Investments

Democratic senators chide Fidelity Investments for BTC-exposed retirement funds

Crypto critic Elizabeth Warren and two colleagues write to the Fidelity CEO again to express their displeasure with crypto-exposed 401(k) offerings.

Three United States senators have written to Fidelity Investments CEO Abigail Johnson demanding an explanation for the financial services company’s decision to include Bitcoin-exposed funds in its 401(k) retirement plans. “This decision is immensely troubling,” they wrote.

Democrats Dick Durbin, Elizabeth Warren and Tina Smith sent their letter Tuesday. The letter, which is around a page and a half long, discussed Americans’ retirement savings habits in general terms with minimal statistics but numerous rhetorical flourishes and strings of adjectives. The money American consumers may invest in retirement funds is “hard earned,” for example, and their exposure to the “cryptocurrency casino” is “a bridge too far.” The authors of the letter asked:

“When saving for retirement is already a challenge for so many Americans, why would Fidelity allow those who can save to be exposed to an untested, highly volatile asset like Bitcoin?”

There is no call to action in the letter, aside from “We look forward to your response.”

The senators were objecting to funds Fidelity Investments introduced in March. Warren, who represents Massachusetts, the state in which Fidelity Investments is based, teamed up with Smith to write to Johnson at the beginning of May, sending a detailed and copiously footnoted letter objecting to the inclusion of Bitcoin (BTC) in retirement plans. That letter concluded with a list of questions and set a two-week deadline for a response.

Related: Survey: More than a quarter of U.S. millennials plan to use crypto to fund retirement

Fidelity Investments’ actions were controversial within the government. The Department of Labor released a compliance report ahead of the announcement of Fidelity Investments’ embrace of crypto-exposed retirement funds that promised an “investigative program” aimed at retirement plans that included crypto. That report eventually led to a lawsuit against the department.

Also at the beginning of May, Republican Alabama Senator Tommy Tuberville introduced the Financial Freedom Act to protect investors’ right to include crypto in retirement accounts.

Critic of Bitcoin’s ‘one-percenters’ still positive about future of digital assets

A finance professor is skeptical about Bitcoin’s design but is still very much involved in crypto research and is bullish about the future of digital assets.

A future without digital assets is hardly imaginable but Bitcoin (BTC) is far from being perfect by design, according to a finance professor at the London School of Economics (LSE).

LSE financial professor Igor Makarov believes that digital money and digassets will undoubtedly be part of the future of finance and their efficiency will depend much on their design.

In an interview with Cointelegraph, Makarov said that there has not been much evidence that Bitcoin can become a store of value as it has been extremely volatile over the past 10 years.

Since Bitcoin’s volatility remains high despite its massive rise in value and increased liquidity, there is no guarantee that its price will become more stable one day, he said.

“Without any government backing Bitcoin, the cryptocurrency’s value depends on the willingness of the general public to hold it, which, in turn depends on changing investor sentiment and its standing against other cryptocurrencies,” Makarov stated.

The professor also assumed that allowing United States public institutions to invest in BTC would almost certainly result in a “temporary price appreciation.” However, this appreciation will mean that early adopters benefit “at the expense of the general public” and other stores of value, especially fiat currencies, Makarov said, adding:

“Since Bitcoin is an unproductive asset — given its current design — its returns come entirely from price appreciation and in the long run we should not expect them to exceed the growth rate of aggregate output.”

Makarov is known for co-authoring a study claiming that 10,000 Bitcoin investors, or 0.01% of all BTC holders, own 5 million BTC, which accounts for 25% of all mined 19.1 million Bitcoin currently in circulation. The analysts argued that top BTC holders control a bigger share of crypto than the richest Americans control dollars.

According to Makarov, the study is based on Bitcoin network data as well as public data from blogs, chat forums and others. “We also use Bitfury Crystal Blockchain information about identity of large public entities such as exchanges, online wallets,” he noted. Makarov also said that very few individuals in the U.S. hold large amounts in cash as the majority of wealth is held in real estate and securities, adding:

“Cash transactions might be difficult to trace, but, unlike Bitcoin transactions, the cost of cash transactions increases with the transacted amount. Also, storing large amounts of cash is costly.”

Despite being skeptical about Bitcoin’s design, Makarov is still positive about the future of digital assets. He has been involved in arbitrage and trading in crypto markets since 2016 and became excited about the financial applications of crypto and blockchain, working on many related projects, including the investigation of the Terra ecosystem crash.

Related: Hodlers and whales: Who owns the most Bitcoin in 2022?

