Crypto News: Insider Trading, BlackRock Takeover, ETH Merge & More!!

19.04.2022

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

Big bucks for crypto stuff: Fabric Ventures, Pantera Capital, Terra’s Luna Foundation Guard, Ava Labs, and Ignite collectively announce billions of dollars in funding. Where will all this money go?
BlackRock on the block: Wall Street’s most controversial asset manager takes a major stake in cryptocurrency’s leading stablecoin issuer. What could possibly go wrong?
Twitter takeover attempt: Tesla CEO Elon Musk’s attempted Twitter takeover ends in a poison pill, but the Dogefather hints at an ace up his sleeve. When will Elon make his next move?
Insider trading accusations: Moments after Coinbase announces clarity around its upcoming crypto listings, Twitter discovers some suspicious wallets. Here’s why this is a big deal.
APY for me, but not for you. It restricts retail investors in the United States from using its popular stablecoin savings feature. Everything you need to know.
Ethereum expectations: The developers announced that the merge would be delayed by a few months. How could this affect Ethereum and its competitors?

A closer look at last week’s top performing cryptos and where they’re headed next. All this and more in just a moment. And one more interesting and useful new is that Jet-Bot platform for Binance exchange may allow you to earn from 200% up to 2,000% APY. Copy best traders and follow all their deals automatically to become one of the best traders as well.

Big Bucks For Crypto Stuff

Last week we saw billions of dollars of mostly institutional money pour into the crypto industry behind the scenes. First there’s crypto VC firm Fabric Ventures, which is on the cusp of raising nearly $250M for two Web3 focused funds. Since fabric ventures’ former investments include the likes of Polkadot, MakerDAO, Bitstamp, and Decentraland, it’s possible that this capital will find its way into similar niches, namely smart contract cryptocurrencies, D5 centralized exchanges, and metaverse projects.

Next, there’s crypto VCF firm Pantera Capital, which is likewise on the cusp of completing a raise of its own, and it looks like its cash pile will be a whopping $1.3B, more than double its target. Pantera Partners specified that they’ll be using this capital to invest in both new and existing crypto projects, and their previous investment suggests they’ll focus on crypto infrastructure projects such as decentralized storage as well as crypto payment focused projects.

Pantera’s portfolio happens to include Terra, whose Luna Foundation Guard recently received over $880M in LUNA from Terraform Labs. As many of you will know, the LFG has been buying up BTC by the bucket load to create a stability reserve for Terra’s U.S. stablecoin, and its ethereum wallet balance suggests it’s running low on stablecoins.

As such, it’s possible, if not likely, that the luna the LFG just received will be sold over the counter to crypto VCS to buy even more BTC and potentially more AVAX as well. As many of you will know, AVAX is the native cryptocurrency of the Avalanche blockchain, and according to Bloomberg, the company behind Avalanche is about to complete a $350M raise. Although it’s not yet known what other labs will spend this money on, I suspect they will use it to attract more developers, as that seems to be the primary area of focus for cryptocurrencies these days.

Cosmos is another cryptocurrency that’s aiming to attract developers, and the recently branded company behind Cosmos’ revolutionary Tendermint consensus mechanism explicitly stated that it will be using the $150M it just raised for this purpose.

The company, now called Ignite, is specifically planning on supporting 20 crypto projects per year and, apparently, it’s willing to sponsor crypto projects that aren’t a part of Cosmos’s ecosystem. This might have something to do with Cosmos’s commitment to creating a truly multi-chain future.

Blackrock On The Crypto Block

Anyways, another crypto company that reported an impressive raise was USDC issuer Circle, which bagged $400M from some of the largest asset managers in the world. For now, the first asset manager on the list was BlackRock. It means that it was Circle’s largest investor in this round of funding. For those who don’t know, BlackRock is the largest asset manager in the world, with over 10 trillion dollars in assets under management.

BlackRock became a household name last summer when it was discovered that it was buying single-family homes in the United States at up to 50% above asking price, basically making it impossible for the average person to buy a house in the areas where BlackRock was buying. Blackrock has also made its mark in crypto. The short of it is that Blackrock is using its influence to get publicly traded companies and even other asset managers to act in accordance with unsurprisingly subjective criteria.

BlackRock has now made the crypto headlines again, but this time in the context of the USDC Issuer Circle. For starters, it was revealed that BlackRock is the primary asset manager of the reserves that back the USDC stablecoin. Not only that, but Circle stated in its press release that

“Blackrock has entered into a broader strategic partnership with Circle, which includes exploring capital market applications for USDC.”

As you can imagine, this resulted in some mixed reactions from the crypto community. On the one hand, BlackRock’s partnership with Circle is a plus because it means that USDC will almost certainly continue to grow. This will have a positive second-order impact on all of the smart contract cryptocurrencies on which USDC is based, particularly Ethereum and Solana.

