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4:27
| Jan 04, 2023, 12:50PM EST
Coinbase, one of the nation’s top cryptocurrency exchanges by trading volume, has agreed to pay $100 million as part of a settlement with New York regulators who allege the firm violated anti-money-laundering laws.
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A worsening macroeconomic climate and the collapse of industry giants like FTX and Terra have weighed on bitcoin’s price this year.
STR | Nurphoto via Getty Images
2022 was a rough year for crypto. More than $1.3 trillion was wiped off the value of the market. And bitcoin, the world’s largest digital coin, saw its price slump more than 60%.
Investors were caught off guard by a wave of collapses in the industry from stablecoin project terraUSD to crypto exchange FTX, as well as a worsening macroeconomic climate. Those who made predictions about bitcoin’s price in the past year really missed the mark.
But with 2023 now here, some market players have stuck their neck out with price calls for what could be another volatile year.
Interest rates around the world are on the rise, and that’s weighing on risk assets like stocks and bitcoin. Investors are also watching how the FTX saga, which resulted in the arrest of the company’s founder Sam Bankman-Fried in the Bahamas, will develop.
CNBC rounds up some of the boldest price calls for bitcoin in 2023.
Bitcoin bull Tim Draper had one of the most optimistic calls on bitcoin of 2022, predicting the token would be worth $250,000 by the end of the year.
In November, the billionaire venture capitalist said he’s extending the timeline for that prediction until mid-2023. Even after the collapse of FTX, he’s convinced the coin will hit the quarter-of-a-million milestone.
“My assumption is that since women control 80% of retail spending, and only 1 in 7 bitcoin wallets are currently held by women that the dam is about to break,” Draper told CNBC via email.
Bitcoin would need to rally 1,400% in order for it to trade at that level.
Despite the depressed prices and trading volumes drying up, there could be reason to suspect the market has found a bottom, according to Draper.
“I suspect that the halvening in 2024 will have a positive run,” he said.
The halvening, or halving, is an event that happens every four years in which bitcoin rewards to miners are cut in half. This is viewed by some investors as positive for bitcoin’s price, as it squeezes supply. The next halving is slated to happen sometime in 2024.
Bitcoin miners, who use power-intensive machines to verify transactions and mint new tokens, are being squeezed by the slump in prices and rising energy costs.
These actors accumulate massive piles of digital currency, making them some of the biggest sellers in the market. With miners offloading their holdings to pay off debts, that should remove most of the remaining selling pressure on bitcoin.
That’s historically a good sign for bitcoin, said Vijay Ayyar, vice president of corporate development at crypto exchange Luno.
“In prior down markets, miner capitulation has usually indicated major bottoms,” Ayyar told CNBC. “Their cost to produce becomes greater than the value of bitcoin, hence you have a number of miners either switching off their machines … or they need to sell more bitcoin to keep their business afloat.”
“If the market reaches a point where it’s absorbing this miner sell pressure sufficiently, one can assume that we’re seeing a bottoming period.”
For some market participants, the worst is yet to come.
In a Dec. 5 research note, Standard Chartered said bitcoin may sink as low as $5,000. The prediction, one of the bank’s list of “surprises” that are being “under-priced” by markets, would represent a 70% plunge from current prices.
“Yields plunge along with technology shares” in Standard Chartered’s nightmare 2023 scenario, “and while the Bitcoin sell-off decelerates, the damage has been done,” said Eric Robertsen, the bank’s global head of research.
“More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets,” he added.
Robertsen said the scenario has a “non-zero probability of occurring in the year ahead” and falls “materially outside of the market consensus or our own baseline views.”
Veteran investor Mark Mobius had a relatively successful 2022 in terms of his price call. In May, he forecast bitcoin would drop to $20,000 when it was trading above $28,000.
He said bitcoin would fall to $10,000 in 2022. That did not happen. However, Mobius told CNBC that he is sticking for his $10,000 price call in 2023.
The investor, who made his name at Franklin Templeton Investments, told CNBC that his bear case for bitcoin stemmed from rising interest rates and general tighter monetary policy from the U.S. Federal Reserve.
“With higher interest rates, the attraction of holding or buying Bitcoin or other cryptocurrencies becomes less attractive since just holding the coin does not pay interest,” Mobius said via email.
Carol Alexander, professor of finance at Sussex University, wasn’t far off the mark with her prediction that bitcoin would slip to $10,000 in 2022.
Now, she thinks the cryptocurrency could be set for gains — but not for reasons you might expect.
The catalyst would be more dominos from the FTX fallout tipping over, Alexander said. If this happens, she expects the price of bitcoin will top $30,000 in the first quarter, and then $50,000 by quarters three or four.
“There will be a managed bull market in 2023, not a bubble — so we won’t see the price overshooting as before,” she told CNBC.
“We’ll see a month or two of stable trending prices interspersed with range-bounded periods and probably a couple of short-lived crashes.”
Alexander’s reasoning is that, with trading volumes evaporating with traders on edge, large holders known as “whales” will likely step in to prop up the market. The wealthiest 97 bitcoin wallet addresses account for 14.15% of the total supply, according to fintech firm River Financial.
Some investors have given up trying to predict the price of bitcoin. For Antoni Trenchev, CEO of crypto lending platform Nexo, the recent events are a sobering moment.
Bitcoin was on a “positive path” earlier in 2022, with institutional adoption rising, but “a few major forces interfered,” he said.
Trenchev once predicted bitcoin surging to a peak of $100,000 by early 2023. Now, he’s done trying to predict the price.
Laith Khalaf, financial analyst at AJ Bell, suggested attempts to forecast bitcoin’s price are futile.
“We could be sitting here talking this time next year and it could be at $5,000 or 50,000 it just wouldn’t surprise me because the market is so heavily driven by sentiment,” he told CNBC’s “Squawk Box Europe.“
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The situation is getting worse for Sam Bankman-Fried, whose crypto empire went bankrupt just days after being at the center of the crypto sphere.
The regulators, who are trying to piece together what happened, and especially how the FTX cryptocurrency exchange, which was valued at $32 billion in February, could implode overnight.
In addition to FTX, Bankman-Fried, known by the initials SBF, also founded Alameda Research, a hedge fund that also served as a trading platform for cryptocurrencies and other crypto-related financial products for institutional investors.
The regulators filed a series of criminal and civil charges against Bankman-Fried, whom they accuse of alleged fraud. They now have the testimonies of two lieutenants of the former crypto king, who agreed to cooperate in exchange for the leniency from the regulators.