“I find many developments in crypto space fascinating. They start with Bitcoin and its ingenious design and include many others, including smart contracts, oracles and others,” Makarov said. But to benefit from the industry, it is important to properly address issues like governance, regulation and others in a timely manne, the expert emphasized, stating:

“There is little doubt that in the future we will have digital money and digital assets. Their efficiency will depend on their design. Therefore, it is important to get it right.”

Makarov said he doesn’t hold any cryptocurrencies at the moment.

Cathie Wood sells Coinbase shares amid insider trading allegations

Cathie Wood’s investment firm ARK Investment Management is the third-largest shareholder of Coinbase, reportedly holding nearly $9 million as of late June.

One of the largest stockholders of the Coinbase cryptocurrency exchange has dumped a massive amount of shares as regulators reportedly probe the firm for alleged insider trading.

Cathie Wood’s investment firm Ark Investment Management has sold a total of more than 1.4 million Coinbase (COIN) shares, according to daily trade information from Ark on July 26.

The sale involved three Ark exchange-traded funds (ETF), including Ark Innovation ETF (ARKK), which offloaded a total of 1,133,495 shares, or 0.6% of the ETF’s total assets. Ark Next Generation Internet ETF and Ark Fintech Innovation ETF sold 174,611 and 110,218 COIN shares, respectively. Based on Tuesday’s closing price, the value of the sold shares amounted to slightly more than $75 million.

Coinbase stock closed at $52.9 on Tuesday, losing 21% of value amid the sale. After showing some signs of revival in mid-July, Coinbase stock has been tanking as United States authorities arrested a former Coinbase Global executive on July 21 for alleged insider trading. Since reaching $77.3 on Friday, the Coinbase stock lost about 32% at the time of writing, according to data from TradingView.

COIN 30-day price chart. Source: TradingView

The sale came after Ark was steadily beefing up its COIN stash this year, buying 546,579 shares in Coinbase in May despite a drop in Coinbase shares. The investment firm has been actively buying Coinbase shares shortly after Coinbase debuted its stock last year, accumulating about 750,000 shares in April 2022. The stock originally opened at $350.

Related: Crypto firms facing insolvency ‘forgot the basics of risk management’ — Coinbase

According to a report by Bloomberg, Ark is the third-biggest shareholder of Coinbase, holding nearly 9 million shares by the end of June. The liquidation reportedly became Ark’s first sale of COIN this year.

Coinbase is reportedly facing a probe from the U.S. Securities and Exchange Commission (SEC) over the company’s potential involvement in crypto insider trading. SEC commissioner Caroline Pham expressed concerns that Coinbase might have improperly let Americans trade digital assets that should have been registered as securities.

Sentiment and inflation: Factors putting pressure on Bitcoin price

Bitcoin prices are besieged by a multitude of factors, and the cryptocurrency is struggling to breach the $25,000 mark.

Subsequently, there are fears that Bitcoin prices will take longer to recover.

Bitcoin (BTC) has been hovering around the $20,000 range for several weeks now after the coin lost over 60% of its value from its peak in November. The recent plunge wiped out over $600 million from its market cap and caused rising concerns of a bubble burst.

Negative investor sentiment

Cryptocurrency investors have been on edge since Bitcoin’s fall to around $20,000. Many of them fear that more unprecedented selloffs by key players could precipitate a bigger downtrend.

Further declines are likely to amplify losses and make it harder for the market to recover in the medium term. As such, many investors are holding off additional investments.

Besides the fall of cryptocurrencies, the decimation of linchpin crypto firms such as Three Arrows Capital (3AC) and the Celsius Network has also had a negative effect on investor sentiment.

The Singapore-based 3AC hedge fund, for example, collapsed with about $10 billion in investor funds.

The recent crypto crash threw the agency into financial turmoil and made it hard for it to repay its creditors and investors.

The Celsius crypto lending network, which was also revered in crypto circles, also fell on hard times when the crypto market dropped. The company was forced to halt payments to creditors and customers due to low liquidity.

Such incidences have upset investor confidence in the industry and reduced capital inflows needed to buttress cryptocurrencies such as Bitcoin.

Margin calls and liquidations

Liquidation occurs when an asset broker forcefully closes an investor’s collateralized position due to a loss affecting the initial margin.

Liquidations usually amplify market slumps by inadvertently increasing the number of selloffs.

On Jan. 11, for example, BTC futures contracts worth approximately $2.7 billion were liquidated within 24 hours, causing prices to retrogress from about $41,000 to sub $32,000 levels.

