Senate defies SEC on crypto

May 17, 2024

Reading time: 5 minutes

FTX’s $16.3B repayment plan could be good news for crypto market

Key points:

  • FTX's repayment plan might inject $16.3 billion, fueling potential bullish sentiment in the market.

  • FTX's approach may counteract selling pressure, but the exact impact hinges on timing. 

News - FTX, a crypto-exchange that filed for bankruptcy last year, has unveiled a plan to repay its creditors. Market analysts anticipate bullish effects from the cash payouts, which could offset selling pressure from crypto repayments by other entities like Mt. Gox and Gemini.

What’s the plan? - On 8 May, FTX revealed its plans to repay up to 98% of its creditors, totaling a staggering $16.3 billion. Notably, those with claims under $50,000 can receive up to 118% of their claims based on November 2022’s crypto prices.

The implications of FTX's repayment plan extend beyond its immediate stakeholders. According to K33 Research, the influx of cash from FTX's payouts might spark a "bullish overhang," potentially driving up market demand.

Things are different with FTX - K33 Research analysts believe that creditor repayments vary in their market impact. In their report, they highlighted the contrast between FTX's cash-based approach which will drive up the market, and the crypto-based repayments of entities like Mt. Gox and Gemini which will increase selling pressure.

However, predicting the exact impact remains challenging and everything depends on the timing. While Gemini and Mt. Gox aim for repayments in June 2024 and October 2024, respectively, FTX's schedule is awaiting court review.

Solana memecoin platform pump.fun rocked by $2M theft

Key points:

  • A former employee orchestrated a $2M breach via an attack on pump.fun.

  • Pump.fun has pledged full reimbursement post "flash loan" exploit on 16 May.

News -  A major breach occurred at pump.fun, a Solana memecoin creation platform, resulting in the loss of nearly $2 million. The breach is suspected to have been carried out by a former employee using a "bonding curve" attack.

Impact of the theft - Exploiting their position, the ex-employee compromised internal systems, allegedly accessing a "withdraw authority." While trading paused temporarily, pump.fun assured users of contract safety and promised full liquidity reimbursement within 24 hours.

Igor Igamberdiev was among many to speculate about an internal key leak, linking it to a user named "STACCoverflow." However, at the time of writing, Pump.fun had refrained from naming the former employee. Instead, it will be closely collaborating with law enforcement.

How things unfolded? - The suspected perpetrator utilized flash loans from the Solana lending protocol Raydium to borrow SOL, subsequently using it to purchase coins on pump.fun. Once these coins hit 100% on their respective bonding curves, the exploiter accessed the bonding curve liquidity and repaid the flash loans.

This resulted in a theft of approximately 12,300 SOL, valued at $1.9 million. This latest episode only underscores the vulnerability of crypto-platforms, while also highlighting the need for robust security measures.

Dogecoin whale has $30M say as DOGE maps its next price rally

Key points:

  • DOGE's bullish momentum faced uncertainty due to a significant whale transfer to Robinhood.

  • Analysts are eyeing a $0.3-breakout amid heightened trader interest.

News - Dogecoin’s price has been on an upswing lately, gaining by 6.8% over the past week. This upward trend has sparked optimism among investors. However, a recent transfer of 200 million DOGE to Robinhood by a whale has raised some serious concerns.

Impact on DOGE’s momentum - Drawing parallels to similar incidents, the aforementioned transfer, valued at around $30.86 million, is typically seen as an indicator of potential selling activities, which could increase the supply in the market and halt the ongoing price rally.

Despite such worries, however, the derivatives market witnessed a hike in activity, particularly in Dogecoin Futures. Open interest in Dogecoin Futures climbed by 8.44% to hit $886.38 million - A sign of renewed interest from traders in the Futures market.

However, the dominance of short sellers, facing liquidations totaling $2.27 million, highlighted the possibility of a short squeeze. Nevertheless, the scale of this potential hike may depend on whether the selling pressure from the whale's transfer will balance out this trend.

What’s on the technical front? While a brief pullback to $0.13 may precede further gains, recent reports indicate most DOGE holders are profiting right now.

Hence, as the bull rally continues, Dogecoin's price target of $0.16 is critical due to past correlations with greater liquidations. A successful breakout above this range could pave the way for Dogecoin's ascent towards the $0.3-mark.