Zixiao (Gary) Wang, 29, FTX co-founder and former Chief Technology Officer, and Caroline Ellison, 28, the former CEO of Alameda Research, pled guilty, on Dec. 19, to multiple federal fraud charges and agreed to cooperate with prosecutors.
The first testimonies of Ellison to the investigators are real bombs launched against Bankman-Fried. She states, in particular, that she and her former boss and boyfriend knowingly enabled and concealed Alameda’s level of borrowing from FTX.
“I knew that it was wrong,” Ellison said about her actions, according to a transcript of her plea hearing released on Dec. 23. This is what she told a federal judge in Manhattan on Monday in entering her guilty plea, according to a transcript of the hearing that was unsealed on Friday.
“From 2019 through 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried,” she added. “In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having negative balances and without being subject to margin calls on FTX.com’s liquidation protocols.”
Ellison also said that: “If Alameda’s FTX accounts had significant negative balances in any particular currency, it meant that Alameda was borrowing funds that FTX’s customers had deposited on the exchange.”
Ellison, who appears to be a formidable witness for investigators to build and solidify their case against Bankman-Fried, said she was fine with hiding the close relationship between Alameda and FTX from investors. She also went along with Bankman-Fried’s decision to divert FTX clients’ funds to pay off Alameda loans.
“I agreed with others to borrow several billion dollars from FTX to repay those loans,” Ellison said.
Ellison’s testimony completely sweeps away SBF’s defense line, who had asserted in several media interviews that he had no intention of defrauding FTX customers.
“I made a lot of mistakes,” Bankman-Fried said during his first interview with the New York Times/DealBook on Nov. 30. “There are things I would give anything to be able to do over again. I didn’t ever try to commit fraud on anyone.”
SBF was extradited to the United States on Dec. 21 by the authorities of the Bahamas, where he lived and where FTX is headquartered. He was released after his parents, both law professors at Stanford, signed a $250 million recognizance bond pledging their California home as collateral. Two other friends with significant assets also signed, according to news reports.
Such a bond doesn’t require full payment up front, but comes into effect if a defendant misses a court hearing, or skips town.
Bankman-Fried will live at his parents’ house and will be required to wear an ankle bracelet to monitor his whereabouts during the pre-trial period, which could be lengthy, given the size and scope of the FTX collapse.
Justice Department prosecutors filed eight criminal counts against Bankman-Fried, according to the indictment unsealed on Dec. 13. Four of the charges, including conspiracy to commit wire fraud on customers and lenders and wire fraud, indicate that the alleged acts began as early as 2019. This is the year FTX was founded.
“Bankman-Fried was orchestrating a massive, yearslong fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the SEC alleges in its civil complaint.
Gary Wang, the co-founder of FTX, said, during his plea hearing, that he was “directed” to make changes to FTX’s platform code in order to benefit Alameda. He also claimed that he was aware of misrepresentations being made to clients and investors.
“I knew what I was doing was wrong,” Wang said, according to the transcript.
As a crypto exchange, FTX executed orders for clients, taking their cash and buying cryptocurrencies on their behalf. FTX acted as a custodian, holding the clients’ crypto.
FTX then used its clients’ crypto assets, through its sister company’s Alameda Research trading arm, to generate cash through borrowing or market-making. The cash FTX borrowed was used to bail out other crypto institutions in summer 2022.
At the same time, FTX was using the cryptocurrency it was issuing, FTT, as collateral on its balance sheet. This was a significant exposure, due to the concentration risk and the volatility of FTT.
The insolvency of FTX stemmed from a liquidity shortfall when clients attempted to withdraw funds from the platform. The shortfall appears to have been the result of Bankman-Fried allegedly transferring $10 billion of customer funds from FTX to Alameda Research.
John Ray, FTX’s new CEO in charge of the restructuring, said there was a software which allegedly allowed the company to hide these transfers from third parties.
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The crypto market has been battered this year, with more than $2 trillion wiped off its value since its peak in Nov. 2021. Cryptocurrencies have been under pressure after the collapse of major exchange FTX.
Jonathan Raa | Nurphoto | Getty Images
2022 marked the start of a new “crypto winter,” with high-profile companies collapsing across the board and prices of digital currencies crashing spectacularly. The events of the year took many investors by surprise and made the task of predicting bitcoin’s price that much harder.
The crypto market was awash with pundits making feverish calls about where bitcoin was heading next. They were often positive, though a few correctly forecast the cryptocurrency sinking below $20,000 a coin.
But many market watchers were caught off guard in what has been a tumultuous year for crypto, with high-profile company and project failures sending shock waves across the industry.
It began in May with the collapse of terraUSD, or UST, an algorithmic stablecoin that was supposed to be pegged one-to-one with the U.S. dollar. Its failure brought down terraUSD’s sister token luna and hit companies with exposure to both cryptocurrencies.
Three Arrows Capital, a hedge fund with bullish views on crypto, plunged into liquidation and filed for bankruptcy because of its exposure to terraUSD.
Then came the November collapse of FTX, one of the world’s largest cryptocurrency exchanges which was run by Sam Bankman-Fried, an executive who was often in the spotlight. The fallout from FTX continues to ripple across the cryptocurrency industry.
On top of crypto-specific failures, investors have also had to contend with rising interest rates, which have put pressure on risk assets, including stocks and crypto.
Bitcoin has sunk around 75% since reaching its all-time high of nearly $69,000 in November 2021 and more than $2 trillion has been wiped off the value of the entire cryptocurrency market. On Friday, bitcoin was trading at just under $17,000.
CNBC reached out to the people behind some of the boldest price calls on bitcoin in 2022, asking them how they got it wrong and whether the year’s events have changed their outlook for the world’s largest digital currency.
In 2018, at a tech conference in Amsterdam, Tim Draper predicted bitcoin reaching $250,000 a coin by the end of 2022. The famed Silicon Valley investor wore a purple tie with bitcoin logos, and even performed a rap about the digital currency onstage.
Four years later, it’s looking pretty unlikely Draper’s call will materialize. When asked about his $250,000 target earlier this month, the Draper Associates founder told CNBC $250,000 “is still my number” — but he’s extending his prediction by six months.
“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC via email.
Bitcoin would need to rally nearly 1,400% from its current price of just under $17,000 for Draper’s prediction to come true. His rationale is that despite the liquidation of notable players in the market like FTX, there’s still a huge untapped demographic for bitcoin: women.
