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Newsletter: President on brink of bailout for bitcoin

Trump tries to breathe life back into the crypto markets’ “Trump pump” while federal regulatory agencies wash their hands of any crypto industry oversight

citationneeded.news/issue-78/

#crypto #cryptocurrency #USpolitics #USpol


Issue 78 – President on brink of bailout for bitcoin

Molly White (Citation Needed)
#crypto #cryptocurrency #uspol #uspolitics
Als Antwort auf Molly White

Molly White
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Molly White
• •

While cryptocurrencies were once viewed as a subversive financial instrument intended to be independent from governments, banks, or the traditional financial system, it’s become clear that the crypto world is deeply dependent on outside forces propping it up.

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The crypto industry has gotten everything it could have dreamed of in the US after the elections, and yet the market has taken a dramatic turn for the worse. Bitcoin prices have been tanking, dropping more than 25% since the previous all-time high price, which was set on January 20. A 12% tumble last week became the new largest three-day drop since FTX exploded in November 2022.1 Although Trump has been hailed by the crypto industry as their knight in shining armor, and although he quickly got to work fulfilling the industry wishlist, prices have been on the decline since he took office. While cryptocurrencies were once viewed as a subversive financial instrument intended to be independent from governments, banks, or the traditional financial system, and although many in the industry still like to repeat that narrative when it suits them, it’s become clear that the crypto world is deeply dependent on outside forces propping it up. Earlier this week, crypto media outlet CoinDesk published a headline that would make Satoshi blush: “Crypto Market Faces Weak Demand, Needs Trump Initiatives to Kick In, JPMorgan Says”.2 (Satoshi inscribed into the first block of the bitcoin blockchain the text “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. This quote of that day’s Times headline has long been interpreted as a nod to bitcoin’s original ideology, and a rebuke of banks and government financial intervention.)
And although many still describe bitcoin as “digital gold”, believing that it should serve as a hedge against economic turmoil in similar ways as some people view actual gold, bitcoin and other crypto assets are once again demonstrating that they are among some of the first assets to decline among broader economic uncertainty. With looming tariffs by the Trump administration against Canada, Mexico, and China, concerns from the Federal Reserve about those and other policies’ impacts on inflation, and continuing wobbles in the labor market, people are selling off risky assets like crypto in hopes of better weathering the economic storm on the horizon. The comparatively new bitcoin ETFs set new records for the highest single-day outflows on February 25, with investors withdrawing more than $1 billion in total from the eleven ETFs.3
CoinDesk headline: Crypto Market Faces Weak Demand, Needs Trump Initiatives to Kick In, JPMorgan Says
#crypto #cryptocurrency #uspol #uspolitics
Als Antwort auf Molly White

Molly White
mastodon
Molly White
• •

Seeming to respond to the panicked pleas from the cryptocurrency industry, Trump rescued bitcoin from its below-$80,000 slide in a Sunday Truth Social post reiterating his plans for a “U.S. Crypto Reserve”.

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Seeming to respond to the panicked pleas from the cryptocurrency industry, Trump rescued bitcoin from its below-$80,000 slide in a Sunday Truth Social post reiterating his plans for a “U.S. Crypto Reserve”, which he added would contain “XRP [Ripple], SOL [Solana], and ADA [Cardano]”. Further panic [I74, 75] from bitcoin maximalists likely prompted his quick addendum two hours later that “And, obviously, BTC and ETH, as other valuable Cryptocurrencies, will be the heart of the Reserve. I also love Bitcoin and Ethereum!” Nice save.4 These assets were certainly not chosen at random, and give us some insight into who’s got the ear of the president (at least at the current moment). Part of it has to do with Trump’s nationalist and also rather absurd insistence that the reserve feature assets that are “made in the USA”. But beyond that: Ripple’s XRP token is an unsurprising if controversial choice — it’s a divisive asset in the crypto world, but on the other hand, the company contributed $48 million to crypto-focused super PACs and another $5 million to Trump’s inauguration fund. The company’s CEO, Brad Garlinghouse, has been rumored to be on the shortlist of people to be named to the much awaited crypto advisory board,5 and both he and the company’s Chief Legal Officer dined with the president in early January.
Trump’s “Crypto Czar” David Sacks is a big Solana guy. Andreessen Horowitz has also heavily invested in Solana — both directly and in Solana-based projects — and in the Trump administration. Cardano founder Charles Hoskinson has also clearly been trying to woo Trump, claiming very shortly after the election that he was “going to be spending quite a bit of time working with lawmakers in Washington DC and quite a bit of time with members of the administration to help foster and facilitate with other key leaders in industry the crypto policy”.6 While he has continued to boast vaguely about meetings with various influential figures, winkingly describing a “VIP dinner” where “diet coke will certainly be on [the menu]”, there’s been little outside confirmation that he’s had much access to the Trump administration. However, the inclusion of his ADA token on the shortlist certainly suggests some degree of success in his endeavors.
#crypto #cryptocurrency #uspol #uspolitics
Als Antwort auf Molly White