U.S Senate repeals SEC's crypto custody policy - SAB 121

Key points:

  • U.S Senate passed a resolution to overturn SEC's SAB 121 which pertained to crypto custody services.

  • President Biden has expressed his intent to veto the resolution.

News - The U.S Senate has voted to pass H.J. Res 109, a resolution aimed at overturning the SEC's controversial Staff Accounting Bulletin No. 121 (SAB 121) - a controversial guidance issued by the SEC. Senator Cynthia Lummis, a vocal pro-crypto advocate, led the efforts to pass the resolution, emphasizing the risks SAB 121 poses to consumers' assets during bankruptcies.

Its impact on crypto regulations - The passage of H.J. Res 109 by a vote of 60 to 38 marks a significant development in cryptocurrency regulations. This resolution aims to dismantle the SEC's restrictive Staff Accounting Bulletin No. 121 (SAB 121), allowing financial institutions to offer custodial services for digital assets like Bitcoin.

While the House approved the resolution, the White House plans to veto it, citing concerns about investor protection. However, proponents argue that overturning SAB 121 is necessary to protect consumers, especially with recent approvals for Bitcoin Exchange Traded Funds (ETFs).

Senators’ diverging views - Senator Cynthia Lummis voiced strong support for overturning SAB 121, criticizing it as an unapproved rule disguised as accounting guidance by the SEC’s staff.

On the contrary, Senator Elizabeth Warren urged alignment with President Biden, arguing that digital assets pose unique risks that traditional banks aren't equipped to handle.

Despite the Senate's approval, H.J. Res 109 faces an uncertain future with a threatened presidential veto. If vetoed, the resolution would return to Congress, requiring a two-thirds majority in both chambers to override. 

Crypto scams uncovered

  • Sonne Finance lost $20 million in cryptocurrencies, including WETH and USDC, to a hacker on 14 May 2024. Efforts to recover the funds are ongoing, but the hacker moved $7.8 million to a new wallet, exploiting a known bug in Sonne's Compound v2 forks.

  • The Alex protocol, a Bitcoin layer-2 protocol known for DeFi applications, was hacked too. This resulted in a $4.3 million loss. The breach occurred through suspicious withdrawals on the BNB Smart Chain after an unexpected contract upgrade.

  • On 12 April, a man exchanged HK$1 million in Tether (USDT) at a cryptocurrency exchange in Tsim Sha Tsui. However, when he tried to withdraw cash from an ATM, he couldn't access it. The employees showed him fake "hell money" before the transaction was completed.

Top 3 coins of the day

Key points:

  • LINK has seen a significant surge in trading volume in the last 24 hours.

  • The RSI sat comfortably around the 64-level mark, confirming strong buying pressure in the market.

What you should know - As the broader market shows signs of recovery, Chainlink (LINK) has also joined the upward trend. At the time of writing, LINK had surged by 18.85% in the last 24 hours, turning green on the daily charts. This bullish sentiment was further supported by the Relative Strength Index (RSI), which, after touching the 36-level, was trading at the 64-level. If the bulls maintain momentum, LINK could surpass the resistance at $18.043. However, if the trend reverses itself, LINK might fall back to its previous support level at $12.502.

Bonk (BONK)

Key points:

  • BONK registered a decline of 2.55% over the past week.

  • RSI mirrored this trend, hovering around the 50-level mark at 51.50.

What you should know - One day after hiking by 7% following its listing on South Korea’s premier exchange, Bithumb, BONK was trading at $0.00002404. However, at the time of writing, the price of BONK had depreciated by 6.12%. This downtrend can be further confirmed by both the Awesome and Volume oscillators moving south. Nonetheless, if BONK manages to overcome its resistance at $0.00002720, there could be potential for a bullish trend in the coming days.

Dogwifhat (WIF)

Key points:

  • WIF has been in the red for weeks, with a notable decline in trading volume.

  • Technical indicators presented a mixed outlook.

What you should know - After garnering significant attention in the crypto space, Dogwifhat (WIF) found itself in the red. At the time of writing, WIF was trading at $2.85, marking a 3.67% decline in the last 24 hours. While the Bollinger Bands indicated reduced price volatility, the Chaikin Money Flow (CMF) for WIF recorded a notable hike, pointing to a decline in the influx of money into the memecoin. This could potentially hinder WIF from breaking through the resistance level at $3.51, prompting a retreat to the support level at $2.09.

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