A similar occurrence happened on June 14 and caused Bitcoin prices to plummet by about 15%. About $532 million worth of Bitcoin was liquidated as a result.

While liquidations influence prices in the short term, they negatively impact asset prices by increasing market turbulence, which causes uncertainty. Uncertainty is bad for the business because it extends fear cycles.

Inflation

Inflation refers to the reduction in relative purchasing power using a nation’s base currency. High inflation usually leads to an increase in commodity and service prices and is typically characterized by unchanging income rates. During the month of May, the United States Consumer Price Index reached 8.3%. For comparison, it was 0.3% in April 2020 when COVID-19 lockdowns started.

Many analysts theorize that the high inflation rate was brought on by the aggressive fiscal policies adopted by the U.S. government in 2020 in response to the COVID-19 pandemic.

The government lowered Fed interest rates to zero and unleashed a $5 trillion stimulus program to avert an economic disaster — far more than the $787 billion used to quell the 2008 recession.

The funds used during the pandemic buoyed the economy and helped boost demand for goods and services. However, supply chains were unable to keep up with the growing demand for certain commodities, hence the rise in commodity prices.

Of course, there are other compounding factors, such as the war in Ukraine, which has affected oil prices and led to higher transport costs.

These elements have led to a higher cost of living and reduced investments in speculative instruments such as Bitcoin due to less disposable income.

That said, Bitcoin prices can recover as soon as current socioeconomic dynamics change for the better.

Federal Reserve interest rates

In March, the U.S. Federal Reserve increased the lending rate for the first time since 2020. At the time, Bitcoin prices didn’t move by much because the rate was already factored in. 

However, the announcement prepped investors for upcoming changes and touched off a gradual descent.

On June 15, the Fed raised its lending rate again, this time by three-quarters of a percentage point, which is the highest increase in two decades. The anti-inflation measure caused markets to fall in the subsequent days. The Dow Jones was forced to recede by over 700 points while the S&P 500 fell by 3.4%.

Notably, Bitcoin investors began pulling out of the market a few days after the announcement, causing prices to drop from $30,000 levels to $18,900 between June 7 and June 18.

The reaction was expected because the Fed had already signaled that it would be implementing an interest hike. Fed interest hikes historically reduce investments in speculative assets such as Bitcoin.

Market correction

2021 was a positive year for Bitcoin. The cryptocurrency ended the year with approximately 60% in gains. However, this was an almost 300% increase since the onset of the COVID-19 pandemic. Consequently, a pullback was almost inevitable due to the market overheating.

Market corrections happen frequently and are a natural occurrence in both equity and crypto markets. They are usually caused by economic shocks that prompt investors to take money out of mercurial markets.

Major market corrections usually give way to a bear market, especially when there is a sudden drop of more than 20%.

The current crypto winter is the result of a multitude of factors that include geopolitical tensions and uncertainty amid reports of a possible recession.

The Bitcoin market is likely to recover once these aspects are overcome.

What to expect in the near future

Bitcoin is set to bottom out in the medium term, and this will allow the asset to gain some stability, enough to mollify investors and give rise to bullish sentiment. Speaking to Cointelegraph, Yubo Ruan, founder and CEO of Parallel Finance — a decentralized finance (DeFi) lending and staking protocol — said that the market was in a transitional period, stating:

“I think a healthy market has lows and highs. This current period is a moment of consolidation and will gain momentum as many who have been on the sidelines waiting for a better price begin to buy in. Institutions and major Fortune 500 companies are likely to add some level of crypto to their balance sheets in the coming months.”

Konstantin Boyko-Romanovsky, CEO and founder of noncustodial hosting and staking platform Allnodes, told Cointelegraph:

“Bear markets and bear sentiments allow for a thorough introspection. This is a time to slow down the race for the next best crypto and concentrate on innovation. Blockchains that suffered the greatest during the most recent market plunge may have to take a deeper look at what needs to change in order to remain competitive and beneficial in the future. With that being said, the crypto market and the traditional market will recover. It’s a matter of time.”

Community-initiated ‘Bitcoin Stackchain’ exceeds $160K in one week

How one tweet about being “broke as hell” created a chain of community Bitcoin buys that exceeded six figures and counting.

The Bitcoin (BTC) community, or “plebs” as they are affectionately known, are a force to be reckoned with. They banded together in less than seven days to stack over $160,000, or 7 BTC, in a “stackchain.”

