FTX US resigns from the Crypto Council for Innovation

“The news this week has been shocking, but we’ve also seen the community come together,” said CCI CEO Sheila Warren.

United States-based exchange FTX US has left its position at the crypto advocacy group Crypto Council for Innovation, or CCI.

In a statement to Cointelegraph on Nov. 10, CCI CEO Sheila Warren said the council had accepted FTX US’ resignation as an associate member of the group. The firm’s departure came amid crypto exchange FTX reporting liquidity issues, leading to volatility across the market and concerns from global regulators and lawmakers.

“We remain committed to working towards building regulation that protects users and safeguards innovation, in order to bring about real change,” said Warren. “The news this week has been shocking, but we’ve also seen the community come together. We have an historic opportunity to get the policies right.”

FTX CEO Sam Bankman-Fried said FTX US had not been “financially impacted” by the liquidity issues the global exchange was facing. However, the U.S. exchange also announced on its website that trading could be halted starting “in a few days” and warned users to close down any positions if they choose.

Related: Crypto Council for Innovation poll sees crypto voters as a force to be reckoned with

Formed in April 2021, the CCI is an alliance including Andreessen Horowitz, Block, Coinbase, Electric Capital, Gemini, Fidelity Digital Assets, Paradigm and Ribbit Capital. The advocacy group has hired U.S. government insiders in its goal to support lawmakers on issues related to crypto and blockchain.


LayerZero Labs bought back its stake from FTX Ventures and Alameda

The protocol announced an agreement to buy out 100% of FTX Ventures’s and Alameda Research’s equity position.

Interoperability protocol LayerZero Labs announced on Nov.10 an agreement to buy out 100% of FTX Ventures’ and Alameda Research’s equity position, including token warrants and all agreements between the parties. 

In March, the protocol raised $135 million in a funding round co-led by FTX Ventures, bringing the startup’s valuation to $1 billion. Other investors in the round included Andreessen Horowitz, Sequoia, Coinbase Ventures and PayPal Ventures.

In a statement released to investors and published on Twitter, Bryan Pellegrino, LayerZero’s CEO, said:

“We’ve worked around the clock for the past 72 hours to structure an agreement and have bought FTX/FTX Ventures/Alameda out of 100% of their equity position, token warrants, and any agreement between us.”

The agreement also included the purchase of the STG tokens Alameda had acquired from its community auction. According to LayerZero, a proposal will be submitted to transfer the tokens to the Stargate Foundation and “let the community decide what to do with them.” 

FTX Ventures participated in the STG launch and bought all the tokens, as Sam Trabuco, CEO at Alameda, explained in a Twitter thread in March. The tokens were later released as a spot-based product.

There’s been some chatter about the recent @StargateFinance auction, and I wanted to clarify a few things about Alameda’s involvement.

— Sam Trabucco (@AlamedaTrabucco) March 22, 2022

LayerZero claimed to possess $107 million in cash, along with the equivalent of $27 million in on-chain funds, with around 90% in stablecoins, coming for a total of $134 million. In addition, the startup had $11.5 million on FTX that was being used for operational purposes but said it now considers it a balance of zero. 

“This puts us in an incredibly strong position going into the next few years. We have no less than 7 years of runway even in our aggressive projections, are equity rich, and have one of the most amazing teams in all crypto,” noted Pellegrino.

Sam Bankman-Fried revealed the FTX crisis on Nov. 8 by announcing Binance’s intention to acquire the crypto exchange amid a “liquidity crunch.” In a Twitter thread published on Nov. 10, he also confirmed that Alameda was “winding down trading” but assured users that the United States-based FTX US “was not financially impacted” by recent events. To learn more, read Cointelegraph’s wrap-up of the whole saga between the exchanges.


New tool mirrors Optimism NFTs to Ethereum mainnet for use in verified apps

NFTs from Layer 2 were not previously recognizable to apps like Twitter.

Optimism developers jvmi and Kelvin Fichter released a new app called Magic Mirror on Nov. 9 that allows NFT holders to copy or “mirror” their Optimism NFTs to the Ethereum mainnet. NFT holders can now use their Optimism NFTs in a variety of verified apps, such as in Twitter’s profile badge system — where previously, only NFTs native to Ethereum Layer 1 could be used.

