SBF’s trial, Grayscale’s close call, and BTC’s ups and downs
Two weeks into the trial of FTX founder Sam Bankman-Fried, and things aren’t looking good for the former crypto mogul. Meanwhile, bitcoin has been on a rollercoaster ride this week after Cointelegraph got the market excited with news of a spot BTC ETF approval, which later turned out to be a false alarm. However, the SEC’s stance on crypto does appear to be softening somewhat.
SBF’s defense appears to be struggling as trial enters third week
Sam Bankman-Fried’s (SBF’s) trial has entered its third week and, so far, it doesn’t appear to be going particularly well for the founder of the collapsed FTX crypto exchange. Media reports indicate that his defense lawyer Chris Everdell has been struggling to raise any serious questions about the credibility of the prosecution’s witnesses, many of whom are from SBF’s inner circle.??
A Blockworks article called Everdell’s strategy “incoherent” and the journalist pointed out she caught “no fewer than three jurors fast asleep at different times over the past two weeks”. Everdell also appears to have made several “missteps in language” and has been reprimanded publicly by the judge on multiple occasions.
According to CoinDesk’s live report, on Tuesday, 17 October, Everdell did succeed in drawing attention to the forgetfulness of one of the prosecution’s witnesses: Nishad Singh, FTX's former director of engineering.?
However, with so many members of SBF’s inner circle pleading guilty and working with the prosecution and a great deal of strong evidence against him, this only marks a small victory in a trial that so far appears likely to end in a conviction.?
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As expected, SBF’s trial is all the crypto media is talking about at the moment, and it appears to have been nail-biting so far. Indeed, lawyers have told the media that the case against FTX’s former CEO is even stronger than it appeared at first glance and there seems little question that crimes were committed at the failed exchange.?
However, it’s still early days to be certain of the outcome as the trial was originally expected to last six weeks. So far, we haven’t seen any strong action from the crypto market on the back of this. Other news, including SEC-related headlines and the unexpected attack on Israel by Hamas, have been far more instrumental in driving the price of bitcoin and other digital assets.
It’s likely the market will pay little attention if SBF is convicted, as this is already highly expected and probably priced in. However, if there is a shock turnaround and the result of the trial surprises the market, this could cause a short-term spike in volatility.?
SEC decides not to appeal Grayscale case loss
On Friday, 13 October, the US Securities and Exchange Commission (SEC) announced that it wouldn’t appeal Grayscale Investments ’s recent victory in court. This saw The District of Columbia Court of Appeals in Washington rule that the watchdog was wrong to reject its proposal to convert its bitcoin trust into an ETF.
The market welcomed the news, with bitcoin shooting up past the $27,000 mark, though the decision doesn’t in itself guarantee the approval of a spot ETF application. The regulator could still deny the application on other grounds.?
This, along with geopolitical tensions in the Middle East after the unexpected attack on Israel by Hamas, has put the brakes on the crypto rally. The market remains range bound while the final decision on the spot bitcoin ETF looms.?
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The news that the SEC wouldn’t appeal the Grayscale ruling is a welcome breath of relief for the crypto market. The regulatory stance towards crypto in the US appears to be relaxing somewhat, but it is just a small victory on the road to widespread acceptance.
As such, though bitcoin welcomed the news, it struggled to extend its rally and dropped back below the $27,000 mark again over the weekend. This was likely due to the increased geopolitical and macroeconomic risks.
One of these risks is around the US economy, where inflation came in higher than analysts had expected. CPI rose 0.4% month-on-month in September and remained unchanged at 3.7%. This announcement, which came out on Thursday 12 October, is yet another indicator that US interest rates are likely to stay higher for longer.?
Bitcoin takes rollercoaster ride after false report of BlackRock ETF approval
Bitcoin momentarily shot up towards the $30,000 mark on Monday (16 October) after a false report on X, which alleged that BlackRock had gained approval for its spot bitcoin ETF. Cointelegraph, which published the report, quickly retracted the tweet and apologized for its mistake.?
However, in the less than two hours it took for Cointelegraph to retract the news, bitcoin soared 10% to $29,900, before dropping back down to $28,000 when the inaccuracy was confirmed.
The short-term price surge caused more than $100 million worth of liquidation, as, first, $81 million worth of short positions were squeezed out of the market, followed by another squeeze of $31 million on bitcoin longs when the price capitulated.
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This incident was the perfect preview of what will happen if the SEC does approve BlackRock’s ETF application. This appears to be the one piece of news that can kick bitcoin out of its holding pattern. And indeed, even this false alarm has allowed bitcoin to settle a little higher than its previous level, as hopes for an approval grow.?
However, the market may still have a long wait ahead of it. The deadline for the approval of BlackRock’s application is 15 March 2024, though the SEC must respond to ARK Investment Management LLC ’s and 21Shares ’s applications by 10 January 2024. Either way, we could still find ourselves in limbo as we head into the new year.?
Disclaimer:?
The content of this newsletter does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up, and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.