The so-called stackchain, a portmanteau of the blockchain (Bitcoin’s ledger) and stacking Sats (buying BTC), is a community-driven meme. The investment chain derived from one man’s desire to express the idea that buying Bitcoin every day and doing dollar-cost averaging (DCA) is essential to being a Bitcoiner.

ArizonanHodl, the Bitcoiner in question, told Cointelegraph contained that he would “eliminate any excuses” by posting a $5.00 purchase. Here is the original tweet:

Bitcoin buyers from around the world supported the gesture. They took the idea by the scruff of the neck and made it a movement. The community began stacking sats in increasing increments of $1.00 at a time. $5.00 became $6.00, $7.00, etc until the cumulative total passed the $100,000 mark over the Saturday weekend.

According to the stackchain’s official GitHub (because, of course, there is an official GitHub), Derek Ross explains that the stackchain is “just fun and shitposting with a little bit of Bitcoin lingo thrown in to make it more fun as we shitpost as we buy Bitcoin.”

However, the “bit of fun” grew exponentially. While Arizonan had set a goal of $10,000 for the bear market tomfoolery, in a matter of days, the plebs had stacked a whole BTC, or $22,000 at the time of writing:

“At that point, I thought people might think the goal had been reached and lose interest, but the exact opposite happened. Plebs started to FOMO into the stackchain!”

By Monday, the stackchain passed $150,000. Each “stack” is now well over half a grand. The incremental amounts will soon approach four-figure purchases, and the hype around the stack chain has caught the eye of Bitcoiners around the world. 

For those of humbler means, “stack joins,” or combined efforts from Bitcoiners working together to reach large Bitcoin buys, are possible. Plus, well-known Bitcoiners in the space, including Cory Klippsten, CEO of Swan Bitcoin, have got in on the action:

Klippsten told Cointelegraph:

“The #stackchain is classic Bitcoin Twitter — something fun, exciting, just a tad competitive, and great for Bitcoin.”

Behind the scenes, the stackchain core developers — a riff on the Bitcoin core developers — keep the stackchain in check. A Telegram group of stackchainers, called the Lightstack Network, aids the organization and shares memes. “We need fun too,” says ArizonanHODL.

The Telegram group also endeavors to avoid stackchain forking. A fork occurs when the stackchain Twitter thread splits off and a stacker inadvertently “double spends.” An unwanted outcome, the forked stack can disrupt the orderly flow of stacks and must therefore be merged into the stack and validated by “nodes.”

Incidentally, the Twitter thread has become so congested by stacks that reportedly, Twitter servers are buckling under the 1000-long thread load. ArizonanHODL sums it up succinctly:

“The stackchain is actually quite complicated, but these plebs made it look effortless and had fun while doing it. It’s just such a cool thing to be a part of.”

But, why buy Bitcoin at all? Despite the price plummeting from the meme-worthy $69,000 to $17,000, analysts would suggest the macro backdrop is forming a healthy bottom. Bitcoin the asset is a savings technology and remains the best-performing asset of the past decade. ArizonanHODL that stacking sats is not just about money, though:  

“I stack for so many reasons. I stack for fun. I stack for my mental health. I stack for my future. I stack for my kids. I stack to defy central authority.”

Indeed, uundeterred by recent bearish price action, the stackchain may surge to greater highs. At the time of writing, the cost to “mine” on the stackchain approaches $600.

Tesla reports $64M profit from Bitcoin sale

Elon Musk’s electric vehicle company sold 75% of its BTC in the second quarter. The company’s overall profitability was impacted by inflation and the competition for battery cells.

Tesla’s decision to offload most of its Bitcoin (BTC) treasuries netted the company a hefty profit in the second quarter, even as crypto prices plunged into a bear market.

In the first six months of 2022, Tesla recorded $170 million of impairment losses “resulting from changes to the carrying value” of its Bitcoin holdings, according to an official Form 10-Q filing with the United States Securities and Exchange Commission, or SEC. After selling 75% of its BTC stash for dollars in the second quarter, the company netted a realized gain of $64 million.

In finance, an impairment loss occurs when the fair value of an asset held by a company falls below the carrying value of the investment.

Tesla recorded per-share earnings of $2.27 in the second quarter on revenues of $16.93 billion. Although profitability was down compared with the first quarter, it was up over the levels of a year ago. However, company profitability was impacted by rising inflation and growing competition for battery cells. 

The electric vehicle maker still has 10,800 BTC on its books, according to Bitcoin Treasuries. At a current price of around $22,000 BTC, Tesla’s digital asset holdings are worth roughly $237 million.