On the other hand, Blackrock’s partnership with Circle is a sign that it’s starting to pay close attention to the crypto industry, and this means Blackrock could eventually take control of certain crypto projects through ownership of their coins or tokens, the same way it has with many publicly traded companies.

Twitter Takeover Attempt

One of the publicly traded companies Blackrock has a large stake in is none other than Twitter, whose board of directors opted to take the so-called poison pill in response to Elon Musk’s offer to buy the social media platform for $43B. As many media outlets were quick to point out, Twitter’s board of directors didn’t actually take a physical poison pill. What they did was introduce an emergency plan in the event of a hostile takeover, which is economists’ speak for buying too much of the company’s stock.

Twitter’s poison pill will make it possible for existing shareholders to purchase additional Twitter shares at a discount if anyone acquires more than 15% of its total shares between now and April 14th, 2023, be it Elon Musk or otherwise. Put simply, if Elon tries to buy too much of Twitter stock, Twitter’s board of directors will turn on the money printer for the stock, which will shrink the 15% stake that’s being held by Elon unless he buys more of the newly printed stock. As basic economics dictates, each individual’s Twitter stock will become less valuable due to the massive increase in supply in the absence of equal or greater demand, and this will make Twitter stock much less attractive to investors, hence the term “poison pill.”

Elon seemed to be aware of this risk going into it, however, because after he announced he’d offered to buy Twitter outright, he did an interview where he said that he has a plan B in mind if Twitter’s board of directors refuses his buy offer. Elon’s epic filing with the securities and exchange commission suggests he might try selling the Twitter stock he currently holds to crash its price, at which point he could buy back all the shares he needs to take control of Twitter at a discount before the poison pill effects are felt.

Alternatively, an investigation by the New York Post suggests that Elon is looking for co-investors in his quest to take over Twitter, though the authors cite unnamed sources, so this should be taken with a grain of salt.

A third possibility is that Elon or even other shareholders of Twitter will sue the company because the board of directors isn’t doing its job, which is, of course, to ensure that the company is being run in a profitable manner and that this is being reflected in the price of Twitter’s stock. As far as I can tell, this is the most popular perspective right now, and that’s because Twitter’s board of directors barely holds any Twitter shares at all. Elon himself pointed out that, as he pointed out,

‘their economic interests are simply not aligned with shareholders’

and that could be grounds for a lawsuit.

Insider Trading Accusations

Speaking of publicly traded companies, Coinbase recently published a blog post where it explained that it wanted to be more transparent about the coins and tokens it’s planning to list on its exchange. Shortly afterwards, a crypto influencer on Twitter named Cobie managed to dig up an ethereum wallet that had purchased many of the ERC-20 tokens Coinbase detailed in its blog post almost a day before it was published. This has resulted in accusations of insider trading, with Cobie and many other cryptocurrency holders speculating that Coinbase is providing this information to politicians in exchange for favors. Given that, this kind of insider training is common among the political elite.

All I’m wondering is what criteria Coinbase is using to list cryptocurrencies because the assets under consideration in the blog post don’t exactly fit the stated listing criteria, to put it mildly. Now if you’re wondering why this is such a big deal, it’s because the SEC seems to have Coinbase in its crosshairs and the man looking through the sniper scope is SEC chairman Gary Gensler. You must know that Gary believes just about every cryptocurrency is a security. In his eyes, that means Coinbase and other crypto exchanges in the United States must register with the SEC. The only problem is that every cryptocurrency that’s tried to register with the SEC has received a massive fine in lieu of a license and no clear explanation as to what exactly they did wrong.

This is exactly what happened to Coinbase last year when it tried to launch a product called Coinbase Earn, where you could earn a modest four percent per year on the USDC stablecoin.

In response to the announcement, the SEC threatened to sue Coinbase on the grounds that Coinbase’s earnings constituted a securities offering akin to the sale of a stock without explaining why. Coinbase subsequently dropped its plans for the product. So, with this background in mind, it’s easy to see how the SEC would use allegations of insider trading as the perfect justification for a full-on crackdown on Coinbase and other crypto exchanges in the US, and this would have a devastating effect on the crypto market.

If you ask me, this is a part of a bigger trend to protect the big banks from competition through regulation, and exchanges aren’t the only crypto services the big banks want to see slain.

APY For Me, Not For Thee

For those unfamiliar, Celsius is an all-in-one crypto app that’s known for offering high interest on crypto deposits, notably stable coins, where you can earn more than nine percent per year. With the record inflation we’re seeing in almost every country, millions of people around the world have been using crypto apps like Celsius to protect their savings, including millions of Americans. For whatever reason, the SEC seems to think that the average American investor needs to be protected from these high-risk platforms and services. If you ask me, the real reason is that these crypto platforms compete directly with big banks, which are currently offering sub-zero rates for fiat savings.