Molly White
mastodon
Molly White
• •

But the “announcement” doesn’t seem to actually announce anything new, and instead seems to be Trump’s attempt to apply some electroshock paddles to the easily swayed crypto markets.

Every time he does this, it seems to work less and less.

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Besides the mention of specific crypto assets, Trump’s post doesn’t actually appear to announce anything new, and instead reiterates that his “Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve” [I75]. (I will note that the actual wording of the EO was more guarded, directing the working group not to “move forward on” a strategic reserve, but rather to “evaluate the potential creation and maintenance of a national digital asset stockpile”.) Nonetheless, crypto prices rallied a bit, with bitcoin returning to around $93,000. This was still somewhat of a subdued recovery, only juicing bitcoin back to around its February 25 price, leaving me wondering how many promises Trump has left in the tank to keep bitcoin prices pumped up as they are now. Without the actual government infusion of cash into bitcoin markets via this “strategic reserve” gambit — something that may yet be a ways off, could take various forms, and could fail to materialize entirely — words alone seem to be running out.
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Als Antwort auf Molly White

Molly White
mastodon
Molly White
• •

Rocky crypto markets have not exactly been steadied by a new theft from a crypto exchange that dwarfs other previous hacks. North Korea has added another $1.5 billion to its stash of stolen crypto — more than all of their (also substantial) thefts last year combined.

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Adding to pre-existing market jitters, the crypto world has just experienced a new record-shattering hack of the cryptocurrency exchange Bybit. Bybit is less known in the United States, as it is not permitted to serve US customers, which is probably why this hack has not earned the media attention of some of the other major industry disasters. However, Bybit is the second-largest exchange globally, ahead of Coinbase and behind Binance. On February 21, attackers stole more than 400,000 ETH (priced at around $1.5 billiona) from one of the company’s so-called “cold wallets”. Cold wallets are crypto wallets that are not routinely connected to the internet, making them less vulnerable to thefts. As a result, crypto exchanges often store substantial quantities of assets in cold wallets, transferring smaller amounts as needed to online “hot wallets” to satisfy withdrawals and purchases. However, any time these transfers happen, there’s some degree of vulnerability, and that’s what North Korea’s state-sponsored Lazarus cybercriminals were able to exploit.7 They were able to manipulate the Safe Wallet multisignature system used by Bybit to authorize transfers from the cold wallet to the company’s hot wallet, and when the Bybit employees signed off on what they thought was a routine transfer, the wallet was drained. Bybit and Safe are now pointing fingers at one another, with Bybit claiming that Safe’s infrastructure was compromised, allowing an attacker to manipulate the transaction s
The Lazarus group is an extremely sophisticated cybercrime group that has been responsible for many of the chart-topping attacks in the crypto world, including the previously recordbreaking thefts of $625 million from the Axie Infinity game in March 2022 [W3IGG], and the the $300 million and $235 million hacks of the exchanges DMM [W3IGG] and WazirX [W3IGG] in May and July 2024. Their expertise means that they know how best to launder the stolen funds without causing serious impacts to the ETH price or risking the funds being frozen by exchanges and other centralized entities, and they have successfully laundered more than half of the stolen assets thus far by swapping it across various chains and into different crypto assets.9 While a substantial $43 million in stolen assets was frozen and recovered by the mETH Protocol, as was around $181,000 in Tether, that amounts to less than 3% of the total.10 To put this theft in perspective, the $1.5 billion stolen from Bybit alone surpasses the North Korean cyberattackers’ entire 2024 profits from crypto heists: around $1.34 billion from across 47 separate attacks throughout 2024. It’s more than double what they stole the year prior.11 According to the United Nations and the US government, these thefts have been a substantial source of funding for the country’s nuclear and ballistic missile programs.1213
#crypto #cryptocurrency
Als Antwort auf Molly White