“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.
In April, Antoni Trenchev, the CEO of crypto lender Nexo, told CNBC he thought the world’s biggest cryptocurrency could surge above $100,000 “within 12 months.” Though he still has four months to go, Trenchev acknowledges it is improbable that bitcoin will rally that high anytime soon.
Bitcoin “was on a very positive path” with institutional adoption growing, Trenchev says, but “a few major forces interfered,” including an accumulation of leverage, borrowing without collateral or against low-quality collateral, and fraudulent activity.
“I am pleasantly surprised by the stability of crypto prices, but I do not think we are out of the woods yet and that the second and third-order effects are still to play out, so I am somewhat skeptical as to a V-shape recovery,” Trenchev said.
The entrepreneur says he’s also done making bitcoin price predictions. “My advice to everyone, however, remains unchanged,” he added. “Get a single digit percentage point of your investable assets in bitcoin and do not look at it for 5-10 years. Thank me later.”
On Jan. 12, Guido Buehler, the former CEO of regulated Swiss bank Seba, which is focused on cryptocurrencies, said his company had an “internal valuation model” of between $50,000 and $75,000 for bitcoin in 2022.
Buehler’s reasoning was that institutional investors would help drive the price higher.
At the time, bitcoin was trading at between $42,000 and $45,000. Bitcoin never reached $50,000 in 2022.
The executive, who now runs his own advisory and investment firm, said 2022 has been an “annus horribilis,” in response to CNBC questions about what went wrong with the call.
“The war in Ukraine in February triggered a shock to the paradigm of world order and the financial markets,” Buehler said, citing the consequences of raised market volatility and rising inflation in light of the disruption of commodities like oil.
Another major factor was “the realization that interest rates are still the driver of most asset classes,” including crypto, which “was hard blow for the crypto community, where there has been the belief that this asset class is not correlated to traditional assets.”
Buehler said lack of risk management in the crypto industry, missing regulation and fraud have also been major factors affecting prices.
The executive remains bullish on bitcoin, however, saying it will reach $75,000 “sometime in the future,” but that it is “all a matter of timing.”
“I believe that BTC has proven its robustness throughout all the crisis since 2008 and will continue to do so.”
Paolo Ardoino, chief technology officer of Bitfinex and Tether, told CNBC in April that he expected bitcoin to fall sharply below $40,000 but end the year “well above” $50,000.
“I’m a bullish person on bitcoin … I see so much happening in this industry and so many countries interested in bitcoin adoption that I’m really positive,” he said at the time.
On the day of the interview, bitcoin was trading above $41,000. The first part of Ardoino’s call was correct — bitcoin did fall well below $40,000. But it never recovered.
In a follow-up email this month, Ardoino said he believes in bitcoin’s resilience and the blockchain technology underlying it.
“As mentioned, predictions are hard to make. No one could have predicted or foreseen the number of companies, well regarded by the global community, failing in such a spectacular fashion,” he told CNBC.
“Some legitimate concerns and questions remain around the future of crypto. It might be a volatile industry, but the technologies developed behind it are incredible.”
A key theme in 2022 has been bitcoin’s correlation to U.S. stock indexes, especially the tech-heavy Nasdaq 100. In June, Deutsche Bank analysts published a note that said bitcoin could end the year with a price of approximately $27,000. At the time of the note, bitcoin was trading at just over $20,000.
It was based on the belief from Deutsche Bank’s equity analysts that the S&P 500 would jump to $4,750 by year-end.
But that call is unlikely to materialize.
Marion Laboure, one of the authors of Deutsche Bank’s initial report on crypto in June, said the bank now expects bitcoin to end the year around $21,000.
“High inflation, monetary tightening, and slow economic growth have likely put additional downward pressure on the crypto ecosystem,” Laboure told CNBC, adding that more traditional assets such as bonds may begin to look more attractive to investors than bitcoin.
Laboure also said high-profile collapses continue to hit sentiment.
“Every time a major player in the crypto industry fails, the ecosystem suffers a confidence crisis,” she said.
“In addition to the lack of regulation, crypto’s biggest hurdles are transparency, conflicts of interest, liquidity, and the lack of reliable available data. The FTX collapse is a reminder that these problems continue to be unresolved.”
In a Nov. 9 research note, JPMorgan analyst Nikolaos Panigirtzoglou and his team predicted the price of bitcoin would slump to $13,000 “in the coming weeks.” They had the benefit of hindsight after the FTX liquidity crisis, which they said would cause a “new phase of crypto deleveraging,” putting downside pressure on prices.
The cost it takes miners to produce new bitcoins historically acts as a “floor” for bitcoin’s price and is likely to revisit a $13,000 low as seen over the summer months, the analysts said. That’s not as far off bitcoin’s current price as some other predictions, but it’s still much lower than Friday’s price of just under $17,000.
A JPMorgan spokesperson said Panigirtzoglou “isn’t available to comment further” on his research team’s forecast.
Ian Harnett, co-founder and chief investment officer at macro research firm Absolute Strategy Research, warned in June that the world’s top digital currency was likely to tank as low as $13,000.
Explaining his bearish call at the time, Harnett said that, in crypto rallies past, bitcoin had subsequently tended to fall roughly 80% from all-time highs. In 2018, for instance, the token plummeted close to $3,000 after hitting a peak of nearly $20,000 in late 2017.
Harnett’s target is closer than most, but bitcoin would need to fall another 22% for it to reach that level.
When asked about how he felt about the call today, Harnett said he is “very happy to suggest that we are still in the process of the bitcoin bubble deflating” and that a drop close to $13,000 is still on the cards.
“Bubbles usually see an 80% reversal,” he said in response to emailed questions.
With the U.S. Federal Reserve likely set to raise interest rates further next year, an extended drop below $13,000 to $12,000 or even $10,000 next can’t be ruled out, according to Harnett.
“Sadly, there is no intrinsic valuation model for this asset — indeed, there is no agreement whether it is a commodity or a currency — which means that there is every possibility that this could trade lower if we see tight liquidity conditions and/or a failure of other digital entities / exchanges,” he said.
Veteran investor Mark Mobius has probably been one of the more accurate predictors of bitcoin.
In May, when the price of bitcoin was above $28,000, he told Financial News that bitcoin would likely fall to $20,000, then bounce, but ultimately move down to $10,000.
Bitcoin did fall below $20,000 in June, and then bounce in August before falling again through the rest of the year.
However, the $10,000 mark was not reached.
