Crypto News: Harmony, Celsius, Voyager, Solana, FATF & MORE!!

Here are this week’s top headlines in crypto news:

  • Harmony Hack: 100 million dollars of crypto was stolen from a cross-chain bridge between two popular smart contract crypto currencies. Will ONE coin recover?
  • Celsius continued:  The ailing crypto platform reportedly prepares for bankruptcy while Wall Street banks plan to purchase its assets at a massive discount. When will users get their funds back after?
  • Crypto bailouts: Celsius competotors BlockFi and Voyager Digital get support from FTX and Alameda Research as the crypto contagion continues. Here’s who’s saying this is a bad idea.
  • Solend dilemma: One of Solana’s largest DeFi protocols float a controversial proposal on the fly to prevent catastrophe within Solana’s ecosystem. What does this mean for cryptographic governance?
  • Cross-chain with a Thorchain. One of cryptocurrency’s most promising projects launches its main net moments before regulations rain down on the industry. Why is this more important than you think? 
  • The FATF strikes back. Starting today, Coinbase users in the Netherlands will have to provide detailed information about the crypto wallets they’re withdrawing to. Is this the beginning of a bigger trend?
  • On the cusp of chaos. The United States starts to crack, Sri Lanka’s prime minister says his country has collapsed, and Germany warns of a global financial crisis. Everything you need to know.
  • A closer look at last week’s top performing cryptos and where they’re headed next.

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Harmony Hack

Last week, Harmony’s cross-chain bridge to ethereum was exploited by a hacker who managed to drain around 100 million dollars of crypto, mostly altcoins. Over the weekend, Harmony’s co-founder Steven Tse said the exploit was not due to a bug in the cross-chain bridges smart contract code but due to a breach of the five private keys kept by Harmony. As many critics have pointed out, Harmony had previously been warned about the fact that its cross-chain bridge could be compromised with just two of the five private keys, which is what happened here. This makes Harmony’s cross-chain bridge hack analogous to the massive 600 million dollar hack of Axiom Infiniti’s bridge from ethereum to its Ronin side chain, which also involved compromised private keys. Harmony has since highlighted its commitment to finishing its trustless cross-chain bridges.

What those affected are wondering, however, is whether they’ll ever see all their coins and tokens again. This depends on a few things. For starters, Harmony has offered one million dollars to the hacker if they return the funds and explain how they were able to access the private keys. Harmony also noted that it will advocate for no criminal charges when funds are returned.

Besides the fact that this wording doesn’t definitely say, no criminal charges will be laid.  On-chain analysis reveals that they have already exchanged all of the altcoins they stole for ETH, save for about $70,000 in Aave, which is unusual. One hundred million dollars of ETH is a lot of money, even at today’s prices, and this means it’s going to be next to impossible to cash out through a centralized exchange without getting caught. There also isn’t nearly enough liquidity in mixing protocols to cover the tracks of any large transactions. As such, it seems that the hacker is going to squat on this ETH indefinitely and possibly even borrow against it in DeFi protocols like Aave, which would explain the Aave tokens.

In terms of what it could mean for the ONE coin, the fact that it wasn’t directly affected by the hack means it may not suffer all that much in the medium to long term. The caveat here is that the Harmony team could opt to use one as a means of making users whole, which could create a lot of cell pressure.

Celsius Continued

Speaking of massive losses, it seems that Celsius hasn’t managed to make the recovery that many had hoped for and its Cell token has consequently continued to struggle. The crypto platform’s downfall was ultimately caused by risky yield-seeking behavior combined with a fall in the price of Lido Finance’s stETH relative to ETH. This supposed mismanagement might be a part of why Celsius is having a hard time finding investors to bail it out, and the fact that many potential buyers are suddenly finding themselves underwater too certainly doesn’t help.

According to the Wall Street Journal, Celsius is now looking to hire lawyers in preparation for a potential bankruptcy. This suggests that Celsius was badly in debt, which makes sense when you remember that Celsius’s own About page notes that the platform had processed over 8 billion in loans. While it’s not clear how much had been borrowed when Celsius closed its doors, what is clear is that the value of the crypto used as collateral was likely liquidated when crypto prices crashed earlier this month. These and other obligations could have left Celsius underwater, i.e., owing money to other parties whom it had borrowed these billions from. I will reiterate that this is speculation because the fact of the matter is we don’t really know what’s going on behind closed doors. That’s why the news from Coindesk that Goldman Sachs is preparing to buy Celsius’s assets at a massive discount should be taken with a grain of salt.

