blockfi

California regulators order MyConstant to cease crypto-lending services

The California DFPI warned in July that it would be cracking down on crypto interest account providers in the state.

The California Department of Financial Protection and Innovation (DFPI) has ordered crypto lending platform MyConstant to cease offering a number of its crypto-related products over alleged state securities law violations.

The DFPI stated in a press release on Dec. 21 that it has ordered MyConstant to “desist and refrain” from offering its peer-to-peer loan brokering service and interest-bearing crypto asset accounts, which it says are in violation of the California Securities Law and California Consumer Financial Protection Law.

The DPFI alleged that MyConstant’s offering and selling of its peer-to-peer lending service called “Loan Matching Service” violates one of the state’s financial codes.

It also alleged that MyConstant engaged in “unlicensed loan brokering,” as the platform induced lenders to lend without proper licenses.

The regulators also had a problem with the crypto lender’s fixed interest-beating crypto asset products, whereby a customer deposits crypto assets (such as stablecoins and fiat) and is promised a fixed annual percentage interest return.

It said that these were examples where MyConstant offered and sold unqualified non-exempt securities.

In July, the regulator said it was investigating multiple crypto interest account providers to determine whether they are “violating laws under the Department’s jurisdiction.”

DFPI first announced it was investigating MyConstant in a press release on Dec. 5, stating that MyConstant is “not licensed” by DFPI to operate in California. 

Related: California regulator investigating crypto interest accounts

The recent action comes only a month after the California-based company appeared to have fallen into hard times, announcing on Nov. 17 that “rapidly deteriorating market conditions” prompted heavy withdrawals and that it was “unable to continue to operate our business as usual.”

The platform at the time added that it had limited its business activity, including pausing withdrawals, and that “No deposit or investment request will be processed at this time.”

The platform has been providing users with updates on its website since then, including an updated plan sent to users on Dec. 15 which includes a financial overview, liquidation schedule, estimated recovery and next steps.

At the time, the platform said it will continue to administer its crypto-backed loans, including ensuring borrower compliance, processing loan repayments, returning borrowers’ collateral (when their loans are paid in full), and liquidating borrowers’ collateral in the event of default.

BlockFi files motion to return frozen crypto to wallet users

Crypto lender BlockFi has asked a U.S. bankruptcy court for the authority to return the crypto held in BlockFi wallets to users.

Bankrupt crypto lending platform BlockFi has filed a motion requesting authority from a United States bankruptcy court to allow its users to withdraw digital assets currently locked up in BlockFi wallets. 

In a motion filed on Dec. 19 with the U.S. Bankruptcy Court in the District of New Jersey, the lender asked the court for authority to honor client withdrawals from wallet accounts that have been frozen on the platform since Nov. 10.

The court documents also request permission to update the user interface to properly reflect transactions as of the platform’s pause.

In a widely shared email sent to affected users, BlockFi called the motion an “important step toward our goal of returning assets to clients through our chapter 11 cases,” adding:

“It is our belief that clients unambiguously own the digital assets in their BlockFi Wallet Accounts.”

According to BlockFi, this motion will not impact withdrawals or transfers from BlockFi Interest Accounts, which remain paused at this time.

The lending platform has also signaled intentions to seek “similar relief from the Supreme Court of Bermuda with respect to BlockFi Wallet Accounts held at BlockFi International Ltd.”

BlockFi International is a subsidiary of the company based in Bermuda, which runs its non-U.S. operations.

Crypto blogger Tiffany Fong shared the communication sent to her by BlockFi on Dec. 19, commenting that the embattled firm appears to be moving much faster than Celsius, which filed for bankruptcy over five months ago, compared to BlockFi’s bankruptcy filing in November. 

According to the court documents, a hearing to decide if the motion will be granted is scheduled for Jan. 9.

A separate hearing regarding wallet accounts held at BlockFi International Ltd is scheduled to go before the Supreme Court of Bermuda on Jan. 13.

