When I was younger,
my main goal was to catch them all.
Pikachu, Squirtle, Bulbasaur,
they were my everyday companions.
Now, as I’ve matured, I’ve turned to a
more serious hobby — catching every cryptocurrency
out there instead.
I’m Molly Jane, and this is our Hodler’s
Digest: Pokemon Edition, and let’s try catch them all!
Let's take a look at the latest market updates.
Crypto exchange Binance experienced a major
security breach this week, which resulted
in the theft of 7,000 BTC.
The amount, corresponding roughly to $41 million,
was stolen from a number of hot wallets which
contain approximately 2% of Binance’s
total Bitcoin holding.
They used both external and internal method
to trap a lot of phish and a lot of user accounts.
And it's probably the most advanced,
and the hackers are very patient.
So they don't move as soon as they have one
account, they wait for when they have a very
large amount of accounts, and they wait until
they get a very high networth accounts.
Following the incident, Binance suspended
all the withdrawal and deposit operations
and encouraged all users to reset their credentials.
The hack impacted the price of Binance Coin, which
dropped almost 10% in the days following the hack.
TRON CEO Justin Sun offered to personally
deposit the Tether equivalent of 7,000 BTC
in order to compensate Binance’s loss, an
offer which CZ politely turned down.
Binance claims to be able to fully refund customers
using its SAFU, an emergency insurance fund.
CZ claimed he was considering the possibility
to roll back the hacked transaction on the
Bitcoin blockchain, as a way to return the
stolen funds.
This option, called reorganization, would
imply incentivising Bitcoin miners to form
a 51% consensus and generate enough hash power
to reorganize the blockchain’s transactions.
CZ discarded this option shortly after, but
still the fact that he considered it in the
first place sparked a wave of disbelief and
criticism in the community as such a move
would completely discredit Bitcoin
as a decentralized immutable network.
Among the critics of the idea were Vitalik
Buterin and Mike Novogratz who argued that
Bitcoin’s network is too mature to be altered.
We talked to Bitcoin educator and developer
Jimmy Song about the hack.
Jimmy, how surprised were you when one of
the most reputable exchanges in the space
got hacked?
It's the same story over and over again.
I've been seeing this since like 2012,
2011 or something like that.
I mean, ever since I got into this space it's
always been: hey, be really careful putting
your coins on an exchange, because most people
don't realize how vulnerable a lot of these services are.
More recently a lot of these exchanges are
flushed with money, so they're able to sort
of cover out of their own funds, but it's
only a matter of time until one of them goes
bankrupt as a result.
Many praised CZ for the way
he handled the crisis.
What do you think about CZ’s
reaction to the hack?
He did the right thing in disclosing it,
and that's a very good thing.
I think too many exchanges just sort of like
sweep it under the rug and hope that they
can make it up later, but by making it public
he's sort of taking the hit now, but long
term it's good in the sense that people will
trust them a little more to come clean whenever
bad things happen.
CZ mentioned the possibility of reorganizing
the Bitcoin blockchain.
Is a reorganization possible and if yes it
is the right thing to do in your opinion?
It's definitely possible and reorgs have been
done before and for different reasons, it
could be as simple as two miners found the
block at the same time, right.
It's not always the case that rewards are
terrible if there's like a bargain and there's
social consensus around that.
It might actually make sense to do it.
There are all sorts of game theoretical reasons
why you wouldn't want to do that.
Especially in this case, where you have the
thief with 7,000 bitcoins, even if CZ is willing
to spend 7,000 bitcoins, the hacker will be
able to get away with some amount of bitcoins
by incentivizing miners themselves.
What the thief can do is, they can basically
give the miners some of their trapped coins
in the form of fees and say: "Okay, well if
you keep mining on the other chain you're
gonna get more fees."
Why would they go and try to take your money
back if they're giving up their own reward.
So you have to compensate them.
It doesn't really matter what the block reward
is, but you're always going to have to spend
more than the thief in order to basically
roll back these transactions.
