Binance Blues??, Bitcoin Bounces??, Trump NFTs himself ??

The big talk ??

So Binance, the world’s biggest crypto exchange, run by the world’s richest crypto man person is in trouble.

Its customers have been withdrawing vast sums of cash out of the exchange all week, forcing Binance to pause withdrawals. ?

On Tuesday, CZ sent a note to staffers after more than $1 billion was withdrawn from the exchange. "Binance will survive any crypto winter," he wrote in the memo, but warned of “bumpy times ahead”.

Those 'ahead' times may be now. Tuesday's withdrawals marked the biggest single-day withdrawal the exchange had seen since June, according to Nansen. In fact, Binance has seen nearly $4 billion in net outflows in the seven days leading up to the letter.?

CZ has been notably chill about the vast amounts leaving the exchange commenting that it's just business as usual.

But others are saying very different. In fact, Binance is currently enduring its biggest day of withdrawals all year, which is far from business as usual.

So why are people so spooked? You mean, apart from the vast tracts of fraud and criminality found in crypto right now? Well, there are two key reasons.

Bruised Binance ??

The first reason Binance is feeling the heat is due to the proof of reserve report it issued in response to the FTX collapse.

The report, designed to show the community it had enough money to cover customer withdrawals - if everyone decided to withdraw them at once - raised more questions than it answered.

Questions like, how effective is Binance's internal financial controls? And why do your books show that Binance was only really kinda collateralized, if you squinted your eyes in a certain way?

The below Twitter thread goes into more detail on this, if you're interested.

The second reason is US lawmakers have been debating whether to file crimnal charges against the exchange. According to Reuters, there has been a four-year criminal investigation looking at whether Binance had failed to comply with anti-money laundering laws and sanctions.

Some of the at least half dozen federal prosecutors involved in the case believe the evidence already gathered justifies moving aggressively against the exchange and filing criminal charges against individual executives including CZ, said two of the sources. Others have argued taking time to review more evidence.

These two stories, which are enough to knock most exchanges off their feet, are causing people to run for the hills. And for good reason.

If Binance isn't as solvent as it says it is, people will rush to withdraw the crypto it does have - which could ultimately cause it to collapse. If Binance has criminal charges filed against it, there's a very real risk assets could be frozen while proceedings are underway, which would cause a further rush on withdrawals. Either which way, Binance is facing an uphill struggle.

If all this speculation does cause its collapse, we're talking a colossal failure of crypto as we know it. But for now, Binance appears to have switched things back on and users appear to be able to withdraw their funds, albeit with a lengthy wait.

So what happens now? ??

Well, this is a difficult thing to answer. And before you all shout DeFi, I'm going to say, "yes, but". The "yes" part of that is yes, in theory, the way these exchanges are set up does make it more difficult for exchanges to act poorly. But, the 'but' part, and this but is really a huge but. A HUGE BUT.

DeFi exchanges have presided over the profileration of scams and rug pulls on a vast scale. Some 98% of crypto projects listed on Uniswawp - the largest DeFi exchange - were just rugpulls according to research.

So while DeFi is good in theory, it does little to protect consumers from fraud and scams. That's hardly a ringing endorsement.

Instead, what happens now is the industry needs to rid itself of the idea that it can copy the broader financial world without the rules and expect everything to run just fine.

The collapse of Terra/Luna, Three Arrows Capital, Genesis, BlockFi, FTX, and potentially Binance demonstrates that this part of crypto, at best, is a poor mirror of the global financial system. Yes, a lot of ingenuity went into building protocols, lending money, creating derivatives, writing contracts, and settling trades.

But the architecture it built was structurally compromised, and there was little, if any policing or regulation in place to either keep the thing up, or stop bad actors from doing bad things.

Crypto is only as good as the people who use it. If everyone who uses crypto is a douchebag looking to swindle their neighbours, then crypto is a douchy thing. No amount of code is going to stop that.

If crypto survives this extinction level event, it might be better. If it doesn't, I think we've all learned a thing or two about human nature.

Merry Fucking Christmas. ??????

What people are shouting about: ???