Related: BlockFi sues FTX’s Bankman-Fried over shares in Robinhood

BlockFi halted client withdrawals and requested clients not to deposit to BlockFi wallets or Interest Accounts on Nov. 11, citing a lack of clarity around FTX.

By Nov. 28, BlockFi filed for Chapter 11 bankruptcy, for the company and its eight subsidiaries. BlockFi International filed for bankruptcy with the Supreme Court of Bermuda on that same day.

Bankruptcy court told FTX and Alameda owe BlockFi $1B, but it’s complicated

While BlockFi has attempted to separate itself from FTX and Alameda in its bankruptcy proceedings, it has many financial ties to firms owned by SBF.

A lawyer for BlockFi told the first-day hearing of its bankruptcy proceedings that the crypto lender has $355 million stuck on FTX and that the collapsed exchange’s sister company Alameda Research has defaulted on a $680 million loan.

BlockFi filed 15 motions on Nov. 28 that were approved by the court in the first day hearing on Nov. 29, including the redaction of personal details of its 50 largest creditors and the appointment of Kroll Restructuring Administration as its claims and noticing agent — the same firm chosen by FTX for its Chapter 11 bankruptcy case.

In a message emailed to worried clients, BlockFi noted that the approved motions allow it to continue “core operations” during the restructuring process and also to continue to pay its employees and independent contractors. BlockFi estimates that its wages bill is around $5.8 million per month and that it owed around $1.5 million in wages when it filed the motion on Nov. 28.

The message to clients said that BlockFi’s “singular focus” throughout the proceedings is “maximizing value for all clients and other stakeholders.”

According to a Nov. 29 CNBC report, BlockFi’s attorney, Joshua Sussberg, also added in the hearing that BlockFi plans to reopen withdrawals to customers at an unspecified time, and he was optimistic that the firm will be able to salvage the business after the restructuring.

While FTX and Alameda owe BlockFi around $1 billion, the state of financial obligations is made more complicated by the $400 million line of credit extended to BlockFi by FTX.US on July 1.

According to BlockFi, which cited the FTX collapse as the reason for its woes, it still owes $275 million to FTX.US in a deal that it claims was agreed to by 89% of its shareholders.

The funds were provided to BlockFi after it was caught up in the contagion caused by the collapse of Terra’s stablecoin on May 10. BlockFi revealed that the loan is set to mature on June 30, 2027, and has an interest rate of 5%.

Related: Bitcoin shrugs off BlockFi, China protests as BTC price holds $16K

Additionally, on Nov. 28, BlockFi sued a holding company of Bankman-Fried’s called Emergent Fidelity Technologies, seeking collateral that Emergent had pledged to pay on Nov. 9, which includes shares in the online brokerage Robinhood. The next hearing is set to be held on Jan. 9.

Timeline of BlockFi’s history. Source: First Day Hearing Presentation.

This simple Bitcoin options strategy allows traders to go long with limited downside risk

Bullish on Bitcoin but afraid of futures liquidation? Here is how pro traders use options to cast safer bets.

Bitcoin (BTC) bulls were hopeful that the Nov. 21 dip to $15,500 would mark the cycle bottom, but BTC has not been able to produce a daily close above $17,600 for the past 18 days. 

Traders are clearly uncomfortable with the current price action, and the confirmation of BlockFi’s demise on Nov. 28 was not helpful for any potential Bitcoin price recovery. The cryptocurrency lending platform filed for Chapter 11 bankruptcy in the United States a couple of weeks after halting withdrawals.

In a statement sent to Cointelegraph, Ripple APAC policy lead Rahul Advani said he expects that FTX’s bankruptcy will lead to greater scrutiny on crypto regulations, and several global regulators have already pledged to develop more stringent crypto regulations.

Unfortunately, there is no way to know when investor sentiment will improve and trigger a new bull run. Despite this, for traders who believe BTC will reach $20,000 by Dec. 30, there is an options strategy that could yield a decent return with limited risk.

