BUSD Targeted by Feds - Is Crypto Under Attack?
I Identify as Software Now - The Polkadot Approach, Narrative Updates - LSDs, AI, ZK, Gaming
Theo Delarosa
February 13, 2023
🗓 Daily Bullets - Monday, February 13th
Today’s newsletter is 1238 words. A cool 5 minute read.
Crypto is down - Onslaught after onslaught of negative news ranging from the SEC targeting Kraken, staking and BUSD has taken all the wind out of the sails in the crypto market. Previously hot narratives are cooling off. Valentine's Day on the 14th will unveil U.S. January CPI data which is expected to be 6.3%.
Today we’re looking at:
- ⚔️ BUSD Targeted by Feds - Is Crypto Under Attack?
- 🎭 I Identify as Software Now - The Polkadot Approach
- ♻️ Narrative Updates - LSDs, AI, ZK, Gaming
🎧 Listen: The Crypto Illuminati Twitter Spaces
⚔️ BUSD Targeted by Feds - Is Crypto Under Attack?
Backstory: The U.S. SEC told Paxos Trust Co. that it plans to sue the company for violating investor protection laws and alleges that Binance USD, a digital asset that Paxos issues and lists, is an unregistered security.
Key Details:
- BUSD has a market cap of over $16B
- Paxos Trust, which issues and lists Binance’s BUSD, will stop minting BUSD tokens
- Paxos will “end its relationship with Binance” for the BUSD stablecoin
- Paxos will continue to manage redemptions of BUSD through at least February 2024
- Binance ready to make adjustments and potentially move away from using BUSD as its main trading pair
Significance: There is debate over how a stablecoin would count as a security because there is no inherent expectation of profit.
The overarching theme that ties into a larger trend we will see this year - is the regulatory hammer coming down. 2022 saw too much happen too quickly. The collapse of Terra/Celsius/3AC/FTX left a lot of casualties and gave the Feds the ammo they needed to target firms and enforce regulation, something they undoubtedly wanted for a long time.
The question remains of whether this will cause the crypto markets to dip further during the year as more inevitable enforcement actions come forth and how long the uncertainty will last.
Big question: Who is next to be targeted?
🎭 I Identify as Software Now - The Polkadot Approach
The Story: Polkadot may have the answer for the crypto woes we’re currently facing. Choose to identify as something else, namely, as software and not a security! Polkadot seemingly decided to front run all the chaos months ago by preemptively attempting to distance itself from a securities classification by “rebranding”
Key Details:
- The Polkadot blockchain's native digital asset (DOT) claims it is no longer considered a security, but rather software
- Polkadot has claimed success in its interactions with the SEC, but the regulator has not publicly confirmed this
- The SEC's Framework for "Investment Contract" Analysis of Digital Assets suggested that many digital assets offered and sold for fundraising purposes were likely to be considered securities, but also indicated a path for re-evaluation.
Significance: If it looks like a duck and quacks like a duck…? How can you rebrand yourself after the fact, once sales have already been completed and everything is already said and done?
The fact that Polkadot claims they’ve had success is interesting though, it highlights that there are alternatives for projects out there to work with regulators. This is just one among many strategies to keep an eye on as we navigate the Crypto Regulatory Saga.
♻️ Narrative Updates - LSDs, AI, Gaming, ZK
Current Narratives and rotations tend to experience a lot of volatility and move fast, compounded by the macro which creates even more uncertainty over how long or how high these can run. The rotation game is not for the faint of heart. Let’s touch base with some of the more popular recent rotations.
Long story short, they are basically all in the same boat: most look strong over the past 90 days but have been struggling over the past week. Natural as the bullish momentum we say in January has stalled. Will we see continuation or is this all of the “echo bubble” we’re going to get?
We’re examining with a multi time frame approach:
Liquid Staking Derivatives: Most look strong over the past 90 days but have been struggling over the past week.
AI: Most look strong over the past 90 days but have been struggling over the past week.
Gaming: Most look strong over the past 90 days but have been struggling over the past week.
ZKs: Most look strong over the past 90 days but have been struggling over the past week.
✅ Daily Bullets
- Ethereum’s Sepolia testnet Shanghai upgrade set for Feb 28
- Tether nears 50% of stablecoin market, highest in 14 months
- Genesis unveils proposed sale plan with DCG and bankruptcy creditors
- Limit Break paid $6.5M for a SuperBowl commercial, which advertised a free Ethereum NFT mint and redirected to CEO’s twitter page
- DeFi protocol Clearpool will deploy its institutional credit platform Prime exclusively on Polygon network
- PayPal is pausing work on bringing its own stablecoin to market
- Caldera, a web3 infrastructure platform, raised $9M to help developers create app-specific layer-2 blockchains led by Sequoia and Dragonfly Capital
- Polygon exploring use of ZK technology for main chain
- Reminder: more Optimism airdrops to come
- Binance reverted withdrawal levels on the Tron network to previous levels after feedback from the community
- UAE plans to issue a CBDC to promote digital payments
- MetaMask asked users to discard a phishing email sent from Namecheap asking for KYC verification
- Wormhole bridge exploiter supplies $46M to crypto lending platform Maker and buys WETH
- Launching Sushi Studios - a decentralized brand licensing & incubator framework
- Rainbow Bridge, the cross-chain bridge integrated into the Aurora blockchain, restored after a temporary suspension due to security concerns
- SushiSwap acquires Cosmos-based trading platform Vortex Protocol
- Crypto staking project Avatar has become the fifth-largest holder of MATIC
- Wirex signed a long-term global partnership with Visa to expand its footprint in 40 countries
📊 Market Dashboard
- 📈 Gainers:
- ULT: Blockchain protocol
- META: Identity ecosystem
- LQTY: Decentralized borrowing
- 📉 Losers:
- DUSK: zk blockchain
- COVAL: Collectibles & NFTs
- RSS3: Social, content & e-commerce
📚Research/Reads
- Buyers may possibly profit from a range of arbitrage, hedging and staking opportunities | Are stablecoins securities? Well, it’s not so simple, say lawyers - source
- The purpose of securities law is to correct for imbalances in information | Coinbase’s staking services are not securities. And here's why - source
- The most detailed account of FTX downfall so far | ‘Sam? Are you there?!’ The bizarre and brutal final hours of FTX - source
- Jump Crypto identifies vulnerability | Helping secure BNB Chain through responsible disclosure - source
- Messari Research | State of TRON Q4 2022 - source
- Economics of blockchain games | Designing a Sustainable Economic System for Blockchain Games: Lessons from History - source
- Arbitrum and its ecosystem: GMX, gTrade, Treasure, The Beacon, Sushiswap, and Uniswap | Arbitrum Mega Issue - source
🎁 Bonus - Strategy to Keep up with the Narrative Rotations
The secret is being prepared! Have your watchlists prepped ahead of time and a shortlist of coins you’ve prescreened. This is the difference between being ready for battle and running around like a chicken with your head cut off.
since ppl ask me this all the time, off top of my head will try to give some advice on timing rotations & predicting narratives ahead of time
what i recommend doing for trading narratives: 1/?
— Ansem🦋 (@conzimp)
Feb 9, 2023
We hope you find this issue engaging and enlightening. As always, we welcome your feedback and suggestions for future issues.
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