Does SBF Own Everything Now? – by Donovan Choy

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Dear Bankless nation,

Here’s a recap of all crypto news for the last week of June, 2022

Three Arrows Capital Contagion, Act III

The dominoes continue to fall from 3AC’s collapse. 

The fund was ordered into liquidation by a British Virgin Island court after failure to repay debts.

Singapore’s central bank MAS — where 3AC was previously headquartered — then stated that the fund willfully submitted false information on its balance sheets, and exceeded its allowed assets under management for several months.

The collateral damage from 3AC’s implosion has spilled over into other crypto companies, namely Voyager Digital and BlockFi.

Last week, Voyager halted withdrawals on its platform. This week saw Voyager issuing 3AC a default notice after the latter failed to make payments on a $670M loan.

Meanwhile, SBF’s Alameda Ventures stepped in with a $500M loan package to save Voyager, of which $75M has already been accessed. VOYG shares have taken a hit of ~60% in the past two weeks after news of its exposure to 3AC broke.

BlockFi’s troubles include an overcollaterized loan of $1B to 3AC, which was liquidated early on in the domino charge. In a public message released today, BlockFi reported a loss of ~$80M in the past month’s events, as well as a credit line of $400M from FTX (also an SBF joint) which to-date has not yet been drawn on.

Both FTX and Morgan Creek Digital are competing to acquire BlockFi, as BlockFi continues to pursue a public offering.

How 3AC ended up in this mess is beyond the scope of this newsletter, but it’s a heady brew of bad investment decisions and poor risk management involving overleveraged loans from other institutions and DeFi protocol treasuries.

With FTX and Alameda scooping up the rubble from the fallout across the contagion, this looks like an effective power play by The SBF.

Catch Ryan and David on this week’s Bankless rollup for the full details.

Grayscale sues the SEC

Grayscale Investments’ application to convert its GBTC asset into a spot-based Bitcoin ETF saw rejection by the SEC this week.

Now Grayscale is taking the SEC to court.

READ  The Pros and Cons of Bitcoin IRAs

The official press release charges that:

“… the SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934”.

As it stands, the Grayscale GBTC financial product is a trust that enables investors to gain exposure to Bitcoin without buying it directly (with an initial lockup period of six months).

Why buy GBTC at all when you can buy BTC directly? Because it’s a legal way for mainstream investors to gain exposure to crypto.

But it’s also terribly market-inefficient. In theory, GBTC is meant to mirror Bitcoin in value. In reality it trades at a premium or discount depending on market sentiment. This opens an arbitrage opportunity that transforms GBTC from a “Buy this if you like Bitcoin” financial product into a hybrid speculative futures-based product.

That lured institutions like 3AC into scooping huge stakes in GBTC when numbers were going up, and we’ve seen how that ended up.

Of course, modern finance has an easy fix to this like: an ETF which trades at a 1:1 parity with the underlying asset.

But access to crypto ETFs are still blocked up as the SEC continues to drag its feet on regulatory approvals. But that’s not stopping institutions from pursuing the license, as VanEck files another application this week.

DeFi DAO governance dynamism

Two big DAO governance items dominated this week. The first was a contentious Maker DAO proposal to centralize the protocol’s governance in a “core unit.” It failed to pass. The proposal saw an unprecedented ~30% of MKR tokens participating.

The second big governance proposal is a Lido initiative to self-limit the amount of ETH deposits into the liquid staking protocol. The context of this proposal lies in the potential risks that a concentration of ETH in Lido might pose to the underlying Ethereum protocol.

It’s hardly a surprise that the proposal was overwhelmingly shot down by LDO holders – that’s a little bit like asking an investor if you’d like to see a company you own a part of to stop growing.

💭 Hasu enters the Maker and Lido governance conversations with moderate suggestions for both.

Web3 News Roundup

Arbitrum Odyssey paused, Optimism numbers go up

The Arbitrum Odyssey campaign was paused this week due to blockchain congestion from the overwhelming success of Odyssey.

Meanwhile, Arbitrum’s closest L2 competitor Optimism is also booming, with a big uptick in DEX trading volume.

READ  Bitcoin (BTC) Social Dominance Rises Yearly High Ahead Of Key Event

We’ve been huge on Ethereum L2s for a long time, so this doesn’t come as a particular shocker. Still, it’s nice to see the L2 Summer 🌻 thesis get vindicated as crypto winter draws near.

Horizon bridge gets hacked

The Horizon bridge by L1 blockchain Harmony endured a $100M exploit this week, allegedly by the North-Korean hackers Lazarus Group. Those are the same guys that hit the Axie Infinity Ronin bridge in March.