How pro traders use the bullish Iron Condor strategy

Buying Bitcoin futures pays off during bull markets, but the issue lies in dealing with liquidations when BTC price goes down. This is why pro traders use options strategies to maximize their gains and limit their losses.

The bullish skewed Iron Condor strategy can maximize profits near $21,000 by the end of 2022 while limiting losses if the expiry price is below $18,000. It is worth noting that Bitcoin traded at $16,168 when the pricing for this model happened.

Bitcoin options Iron Condor skewed strategy returns. Source: Deribit Position Builder

The call option gives its holder the right to acquire an asset at a fixed price in the future. For this privilege, the buyer pays an upfront fee known as a premium.

Meanwhile, the put option allows its holder to sell an asset at a fixed price in the future, which is a downside protection strategy. On the other hand, selling this instrument (put) offers exposure to the price upside.

The Iron Condor consists of selling the call and put options at the same expiry price and date. The above example has been set using the Dec. 30 contracts, but it can be adapted for other timeframes.

As shown above, the target profit area is $18,350 to $24,000. To initiate the trade, the investor needs to short (sell) 2 contracts of the $20,000 call option and two contracts of the $20,000 put option. Then, the buyer must repeat the procedure for the $22,000 options, using the same expiry month.

Buying 5.8 contracts of the $18,000 put option to protect from an eventual downside is also required. Lastly, one needs to purchase 5.3 contracts of the $24,000 call option to limit losses above the level.

Related: Kraken settles with US Treasury’s OFAC for violating US sanctions

This strategy yields a net gain if Bitcoin trades between $18,350 and $24,000 on Dec. 30. Net profits peak at 0.485 BTC ($7,860 at current prices) between $20,000 and $22,000, but they remain above 0.10 BTC ($1,620 at current prices) if Bitcoin trades in the $18,350 and $23,600 range.

The investment required to open this Iron Condor strategy is the maximum loss — 0.103 BTC or $1,670 — which will occur if Bitcoin trades below $18,000 on Dec 30. The benefit of this trade is that a wide target area is covered while providing a 475% return versus the potential loss.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin shrugs off BlockFi, China protests as BTC price holds $16K

BTC price action heads higher with Bitcoin joining Asia stocks in a rebound despite FTX pressures continuing.

Bitcoin (BTC) held crucial $16,000 support into Nov. 29 as bulls weathered ongoing FTX fallout and macro triggers.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Trader teases BTC long as $16,500 reappears

Data from Cointelegraph Markets Pro and TradingView confirmed BTC/USD leaving lower levels untouched overnight.

The pair had seen a flash downturn after the Nov. 27 weekly close thanks to uncertainty from China over COVID-19 measures.

A recovery nonetheless took the market higher, with $16,500 coming into play at the time of writing.

As Cointelegraph reported, traders and analysts had warned that it was all but essential to preserve current support, with a violation opening up the road to $14,000 or lower.

Popular trader Crypto Tony even felt comfortable going long BTC on the day.

“Flipping the EQ would be a safer long entry, but keeping this open with a tight stop loss is the best way for me,” he revealed to Twitter followers.

An accompanying chart identified support and resistance zones in play on midrange timeframes.

BTC/USD annotated chart. Source: Crypto Tony/ Twitter

Even fresh repercussions over the FTX debacle failed to dent Bitcoin’s performance. Meanwhile, these came in the form of a bankruptcy filing and lawsuit from crypto lender BlockFi.

The latest in a chain reaction sparked by FTX going under, the news came alongside a surprise resumption of salary payments by the defunct exchange.

“Makes sense after this bounce, as we’ve created a HL on Bitcoin and aiming at resistance again,” Michaël van de Poppe, founder and CEO of trading firm Eight, continued about a higher low (HL) on the 4-hour chart:

“Taking out the range between $16.5-16.8K would trigger continuation towards $18K.”