After all, the Coindesk story itself specifies that this would only happen if Celsius does go bankrupt, which is again up in the air. I will quickly point out that this headline is quite significant, especially if Goldman Sachs does manage to get two billion dollars from investors to buy the Celsius dip. That’s because it would suggest that institutions are not only serious about crypto but that we might even be close to the bottom. This doesn’t seem to be all that likely, but it is still a very real possibility. In any case if Celsius does go bust, and if Goldman Sachs does manage to buy up all its crypto for cents on the dollar, it should go without saying that these coins and tokens won’t be going back to their rightful owners. This suggests that Celsius users will be lucky to get some fiat back and this compensation could come months or even years after Celsius has gone under.

I suspect the first folks to get this fiat will be the individuals and institutions at the top of the Celsius food chain. Let’s hope it doesn’t come to this.

Crypto Bailouts

A bailout of some kind, whether in the form of an acquisition or an injection of capital, would be a better outcome for Celsius. It so happens, Celsius competitor Nexo, which had earlier offered to purchase Celsius, is now asking Citibank for advice about acquisitions. Coincidentally, Celsius is reportedly in talks with Citigroup, the parent company of Citibank.

What’s more is that Celsius had actually hired Citigroup’s former chief operating officer and head of risk in January of this year to become Celsius’s chief operating officer. Call me crazy, but all this suggests Celsius could still have a shot at a recovery.

What would be really crazy is if cryptocurrency exchange Binance came in and bought it. Given Changpeng Zhao’s position as finance chief, this is not entirely out of the question. According to a recent report, Binance is looking to acquire up to 100 crypto companies in the coming months. Now this really would be crazy because it would also specify poorly managed crypto projects. “Companies should not be bailed out,” a description which could arguably be applied to Celsius, especially since Cz’s comments were a not so subtle reference to Celsius’s competitors BlockFi and Voyager Digital.

Whereas BlockFi signed a debt deal with the FTX cryptocurrency exchange for 250 million dollars, Alameda Research, a crypto trading firm, signed a massive $500 million debt deal with Voyager Digital. This is due to a 600 million dollar hole left by an unsecured loan Voyager Digital made to Three Arrows Capital, the ostensible crypto hedge fund and potential Ponzi scheme.

FTX is now reportedly trying to buy a significant stake in BlockFi, a move that is drawing counterbids from crypto hedge fund Morgan Creek Digital, which took issue with the terms of FTX’s aforementioned 250 million dollar loan, arguing that it could see FTX buy BlockFi for next to zero.

Pro-crypto SEC commissioner, Hester Pierce, has also raised concerns about big crypto companies coming in to acquire smaller ones, echoing the sentiment that poorly managed crypto projects. Many mainstream media outlets, including Bloomberg, have dubbed FTX CEO and Alameda Research founder Sam Bankman-Freed the “JP Morgan of Crypto,” a reference to the 1907 panic.

Solend Dilemma

Anyway, another thing that FTX and Alameda Research are known for is their strong support of Solana, with Sam Bankman Freed joining Solana founder Anatoly Yakivenko on stage last week to announce a crypto phone called Saga.

However, it wasn’t the Saga phone that had people talking about Solana. It was the news that the community of the largest DeFi protocol on Solana called Solend had suddenly voted to take away cryptocurrency belonging to a Solana whale who had borrowed over 100 million dollars worth of USDC against their 170 million dollars worth of SOL. This is because there were serious concerns about what would happen to the on-chain price of SOL and the Solend protocol.

For context, if this whale had their sole collateral liquidated, the sole deposited by this Solana whale accounted for more than 50 percent of Solend’s total value locked. The proposal received no shortage of backlash from the crypto community, which is not surprising considering the Solend DAO had been set up shortly before the governance proposal was tabled. Almost all the yes votes came from a  single Solana wallet. The backlash caused the Solend community to pass a second proposal shortly afterwards which negated the first, meaning the Solana whale could keep their SOL.