Microstrategy goes Bitcoin shopping

Microstrategy is a small software company, but it has come a long way from doing small software things. CEO Michael Saylor shut down market rumors of any potential insolvency in perhaps the most demonstrative way possible: a $10M purchase of another 480 Bitcoins.

El Salvador too checks out another purchase of 80 Bitcoin.

Bankless July Token Report

Finally, the Bankless July Token report dropped this week for premium subscribers. Ben reviews ATOM, SOL, AVAX, PERP, TRIBE, and SUSHI 👀

https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F4945a1b8-af62-4fbc-a444-b9f68779ddc0_700x394.gif

Here’s what we have lined up next week:

  1. William and Lucas will teach us how to evaluate NFTs and Layer-1s respectively 🧑‍🏫

  2. Ben is publishing the big Ethereum Q2 report 🔥

  3. Matthew Green joins us on the podcast on in a Defense of Cryptocurrencies 🛡️

Have a great weekend!

Donovan

🙏 Sponsor: Polygon Studios—Fostering culture across Gaming, NFTs, and the Metaverse

Recap for the week of June 27, 2022

📺 Matt Cutler’s Ethereum’s Hidden Power Structures

Listen to podcast episode | Apple | Spotify | YouTube | RSS Feed

ACTION RECAP 📚

READ 📚

  1. 📘 Why Would a dAPP Leave Ethereum Right Now?

  2. 📘 How to Earn Passive Yield on Your NFTs

  3. 📘 7 Mental Health Tips for This Bear Market

  4. 📘 5 Crypto Investment Trends for the Rest of 2022

  5. 📘 Bankless Token Ratings | July 2022

WATCH 🔊

  1. 📺 CZ’s Bear Market Plans

  2. 📺 Bear Market War Stories with DCinvestor & Eric Conner

  3. 📺 dYdX Abandoning Ethereum?! with Founder, Antonio Juliano

  4. 📺 Resilient DeFi with Kirk Hutchison | Layer Zero

  5. 📺 Ethereum’s Hidden Power Structures | Matt Cutler

METAVERSAL 🧙‍♂️

  1. 📘 Luck of the mint (or trade) 🍀

  2. 📘 Study these NFT smart contract approaches 🙇

  3. 📘 5 cool new NFT projects 😎

BANKLESS DAO 🏴

  1. 📘 Building Season With Making Bank | Weekly Rollup

  2. 📘 Non-Fungible Tokens | Decentralized Law

  3. 📘 DAOs Get in the Golden State of Mind | State of the DAOs

  4. 📘 eBay and Hilton Bring on NFTs, Adidas Dives into the Metaverse

READ  BITCOIN SV Price Analysis: Sinking Price Calling BSV Bulls

OVERPRICED JPEGS 🖼️

  1. 📺 [Part 3] Jon Rogers Breaking Down the Yuga Labs and Ryder Ripps Lawsuit

  2. 📺 [Part 2] Jon Rogers on Huge Releases, Acquisitions, & Deals

  3. 📺 [Part 1] Jon Rogers on NFT NYC, Punks’ Brand Lead, Doodles 2 & More

  4. 📺 NFT Lending’s Potential with Arcade Founder, Gabe Frank

GREEN PILLED 🌳

  1. 📺 Kimbal Musk on Food and Philanthropy

  2. 📺 Impact Certificates | Evan Miyazono, Head of Research at Protocol Labs

Weekly Subscriber Perks 🔥

Bankless Premium Members get access to perks like these:

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🗞️ Latest Weekly Rollup! Download the week in crypto to your brain in one show.

Listen to podcast episode | Apple | Spotify | YouTube | RSS Feed

Jobs opportunities 🧑‍💼

✨ See all listings on the Bankless Job Board

  1. Alliance DAO: CTO

  2. Alliance DAO: Software Engineer, Full Stack

  3. Alliance DAO: Senior Software Engineer, Full Stack

  4. Alliance DAO: Executive Assistant

  5. Otterspace: Solidity Engineer

  6. Abstract Ventures: Front-End Engineer

  7. Boolean Labs: Founder & CEO of a Web3 Community Analytics Platform

  8. Bankless: Twitter Specialist (Social Media)

  9. Blockchain Capital: Research Engineer

Go Bankless. $22 / mo. Includes archive accessInner Circle & Badge(pay w/ crypto)

🙏Thanks to our sponsor

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Write for Bankless

Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

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