Related: Experts reveal what Tesla’s $936M sell-off means for Bitcoin

The 10-K disclosure didn’t reveal any new insights about Tesla’s digital asset strategy. However, the company did state that it may increase or decrease its holdings over time:

“As with any investment and consistent with how we manage fiat-based cash and cash equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and on our view of market and environmental conditions.”

3AC: A $10B hedge fund gone bust with founders on the run

3AC downfall has led to a multi-billion dollar cascade that has claimed the likes of Celsius, Voyager and many other crypto lending firms with exposure to the hedge fund.

Three Arrow Capital (3AC), a Singapore-based crypto hedge fund that at one point managed over $10 billion worth of assets, became one of the many crypto firms that went bankrupt in this bear market. 

However, the fall of 3AC wasn’t purely a market-driven phenomenon. As more information surfaced, the collapse looked more like a self-inflicted crisis brought upon by an unchecked decision-making process.

To put it concisely, the hedge fund made a series of large directional trades in Grayscale Bitcoin Trust (GBTC), Luna Classic (LUNC) and Staked Ether (stETH) and borrowed funds from over 20 large institutions. The May crypto crash led to a series of spiral investment collapse for the hedge fund. The firm went bust and the loan defaults have led to mass contagion in crypto.

The first hints of possible insolvency occurred in June with a cryptic tweet from the co-founder Zhu Su in the wake of the movement of 3AC funds. The crypto market crash led to a severe decline in the prices of top cryptocurrencies including Ether (ETH), which led to a series of liquidations for the hedge fund.

3AC exchanged roughly $500 million worth of Bitcoin (BTC) with the Luna Foundation Guard for the equivalent fiat amount in LUNC just weeks before Terra imploded.

The rumors ramped up after Zhu removed all mention of investments in ETH, Avalanche (AVAX), LUNC, Solana (SOL), Near Protocol (NEAR), Mina (MINA), decentralized finance (DeFi) and nonfungible tokens (NFTs) from his Twitter bio, keeping only a mention of Bitcoin (BTC).

The series of liquidations for 3AC had a catastrophic impact on crypto lenders such as BlockFi, Voyager and Celsius. Many of the crypto lenders had to eventually file for bankruptcy themselves due to exposure to 3AC.

Sam Callahan, a Bitcoin analyst at BTC savings plan provider Swan, told Cointelegraph:

“Using only publicly available information, in my opinion, the failure of 3AC can really be broken down into two things, 1) Poor risk management and 2) Unethical and potentially criminal behavior. The first is a classic example of what happens when you use too much leverage, and the trade turns against you. In this case, 3AC borrowed hundreds of millions of dollars, mostly from cryptocurrency lending platforms, to make arbitrage bets in risky DeFi protocols. One such risky bet was on Terra. Of course.”

He added that 3AC didn’t own up to the mistakes, went ahead to borrow more money and “allegedly even used clients’ funds to make bets to try to make their money back. This was the moment when 3AC morphed into more of a blatant Ponzi scheme. As general market conditions continued to worsen and liquidity dried up, 3AC was exposed as the Ponzi scheme it had become, and the rest is history.”

Looking at the timeline of events in 3AC:

  • May 11–12: Immediately following the Luna collapse, several lenders ask about Luna exposure, 3AC says there is nothing to worry about. 
  • May 18: Co-founder Kyle Davies tries to prevent loans from getting called
  • June 3: Interest rates raised on loans due to market conditions
  • June 7: 3AC team pitches investors on new opportunities to save the company
  • June 10–11: Crypto options broker Deribit margin calls 3AC’s account mobyDck
  • June 13: Davies tries to arrange a new loan from Genesis to pay the margin call
  • June 16–17: 3AC insolvency widely reported

3AC eventually filed for a Chapter 15 bankruptcy on July 1 in a New York court with no known whereabouts of the founders.

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Marius Ciubotariu, the co-founder of Hubble Protocol, believes the 3AC lending crisis highlights the resilience of the DeFi ecosystem. He told Cointelegraph:

“The challenges that faced 3AC are not unique to cryptocurrency nor financial markets as a whole. Cryptocurrency is currently the only financial market where market dynamics are allowed to play out. 3AC crisis has revealed how resilient DeFi protocols actually are. For example, Celsius suffered from lending losses and was being margin called. In fear of on-chain automated liquidations that are visible to everyone, they rushed to pay their MakerDAO and Compound loans first.”