The Solend community has since passed a third proposal to set a limit on how much a person can borrow from the protocol. As for the Solana whale, he, she, or they have been gradually paying off their USDC debts and moving their SOL from Solend to other DeFi protocols on Solana. No mistake, the whole ordeal served as a serious wake-up call to the crypto community, especially DeFi users who were under the impression that they always had control of their crypto.

Every time you connect your Web3 wallet to a decentralized application, you almost always give that dApp permission to do what it pleases with certain coins and tokens in your wallet. In fact, one of the most popular scams out there involves tricking you into giving this permission to a fake website that’s promising to give you free crypto or NFTs. A scam which apparently even some of the wealthiest crypto holders continue to fall for.

When it comes to the issues with crypto governance, that is a whole other can of warns. There’s clearly a lot of work to do on that front, and switching from one token equals one vote to one identity equals one vote would solve many of those problems. That’s why ethereum creator Vitalik Buterin is so enthusiastic about so-called SOL-bound NFTs.

Cross-Chain With Thorchain

Anyhow, another crypto project that made the headlines last week was the Thorchain. That’s because it’s mainnet has finally launched. For those who don’t know, Thorchain is a crypto project that makes it possible to swap cryptocurrencies between blockchains.

What makes Thorchain different from other decentralized exchanges is that you can swap directly between native cryptocurrencies the same way you can on a centralized exchange. What makes Thorchain different from centralized exchanges is that you don’t need to provide any personal information to use it. Thorchain is accessible to anyone with an internet connection. It’s available on both desktop and mobile.

The Thorchain currently supports native Bitcoin, Ethereum, Binance Coin, Litecoin, Dogecoin, Bitcoin cash, and Thorchain RUNE, which is used behind the scenes to make swaps between these cryptos. You should also note that you don’t need to hold any RUNE to swap, even though it’s technically used to pay for fees.

The Thorchain is planning to add support for additional cryptocurrencies, including privacy coins like Monero, once the tech has been adequately tested and assuming the liquidity requirements are met. This powerful value proposition is why I hold RUNE as part of my personal crypto portfolio.

I should also note that the Thorchain was hacked twice last summer, and though it has doubled up on security, Thorchain’s own medium post announcing its main net launch warns that there could still be unforeseen risks for chains.

The medium post also announced a partnership with Binance to celebrate its mainnet launch, which will see one million dollars’ worth of RUNE up for grabs between the 23rd of June and the 7th of July.

In all seriousness, cross-chain protocols like Thorchain are going to be extremely important as time goes on because regulators around the world are slowly but surely starting to crack down on crypto, starting with the shared centralized points of failure, which are, of course, cryptocurrency exchanges.

The FATF Strikes Back

In this regard, the elephant in the room is Coinbase, which will require users in the Netherlands to provide detailed information about crypto wallets they’re withdrawing from in accordance with a controversial law written way back in 1977.

If you’ve been keeping up with the crypto headlines, you’ll know that this is nothing new. Back in March, Coinbase announced that it would start collecting detailed data about crypto withdrawals in several countries, including Canada, Singapore, and Japan. Despite what some crypto media outlets and cryptocritics would have you believe, Coinbase is not actually to blame here. The entity that’s to blame is the financial action task force, or FATF, whose so-called recommendations have been shaping crypto regulations around the world for the last couple of years. The end game is to make it impossible to use self-custodial crypto wallets or privacy coins by labeling any activities related to them as high risk.

Naturally, any individual or institution who engages in these activities will therefore find themselves restricted from other financial services, and the countries they live or operate in could end up on the FATF’s blacklist, effectively cutting these countries off from the global financial system.

This makes Coinbase a first mover of sorts, and its announcements related to collecting data about user funds should serve as a canary in the coal mine for the entire crypto industry rather than a point of criticism. It’s also certain that other crypto companies will eventually follow suit, especially since the regulations currently being proposed in the European Union and elsewhere explicitly invoke the FATF as part of their justifications for what it’s worth.

There are many crypto lobby groups who are actively working to ensure crypto regulations don’t cross any unnecessary lines, and we’re unlikely to see any of these crypto regulations come to fruition anytime soon because governments seem to have their hands full with rather more pressing matters.

On The Cusp of Chaos

If you’ve been keeping up with the regular headlines, you’ll know that things aren’t looking all that pretty. In the UK, the entirety of the public sector seems to be preparing to go on strike, starting with transport. Public sector employees are upset that their wages aren’t keeping up with inflation, and I can’t say I blame them across the pond.