BTC/USD annotated chart. Source: Michaël van de Poppe/ Twitter

China woes cool ahead of Fed Powell speech

China meanwhile formed the main macro focus on the day, with anti-lockdown protests’ impact on market sentiment nonetheless seeming to ease.

Related: New BTC miner capitulation? 5 things to know in Bitcoin this week

Asian markets bounced back strongly, with Hong Kong’s Hang Seng up 5.2% at the time of writing and the Shanghai Composite Index gaining 2.3%.

Hang Seng Index (HSI) 1-hour candle chart. Source: TradingView

“We do not expect China policy to publicly shift away from the Zero Covid stance, however, we could see some easing of the policy privately and in localized areas,” Mohit Kumar, an analyst at investment banking firm Jefferies, wrote in a note quoted by Bloomberg.

Nov. 30 looked set to be the key trading day of the week, with Bitcoin’s monthly close accompanied by a speech from Jerome Powell, Chair of the United States Federal Reserve.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Silvergate denies recent FUD, confirms minimal exposure to BlockFi

Silvergate Capital has been quick to distance itself from the now-bankrupt crypto lender BlockFi.

Institutional crypto services provider Silvergate Capital has confirmed its minimal exposure to the embattled BlockFi crypto lending firm.

On Nov. 28, Silvergate announced that its deposit relationship with BlockFi is “limited to less than $20 million of its total deposits from all digital asset customers.” Those deposits totaled $13.2 billion in Q3 according to the firm’s revenue report.

It added that BlockFi was not a custodian for its Bitcoin (BTC) collateralized leverage loans and the firm has no investments in BlockFi.

To quell investor jitters, Silvergate CEO Alan Lane said, “as the digital asset industry continues to transform, I want to reiterate that Silvergate’s platform was purpose-built to manage stress and volatility.”

Silvergate has been the subject of a lot of FUD (fear, uncertainty, and doubt), or “false and misleading statements,” in its words.

On Nov. 29, technical analyst and Swiss investor Walter Bloomberg told his 622 thousand Twitter followers, “Silvergate Capital said to have lent money to BlockFi,” but failed to provide any evidence.

Others have added to the FUD fest with several tweets over the past week. However, most of them were lacking specifics.

On Nov. 28, Cointelegraph reported that BlockFi had become the latest victim of the FTX contagion to file for Chapter 11 bankruptcy.

The filing stated that BlockFi has more than 100,000 creditors, assets between $1 billion and $10 billion, and similar liabilities. The latest high-profile crypto bankruptcy appears to have fuelled this recent round of FUD, which Silvergate has seen fit to refute.

Related: Silvergate Capital’s crypto-to-fiat transfers decrease by $50B compared with Q3 2021

Earlier this month, the WSJ ran an article on Silvergate, claiming that the company was battling the contagion fears. The crypto bank has seen its stock prices plunge this year but that has been the case for most publically listed crypto companies.

SI prices declined 11.1% on the day to finish at $24.45 in after-hours trading, according to Market Watch. Silvergate stock has slumped 83.6% since the beginning of the year.

On Nov. 23, Cointelegraph reported that Block.one CEO, Brendan Blumer, had purchased a stake in Silvergate Capital.

BlockFi sues FTX’s Bankman-Fried over shares in Robinhood

BlockFi is demanding Bankman-Fried’s investment company turn over its shares in Robinhood as collateral it agreed to pay as part of a pledge agreement.

Newly-bankrupt crypto lending platform BlockFi has filed a lawsuit against Sam Bankman-Fried’s holding company Emergent Fidelity Technologies seeking his shares in Robinhood that were pledged as collateral earlier in November.

The suit was filed on Nov. 28 in the United States Bankruptcy Court for the District of New Jersey just hours after BlockFi filed for Chapter 11 bankruptcy in the same court.

As per the filing, BlockFi is demanding Emergent turnover collateral as part of a Nov. 9 pledge agreement that saw Emergent agree to a payment schedule with BlockFi that it has allegedly failed to pay.