• Sam Bankman Fried was arrested - You know this already. But what you might not know - because you have a life, friends, family, a modicum of a social life - is that the legal proceedings have turned up some unusual things in it. Things like screenshots of conversations between Sam Bankman Fried and CZ (allegedly) showing CZ telling SBF to stop shorting Tether. While CEOs of companies do talk to each other behind closed doors, what’s odd here is CZ said SBF’s behaviour could see him wind up in jail. Which feels oddly prescient now doesn’t it??
• Celebs are facing a class action lawsuit for promoting Bored Apes - Oh yes. The long arm of the law has reached all the way into celeb-Hollywood-land, and is tugging at the hair of the rich and famous. Scott+Scott Attorneys have filed a class action against Yuga Labs, and a long list of celebrities deemed responsible for unrealistically hyping up the value of Yuga Labs’ intangible goods. A report by Deadline also pointed out that some of the defendants cited in the class action include Justin Bieber, Paris Hilton, Madonna, Jimmy Fallon, and Kevin Hart, among others. Uh-oh.?
• SEC charges 8 social media influencers in $100 million for pumping a crypto scheme - Law enforcement is having a bumper Christmas this year. Not only are they pursuing SBF and the rich and famous, but they’re also gunning for influencers too. According to the filing, the SEC has announced charges against eight influences for hyping up a cryptocurrency, before secretly dumping it. As I’ve told you before, influencers, don’t be a Kim Kardashian.?
• The UN is using USDC to get money to Ukrainian refugees - What’s this? Some positive news? Yep, these are rare these things in crypto. But, through a new blockchain-based aid program, UN’s refugee agency will transfer USDC, a stablecoin pegged to the U.S. dollar, to eligible recipients’ Vibrant digital wallets, which run on the Stellar blockchain. The aid recipients can then receive the funds in dollars, euros, or local currency at a MoneyGram location, of which there are 4,500 in Ukraine, according to a statement. It’s a pilot so far, but an actual use case that might perform better than fiat alternatives.?
• Bitcoin’s price seems to be err… rising? - You’d think with all the bad news bears running around clobbering any festive cheer within an inch of its life would mean prices are down. But not in crypto! Bitcoin this week has been fairing surprisingly well given the raging inferno on its doorstep. It’s up 3% for the week, and 10% since this whole SBF thing kicked off. The Guardian asks, “What are crypto’s true believers still smoking?”

The at first glance incredibly boring, but in reality, incredibly insightful and interesting thing you should read this week ??

A bit of an odd selection this, but no one seems to have done a "best of FTX in court" yet. So I've dropped in a collection of videos from FTX's Congressional hearing, where you'll hear John J Ray's testimony (he's the guy running FTX now that SBF is gone) Kevin O'Leary's non-sensical arguments, and Ben McKenzie - that guy from the OC - talk about how it's all one big scam.

Chart of the week ??

The size and scale of withdrawals on Binance for Bitcoin.

Strange but true ??

• Memecoins like Floki have been bucking broader trends - Yep, the coins with even less backing them up than most of the projects in trouble right now, is doing great thanks! Floki has risen some 20% thanks to news the project, which again, isn’t really backed by anything bar people think it’s super cool and hip, has been listed as a trading pair on crypto platform OKX. Is that enough to buy it? You tell me. ??
• Sam Bankman Fried is being investigated for illegal political donations - It can’t get much worse for a man who seems to look both overweight and emaciated at the same time. But it seemingly has. Federal authorities on Tuesday charged Sam Bankman-Fried with using what they said were tens of millions of dollars of misappropriated customer funds to make illegal political donations to both Democratic and Republican candidates.
• Donald Trump launches an NFT collection - Yep, everyone’s favourite pariah is back, and he’s flogging digital collectibles, for “Only $99!”. The collection, announced on his Truth Social profile - another bin fire of a social network -? will be minted on the Polygon blockchain, with a total of 45,000 NFTs created in the "initial" run of the collection. There’s also additional prizes to be won, like a 1-on-1 Zoom call with the former President, or one hour of golf, if you’re into that sort of thing.?Wanna know who is trying to get on the whitelist for a free one? These guys.

And we're done. I'm going to take a break for a couple of weeks and go and do something normal for a fortnight. But I will be back in the New Year, with more ways of telling the crypto story in a way that hopefully doesn't leave you too depressed. But depressed enough you'll keep coming back.

I love you all. ????