Mobius told CNBC he forecasts bitcoin to hit $10,000 in 2023.
In December 2021, a month on from bitcoin’s all-time high, Carol Alexander, professor of finance at Sussex University, said she expected bitcoin to drop down to $10,000 “or even more” in 2022.
Bitcoin at the time had fallen about 30% from its near $69,000 record. Still, many crypto talking heads at the time were predicting further gains. Alexander was one of the rare voices going against the tide.
“If I were an investor now I would think about coming out of bitcoin soon because its price will probably crash next year,” she said at the time. Her bearish call rested on the idea that bitcoin has little intrinsic value and is mostly used for “speculation.”
Bitcoin didn’t quite slump as low as $10,000 — but Alexander is feeling good about her prediction. “Compared with others’ predictions, mine was by far the closest,” she said in emailed comments to CNBC.
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WATCH
3:42
| Dec 19, 2022, 03:31PM EST
Sam Bankman-Fried, the former billionaire crypto wunderkind now jailed in the Bahamas and facing a litany of criminal charges for alleged fraud, did not agree to extradition back to the U.S. as expected in a Monday court hearing.
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The collapse of FTX, once a $32 billion crypto exchange, has shattered investor confidence in cryptocurrencies. Market players are trying to gauge the extent of damage it has caused — and how it will reshape the industry in the years to come.
Sam Bankman-Fried, FTX’s former boss who stepped down on Nov. 11, was arrested in the Bahamas last week. He has been charged by the U.S. government with wire fraud, securities fraud and money laundering.
FTX connected buyers and sellers of digital currencies like bitcoin, as well as derivatives. However, the company did more than that, allegedly dipping into client accounts to make risky trades through its sister firm Alameda Research.
“It’s hugely disappointing for investors, or more so devastating for investors,” said Louise Abbott, a partner at law firm Keystone Law who specializing in crypto-asset recovery and fraud.
It’s clear the FTX drama could radically reshape crypto in the years to come. Here are three big ways the industry could change.
For one, the disaster will looks certain to stir regulators into action.
Crypto as an industry is still largely unregulated, meaning investors don’t have the same protections they would have placing their funds with a licensed bank or broker.
That may be about to change. Governments in the U.S., European Union and the U.K. are taking steps to clean up the market.
If there’s no regulation, the investors are left without that protection that they need.
Louise Abbott
Partner, Keystone Law
The EU’s Markets in Crypto-Assets is the most comprehensive regulatory framework to date. It aims to reduce the risks for consumers buying crypto, making exchanges liable if they lose investors’ assets.
But MICA is not due to start until 12 months from now. Keystone Law’s Abbott said it’s important that regulators act quickly.
“People need to see that there’s steps being taken to regulate it. And I think If we are able to offer some regulation, we will build confidence,” she said. “If there’s no regulation, the investors are left without that protection that they need.”
The saga has set back adoption of crypto assets by “one or two years,” according to Evgeny Gaevoy, founder and CEO of crypto market maker Wintermute.
“Everything that failed this year, if you look at Celsius, Three Arrows, FTX now — all those guys were taking the worst of both worlds because they were not completely decentralized, and they were not properly centralized either,” he said.
For Kevin de Patoul, CEO of crypto market maker Wintermute, the biggest lesson from FTX’s bankruptcy is that “you cannot have complete centralization and lack of oversight.”
“We are evolving to a world where you are going to have both centralization and decentralization,” he said. “When you do have that centralization, you need to have proper oversight and a proper balance of power.”
I don’t think all the dominoes have fallen out from the contagion. The impact that this will have is that a lot of projects actually are not going to have the funds…
Marieke Flament
CEO, Near Foundation
“The challenge for the whole space when you think about contagion is that FTX and Alameda were extremely active investors in this space,” Peter Smith, CEO of Blockchain.com, said in a CNBC-moderated talk at a crypto conference in London.
Near Foundation, which is behind a blockchain network called Near, was among the firms that took investment from FTX. Marieke Flament, Near’s CEO, said the firm had limited exposure to FTX — though the collapse was still “a surprise and a shock.”
“I don’t think all the dominoes have fallen out from the contagion,” Flament said. “The impact that this will have is that a lot of projects actually are not going to have the funds, and therefore the resources, for them to continue and develop.”
Fears have risen over the financial health of other major crypto exchanges after FTX’s failure. Since early 2020, about 900,000 bitcoins have flowed out of exchanges, according to data from CryptoQuant.
Binance, the world’s largest exchange, is facing questions about the reserves it holds to backstop customer funds. The company saw billions of dollars in outflows in the past week.
Currently, there is no reason to suspect Binance faces any risk of bankruptcy. But exchanges like Binance and Coinbase face a bleak market backdrop ahead amid falling trading volumes and account balances.
Experts believe they’ll continue to play a role — though their survival will be determined by how seriously they take risk management, governance and regulation.
“There will be exchanges that are doing things the right way and that will survive,” said Abbott.
As for tokens — bitcoin, being the longest-living digital currency, may be better positioned than its smaller rivals.
“My bet would be that bitcoin and DeFi [decentralized finance] are decoupled from the rest of crypto and actually start to have a life of its own,” Gaevoy from Wintermute told CNBC.
Despite the depressed state of crypto markets, and the toll it’s taken on investors, the digital asset industry is likely to pull through.
Proponents of “Web3,” a hypothetical blockchain-based internet, expect 2022’s crypto winter to pave the way for more innovative uses of blockchain, rather than the speculative uses crypto is associated with today.
“What we’re seeing a lot is companies having digital innovation arms or metaverse innovation arms,” Flament said. “They understand that the technology is here. It’s not going to go away.”
NFTs, or nonfungible tokens, could alter users’ relationships with properties in games and events, for example. These are digital assets that track ownership of unique virtual items on the blockchain.
“Digital assets will be an increasing part of our lives, whether that is a collectible, a ticket, value, identity,” Ian Rogers, chief experience officer at crypto wallet firm Ledger, told CNBC. “Identity could be membership … [people] using NFTs they own to get access to a particular event or something like that.”
But for many, there’s still a learning curve to overcome. “It’s hard creating wallets and storing keys and going through different platforms,” Cordel Robbin-Coker, CEO of mobile games firm Carry1st, told CNBC at the Slush startup conference in Helsinki, Finland.
Robbin-Coker compared Web3 today with the internet in the early 90s. “It was clunky. You had dial-up, it took four minutes to get on, the original web browsers were not very intuitive,” he said.