In the good old US, over 8 million people may be evicted in the coming months, with an estimated 15% of renters falling behind on their payments. There was also a deeply polarizing development that took place last Friday, and I think you know which one I’m talking about.

When you combine these factors with soaring inflation, warnings of energy shortages, and scorching heat, what you get is a recipe for some serious societal conflict. What we saw over the weekend may just be the beginning.

These first world problems pale in comparison to the crisis being experienced in some countries, such as Sri Lanka, whose prime minister announced the country has completely collapsed after months of severe shortages on all fronts: food, oil, energy, even paper for exams.

As one of my colleagues here at the Coin Bureau asked where the international monetary fund is given that it typically takes a moment like this as an opportunity to burden the country with billions of dollars of debt that comes with lots of strings attached, as was the case in Argentina earlier this year.

As far as I can tell, the IMF isn’t coming to Sri Lanka’s aid because it’s open to buying oil from Russia and is reportedly looking for financial support from China, which will almost certainly come with its own set of draconian conditions. I suppose Sri Lanka sees China as the lesser of two evils, which is even scarier.

The most terrifying announcement of all came from Germany, whose energy minister warned of a Lehman effect if the country’s energy situation doesn’t improve, a reference to the 2008 financial crisis. Germany’s situation is particularly precarious because it shuttered its nuclear power plants in the wake of the Fukushima disaster of 2011. It’s clear that nuclear power alone isn’t enough.

However, the fact that France, which gets roughly 80% of its energy from nuclear facilities, is now also warning of an energy shortage highlights the fact that there is currently no substitute for oil and gas, and transitioning away from them will take much longer. In the interim, we will all get to enjoy the consequences of the ideological and deliberate decisions made by the kind of folks who attend the World Economic Forum’s annual meetings in Davos.

Top Performing Cryptos

Turning to the charts, we can see that Bitcoin is painting a nasty bear flag on the daily chart. If it breaks to the downside, we could fall as low as $12k in the coming weeks.

Last week’s top performing cryptos were:

Starting with Compound, the COMP token appears to be rallying on the upcoming release of circles euro stablecoin with the ticker Euro Coin that is set to launch later this week, specifically on the 30th of June. The website notes that Euro Coin will be made available on compound as well as UniSwap when it launches. Unfortunately, the COMP’s price action is nothing to write home about and it seems to have taken the biggest beating of all the DeFi tokens. With some luck, the Euro Coin launch will bring the COMP back up to the 100 level, where the next zone of resistance is.

Next up is the Polygon whose MATIC token appears to be rallying on the recent release of the Polygon ID’s first integration, which is with the Polygon DAO. This makes it possible to create the one person equals one vote governance structure I was talking about earlier, although Matic’s weekly rally looks incredible. Zooming out reveals that it’s still a far cry from its all-time high. This is partially because the Polygon Foundation has been selling lots of MATIC to fund its exponential expansion.

As for Synthetix, its SNX token appears to be rallying due to the popularity of its protocol. According to cryptofees, Io synthetics has seen over 500 million dollars in fees over the last week. Good old ethereum is right now.

The only thing funnier than that joke is SNX’s price action, which is almost as bad as COMP. The important thing is that the fundamentals are there for the Synthetix protocol, and that means it’s only a matter of time before SNX hits its fair value.

When it comes to STEPN’s GNT token, I couldn’t really find the cause of its recent rally. I suspect it has something to do with the fact that it’s warm and sunny and everyone is out and about and active. The fact that Solana’s SOL was rallying could have contributed as STEPN is part of Solana’s ecosystem now.

Similar to the other cryptos I’ve mentioned so far, GMT seems to have exited its speculative phase and has entered what is likely to be a long-term downtrend. Proceed with caution  

Last but not least, we have the Sandbox, whose SAND token is reportedly rallying because tech giants came together to set standards for the metaverse earlier this week. I would say that this is bearish rather than bullish for crypto, but it seems that sand holders disagree. It’s too bad that the Sand Castle has collapsed, and by that I mean SAND price.

It’s a good thing that sand has some actual fundamentals, unlike most of the other metaverse cryptos out there not naming names.

[This article is a transcription of a video made by Coin Bureau]

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