Introducing Magic Mirror: a way to mirror your @optimismFND NFTs on Mainnet so you can have verified NFTs on apps like Twitter ✨

— jvmi ❤️‍_❤️‍ (@jvmi_) November 9, 2022

Twitter introduced its NFT badge feature in January, allowing NFT holders to verify ownership of their art. Verified NFTs can be used as a profile pic on Twitter, where they are then denoted with a special, hexagonal shape. Prior to Magic Mirror’s release, holders of NFTs from other networks, like Optimism, Polygon, or Avalanche, did not have the ability to do this.

The company said that this new tool is an attempt to solve this problem, albeit only for holders of Optimism NFTs. Users can switch out the NFT that is inside wach mirror anytime they want, rather than minting a new one each time. However, only one Optimism NFT can be put inside the mirror at a time.

Magic Mirror is part of a renewed push by Optimism to win the battle between Ethereum scaling solutions. In June, a version of balancer was released on the Optimism platform, and in September, 1Inch users on Optimism received a 300K token airdrop to incentivize use of the network.


Bitcoin options data shows sub-$17K BTC price gives bears a $200M payday on Friday

BTC bears are set to profit from this week’s $710 million options expiry, which could be used to add further sell pressure to Bitcoin price.

Bitcoin (BTC) crashed below $16,000 on Nov. 9, driving the price to its lowest level in two years. The 2-day correction totaled a 27% downtrend and wiped out $352 million worth of leverage long (buy) futures contracts.

To date, Bitcoin price is 65% down for 2022, but it’s essential to compare its price action against the world’s biggest tech companies. For instance, Meta Platforms (META) is down 70% year-to-date, and Snap Inc. (SNAP) has dropped 80%. Furthermore, CloudFare (NET) lost 71% in 2022, followed by Roblox Corporation (RBLX) and Snapchat (SNAP), both down 70%.

Inflationary pressure and fear of a global recession have driven investors away from riskier assets. This protective movement has caused the U.S. Treasuries’ 5-year yield to reach 4.33% earlier in November, its highest level in 15 years. Investors demand a higher premium to hold government debt, signaling a lack of confidence in the Central Bank’s ability to curb inflation.

Contagion risks from FTX and Alameda Research’s insolvency are the most pressing issues. The trading group managed multiple cryptocurrency project funds and was the second-largest trading exchange for Bitcoin derivatives.

Bulls were overly optimistic and will suffer the consequences

The open interest for the Nov. 11 options expiry is $710 million, but the actual figure will be lower since bulls were ill-prepared for prices below $19,000. These traders were overconfident after Bitcoin sustained above $20,000 for almost two weeks.

Bitcoin options aggregate open interest for Nov. 11. Source: CoinGlass

The 0.83 call-to-put ratio reflects the imbalance between the $320 million call (buy) open interest and the $390 million put (sell) options. Currently, Bitcoin stands near $17,500, meaning most bullish bets will likely become worthless.

If Bitcoin’s price remains below $18,000 at 8:00 am UTC on Nov. 11, only $45 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $18,000 or $19,000 is useless if BTC trades below that level on expiry.

Bears aim for sub-$17k to secure a $200 million profit

Below are the three most likely scenarios based on the current price action. The number of options contracts available on Nov. 11 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $16,000 and $18,000: 1,300 calls vs. 12,900 puts. Bears dominate, profiting $200 million.Between $18,000 and $19,000: 2,500 calls vs. 10,200 puts. The net result favors the put (bear) instruments by $140 million.Between $19,000 and $20,000: 3,600 calls vs. 5,900 puts. The net result favors the put (bear) instruments by $40 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.

Related: Grayscale Bitcoin Trust records a 41% discount amid FTX meltdown

Bulls probably have less margin to support the price

Bitcoin bulls need to push the price above $19,000 on Friday to avoid a potential $140 million loss. On the other hand, the bears’ best-case scenario requires a slight push below $17,000 to maximize their gains.

Bitcoin bulls just had $352 million leverage long positions liquidated in two days, so they might have less margin required to support the price. In other words, bears have a head start to pin BTC below $17,000 ahead of the weekly options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.


Financial group CEO claims he tried to warn Bankman-Fried about insolvency in July

Richard Handler alleged that he offered restructuring services to FTX that might have saved it, but exchange reps refused to meet with him.