BlockFi names the collateral as “including certain shares of common stock.”

In May, Bankman-Fried acquired a 7.6% stake in the online brokerage firm Robinhood, buying a total of $648 million in Robinhood shares through his Emergent investment company.

Related: FTX collapse drives curiosity around Sam Bankman-Fried, Google data shows

BlockFi is one of the latest firms to file for bankruptcy as a result of the collapse of FTX crypto exchange.

The crypto firm initially previously denied that a majority of its assets were held on FTX earlier in the month, but also acknowledged “significant exposure” to FTX.

In its bankruptcy filing, BlockFi stated that it has assets between $1 billion and $10 billion with liabilities in the same range, along with over 100,000 creditors.

BlockFi sues FTX’s Bankman-Fried over shares in Robinhood

BlockFi is demanding Bankman-Fried’s investment company turn over its shares in Robinhood as collateral it agreed to pay as part of a pledge agreement.

Newly-bankrupt crypto lending platform BlockFi has filed a lawsuit against Sam Bankman-Fried’s holding company Emergent Fidelity Technologies seeking his shares in Robinhood that were pledged as collateral earlier in November.

The suit was filed on Nov. 28 in the United States Bankruptcy Court for the District of New Jersey just hours after BlockFi filed for Chapter 11 bankruptcy in the same court.

As per the filing, BlockFi is demanding Emergent turnover collateral as part of a Nov. 9 pledge agreement that saw Emergent agree to a payment schedule with BlockFi that it has allegedly failed to pay.

BlockFi names the collateral as “including certain shares of common stock.”

In May, Bankman-Fried acquired a 7.6% stake in the online brokerage firm Robinhood, buying a total of $648 million in Robinhood shares through his Emergent investment company.

Related: FTX collapse drives curiosity around Sam Bankman-Fried, Google data shows

BlockFi is one of the latest firms to file for bankruptcy as a result of the collapse of FTX crypto exchange.

The crypto firm initially previously denied that a majority of its assets were held on FTX earlier in the month but also acknowledged “significant exposure” to FTX.

In its bankruptcy filing, BlockFi stated that it has assets between $1 billion and $10 billion with liabilities in the same range, along with over 100,000 creditors.

$600M in Bitcoin options expire on Friday, giving bears reason to pin BTC under $16K

Bears are better positioned for Friday’s $600 million BTC options expiry, but bulls can flip the tables if Bitcoin price trades above $18,000.

No one can blame Bitcoin (BTC) bulls for placing bets at $20,000 and higher for the $600 million weekly options expiry on Nov. 18. After all, this level had provided a solid resistance since Oct. 25 and held for almost two weeks.

However, the base scenario changed abruptly on Nov. 8 after a liquidity crisis halted withdrawals on the FTX exchange. The movement surprised traders and over a 48-hour timespan, over $290 million in leverage buyers were liquidated.

Bitcoin/USD price index, 12-hour chart. Source: TradingView

The market quickly adjusted to the news, ranging from $15,800 to $17,800 for the past seven days. At the moment, investors are afraid that contagion risks might force other key players to sell their cryptocurrency positions.

FTX held significant deposits from key industry players, so its demise meant other participants would also face substantial losses. For example, BlockFi held a $400 million credit line with FTX US. On Nov. 15, collateralized yield platform SALT disclosed significant losses from the FTX collapse and subsequently halted withdrawals.

Similar events happened at the Japanese cryptocurrency exchange Liquid, increasing the uncertainty level in the entire market.

The Nov. 18 options expiry is especially relevant because Bitcoin bears can secure a $120 million profit by suppressing BTC below $16,500.

Bulls placed their bets at $20,000 and higher

The open interest for the Nov. 18 weekly options expiry is $600 million, but the actual figure will be lower since bulls were overly-optimistic. These traders missed the mark, placing bearish bets at $18,000 and higher, while BTC was dumped following the FTX insolvency.

