit Japan as of Jan. 31. The decision was prompted by local economic factors “in combination with a weak crypto market globally." Separately, exchange Gemini is being sued by investors for offering interest-earning crypto products that should have been registered with the SEC. Gemini’s “Earn” program was halted in November amid FTX contagion. Last, the crypto investor whose “highly profitable trading strategy” drained DeFi trading platform Mango Markets of $110 million was arrested Monday in Puerto Rico for manipulating commodities contracts. Avraham Eisenberg, who spoke openly about the exploit and negotiated a partial return of funds, may be the first arrested for manipulating a DeFi platform. |
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Overheard on CoinDesk TV... |
"The United States still lags behind many major economies in its consideration of a CBDC." – Michael Greco, policy research director at the Digital Dollar Project, discussing central bank digital currencies, on CoinDesk TV's "First Mover" |
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The Takeaway: NFTs and Notoriety
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The art market has always been a securities market, we just couldn't see it, because objects got in the way. The art market is the market for "art as an investment." You're really buying an entry on an artist's catalogue raisonné, the list of all the artworks the art market attributes to that artist. That ledger entry is usually accompanied by a physical token, typically a canvas or statue. However, only the ledger entry has valuable. You can tell this is true because if the connection between the ledger entry and the object is broken, the object is worthless, even though it hasn't physically changed. The NFT market works exactly the same way, it just eliminates the object and enables collectors to trade ledger entries directly, rather than by proxy. Obviously, that's great, because it's cheaper and more efficient than trading fragile, costly objects. Now people can trade NFTs instead, what a relief. So, what are you really buying when you buy an artwork or an NFT? A fractional interest in the commercial goodwill associated with an artist, or rather, a share of the artist's "clout." If the artist becomes an art star, then their clout will increase and you will be able to sell your artwork or NFT at a profit. But if their star fades, your artwork or NFT is worthless, just like any other failed investment. The SEC very much doesn't want to regulate the art market – and hasn't. I suspect, despite recent grandstanding, the SEC will soon figure out that it doesn't want to regulate the NFT market either. If it starts regulating the NFT market, it'll be hard put to explain why it isn't regulating the art market as well. So it's likely only the most stock-like entities will face scrutiny. The reason it'd be good for NFTs to be regulated, however, is because we live in a fame-based society and NFTs are a powerful tool for monetizing it. Celebrities can only capture a tiny fraction of the social value they generate, and there are countless people willing to bet on any given influencer, artist or otherwise's continued success. Regulated NFTs would unlock these new capital markets – and the world can march on into the intersection of ideas, money, art and celebrity. – Brian Frye, artist and lawyer, writing first for CoinDesk's "Crypto 2023" series |
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| Alameda-linked Addresses Begin Swapping Ethereum, ERC-20 Tokens for Bitcoin (Decrypt) Former CFTC and SEC chairs, Jay Clayton and Timothy Massad, write about “how to start regulating the crypto markets – immediately” (WSJ – paywalled)Protos’ Bennett Tomlin writes about SBF’s “enablers,” the people that fed the monster with cash (Protos) |
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