Richard Handler, CEO of Jefferies Financial Group, seemingly alleged on Nov. 10 that he knew about FTX’s liquidity problems back in July. In a Twitter thread, Jeffries revealed screenshots of emails that he claimed were sent to associates of Sam Bankman-Fried, also known as SBF.

The images Handler provided do not show the names or email addresses of the other parties to the conversation, but the bodies of the messages imply that Handler was trying to warn SBF about a potential financial problem at FTX and offer Jefferies’ restructuring services as a solution.

My personal email trail on my non-meeting with #FTX! #lessons

— Rich Handler (@HandlerRich) November 10, 2022

The first email is dated July 7, 2022. In it, Handler asks the recipient if they know Bankman-Fried. Handler states that he is concerned that SBF “seems in over his head, and could quickly be in a precarious position.”

The recipient of the first email responds by saying that they spoke to SBF once and have exchanged emails with him, “including recently.” They tell Handler that they will send SBF a note.

In the following email, Handler responds:

“We should get together for a meeting or dinner. What he is going through is not going to pass as quickly as he might wish and you can quickly become the rescuee versus the rescuer if you are not careful.”

According to Handler, the other party to this conversation did reach out to SBF, but “he never responded nor took a meeting.”

Handler said that he tried once again to contact SBF on Sept. 16, less than two months before the present liquidity crisis started, but the FTX CEO once again did not respond.

On Nov. 7, FTX customers started facing slow withdrawals as the exchange suffered a liquidity crisis. The exchange’s CEO admitted on Nov. 10 that it needed an $8 billion bailout to deal with the crisis. The crisis quickly spread throughout the crypto economy, at one point causing Bitcoin (BTC) to fall below $16,000 for the first time since 2020.

The first emails from Handler are dated July 7, over four months before the beginning of the company’s public crisis. It is unclear why if Handler knew about the issues he did not alert others in the industry, instead choosing to allow the crisis to unfold.


FTX US announces it may halt trading on its platform in a few days

According to the FTX US, “Withdrawals are and will remain open.”

In a long apology issued by the CEO of FTX, Sam Bankman-Fried, also popularly known as SBF, he assured the crypto community that the recent turn of events was only going to affect FTX international. According to him “FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow.” He assured users that FTX US was “100% liquid” and that “Every user could fully withdraw (modulo gas fees etc)”. 

19) A few other assorted comments:

This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow.

It’s 100% liquid. Every user could fully withdraw (modulo gas fees etc).

Updates on its future coming.

— SBF (@SBF_FTX) November 10, 2022

However, many are beginning to question the validity of his statement as a recent announcement on FTX US’s website is beginning to raise eyebrows for users. According to an announcement displayed in a benner at the top of FTX US’s website “trading may be halted on FTX US in a few days.” The announcement urged exchange users to “Please close down any positions” they may want to close down. While assuring its users that “Withdrawals are and will remain open.”

FTX international liquidity issues were triggered within the last seven days when Binance CEO Changpeng “CZ” Zhao announced that his exchange would liquidate its FTX Token (FTT) holdings. CZ’s announcement effectively initiated a bank run whereby FTX’s users attempted to withdraw funds only to discover that the exchange didn’t have enough liquidity on hand to meet the demand.

Related: US lawmaker warns of ‘major consequences’ for users of unregulated crypto firms, citing FTX

Within the past week, reports have also surfaced that FTX CEO Sam Bankman-Fried called investors saying the exchange needed $8 billion in emergency funding to help cover the withdrawal requests and looked to raise $3 billion to $4 billion.

On Oct 10, Cointelegraph reported that data from Etherscan indicated that the troubled cryptocurrency exchange FTX appears to have resumed withdrawals.


82% of Tether reserves held in ‘extremely liquid’ assets, according to attestation

The USDT issuer had total assets of $68.06 billion at the end of the third quarter, exceeding its total liabilities of $67.8 billion.

Stablecoin issuer Tether Holdings Limited published its latest quarterly attestation on Nov. 10, highlighting the “extremely liquid” nature of its assets at a time when crypto markets were reeling from news of FTX’s apparent insolvency. 

Eighty-two percent of Tether’s reserves were held in cash, cash equivalents and other short-term deposits as of Sept. 30, 2022, the company disclosed in its quarterly attestation report. Tether’s exposure to commercial paper — a form of short-term corporate debt with a higher risk profile — has fallen to just 0.07% of its holdings.

