The Wolf Den #752 - Hinman Bomb Drops. Binance To Freeze Assets?
The crypto news cycle is insane.
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In This Issue:
Hinman Bomb Drops. Binance To Freeze Assets?
Bitcoin Thoughts And Analysis
Legacy Markets
China Employs Ethereum Blockchain To Issue Bonds
eToro Takes Steps To Avoid SEC
Uniswap v4 Is Coming
Fire Gary Gensler! Free Crypto In The US!
Hinman Bomb Drops. Binance To Freeze Assets?
The crypto universe is buzzing right now, and it's enough to make my head go supernova. We're seeing a full-blown campaign to dethrone Gary Gensler, alongside a reel of footage showcasing Gensler's flip-flopping from just a few years back. Plus, there's the unveiling of previously withheld SEC files (and they're not pretty), and the saga of Binance battling for survival against the SEC. Time to slice and dice it all.
Grabbing the spotlight now is the long-awaited release of the Hinman files, which have had everyone on tenterhooks for a cool 18 months. Initially, everyone figured these files would be the silver bullet in the SEC vs XRP legal face-off, but lo and behold, the chatter's veered towards Ethereum and its status as a security. In crypto land, the only constant is change.
While I won't be deep-diving into the reams of emails, drafts, and comments in the documents, I'll say this much: the SEC's actions are as clear as mud. To fill you in, William Hinman was once at the helm of the SEC’s Division of Corporation Finance. Hinman's objective wasn't just decoding XRP and ETH in the context of securities law, but to take a sledgehammer to the foundations the SEC had laid since 1933.
Try and wrap your head around this:
The files expose Hinman highlighting inconsistencies in the classification of securities.
Certain SEC officials nudged Hinman to state that ETH wasn’t a security.
Contrarily, some SEC divisions advocated for ETH's classification as a security.
In response, Hinman delivered his speech, affirming that ETH isn't a security.
This stance was backed by SEC Chairman Jay Clayton.
Simultaneously, Gary Gensler was lauding Bitcoin, ETH, etc., as non-securities to a classroom of eager college students.
The revealing Hinman files were then sealed off from the public eye (presumably due to their damaging implications for the SEC).
The speech in which William Hinman proclaims, “Ether is not a security” is still available on the SEC’s website.
Now, Gary Gensler seems to fancy the idea of ETH being a security.
The outcome of the Hinman files release sends shockwaves among XRP and BTC maximalists.
Let's decode this pandemonium!
Another worthy point to ponder is that Ethereum's consensus mechanism was proof-of-work during Hinman's tenure, though I don't believe this shifts the narrative significantly. The notion that either proof-of-work or proof-of-stake automatically qualifies a cryptocurrency as a security is rather simplistic. I highly recommend you peruse Hinman's speech if you haven't already. Given the newly revealed context, there's a chance the SEC might remove it.
The last thing I will say about Hinman before moving on to Binance is that I agree with his main premises as follows: If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract.
I will be discussing the Hinman docs with John Deaton and Eleanor Terrett today on YouTube at 9 AM EST. They are the leading experts on the Ripple case.
Shifting gears to Binance, you might remember that the SEC filed a lawsuit against Binance and its CEO, Zhao. The lawsuit came with a court request to freeze Binance.US's assets. Predictably, Binance.US didn't take this lying down and retaliated. However, they have also worked towards a compromise with the SEC, aiming to reach a resolution beneficial to both parties.
As per a new court filing, Binance.US will maintain, “possession, custody, and control in the United States of all fiat currency and crypto assets that are deposited, held, traded, or accrued by customers, including affiliated and non-affiliated liquidity providers on the crypto trading platform…” BUT, “within 14 days defendants will begin to transfer all customer crypto assets to new wallets with new private keys.”
In essence, Binance.US plans to retain custody but transfer assets to a new wallet with fresh keys. This strategy is aimed at preventing any further mixing of funds by Binance or CZ. Is this a solid solution? Yes. Should you move your assets now to avoid getting caught in the crossfire of a lawsuit? Most definitely. The public has had sufficient warning to remove funds from Binance, whether staked or unstaked, thereby minimizing potential damage if things go sideways for Binance.US or Binance.
Speculation is rife about the fate of Binance if BNB takes a nosedive, but the truth is, no one has concrete answers. The court has yet to greenlight the filing, and there are minor discrepancies in the details requiring resolution. But what truly matters is that Binance.US users have been fortunate to have enough time to secure new homes for their assets.
To summarize, it's reasonable to assume that whatever befalls Binance will be harsher than what Coinbase faces. While their cases vary, there is a significant overlap. The primary looming threat for Binance is the involvement of the DOJ, which I believe won't cause an industry-wide upheaval but will certainly deal a severe blow to the Binance ecosystem. BNB, along with other industry players relying on Binance, will probably feel the sting.
My instinct (though it could be off) suggests we're nearing the definitive bottom of our current market structure. I maintain my belief that FTX marked the official bear market bottom, but it's evident that the SEC poses the next big hurdle for crypto's progress. Every new SEC lawsuit introduces fresh challenges to the space, but each subsequent blow will sting a bit less.