That's how it's designed.
It's designed to be very-very expensive in
order to roll back.
And how do you think this incident will reflect
on Binance’s business in the medium or even
the long term?
We've seen a bunch of these hacks
in the past few years.
The pattern that I've seen is that customers
don't really care that much.
The things that are important, it seems to
the customers seeing it, are liquidity, ability
to trade and things like that, and maybe leverage.
I personally think security
should be much higher.
But that's not what the market
seems to be saying.
There's a lot of people still on Bitfinex
and some of these other exchanges that have
been hacked in the past.
I hate to say it, but it doesn't seem to have
affected things any, and I imagine Binance
will keep chugging along.
After a year of rumours and more rumours,
Mark Zuckerberg's New Year’s resolution
to study blockchain and crypto might be bearing
some fruit.
Facebook is now hiring PayPal staff ahead
of its mysterious crypto launch,
near the end of this year.
MIT professor Christian Catalini is also reportedly
working on the development of Facebook’s coin.
About 20% of the team’s 50 members come
from Paypal, no sign as of yet of their most
famous son’s involvement, Elon Musk, although
knowing him, he is more likely to be working
on MuskCoin, the native currency
of a galaxy far far away.
Back down to dystopian Earth, Facebook’s
crypto will probably be a stablecoin called
FB Coin that will allow you to buy friends
or something.
According to reports, the social media giant
is seeking investments of $1 billion and is
also in talks with Visa and Mastercard.
They also acquired the “Libra” trademark
for the token, which will be pegged to the
U.S. dollar and have a range of applications.
Sources from Facebook itself have done that
thing where you lock your mouth with an invisible
key, declining to comment.
Is Facebook Coin a good idea, won’t it just
make the world’s most powerful nerd villain
even more powerful?
Just this week, one of Facebook's founders,
Chris Hughes, called for the platform to be
broken up, saying that while he still believes
Zuckerburg to be a good person, he has amassed
too much power for one man.
Barclays, Goldman Sachs and JP Morgan Chase
have all planned crypto trading desks, but
only one Wall Street Titan has got this close.
In the coming weeks Fidelity Investments might
be introducing its very own crypto trading desk.
Earlier this year, the asset management firm
launched a crypto custody service, but now
they will, apparently, buy and sell crypto
for their institutional clients.
The clients will be able to trade Bitcoin
at first, but other digital assets are likely to follow.
Both Robinhood and E*Trade actually got into
the crypto game before them, but they go after
retail: Fidelity is the largest manager of
retirement funds and is likely to attract
an institutional client base.
Although it is just institutional for now,
this is a sign that institutional players
are no longer shy about getting
into the crypto space.
This is something that was anticipated for
2018, but was never actually materialized,
largely because of volatility
and regulatory uncertainty.
However, now that unsophisticated speculators
are gone, more serious investors are interested
in the space.
According to a recent study, Fidelity found
that, out of 441 institutional investors,
47% think digital assets
are worth investing in.
The bullish attitude gleaned from the survey
comes at a time when the industry is still
plagued by FUDy stories like Quadriga, Bitfinex
and the Binance hack, but this kind of stuff
apparently doesn’t deter institutional investors.
Take Mike Novogratz, who, despite losing $272
million in 2018, is still a believer;
this week, he predicted that Bitcoin would shoot
past $20K by 2021.
Billionaire investor and increasingly out
of touch grouch, Charlie Munger, made a discovery
this week, he found out what Bitcoin investors
do during their happy hour events.
They gather around to celebrate
the life of Judas Iscariot.
That’s right, the famous biblical traitor.
Charlie made sure to use his full name just
in case you got it mixed up with all the other
famous Judas’ out there.
Previously, he referred to crypto traders
as turd traders, which at least made sense,
but this latest comment makes no sense.
Do the investors have a shrine or a capital
at the events, is the event mobile?
If Judas represents Bitcoin, then is Christ
the dollar and the romans are the federal reserve?