“It’s really the early adopters that really engage at that stage. But over time, companies build smoother interfaces. And they cut steps out of it.”
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Cryptocurrency firms reeling from the epic collapse of FTX and its aftereffects received yet another unwelcome development on Sunday’s talk shows.
Senator Sherrod Brown, chair of the Senate banking committee, took questions on NBC’s Meet the Press today about how lawmakers should approach cryptocurrencies after the FTX debacle.
Host Chuck Todd asked the lawmaker whether regulating crypto would give a “green light” to something that many people think should be banned.
Brown, referring to government agencies—the Treasury, the Securities and Exchange Commission, and the Commodity Futures Trading Commission—replied, “We want them to do what they need to do…maybe banning.”
His comments follow ones made by Senator Jon Tester, who serves on the same banking committee and was asked by Todd last weekend whether crypto should be regulated or banned.
“One or the other,” he answered. “It’s not been able to pass the smell test for me…I see no reason why this stuff should exist. I really don’t.”
But it isn’t just lawmakers in Washington, D.C.—many top business leaders feel the same way.
In September, JPMorgan Chase CEO Jamie Dimon called crypto a “decentralized Ponzi scheme” that’s not “good for anybody.”
Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett’s business partner, said this summer: “Crypto is an investment in nothing…I think anybody that sells this stuff is either delusional or evil. I’m not interested in undermining the national currencies of the world.”
Munger went so far as to praise Chinese leader Xi Jinping for being “smart enough” to ban Bitcoin in China.
But Brown on Sunday acknowledged banning crypto is “very difficult because it will go offshore and who knows how that will work…This is a complicated, unregulated pot of money.”
FTX founder Sam Bankman-Fried based his business in the Bahamas, where he reportedly led a lavish penthouse lifestyle and, according to federal prosectors, misused billions of dollars in customer funds.
Bahamian authorities arrested him on Monday following a formal notification by the U.S. government that it had filed criminal charges against him and would likely request his extradition. The U.S. and the Bahamas have had an extradition process in place since 1994.
Brown this week thanked the U.S. and Bahamian officials behind the arrest, adding in a statement, “I trust that Mr. Bankman-Fried will soon be brought to justice. It is clear he owes the American people an explanation.”
He added, “Things that look and behave like securities, commodities, or banking products need to be regulated and supervised by the responsible agencies who serve consumers…Crypto doesn’t get a free pass because it’s bright and shiny.”
Brian Armstrong, CEO of crypto exchange Coinbase, noted in tweet last month that FTX was “an offshore exchange not regulated by the SEC.”
His company is based the U.S. and as a publicly traded firm has more transparency than FTX did. This week, Coinbase shares fell to an all-time low.
“The problem is that the SEC failed to create regulatory clarity here in the US, so many American investors (and 95% of trading activity) went offshore,” he wrote. “Punishing US companies for this makes no sense.”
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Steve Mollman
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Before his surprise Monday night arrest, Sam Bankman-Fried had apologized for everything he could think of, to everyone who would listen. In a leaked draft of his aborted House testimony, he wrote that he was truly, for his entire adult life, “sad.” He “f—– up,” he tweeted, and wrote, and said.
He told Bahamas regulators he was “deeply sorry for ending up in this position.” But when Bankman-Fried was escorted out of his penthouse apartment in Nassau in handcuffs, it still wasn’t clear what he was apologizing for, having stridently denied committing fraud to CNBC’s Andrew Ross Sorkin, ABC News’ George Stephanopoulos, and across Twitter for weeks.
But the day after his arrest, federal prosecutors and regulators unsealed dozens of pages of filings and charges that accused Bankman-Fried of not just having perpetrated a fraud, but having done so “from the start,” according to a filing from the Securities Exchange Commission
Far from having “f—– up,” SEC and Commodity Futures Trading Commission regulators, alongside federal prosecutors from the United States Attorney’s Office for the Southern District of New York, allege that Bankman-Fried was at the heart — indeed, the driver — of “one of the biggest financial frauds in American history,” in the words of U.S. Attorney Damian Williams. The allegations against Bankman-Fried were assembled with stunning speed, but offer insight into one of the highest-profile fraud prosecutions since Enron.
Bankman-Fried founded his crypto hedge fund Alameda Research in November 2017, renting office space in Berkeley, California. The scion of two Stanford law professors, Bankman-Fried had graduated from MIT, worked at the prestigious quantitative trading firm Jane Street Capital, and had broken into cryptocurrencies with a MIT classmate, Gary Wang.
Alameda Research was essentially an arbitrage shop, purchasing bitcoin at a lower price from one exchange and selling it for a higher price at another. Price differences in South Korea versus the rest of the world allowed Bankman-Fried and Wang to profit tremendously from what was nicknamed “the kimchi swap.”
In April 2019, Bankman-Fried and Wang — along with U.C. Berkeley graduate Nishad Singh — founded FTX.com, an international cryptocurrency exchange that offered customers innovative trading features, a responsive platform, and a reliable experience.
Federal regulators at the CFTC say that just a month after founding FTX.com, Bankman-Fried, “unbeknownst to all but a small circle of insiders,” was leveraging customer assets — specifically, customers’ personal cryptocurrency deposits — for Alameda’s own bets.
Rehypothecation is the term for when businesses legally use customer assets to speculate and invest. But Bankman-Fried didn’t have permission from customers to gamble with their funds. FTX’s own terms of use specifically forbade him, or Alameda, from using customer money for anything — unless the customer allowed it.
And from FTX’s inception, there was a lot of customer money. The CFTC cited 2019 reports from FTX which pegged the futures volume alone as often exceeding $100 million every day.
Using customer money for Alameda’s bets constituted fraud, the CFTC alleges. In the Southern District of New York, where Bankman-Fried was indicted by a grand jury, Bankman-Fried faces criminal fraud charges as well. From the very genesis of FTX, regulators allege, Bankman-Fried was using customer funds to bankroll his speculative investments.
It is a swift fall from grace for the one-time king of crypto, who as recently as two months ago was hailed as the savior of the industry. Now, Bankman-Fried heads to a Bahamian court on Monday to surrender himself to the U.S. extradition process, according to a person familiar with the matter. A criminal trial awaits him once he is back on U.S. soil.
Attorneys for Bankman-Fried, and attorneys for his former companies, did not immediately return requests for comment. A representative for Bankman-Fried declined to comment.
FTX quickly rose, launching its own token, FTT, in July 2019 and snagging an equity investment from Binance in November of that year.