3AC owes creditors $3 billion

3AC liquidators have requested a stay of proceedings against the business and access to its Singapore offices in a petition to the High Court of Singapore. The court documents show that 3AC owes about $3 billion to creditors, out of which 3AC’s biggest creditor, trader Genesis Asia Pacific, a subsidiary of Digital Currency Group, loaned $2.36 billion.

Among the long list of creditors, Zhu Su also filed a claim for $5 million. In addition to Zhu’s claim, 3AC investment manager ThreeAC Limited is reportedly making a $25 million claim. Kyle Davies’ wife, Kelli Kali Chen, is reportedly seeking a claimed $65.7 million debt in the same filing in the Eastern Caribbean Supreme Court. A court in the British Virgin Islands ordered 3AC into liquidation on June 27.

There is speculation that founders Zhu and Kylie used investors’ funds to make a downpayment on a $50 million yacht purchase. However, other reports have claimed that Zhu tried selling his house in the wake of the 3AC crisis.

A report from blockchain analytic firm Nansen showed that there was an active and trackable contagion in the markets. The stETH depeg was prompted in part because of TerraUSD Classic’s (USTC) implosion. The report claimed that 3AC was a victim of this contagion as it sold its stETH position at the peak of the depeg panic, taking a significant haircut.

Jonathan Zeppettini, international operations lead at decentralized autonomous currency platform Decred.org, believes market conditions played a bare minimum in the 3AC saga and only helped in preventing the fraud further. He told Cointelegraph:

“In reality, they were just participating in other scams such as Terra and acting as a middleman between questionable investments and lenders who thought their record was so impeccable it absolved them from having to do any due diligence. Cascading liquidations caused by the market correcting forced the end of the game. However, in reality, their model was always a ticking time bomb and would have imploded eventually no matter what.”

Michael Guzik, CEO of institutional lending platform CLST, told Cointelegraph that 3AC failed to mitigate market risks and the wave of collapses, and the liquidity crisis underneath it all, is a “reminder of the importance of age-old lending/borrowing practices like leverage and counterparty risk assessment.”

3AC operated in a very opaque way for being the largest crypto hedge fund, and after the collapse set in, it continued to lie to investors about the extent of losses to lenders, movement of funds and its directional market exposure.

Centralization and opaqueness in crypto firms

3AC’s fall highlights the fragility of the centralized decision-making process that can turn into a nightmare during the bear market. The centralization of the decision-making process in 3AC’s operations only came to light after its positions started getting liquidated.

Zhu and Davies, the founders of the tainted hedge fund, revealed that they received a series of death threats after the collapse of 3AC, which forced them to go into hiding. The two founders admitted that the overconfidence born out of a multiyear bull market, where lenders saw their values swell by virtue of financing firms like theirs, led to a series of bad decisions that should have been avoided.

Joshua Peck, founder and chief investment officer at crypto hedge fund Truecode Capital, explained to Cointelegraph that what made 3AC’s failure especially pernicious was its venture capital investing, it often managed the treasury for its portfolio companies, plus it was so well regarded that many other platforms extended them substantial credit, such as Blockchain.com’s $270 million in loans.

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The full extent of its interdependence with other digital asset firms was unclear until 3AC’s positions began liquidating during the cryptocurrency bear market in 2022. It rapidly became apparent that many firms were more exposed to 3AC than was broadly understood. Peck told Cointelegraph:

“Our view is that to avoid total loss in the crypto market, the totality of the cryptocurrency risk profile must be managed. Managers with a background in the engineering disciplines are more qualified to manage cryptocurrency portfolios because the majority of the risks associated with digital assets have more in common with software projects than financial firms. This was certainly true in the case of Three Arrows Capital.”

3AC’s downfall snowballed into a catastrophe that brought down the likes of Celsius, Voyager and a few other crypto lending firms along with them. The extent of the damage caused by 3AC exposure is still unfolding, but it is important to note that the crypto market has managed to get past Terra and the crypto lending fiasco.

Thai SEC launches digital hotline for Zipmex users

The investors affected by Zipmex’s withdrawals’ pause can submit information about their losses via an online forum on the Thai SEC’s official website.

In the aftermath of the Thai cryptocurrency exchange Zipmex stopping withdrawals last week, local financial regulators are stepping in to look into potential losses by investors.

Thailand’s Securities and Exchange Commission (SEC) is taking action to collect all necessary information from investors on how they have been affected by issues on Zipmex.

The regulator officially announced on July 25 that Zipmex customers can submit information via an online forum on the Thai SEC’s official website.

The SEC has received a number of complaints from people affected by Zipmex after the crypto exchange temporarily suspended withdrawals of the Thai baht and digital assets on Wednesday, the regulator said.