Bitcoin options aggregate open interest for Nov. 18. Source: CoinGlass

The 1.00 call-to-put ratio shows the perfect balance between the $300 million put (sell) open interest and the $300 million call (buy) options. Nevertheless, as Bitcoin stands near $16,500, most bullish bets will become worthless.

If Bitcoin’s price remains below $17,500 at 8:00 am UTC on Oct. 21, only 10% of these call (buy) options will be available. This difference happens because a right to buy Bitcoin at $18,000 or $19,000 is worthless if BTC trades below the expiry price.

Bulls need a pump above $18,000 to come out ahead

Below are the four most likely scenarios based on the current price action. The number of Bitcoin options contracts available on Nov. 18 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $15,500 and $16,500: 400 calls vs. 7,900 puts. The net result favors the put (bear) instruments by $120 million.
  • Between $16,500 and $17,500: 1,700 calls vs. 6,100 puts. The net result favors the put (bear) instruments by $75 million.
  • Between $17,500 and $18,000: 2,500 calls vs. 5,000 puts. The net result favors the put (bear) instruments by $45 million.
  • Between $18,000 and $18,500: 4,500 calls vs. 3,100 puts. The net result favors the call (bull) instruments by $25 million.

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

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

Related: Bitcoin price dips to $16.4K over Genesis woes as execs defend GBTC

BTC price dips below $16,000 should not be surprising

Bitcoin bears need to push the price below $16,500 to secure a $120 million profit. The bulls’ best-case scenario requires a 10% pump above $18,000 to flip the tables and score a $25 million gain.

Considering that Bitcoin margin and options instruments show low confidence in regaining the $18,500 support, the most likely outcome for Friday’s expiry favors bears. Bulls might be better served by throwing in the towel and concentrating on the Nov. 25 monthly options expiry.

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

Payments company Curve bids for BlockFi’s 87,000 credit card customers

A Curve spokesperson has confirmed they have been in negotiations to acquire BlockFi’s credit card program’s customers since Nov. 12.

Payments company Curve is in active discussions to acquire crypto lender BlockFi’s more than 87,000 credit card customers — whose credit cards have been suspended since Nov. 11. 

A Curve spokesperson told Cointelegraph that “outreach and negotiations” started on Nov. 12 and are still in the process with Banking as a Service (BaaS) company Deserve, which services the BlockFi card program.

“Terms are being negotiated actively between Curve and Deserve, but a sale or partnership, if agreed to, is pending the conclusion of due diligence,” the spokesperson said.

“The primary point of contact for the pending negotiation is Deserve/ Evolve, not BlockFi, but that is an understanding that needs to be confirmed,” they added, noting also that Curve is not interested in BlockFi’s assets.

Should the acquisition succeed, the fintech is looking to continue BlockFi’s credit card program, noting that customers will still be able to earn crypto rewards.

They also said an added benefit of a successful acquisition is that customers from BlockFi’s credit card program “will not be ported to yet another centrally-held exchange.”

Reports over the weekend suggested that Binance US and Coinbase were also pursuing BlockFi’s credit card customers as well.

A spokesperson from Coinbase however clarified to Cointelegraph that: “We’re not engaged in any conversations or efforts related to BlockFi’s card program,” while Binance US has not yet responded to requests for comment by the time of publication.

Related: BlockFi limits platform activity, including a halt on client withdrawals

The bid for BlockFi’s credit card customers comes days after BlockFi announced it was suspending withdrawals on Nov. 11, citing the ongoing saga with crypto exchange FTX as the cause.

The same day BlockFi credit card users flooded Twitter reporting their cards were no longer working and had received messages from BlockFi confirming the cards had been suspended because of “recent events at BlockFi.”

Some users were further antagonized when they received messages from BlockFi informing them they would still be required to keep up with their credit card payments.

Crypto market watcher Just Boby told his 14,000 followers in a Nov.11 post, “This is NOT fake, BlockFi reached out via both email and text to remind me to pay my credit card bill,” others have shared a copy of the communication from BlockFi.