By 2021, according to the CFTC filing, FTX and its subsidiaries held roughly $15 billion worth of assets, and accounted for 10% of global digital transaction volume, clearing $16 billion worth of customer trades every day.
The firm’s “years-long” fraud didn’t just extend to playing with customer money, according to the SEC.
FTX was able to operate so effectively, clear such massive volume, and generate such interest because it had a designated market maker (DMM) of its own. In traditional finance, a DMM is a firm that will buy and sell securities to and from customers, hoping to clear a profit in any difference in price, called the spread.
From FTX’s 2019 founding, Alameda was that market maker, snapping up and releasing cryptocurrencies on the exchange. Alameda and FTX’s symbiotic relationship proved advantageous for both ends of Bankman-Fried’s growing empire.
As FTX matured, other market makers came online to offer liquidity. But Alameda was, and remained, FTX’s largest liquidity provider, easing platform function at “Bankman-Fried’s direction,” the SEC alleges.
Unlike those other market makers or power users, Alameda had a set of powerful tools at its disposal.
In August 2019, the SEC alleges, Bankman-Fried directed his team at FTX to program an exception into the exchange’s code, allowing Alameda to “maintain a negative balance in its account, untethered from any collateral requirements.”
“No other customer account at FTX was permitted to maintain a negative balance,” the SEC filing continues. The negative balance meant that Alameda was allegedly effectively backstopped by customer assets while making trades.
Former Alameda CEO Caroline Ellison once alluded to this in a widely disseminated interview.
“We tend not to have things like stop losses,” Ellison said.
In traditional finance, a stop-loss order helps traders limit exposure to a potentially losing trade. When an asset (a stock, for example) reaches a pre-determined lower limit, the stop-loss order will automatically sell off the asset to prevent losses from spiraling out of control.
Not content with what would eventually become a “virtually unlimited” line of credit from investors — his own customers — Bankman-Fried conspired to stack the deck in Alameda’s favor, regulators say.
FTX offered power users access to an API — an interface that allowed the user to bypass FTX’s front-end platform and communicate directly with FTX’s back-end systems. Normal users were still subjected to common-sense checks: verifying that they had enough money in their account, for example.
Alameda traders could access a fast-lane which let them shunt past other users and shave “several milliseconds” off their trade execution times, according to the CFTC. The kind of high-frequency trading that FTX users engaged in made that invaluable.
Despite the deck being stacked in Alameda’s favor, the hedge fund offered terrible returns. A court filing indicated that Alameda lost over $3.7 billion over its lifetime, despite public statements by FTX leaders touting how profitable the trading arm was.
Alameda’s losses and lending structure were a critical component of FTX’s eventual collapse.
Alameda didn’t just play fast and loose with customer money. The hedge fund borrowed aggressively from multiple lenders, including Voyager Digital and BlockFi Lending. Both those companies entered Chapter 11 bankruptcy proceedings this year, and FTX targeted both for acquisition.
Alameda secured its loans from Voyager and BlockFi with FTT tokens, which FTX minted itself. Bankman-Fried’s empire controlled the vast majority of the available currency, with only a small amount of FTT actually circulating at any time.
Alameda should have acknowledged the fact that its tokens couldn’t be sold at the price that they claimed they were worth, the CFTC alleges in its complaint.
This was because any attempt by Alameda to sell off their FTT tokens would crater FTT’s price, given how much of the available supply Alameda controlled.
Instead of correctly marking its tokens to market, though, Alameda recorded their entire hoard of FTT as being worth the prevailing market price.
Alameda used this methodology with other coins as well, including Solana and Serum (a token created and promoted by FTX and Alameda), using them to collateralize billions in loans to other crypto players. Industry insiders even had a nickname for those tokens — “Sam coins.”
The tables turned after the collapse of Luna, a stablecoin whose implosion and subsequent crash devastated other lenders and crypto firms and sent crypto prices plunging. Major Alameda lenders, like Voyager, declared bankruptcy. Remaining lenders began to execute margin calls or liquidate open positions with customers, including Alameda.
The CFTC alleges that between May and June 2022, Alameda was subjected to “a large number of margin calls and loan recalls.”
Unbeknownst to investors, lenders, or regulators, Alameda lacked enough liquid assets to service its loan obligations.
But while Alameda was illiquid, FTX’s customers — who had been constantly reassured that the exchange, and Bankman-Fried, were determined to protect their interests — were not.
Bankman-Fried stepped down from his leadership position at Alameda Research in Oct. 2021 in what CFTC regulators claim was a calculated bid to cultivate a false sense of separation between FTX and the hedge fund. But he continued to exercise control, regulators claim.
Bankman-Fried allegedly ordered Alameda to increase its use of customer assets, drawing down massively on its “unlimited” credit line at FTX.
“Alameda was able to rely on its undisclosed ordinary-course access to FTX credit and customer funds to facilitate these large withdrawals, which were several billion dollars in notional value,” the CFTC filing reads.
By the middle of 2022, Alameda owed FTX’s unwitting customers approximately $8 billion. Bankman-Fried had testified before the House that FTX boasted world-class risk management and compliance systems, but in reality, according to the firm’s own bankruptcy filings, it possessed almost nothing in the way of record-keeping.
Then, on Nov. 2, the first domino fell. Crypto trade publication CoinDesk publicized details on Alameda’s balance sheet which showed $14.6 billion in assets. Over $7 billion of those assets were either FTT tokens or Bankman-Fried-backed coins like Solana or Serum. Another $2 billion were locked away in equity investments.
For the first time ever, the secretive inner workings of Alameda Research were revealed to be a modern-day Potemkin village. Investors began to liquidate their FTT tokens and withdraw their holdings from FTX, a potentially calamitous situation for Bankman-Fried.
Alameda still had billions of collateralized loans outstanding — but if the value of their collateral, FTT, fell too far, their lenders would execute further margin calls, demanding full repayment of loans.
Allegedly, Alameda had already been unable to fulfill loan obligations over the summer without accessing customer funds. Now, with money flowing out of the exchange and FTT’s price slipping, Alameda and FTX faced a liquidity crunch.
In a now-deleted tweet, Bankman-Fried continued to claim FTX was fully funded and that customer assets were safe. But on Nov. 6, four days after the CoinDesk article, the crack widened into a chasm, thanks to an old investor-turned-rival, Changpeng “CZ” Zhao.