“In the past, the SEC issued a letter requesting the company [Zipmex] to provide an efficient system to contact customers and handle complaints, as well as to take into account the protection of the interests of customers,” the announcement notes.

Zipmex is one of the major cryptocurrency exchanges officially regulated by the government of Thailand, alongside platforms like Upbit, Bitkub and others. The Zipmex exchange abruptly stopped withdrawals last week, citing a “combination of circumstances” that were beyond the company’s control, including “volatile market conditions.”

Related: CoinFLEX resumes withdrawals, limiting users to 10%

The withdrawals’ pause came amid Bitcoin (BTC) hitting multi-week highs above $24,000. Zipmex partially resumed some operations on the platform, re-launching withdrawals from its trade wallet after two days after disabling withdrawals. “Transfer from Z Wallet, deposit and trade will continue to be disabled until further notice,” the firm said.

The opportunities and risks of Metaverse for small businesses

The benefits outweigh the risks when it comes to the adoption of Metaverse for small businesses.

The Metaverse has been become one of the biggest buzzwords in the blockchain and crypto, as it promises to provide a more immersive, interactive and collaborative experience than what the internet has accomplished to date. 

This promise of a new world has huge enterprises like Meta (formally known as Facebook) investing huge sums in the budding space. When most hear the name Metaverse, their mind wanders to a few things: an avenue for global conglomerates to showcase their technology-forward bent, an esoteric product for a selected few to display nonfungible tokens (NFTs) or a new front in gaming development. However, a deep dive into Metaverse reveals a whole new world, a world full of new opportunities and risks for both consumers and businesses.

Although the current Metaverse ecosystem might be populated with giant corporations, eventually, for wider adoption, small businesses will have to make a transition. Looking at historical patterns in the adoption of new technology like the internet, mobile payments and more, it is apparent that small businesses play a monumental role in getting the masses onboarded.

One of the critical insights from Facebook’s Connect 2021 was that the advent of Metaverse is imminent, but the timeline for widespread adoption is spread out at least over a decade. A study done by Pew Research found that around 54% of top technology innovators, developers and businesses. Meanwhile, policy leaders believe that by 2040, the Metaverse will be a functioning aspect of daily life for a half-billion or more people globally.

The urgency for transitioning to Metaverse may not be immediate, but businesses should be considering the technology at least in the periphery. By strategically using resources now, an enterprise will be able to improve the experience for customers of the future.

To understand what opportunities and risks Metaverse brings to a business, it is imperative to understand the infrastructure of Metaverse. Jon Radoff, CEO of 3D gaming company Beamable, categorized in seven layers:

  1. Infrastructure: This layer is the semiconductors, material science, cloud computing and telecommunications networks that enable the construction of the layers over it.
  2. Human interface: The human interface layer refers to the hardware that will be used to access the metaverse. This includes everything from mobile devices to VR headsets.
  3. Decentralization: Build everything on a permissionless, distributed and democratized structure.
  4. Spatial computing: This layer refers to the software that brings objects into 3D and allows the hardware interface to interact with them.
  5. Creator economy: Make it easier for creators to make Metaverse projects and monetize them.
  6. Discovery: Ways to discover the experience.
  7. Experience: Users can engage with games, social experiences, live music and so on.

In all probability, most small businesses will be involved in bringing Metaverse experiences to their customers. Talking to Cointelegraph about the disruptive potential of Metaverse, Naveen Singh, co-founder and CEO of decentralized data management network Inery, said:

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“It is no longer a question that the Metaverse would be a major disruption for the digital economy. The real focus now is for which industries the Metaverse would be the most significant. As a gateway for a new digital economy, the Metaverse opens new possibilities for several domains.”

“The industries that are most likely to undergo transformation and feel the immediate impact of the Metaverse are gaming, fashion, entertainment, media and retail. At the same time, for the Metaverse to unleash its full potential one of the most defining properties would be interoperability across its fabric,” he said.

The Metaverse is reshaping industries

The gaming industry has traditionally been a trailblazer in adopting cutting-edge technologies, and it’s the same case for the Metaverse. Many gamers already consider Metaverse to be the next frontier in gaming. Developers say today’s gaming can often feel lonely. Although multiplayer gaming solves the problem of isolation to an extent, Metaverse takes immersion and community to a whole new level. Communities created by Metaverse projects like Decentraland, Axie Infinity and Sandbox give not only social benefits but also monetary ones. 