The company claims to have incurred no losses from winding down its commercial paper holdings by more than $24 billion. United States Treasury Bills now account for over 58% of the stablecoin issuer’s reserves.

Tether booked a profit in the third quarter, adding $60 million to its excess reserves. Paolo Ardoino, Tether’s chief technology officer, said the latest attestation demonstrates the company’s healthy financial position and commitment to transparency. 

The quarterly attestation was conducted by BDO Italia, an arm of the BDO Global accounting organization, which Tether hired in August to fulfill its reporting obligations. Since then, Tether has published monthly attestations to prove its USDT stablecoin is fully backed.

USDT briefly dipped below its $1 peg on Nov. 10 as the implosion of crypto exchange FTX roiled the crypto sector. However, Ardoino urged calm after disclosing that his firm processed roughly $700 million in USDT redemptions over 24 hours. “No issues. We keep going,” he said in a tweet. USDT has since regained its peg and is trading at $1.

#tether processed ~700M redemptions in last 24h.
No issues.
We keep going.

— Paolo Ardoino (@paoloardoino) November 10, 2022

Related: Tether responds to Wall Street Journal ‘disinformation’

Although Tether has seen an influx of competitors over the years, it remains the single largest stablecoin by market capitalization with $68.5 billion worth of USDT in circulation at the time of publication, according to CoinMarketCap. As such, crypto industry participants view Tether as a major bellwether of risk appetite.


The Clearing House stands up for bank rights, opposes CBDC in comments for US Treasury

The payments operator responded to a Treasury inquiry related to the presidential executive order with an appeal to keep bank interests in sight when designing digital assets.

United States payment systems operator The Clearing House has released its response to a Treasury Department request for comment on “digital-asset-related illicit finance and national security risks as well as the publicly released action plan to mitigate the risks.” The Clearing House found significant security serious risks associated with digital assets, but was concerned that banks should have the same opportunities to participate in the market as nonbanks. 

The Treasury Department issued its request for comments Sept. 20 as part of its ongoing response to President Joe Biden’s Executive Order 14067 of March 9, 2022, “Ensuring Responsible Development of Digital Assets.” In its 22-page response letter, The Clearing House addresses some of the questions posed by the Treasury, and it highlights five main points that its sees as ways to mitigate national security and illicit finance risks posed by privately issued non-bank digital assets (many cryptocurrencies and stablecoins) and U.S. government tokens (CBDCs). The letter, dated Nov. 3, was made public on Nov. 10.

Leaders from #fintech and traditional financial services agree: a government token (central bank digital currency #CBDC) is a “perilous societal prospect”

— The Clearing House (@TCHtweets) October 28, 2022

The Clearing House called for a federal prudential framework with standards for digital assets service providers that are equivalent to those for depository financial institutions engaged in functionally similar activities. Furthermore, banks “should be no less able to engage in digital-asset-related activities than nonbanks.”

The company minces no words on CBDC, stating:

“The risks associated with the possible issuance of a CBDC in the U.S. outweigh its potential benefits and, therefore, it should be determined that a CBDC is not in the national interest.”

In the event the United States decides to adopt a CBDC, “the foundational requirements in place to prevent criminal and illicit use of commercial bank money must be applied to a U.S. CBDC in such a way that criminal actors are not incentivized to use CBDC,” the company writes.

Related: US Treasury report encourages instant payment, recommends more CBDC research

The Clearing House sees limited appeal for a U.S. CBDC in any case:

“Intermediaries must have a clear business case for assuming the customer identification/identity verification, AML/CFT screening, and sanctions compliance obligations, particularly as the risks associated with such assumption may, without fees, be unsupported by the low margins typically associated with the provision of custodial services.”

The Clearing House is owned by 23 banks and payment companies. It was founded in 1853.


Republican lawmaker claims SEC chair was coordinating with FTX ‘to obtain regulatory monopoly’

Minnesota Representative Tom Emmer did not provide any evidence to his claim Gary Gensler was “helping SBF and FTX work on legal loopholes,” but said he was looking into the matter.

Tom Emmer, the recently re-elected Republican lawmaker representing Minnesota’s 6th district in the United States House of Representatives, has alleged Securities and Exchange Commission chair Gary Gensler had been helping FTX CEO Sam Bankman-Fried to gain a “regulatory monopoly” through the crypto firm.