Zhao founded Binance in 2017, and it was the first outside investor in FTX, funding a Series A round in 2019. It had exited the investment by July 2021, the same year that FTX raised $1 billion from big names like Sequoia Capital and Thoma Bravo.
FTX bought out Binance with a combination of BUSD, BNB, and FTT, according to Zhao.
BUSD is Binance’s exchange-issued stablecoin, pegged to the value of the U.S. dollar. BNB is their exchange token, similar to FTX’s FTT, issued by Binance and used to pay transaction and trading fees on the exchange.
Zhao dropped the hammer with a tweet saying that because of “recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books.”
FTX executives scrambled to contain potential damage. Ellison responded to Zhao offering to purchase Binance’s remaining FTT position for $22 per token.
Privately, Bankman-Fried ordered Alameda traders to liquidate Alameda’s investments and positions “to rapidly free up capital for FTT buybacks,” the CFTC filing states. Bankman-Fried was preparing to bet the house in an effort to maintain Ellison’s public support level of $22.
Alameda traders managed to fend off outflows for two days, holding the price of FTT at around $22.
Publicly, Bankman-Fried continued to operate as if all was well. “FTX is fine. Assets are fine,” he wrote in a tweet on Nov. 7 that has since been deleted. Bankman-Fried asserted that FTX did not invest client assets and that all redemptions would be processed.
But at the same time Bankman-Fried was tweeting reassurances, internally, executives were growing more and more alarmed at the increasing shortfall, according to prosecutors. It was “not merely a matter of having sufficient liquid funds on hand to cover customer withdrawals,” the CFTC alleges.
Rather, Bankman-Fried and other executives admitted to each other that “FTX customer funds were irrevocably lost because Alameda had appropriated them.”
It was an admission that flew in the face of everything Bankman-Fried would claim publicly up through the day of his arrest, a month later.
By Nov. 8, the shortfall had grown from $1 billion to $8 billion. Bankman-Fried had been courting outside investors for a rescue package. “Numerous parties declined […] regardless of the favorable terms being offered,” the CFTC filing alleges.
FTX issued a pause on all customer withdrawals that day. FTT’s price plummeted by over 75%. Bankman-Fried was in the midst of a high-tech, decentralized run on the bank. Out of options, he turned to Zhao, who announced that he’d signed a “non-binding” letter of intent to acquire FTX.com.
But just a day later, on Nov. 9, Binance said it would not go through with the acquisition, citing reports of “mishandled customer funds” and federal investigations.
Two days later, Bankman-Fried resigned as CEO of FTX and associated entities. FTX’s longtime attorneys at Sullivan & Cromwell approached John J. Ray, who oversaw Enron through its bankruptcy, to assume Bankman-Fried’s former position.
FTX filed for bankruptcy that same day, on Nov. 11. A month later, Bankman-Fried was arrested by Bahamian authorities, pending extradition on charges of fraud, conspiracy, and money laundering.
Bankman-Fried, a devotee of a philosophy known as “effective altruism,” was apparently driven by an obsessive need to quantify the impact he had on this world, measured in dollars and tokens. He drafted a spreadsheet which measured the influence that Alameda had on the planet (and determined it was nearly a net wash).
Billions of dollars of customer money are now floating in venture funds, political war chests and charitable coffers — money now at risk of being clawed back, thanks to Bankman-Fried’s alleged crimes.
Almost a decade ago, Bankman-Fried posed a hypothetical question to his friends and family on his personal blog: Waxing poetic on effective altruism, he asked rhetorically, “Just how much impact can a dollar have?”
“Well, if you want a one-sentence answer, here it is: one two thousandth of a life,” he said.
The CFTC alleges that over $8 billion dollars of customer funds are missing. Some customers have doubtless lost their life savings, their kid’s college funds, their future down payments. By Bankman-Fried’s own math, his alleged misdeeds were worth four million lives.
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Sam Bankman-Fried has been remanded in Bahamian custody until February, a day after he was arrested at a luxury apartment in the Bahamas.
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Before he was arrested Monday in the Bahamas, disgraced FTX founder and former CEO Sam Bankman-Fried was planning to testify before Congress on Tuesday about the dramatic collapse of his cryptocurrency exchange.
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Tom Williams | CQ-Roll Call, Inc. | Getty Images
Sam Bankman-Fried’s arrest in the Bahamas on Monday marks the beginning of a new chapter in the FTX saga, one that will pit the former crypto billionaire against the Southern District of New York.
The indictment is expected to remain sealed until Tuesday morning. U.S. prosecutors haven’t commented, and neither the Attorney General of the Bahamas nor the Royal Bahamas Police Force would confirm the nature of the charges against Bankman-Fried.
The New York Times reported that the charges against Bankman-Fried included conspiracy to commit wire fraud and securities fraud, as well as standalone charges of securities fraud, wire fraud and money laundering.
The SEC has initiated a separate set of charges against Bankman-Fried, relating to “violations of our securities laws, which will be filed publicly tomorrow in the Southern District of New York,” enforcement director Gurbir Grewal said in a statement on Monday.
A spokesperson for the SEC declined further comment.
The charges could land Bankman-Fried in prison for decades, legal experts told CNBC. But before he ever serves time, U.S. prosecutors have to secure an extradition from the Bahamas back to New York.
“It is inconceivable to me that the Justice Department would have charged this case unless they were confident that they could extradite him,” Renato Mariotti, a former federal prosecutor, told CNBC.
Mariotti anticipates an extradition will take weeks to complete.
“The statement by the Bahamian government suggests that they’re going to cooperate,” Mariotti said.
The U.S. and the Bahamas have had an extradition treaty in place since 1931, with the most recent iteration codified in 1990. Because Bankman-Fried hasn’t been convicted in the Bahamas yet, U.S. prosecutors had to secure an arrest warrant and provide sufficient evidence to the Bahamians that he had committed a crime.
Extradition is the first step in a process that could take years to finish. Given the magnitude of Bankman-Fried’s alleged crimes, prosecutors and regulators will be pursuing concurrent cases around the world.
A trial in the U.S. “may not occur for years,” Mariotti said.
“The more that they charge, the bigger that the case is, the more time they’re going to need to get in motion,” he said. “I would say late 2023 is the earliest a trial would occur.”
Prosecutors could argue that FTX breached its fiduciary duty by allegedly using customer funds to artificially stabilize the price of the company’s self-issued FTT coin, Mariotti said.
Intent is also a factor in fraud cases, and Bankman-Fried insists he didn’t know about potentially fraudulent activity. He told CNBC’s Andrew Ross Sorkin at the New York Times DealBook conference that he “didn’t knowingly commingle funds.”
