Reading time 5m50s
GM, fine reader.
We’ve got a special edition for you today — covering all about Binance’s dominance of the crypto industry:
How did CZ’s brainchild rise to power?
Does Binance (read: CZ) control too much of the market?
We also have updates on the Gemini and DCG debacle. Cam Winklevoss (Gemini co-founder) wrote another open letter, this time straight to DCG’s board. And Barry Silbert (CEO of DCG) Tweeted out some new reflections that you don’t want to miss.
All this and more await you below — but first, let’s make a pit stop in TRIVIA TOWN:
“Satoshis” are the smallest measure of bitcoin (“sats” for short). How many sats are in 1 bitcoin? This should be an easy one…
Tap your answer below to see if you’re right!
And we’re off — let’s get started.
Today's Agenda:
- The Story of the Binance Empire 👑
- Cam and Barry’s Billionaire Battle 🥊
- The Godfather: Brutal Trojan Malware 🦠
- Coinbase Hits Eject Button in Japan 🍙
- Index Will Grade Your NFT Trading 💯
Bloomberg crypto released a new podcast episode yesterday covering Binance’s rise to absolute power within the crypto industry, detailing CZ’s shrewd business practices and posing questions about his exchange’s dominance.
Bloomberg’s crypto senior editor Phil Lagerkranser was joined by Justina Lee (cross-asset markets reporter) and Muyao Shen (Crypto and DeFi reporter) to discuss the finer points of the Binance empire.
As of the end of last year, Binance had 92% of all Bitcoin spot trading in the whole market 😳That’s a sobering statistic. Setting the scene, Phil said that “critics call [Binance] the ultimate poster child for ‘too big to fail,’” referring to the notion that if Binance fails, all of crypto goes down with it, so there’s no way that it could happen.
That’s what people thought about the housing market in 2008, and we all know how that went.
The huge banks and insurance companies who were a major cause of the market meltdown got bailed out by the government because if they failed, the entire economy would collapse. Meanwhile, the average person suffered the consequences of actions they didn’t take.
Crypto doesn’t have the government support of big banks, but there’s no way CZ will be paying the price if Binance fails — the whole crypto industry will.
The conversation shifted to address just how Binance rose to power and has been able to sustain such success over the years.
Founded in 2017 in China, the firm quickly had to make a decision — crypto got banned in China, and Binance decided to leave the country for warmer regulatory waters. By 2018, they were already the biggest crypto exchange in the world — but how?
Honestly, I think it’s their adaptability. The company has always had a really strong grip on how to give the people what they want. For example, during the ICO boom, many exchanges were scared to “offer every coin in the world, and that’s exactly what [Binance] did.”
Binance is always the first crypto exchange to hop on the next big trend and to do it really well. DeFi. Their own token. An NFT platform. Trading competitions. You name it.
Lagerkranser pointed to the firm’s lack of a global headquarters as a major strength. I think he’s totally right — the lack of a formal HQ makes it impossible to establish regulations over them, and therefore difficult to sue them. It’s honestly kind of like a cheat code, and CZ was just quick to catch on to it 😅
And although there are questions circulating about its solvency, Binance has withstood some serious tests already — the exchange has experienced more than 10bn of net outflows since the collapse of FTX, and has been able to handle it all. Check out this great December commentary from Fasanara Digital for more info.
Justina went on to make a key observation on the podcast — the crypto industry is so focused on decentralization, but “at the end of the day, we are seeing consolidation take place right before our eyes.”
And that’s the key issue here for me — I don’t see crypto’s promises of decentralization being fulfilled by massive firms like Binance. That’s where all the concerns about CZ’s company come from.
Regardless, I agree with Muyao’s closing thought that the firm needs to get a legit audit to restore trust moving forward.
We’ll see if that happens, and you’ll be the first to know from us at Tokengraph if and when it does.
Gemini customers received an email yesterday stating that Gemini has terminated their Master Loan Agreement with Genesis, meaning that they’re shutting down the Earn program.