In any case, the SEC has been issuing massive fines to similar apps over the last few months, notably BlockFi back in February. As you might have guessed, one of the conditions of BlockFi’s settlement with the SEC was to stop offering its crypto interest accounts to U.S. users. The threat of a similarly massive fine is probably one of the many reasons why Celsius made its earning feature off-limits to non-accredited investors in the United States last Friday. From now on, only accredited investors, aka high net-worth individuals, will be allowed to use Celsius’s earned product in the US. Note that these changes do not apply to Celsius users outside the United States, but some second-order effects have already begun.

With official inflation in the United States running hot at 8.5%, the 9.3% offered by crypto lending platforms becomes that much less attractive. Better APYs can be found in D5, notably Terra’s Anchor Protocol, which is still offering almost 20% per year on the UST stablecoin.

Ethereum Expectations

On the topic of DeFi, Ethereum continues to be the undisputed leader in terms of total value locked, but the announcement of another delay to its upcoming merge could give its competitors an edge. To quickly recap, the merge is when Ethereum will transition from proof-of-work to proof-of-stake, and it was originally scheduled for the first half of this year. However, Ethereum developer Tim Baco recently tweeted that it’s unlikely the merge will be completed by June and a specific date has not yet been set.

Normally, this would not be newsworthy because Ethereum has a reputation for being slow. That’s common among most crypto projects. What makes the delay different this time is that a specific timeline had been set and everything appeared to be going as planned.

This still seems to be the case, and in the Ethereum devs’ defense, making such a major change to the second largest cryptocurrency is something you probably want to take your time with. This ties into the second difference, and that’s Ethereum’s difficulty bomb without getting too technical. The difficulty bomb is a sort of special feature built into Ethereum that makes it abnormally difficult to mine after a certain date, or more accurately, a certain block. The difficulty bomb exists to disincentivize Ethereum miners from participating on the network once it transitions to proof of stake and to incentivize Ethereum developers to finish proof-of- stake by a specific date. Right now, Ethereum’s difficulty bomb is set to begin exploding around May, which is less than two weeks away. Before you panic, it’s important to point out that Ethereum’s difficulty bomb has been delayed on many occasions too, and it will likely be delayed again, but it looks like they’ll be cutting it fine.

But in short, Ethereum’s merge delay has created uncertainty that Ethereum’s competitors will capitalize on. This will likely result in a small migration of funds and users from Ethereum to other eVM-compatible chains such as Phantom and Avalanche, and some would say that this has already begun.

Make no mistake, however, Ethereum will continue to be the king of smart contract cryptocurrencies for the foreseeable future.

Top Performing Cryptos

Turning to the charts, we can see that Bitcoin has had another tough week and it looks like this week could be worse. That’s because Bitcoin is painting a bearish pennant pattern on the daily, which could take it as low as $38K if it breaks to the downside. For what it’s worth, bearish pennant patterns do sometimes break to the upside, and in this case, that would bring Bitcoin back up to around $42k.

Last week’s top performing cryptocurrencies were STEPN, Compound Finance, Audius, EOS, and Bitcoin Cash, an interesting combination to say the least. Starting with STEPN, the GMT token is pumping because the GST token that’s earned by running as part of the project’s novel move to earn model became tradable last week and happens to be increasing in value too. Now GMT still doesn’t have enough price history for me to make a clear call, but as far as I can tell, there seems to be a lot of cell pressure above the $2.50 mark, so all I’ll say is be careful above this level.

Next, there’s compound finance, whose COMP token appears to be rallying because of the recent release of the 2.0 version of the Binance Bridge, which makes it possible to interact with Ethereum D5 protocols from the Binance smart chain and vice versa. Last week, COMP was also added to Robinhood’s list of tradable assets, which means a lot more retail exposure. Unfortunately, there’s not much to write home about on COMP’s price charts. It has been in a steady decline since last May, though it seems to have found some strong support around its current level.

As for Audius, the audio token appears to be pumping because of an upcoming virtual concert that it’ll be hosting with Trap Nation, a popular music channel on YouTube with over 30 million subscribers. As you can see, Audius has a long history of pumping and dumping, but it finally seems to have found some meaningful support around its current levels and is in something of a long-term uptrend now.

When it comes to EOSIO, I’m seriously confused because I couldn’t find any news. The official EOSIO twitter account hasn’t done anything since November last year, nor has the project posted a single blog post.

Last but not least, we have Bitcoin Cash, which is a fork of Bitcoin that resulted from the infamous dispute over increasing Bitcoin’s block size. Well, Bitcoin Cash decided to implement a bigger block and, well, the price history for BCH speaks for itself.