Side note: 1.5M people have already listened to yesterday’s Crypto Town Hall conversation with Congressman Warren Davidson, who proposed the SEC Stabilization Act and is leading the charge to fire Gary Gensler. We are now the biggest crypto show in the world, period.
Bitcoin Thoughts And Analysis
Instead of sharing my own thoughts, I will share those of legend Peter Brandt.
Since the drop last weekend, Bitcoin has done… nothing. Absolute stalemate as price consolidates sideways. Nothing to see here, as he shows.
FOMC is today, so maybe we will see some volatility in all markets.
Legacy Markets
Stocks rose on Wednesday in anticipation of Federal Reserve Chairman Jerome Powell announcing a pause in the central bank’s interest rate hikes. Corporate news, including Shell Plc's dividend increase, Advanced Micro Devices Inc's unveiling of its AI processors, and Tesla Inc's ongoing winning streak, also contributed to market gains.
The S&P 500 saw its fourth consecutive increase, its longest winning streak since early April. Following Tuesday’s data showing a US inflation slowdown, global investors anticipate that the Federal Open Market Committee will keep rates between 5% and 5.25%. Swap traders predict only a 10% chance of an increase, while acknowledging the potential for a July move, given that inflation is still more than twice the central bank's target.
Treasury yields marginally dropped following a short-term yield surge, the highest since March. The dollar index maintained near a one-month low.
Market strategists anticipate a 'hawkish skip' scenario for the Federal Open Market Committee, with Powell expected to maintain a relatively hawkish tone in the press conference, emphasizing the need for inflation control. Wall Street's "fear gauge," the Cboe Volatility Index, has dropped back below 15, indicating support for risk assets.
Key events this week:
Eurozone industrial production, Wednesday
US PPI, Wednesday
Federal Reserve rate decision, updated economic forecasts, Jerome Powell’s press conference, Wednesday
IEA oil market report, Wednesday
China property prices, retail sales, industrial production, Thursday
European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
Bank of Japan rate decision, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 6:10 a.m. New York time
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 rose 0.5%
The MSCI World index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.1% to $1.0805
The British pound rose 0.3% to $1.2645
The Japanese yen rose 0.2% to 139.94 per dollar
Cryptocurrencies
Bitcoin rose 0.5% to $25,981.74
Ether rose 0.4% to $1,745.05
Bonds
The yield on 10-year Treasuries was little changed at 3.81%
Germany’s 10-year yield advanced three basis points to 2.45%
Britain’s 10-year yield declined two basis points to 4.41%
Commodities
West Texas Intermediate crude rose 1.2% to $70.24 a barrel
Gold futures rose 0.3% to $1,964.10 an ounce
China Employs Ethereum Blockchain To Issue Bonds
In a departure from the ongoing SEC saga, the most riveting news of the week hails from China, hands down. While the U.S. grapples with the status of altcoins, Bank of China's investment bank subsidiary, BOCI, in partnership with Switzerland's investment bank UBS, has launched 200 million Chinese yuan ($28 million) worth of digital structured notes, minted on the Ethereum blockchain.
Targeted specifically at customers in the Asia Pacific region, this move sets BOCI apart as the first Chinese financial institution to issue a tokenized security in Hong Kong - a truly exceptional achievement. If the West weren't so engrossed in the SEC's theatrics, this would be the hot topic of discussion. Regardless, it's such advancements that fuel bull markets, whether they receive the recognition they deserve or not.
eToro Takes Steps To Avoid SEC
eToro Follows Robinhood in Delisting Four Cryptos
The SEC's aggressive stance is causing tremors within the crypto industry. What's intriguing about eToro's move is their selection of different coins for delisting compared to Robinhood. Could this be a strategy to maintain revenue from specific coins while giving off a proactive image? It's anyone's guess. However, we can say with certainty that exchange delistings inflict serious harm on a project. We can only hope this trend sees a reversal soon.
Due to recent developments, we will be making some changes to our crypto offering for US customers. From 6:00 AM ET on Wednesday, July 12th, 2023, US customers will no longer be able to open new positions in Algorand (ALGO), Decentraland (MANA), Dash (DASH), and Polygon (MATIC). Customers can continue to hold and sell existing positions in these coins.
Uniswap v4 Is Coming
Uniswap Update Means 'The Possibilities Are Pretty Endless,' Says Developer
Kudos to Uniswap for seizing the opportunity amidst the current turbulence. With centralized exchanges under scrutiny (and decentralized ones potentially next in line), Uniswap is pressing ahead with updates, reinforcing its ambition to surpass centralized exchanges in trading volume. The v4 update incorporates features like smart contract customization, fee reduction, and limit orders - traditionally the realm of centralized exchanges. In a nod to their commitment to decentralization, Uniswap is, for the first time, inviting community input on this update. According to Hayden Adams, we might be a few months away from its public launch.
Fire Gary Gensler! Free Crypto In The US!
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.