In a Nov. 10 tweet, Emmer criticized Gensler for “run[ning] to the media” amid FTX’s liquidity issues causing ripples throughout the crypto market. According to the Republican lawmaker, his team was looking into the SEC chair’s alleged collaboration with Bankman-Fried and FTX, but only cited reports presented to his office as evidence without providing details.

Interesting. @GaryGensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We’re looking into this.

— Tom Emmer (@RepTomEmmer) November 10, 2022

Gensler spoke on CNBC’s Squawk Box shortly before Emmer’s statement, not disputing records that SBF met with SEC officials on March 29. The SEC chair said many similar meetings led to the same message to crypto industry leaders — “non-compliance is not gonna work” — but did not confirm reports that the regulatory body was investigating the FTX US exchange.

“When you mix together a bunch of customer money, non-disclosure, and leverage, borrowing against it — and inside these companies trading — investors get hurt,” said Gensler, also citing the collapse of Terra. “This is a very interconnected world in crypto with a few concentrated players at the middle […] When markets turned on them it appears that a lot of customers lost money.”

Bankman-Fried is no stranger to Capitol Hill, having testified in December 2021 before the House Committee on Financial Services on the challenges crypto firms faced with regards to regulatory clarity. Committee chair Maxine Waters issued a statement on Nov. 10 pushing for federal oversight of crypto trading platforms and consumer protection amid FTX facing liquidity issues, but did not suggest the sort of coordination between the exchange and SEC that Emmer claimed.

Related: Claims and rumors fuel crypto market turmoil amid FTX collapse

The ongoing saga with FTX and SBF has resulted in extreme volatility across the crypto market and uneasiness from many users looking for the status of their funds. Bankman-Fried issued a public apology via Twitter on Nov. 10, claiming responsibility for not providing enough transparency during FTX’s “liquidity crunch.”


‘Thank God’ El Salvador doesn’t have any Bitcoin on FTX, CZ clarifies

The Binance CEO added that the amount of misinformation going around now is “insane.”

False information spreading online suggested that the president of El Salvador, Nayib Bukele, was seeking the immediate extradition of FTX CEO Sam Bankman-Fried along with Alameda Research co-CEO Sam Trabucco to answer for their crimes of losing the Salvadoran people’s Bitcoin.

The CEO of Binance, Changpeng “CZ” Zhao, took to his Twitter account to put these rumors to bed, sharing that “the amount of misinformation is insane” and that he “exchanged messages with President Nayib a few moments ago.” He said that President Buckle told him, “We don’t have any Bitcoin in FTX and we never had any business with them. Thank God!”

Man, the amount of misinformation is insane.

I exchanged messages with President Nayib a few moments ago. He said “we don’t have any Bitcoin in FTX and we never had any business with them. Thank God!”

— CZ Binance (@cz_binance) November 10, 2022

Billionaire Mike Novogratz, who spread the misinformation in an interview with CNBC in a video that has now been deleted, took to his Twitter account to offer an apology to President Bukele and the Salvadoran people, sharing, “I fell for ‘fake news’ and while I mentioned I hadn’t confirmed it, I should have.” Novogratz thanked Binance’s CZ for “pointing it out.”

Apologies to @nayibbukele and the people of El Salvador. I fell for ‘fake news’ and while I mentioned I hadn’t confirmed it, I should have.

Thanks @cz_binance for pointing it out.

I am a huge fan of what you are doing in El Salvador.

— Mike Novogratz (@novogratz) November 10, 2022

Related: El Salvador’s Bitcoin decision: Tracking adoption a year later

Since 2021, El Salvador has reportedly purchased 2,301 Bitcoin (BTC) for about $103.9 million. The Salvadoran government has said it believes BTC is a powerful tool to attract foreign investment, create new jobs and cut reliance on the United States dollar. President Bukele previously mentioned that the primary focus of recognizing BTC was to offer banking services to more than 80% of unbanked Salvadorans.

In the wake of the fallout from FTX’s insolvency issues, rumors began circulating online that the Central American nation of El Salvador, which made history in 2021 by making Bitcoin legal tender, was in trouble because it held some or all of its Bitcoin holdings in FTX.

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