And Charlie, you are only 95,
get some more contemporary traitors
like Benedict Arnold or something.
And now Pikachu Molly, I choose you!
It is now official: Bitfinex will conduct
an IEO in the attempt to raise $1 billion.
The exchange will use the raised funds in
a bid to compensate a $850 million gap in its funds.
The funds raised will also be used
“for working capital and general business purposes.”
According to a recently released whitepaper,
the sale will be private and it will be accessible
only from outside the U.S.
Investors can participate in the sale after
going through the exchange’s KYC procedures.
Holders of the new token, called LEO, will be given
discounts and rebates while trading on Bitfinex.
The LEO will be pegged to the USDT, the controversial
stablecoin issued by Tether,
Bitfinex’s affiliated company.
According to Dong Zhao, prominent Chinese
trader and Bitfinex’s shareholder, the exchange
already secured $1 billion in hard and soft
commitments from investors for the IEO.
The announcement of the IEO came amidst a
lawsuit which the State of New York opened
against Bitfinex and Tether.
According to authorities, Tether secretly
gave Bitfinex a loan to cover up a $850 million loss,
thus compromising the fiat reserves
which should supposedly back the Tether stablecoin.
Bitfinex claims the funds are not lost, rather
they were rather seized by various authorities,
adding that it was working
for retrieving the money.
According to an injunction filed by the Attorney
General, a $900 million credit line from Tether
to Bitfinex should be frozen as long as the
investigation is ongoing.
On the other hand, Bitfinex’s lawyers claim
the injunction is unjustified and likely to
harm the startup’s customers
and the market as a whole.
We reached out to Aaron Krowne, attorney at
fintech-focused firm Krowne Law, and asked
him to comment on the legal
aspects of the Bitfinex case.
So Aaron, despite the accusations, Bitfinex
claimed to have acted in a transparent way
towards its customers.
What do you think,
did Bitfinex commit fraud in this case?
I think they're having an issue with the legitimacy
of the loan, the line of credit from Tether
to Bitfinex.
So essentially this looks like a bailout of
Bitfinex from Tether.
And the legitimate question here is: should
a stablecoin trust fund be bailing out an exchange?
That's not something that anyone would approach
a stablecoin and think: "Oh, this is great.
I want to own a share in the stablecoin and
I'm going to participate in this if it runs
around bailing out exchanges."
So that would have to be judicially hashed
out in a situation like this and basically
be down to the court to determine whether
this was fraudulent and besides that whether
it's a legitimate use of Tether's funds.
Bitfinex’s lawyers questioned the legitimacy
of the Attorney General’s injunction, as
there is no evidence Tether qualifies as a
security or a commodity under the Martin Act.
What do you think about that,
is that a solid argument?
They don't want to be under the jurisdiction
of the securities.
That just gives more compliance points.
They would have to follow more disclosures,
more restrictions, plus more enforcement rights
including multiple damages, different sorts
of damages that would be opened up if they
were considered to be a security.
So that's something, you know by default,
if you're doing something like stablecoin
or any sort of asset on deposit you don't
want to be a security, you want to be under
a different narrower set of laws.
So that's something that anyone
would argue in that situation.
And do you think that this upcoming IEO is
going to have any consequences on the legal dispute?
I don't know if it has much of a direct tie
into the legal dispute.
I suppose it could be piled on,
as sort of a claim of the nature.
"Why are you guys trying to raise funds, when
you're misrepresenting something else?"
If it's deemed that they are misrepresenting
something else.
So it's certainly a situation where probably
my advice would be don't do that, don't try
to raise capital while you're fighting out
a capital deficit in court.
So it's not a great thing to be doing I think,
but it doesn't necessarily have a direct bearing.
So what was your favourite
Pokemon as a kid?
Comment below!
And if you would have a choice today to have
one Bitcoin right now or your own Pikachu,
what would you choose?
Because I know what I would choose.