The plan is still to demand that Genesis repay Gemini Earn users all that they are owed.
And in the most recent round of billionaire boxing, Cam Winklevoss has taken a swing straight over Barry Silbert’s head and toward DCG’s board members themselves.
He penned another open letter yesterday to the board and blasted it out into the Twitterverse.
Cam said that 3AC and Grayscale (DCG’s asset management subsidiary) engaged in “recursive trades” that Silbert lost out on and didn’t report on their balance sheets. If that's true, that's bad.
He sums up his thoughts here: “These misrepresentations… were a sleight of hand designed to make it appear as if Genesis was solvent and able to meet its obligations to lenders, without DCG actually committing to the financial support necessary to make this true. DCG wanted to have its cake and eat it too.”
The letter concludes with this: “For all the reasons mentioned above, there is no path forward as long as Barry Silbert remains CEO of DCG.”
Meanwhile, Silbert pushed his own thoughts out on Twitter, detailing Genesis’ and DCG’s success over the years and looking ahead to growth in the future.
I don’t know, it seems super sketchy to me. He went on to talk about how difficult the past year has been, and how painful the questions against his integrity are.
Of course, having people talk about you on the internet is never a good feeling. But he’s not taking any responsibility for his actions or addressing the actual problems here — like the fact that Gemini Earn users are still owed $900M by Genesis.
It feels like this story is coming to a head — keep your eyes peeled, and we’ll be coming to your inbox with the next developments.
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Other Top Stories Today 📢
This is a next-level scam, and it’s so simple, but so effective. German financial authorities are warning us of “Godfather,” a new malware that displays fake versions of actual banking and crypto websites, stealing user information when they log in. It’s currently known to target 110 crypto exchanges and over 90 different wallet apps. The malware imitates the Google Protect tool once it’s infected your device, which enables it to see your contacts and even record your screen. After that, it’ll start bringing up fake sites. Be careful out there, and always confirm that you’re on the actual app or website you meant to visit before entering your information.
After letting go of 20% more of its workforce, the centralized exchange is now letting go of its hopes for Japanese adoption in order to save money and make it through the bear market. Nana Murugesan, a Coinbase exec, stated the following in an interview: “We’ve decided to wind down the majority of our operations in Japan, which led to eliminating most of the roles in our Japan entity.” This is the next in a series of actions taken by Coinbase to save on expenses and hunker down for Crypto Winter.
There’s a new tool from Upshot, an NFT platform, called Upshot GMI (short for “gonna make it”) that grades and sorts wallets based on how well or poorly their trades have gone. Some of the factors that the grading is based on include “realized and unrealized gains, number of transactions, volume, NFTs and premium NFTs held and the age of the wallet,” according to Cointelegraph. The goals of the tool are to give hopeful traders some insight into profitable trading strategies and to give lenders context for good (or bad) potential wallets to lend to.
Web3 Resource of the Day
My First Impressions of Web3 - Article by Moxie Marlinspike (@moxie)
This is an extremely important article for the conversation about true decentralization. Moxie, a cryptographer, computer security researcher, and founder of Signal, shares his honest thoughts on the current state of crypto, the difficulties and challenges for actual, full-on decentralization, and what needs to happen if we want to change the current course of tech development moving forward. This article has inspired tons of discourse all over the world, including responses from Vitalik Buterin (founder of Ethereum) and Alchemy (blockchain infrastructure company), and articles from huge news outlets (Coindesk, Fortune, and Nasdaq). I highly recommend checking it out.
And That’s a Wrap
I hope you found today’s newsletter as enjoyable to read as it was enjoyable to write for you.
Don’t worry about missing the latest industry news — we’ve got you covered. Just check your inbox tomorrow, sit back, and enjoy the show. And the memes:
That’s all for today, frens!
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DISCLAIMER: This is not financial advice. This newsletter is strictly educational and is not investment advice to buy or sell any assets or to make any financial decisions. Do your own research.