Dispatch #56: Why the Latest Regulatory Discussions Are Bullish

In this patch of your weekly Dispatch:

• The US has no plans to ban crypto
• Seven crypto billionaires on the Forbes 400
• SOL shows up on Nexo

The Big Idea

Powell and Gensler Say “No Crypto Ban”

There is no doubt that regulatory issues seem to be coming to a head in the US. Throughout the summer, politicians like Senator Elizabeth Warren inserted themselves into the crypto conversation. What’s more, SEC Chair Gary Gensler has been spending significantly more time discussing crypto publicly.

Last week, during testimony before Congress, Federal Reserve Chairman Jerome Powell was asked point blank by Congressman Ted Budd whether it was his intention to ban crypto. Powell was vociferous that he was not. SEC Chair Gensler echoed this in statements on Tuesday October 5th that the US has no plans to follow China into a ban. Bullish.

That said, Powell did suggest that stablecoins resembled money market funds and Congress might want to look into regulating them as such. Last weekend, the Wall Street Journal reported that the Biden Administration is weighing two different types of stablecoin regulation: referring them to the Financial Stability Oversight Committee on the one hand or regulating stablecoin issuers like banks on the other.

Perhaps surprisingly, many in crypto think that the bank route (apparently the preferred route of the Biden Treasury Department) might actually be the correct choice, with the one concern being whether the banks of the future (cough, cough) will be allowed to compete on an even playing field with existing banks. Bullish.

Finally, as this is all happening, Circle disclosed that they were cooperating with the SEC after an investigatory subpoena, and are arguing that the engagement of the regulator is….you guessed it…Bullish.

We’re used to seeing everything that involves a government as concerning or FUD, but the reality is that regulation is coming, and what matters is how thoughtful, fair, and considered it is. By those criteria, one has to view this week as, simply put, bullish.

The Latest In…

Nexo Asset Integrations

Did someone say new assets on Nexo? Summer might be over but SOL is still hot and rising so this week we at Nexo added Solana’s SOL to our full suite of services, enabling clients to buy, borrow against and earn up to 8% interest on their SOL.

Also, another shameless plug, Nexo’s Cardano offering is expanding with ADA top-ups and withdrawals now available on the platform. So if Solana or Cardano are your thing, it’s definitely been a good week for you.

The Latest In…

Crypto Billionaires

It’s Forbes Billionaires list time, and this special edition is the 40th anniversary of the list. It was, apparently, a good year for billionaires. This year minted 660 new billionaires for a total of 2,755 and 86% are richer than they were a year ago. Something something money printer go something.

Anywaaaaaaay, this year the Forbes list of the 400 richest people in America included seven crypto billionaires, up from just one last year. The list includes FTX’s Sam Bankman-Fried ($22.5B), Coinbase’s Brian Armstrong ($11.5B) and Fred Ehrsam ($3.5B), Ripple’s Chris Larsen ($6B), Gemini’s Cameron and Tyler Winklevoss ($4.3B), and Ripple and Stellar co-founder Jed McCaleb ($3B). Something tells us, this is just the beginning of a growing crypto presence on this list.

The Latest In…

Institutions

Two big bits of institutional news this week. First, Bank of America, the second largest US bank, has launched digital assets research coverage. This comes three months after BofA formed a crypto group. In a just-released research note, the analysts call the crypto sector “too large to ignore.” It’s clear from the report that this is not just a bank getting into Bitcoin but a full-throated entrance into the sector.

The Latest In…

Global Corruption

Every few years, it seems, we get another leak of private offshore accounts that makes us remember how much of the world’s wealth is hidden in legal but shady structures. In 2016 it was the Panama Papers. In 2017 it was the Paradise Papers. Now we can add to that list the Pandora Papers. Does PaPa stand for … by the way?This Pandora drop is even bigger than before, involving leaked records from 14 different legal and corporate service firms that helped some 29,000 clients set up 27,000 benefit corporations designed to obfuscate ownership. Some 336 politicians, hundreds of billionaires, and – for good measure, Shakira – are implicated.

CoinDesk’s David Z Morris points out that despite the fact that 15 times the value of all cryptocurrencies are currently held in offshore tax havens, some still find it easier to “punch downward at an emerging technology than to challenge the legalized corruption of the legacy banking system.”

The Week’s Most Interesting Data Story

The Fundamentals Behind the Uptober Rally?

Bitcoin had another terrible September, repeating historical trends. But just like that, it’s now rallying. Over the last week, BTC has broken out of a recent consolidation range low of $40,931 to rocket up above $50,000. Alongside this rally, about 10.3% of the circulating supply returned to an unreleased profit (aka it’s worth more than when the hodler bought it). In total, 86.6% of all circulating BTC is held above where it was purchased. Fundamentals are also showing positive signs. This year saw, “the most dramatic short-term disruption in all history” when over 50% of network hashpower went offline throughout May. The difficulty has now recovered 39% to late 2020 levels and has done so more than a full month faster than the last comparable mining downturn. Put differently, Uptober looks like more than a meme.

Hot Topics

What the Community Is Discussing

Not to put too fine a point on it but…

Layer 1 battles continue to heat up.

NFTs - you’re not bullish enough.

What to Watch for Next Week:

• What’s the next asset Nexo will add?
• Will Cryptoadz continue to gain steam?
• Will the Uptober rally continue?