However, the current Metaverse gaming space is dominated by large firms. The research and development for a Metaverse game are generally out of budget for small businesses. Nikita Sachdev, the founder and CEO of Luna PR, thinks that along with gaming, real estate is another sector that could potentially be an earlier adopter of the Metaverse. Sachdev told Cointelegraph:

“For real estate, companies and agencies are always looking to develop ways of touring and visualizing properties for pre-plan sales and foreign investors. Imagine if you can tour an entire compound before it is even developed? Investing in real-world property will become a lot more immersive and ‘open houses’ will not be necessary anymore.”

The global real estate market is estimated to be valued at over $3 trillion, and any potential dent in this space can have immense economic and sociological implications.

Fashion is another sector that could be disrupted by the Metaverse. In fact, there has already been a successful Metaverse Fashion Week which included runway shows, after-parties, immersive experiences, shopping, panel talks and more. 

Wahid Chammas, the co-founder of Faith Tribe — an open-source design platform — believes that since the Metaverse and fashion are ultimately about identity, they are bound to complement each other. Speaking to Cointelegraph, he said:

“People venture into the Metaverse and do all kinds of things to live and portray an identity that they may not be living in the physical realm. Wearables are undoubtedly the most conducive to showcasing your personality and identity. Having this link between physical and digital accentuates your perceived identity, we believe there will be further disruption of both the physical and the Metaverse worlds of fashion for brands that take digital fashion seriously.”

Risks associated with Metaverse

Exposure to Metaverse can have a higher risk for small businesses. The ecosystem is still taking shape and the uncertain and nascent character of Metaverse could lead some businesses’ roadmap astray. Expounding on this point, Jake Fraser, head of business development at Mogul Productions, told Cointelegraph:

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“Technical expertise and knowing how to structure environments for users virtually is a fluid space and requires people to have their finger on the pulse to execute the best user experience. There also needs to be value for the user and something unique that they can’t get from your brand in another place. If there is no clear ‘hook,’ it can be difficult to drive adoption from businesses.”

However, it is evident that venturing into the Metaverse for relevant companies not only helps businesses to be ready for the future but also makes their present offerings more lucrative. The benefits far outweigh the risks. George Narita, CEO of Aurora42, told Cointelegraph: 

“The most significant risk is not getting into the metaverse world. I see a lot of opportunities, especially for early adopters, the same way it was at the beginning of the dotcom era; many didn’t understand how to communicate. Just being in the Metaverse is not enough. Those who have a disruptive vision and provide experiences and emotional connections by co-creating with their followers will be ahead. Today, people do not want to be passive but to be part of the construction of this universe.”

Mike Novogratz warns that 200x returns from crypto are ‘not normal’

Former-LUNAtic Mike Novogratz has told crypto investors that the insane returns seen in the crypto space are simply unsustainable.

Mike Novogratz, the billionaire founder of crypto asset management firm Galaxy Digital, has warned that making more than 200X returns on crypto investments is simply “not normal.”

Speaking at the Christie’s Art + Tech Summit in New York on Wednesday, Novogratz warned listeners about the steep volatility of the crypto industry.

“I had friends that had bought lots of crypto, and it had changed their lives — guys who didn’t make a whole lot of money but all of a sudden had a $5 million net worth in crypto,” said Novogratz:

“I shook them and I made them look me in the eye, [and] I said, ‘You have to sell half or two thirds of this, it’s not normal to make 200 times your money on things.’”

He offered further caution, saying that “not everyone is made to be an investor” because greed too often gets in the way of rational thinking.

Novogratz also hasn’t been shy when it comes to handing out criticism of the crypto industry. On Tuesday, he vented his frustrations about the ineptitude and poor practices in the sector that have recently come to light to the attendees of the Bloomberg Crypto Summit.

“It’s frustrating as heck because at times the whole industry looks like a bunch of idiots,” he said.

His newfound disapproval of certain practices within the cryptocurrency space comes less than two months after the Terra ecosystem suffered a catastrophic meltdown, shaving off approximately $50 billion from the digital asset space in the process.

Following the fallout, Novogratz, a vocal advocate of the Terra project who famously inked himself with a moon-themed tattoo, penned an open letter in May, telling his followers: ​​“My tattoo will be a constant reminder that venture investing requires humility.”

While Novogratz may seem more pessimistic than usual, especially when combined with the recent market turmoil, he ultimately believes that blockchain-based technology will gradually become a foundational part of the future of the modern world.

“Over the next decade, Web3 and blockchains will reshape industries, communities and the internet as we know it, blurring the lines between our physical and digital realities,” he said.