Molly White
mastodon
Molly White
• •

While Bybit’s CEO immediately claimed that “all of client assets are 1 to 1 backed”, it was later disclosed that wasn’t true. Bybit papered over the stolen funds by taking loans from other exchanges and crypto VCs, but their ability to repay those loans will remain to be seen.

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Bybit CEO Ben Zhou was quick to try to reassure customers that “Bybit is Solvent even if this hack loss is not recovered, all of clients assets are 1 to 1 backed, we can cover the loss.”14 Many customers weren’t satisfied with his promises,b and they withdrew a combined more than $5.5 billion from the exchange after the theft was announced. Bybit was able to satisfy the withdrawals, and has since said they “closed the gap” in ETH supplies to back client assets through a combination of OTC purchases and loans from exchanges and crypto VCs.15 The lack of skepticism around Bybit’s solvency is a little odd to me. For one, it’s clear that the assets were not 1:1 backed at the time of Zhou’s tweet, given that 400,000 ETH had just been stolen. Bybit later issued a press release boasting that they were “Fully Backed Within 72 hours”, acknowledging themselves that customer balances weren’t fully backed for those three days.16 Furthermore, much of the “gap” has been papered over with loans rather than the firm’s own assets. As we saw with Genesis’s $1.1 billion “loan” to try to cover losses in 2022 [I74], a company’s ability to secure a loan to cover a hole does not magically make that hole disappear. While Bybit’s proof-of-reserves demonstrates that the company now holds a sufficient quantity of ETH to back customer balances, these reports do not evaluate Bybit’s ability to repay the loans or provide any information about the terms of those loans.
#crypto #cryptocurrency
Als Antwort auf Molly White

Molly White
mastodon
Molly White
• •

The SEC has rapidly been pausing and dropping enforcement cases and investigations against crypto companies, including some of the largest crypto-focused political donors (and those paying Trump in more... creative ways).

#crypto #cryptocurrency #USpolitics #USpol

SEC Trump’s nominee for SEC Chair, Paul Atkins [I71], has not even been confirmed yet, but that hasn’t stopped the agency from barreling ahead with the new administration’s promises to the industry that all their problems would go away. Most notably, the SEC case against Coinbase was dismissed with prejudice, meaning the SEC cannot refile the case in the future. CEO Brian Armstrong was explicit with his thanks when announcing the dismissal on Twitter: “I have to give credit here to the Trump administration, for winning the election”. He insisted that he believed “we would have won this case in the courts either way”, but noted that Trump’s election “certainly helped accelerate the process”.23 Coinbase has spent $75 million on contributions to crypto-focused super PACs, some apparently in violation of federal election law, and contributed $1 million to Trump’s inauguration fund. A case against Justin Sun and his Tron project, opened in March 2023 and alleging fraudulent market manipulation “through extensive wash trading”, “orchestrating a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation”, and unregistered securities offerings, has been stayed as parties “consider a potential resolution”.24 As a foreign national, Sun is not permitted to make contributions to American political candidates or committees. However, he has spent $75 million purchasing World Liberty Financial’s WLFI tokens, and Trump personally gets a 75% cut of that project’s re
A case against Consensys, the makers of the MetaMask crypto wallet, will be dropped shortly by the agency, according to the company.25 Consensys contributed $800,000 to crypto-focused super PACs. Simultaneously, ongoing investigations of companies including Gemini, OpenSea, Robinhood, and Uniswap have been dropped, despite the agency previously having sent Wells notices signaling impending enforcement action. Gemini’s Winklevoss twins contributed $4.9 million to crypto-focused super PACs and $2.6 million to Trump directly; Robinhood contributed $2 million to Trump’s inauguration fund.
#crypto #cryptocurrency #uspol #uspolitics

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