“I didn’t ever try to commit fraud,” Bankman-Fried said.
In prepared testimony for the House Financial Services committee, new FTX CEO John Ray confirmed that commingling of funds had occurred between FTX and Alameda Research, Bankman-Fried’s hedge fund.
Beyond the criminal charges set to be unveiled Tuesday morning, Bankman-Fried is also facing civil action, which could be brought by the SEC, the Commodity Futures Trading Commission and state banking and securities regulators, said Richard Levin, who chairs the fintech and regulation practice at Nelson Mullins Riley & Scarborough.
The CFTC and lawmakers have begun their probes into FTX and Bankman-Fried, who told Sorkin he was down to his last $100,000.
Shortly after Bankman-Fried’s arrest, the SEC appeared to confirm that the agency would pursue a separate set of charges from the criminal indictment.
Lawmakers also expressed their satisfaction at Bankman-Fried’s arrest. Senator Sherrod Brown (D-Ohio), who chairs the Senate Committee on Banking, Housing, and Urban Affairs, applauded both the Justice Department and Bahamian law enforcement “for holding Sam Bankman-Fried accountable.”
Rep. Maxine Waters (D-Calif.), the chairwoman of the House Financial Services Committee, echoed that sentiment, but expressed disappointment that Bankman-Fried was arrested before his House testimony, which was scheduled for Tuesday.
“I am surprised to hear that Sam Bankman-Fried was arrested in the Bahamas at the direction of the United States Attorney,” Waters said in a statement.
“[The] American public deserves to hear directly from Mr. Bankman-Fried about the actions that’ve harmed over one million people,” Waters continued.
Bankman-Fried had also been invited to appear before the Senate prior to his arrest. That hearing will occur on Wednesday.
It’s unclear whether the SEC or the CFTC will take the lead in securing civil damages.
“The question of who would be taking the lead there, whether it be the SEC or CFTC, depends on whether or not there were securities involved,” Mariotti told CNBC.
SEC Chairman Gary Gensler, who met with Bankman-Fried and FTX executives earlier this year, has said publicly that “many crypto tokens are securities,” which would make his agency the primary regulator.
But many exchanges, including FTX, have crypto derivatives platforms that sell financial products like futures and options, which fall under the CFTC’s jurisdiction.
“For selling unregistered securities without a registration or an exemption, you could be looking at the Securities Exchange Commission suing for disgorgement — monetary penalties,” said Levin, who’s represented clients before both agencies.
Investors who have lost their savings aren’t waiting. Class-action suits have already been filed against FTX endorsers, like comedian Larry David and football superstar Tom Brady. One suit excoriated the celebrities for allegedly failing to do their “due diligence prior to marketing [FTX] to the public.”
FTX’s industry peers are also filing suit against Bankman-Fried. Failed lender BlockFi sued Bankman-Fried in November, seeking unnamed collateral that the FTX founder provided for the crypto lending firm.
FTX and Bankman-Fried had previously rescued BlockFi from insolvency in June, but when FTX failed, BlockFi was left with a similar liquidity problem and filed for bankruptcy protection in New Jersey.
Bankman-Fried has also been sued in Florida and California federal courts. He faces class-action suits in both states over “one of the great frauds in history,” a California court filing said.
The largest securities class-action settlement was for $7.2 billion in the Enron accounting fraud case, according to Stanford research. The possibility of a multibillion-dollar settlement would come on top of civil and criminal fines that Bankman-Fried faces.
If the DOJ were able to secure a conviction, a judge would look to several factors to determine how long to sentence him.
Based on the size of the losses, if Bankman-Fried is convicted on any of the fraud charges, he could be behind bars for years — potentially for the rest of his life, said Braden Perry, a partner at Kennyhertz Perry who advises clients on anti-money laundering, compliance and enforcement issues.
But the length of any potential sentence is hard to predict, said Perry, who was previously a senior trial lawyer for the CFTC, FTX’s only official U.S. regulator.
Federal sentencing guidelines follow a numeric system to determine the maximum and minimum allowable sentence, but the system can be esoteric. The scale, or “offense level,” starts at one, and maxes out at 43.
A wire fraud conviction rates as a seven on the scale, with a minimum sentence ranging from zero to six months.
But mitigating factors and enhancements can alter that rating, Perry told CNBC.
“The dollar value of loss plays a significant role. Under the guidelines, any loss above $550 million adds 30 points to the base level offense,” Perry said. FTX customers have lost billions of dollars.
“Having 25 or more victims adds 6 points, [and] use of certain regulated markets adds 4,” Perry said.
That means Bankman-Fried could be facing life in federal prison, without the possibility of supervised release, if he’s convicted on just one of the offenses that prosecutors will reportedly pursue.
If convicted, his sentence could be reduced by mitigating factors.
“In practice, many white-collar defendants are sentenced to lesser sentences than what the guidelines dictate,” Perry said. Even in large fraud cases, that 30-point enhancement previously mentioned can be considered punitive.
By way of comparison, Stefan Qin, the Australian founder of a $90 million cryptocurrency hedge fund, was sentenced to more than seven years in prison after he pleaded guilty to one count of securities fraud.
Roger Nils-Jonas Karlsson, a Swedish national accused by the United States of defrauding over 3,500 victims of more than $16 million, was sentenced to 15 years in prison for securities fraud, wire fraud and money laundering.
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Tim Draper, founder of Draper Associates, onstage at the Web Summit 2022 tech conference.
Ben McShane | Sportsfile via Getty Images
Venture capitalist Tim Draper thinks bitcoin will hit $250,000 a coin by the middle of 2023, even after a bruising year for the cryptocurrency marked by industry failures and sinking prices.
Draper previously predicted that bitcoin would top $250,000 by the end of 2022, but in early November, at the Web Summit tech conference in Lisbon, he said it would take until June 2023 for this to materialize.
He reaffirmed this position Saturday when asked how he felt about his price call following the collapse of FTX.
“I have extended my prediction by six months. $250k is still my number,” Draper told CNBC via email.
Bitcoin would need to rally nearly 1,400% from its current price of around $17,000 for Draper’s prediction to come true. The cryptocurrency has plunged over 60% since the start of the year.
Digital currencies are in the doldrums as tighter monetary policy from the Fed and a chain reaction of bankruptcies at major industry firms including Terra, Celsius and FTX have put intense pressure on prices.
FTX’s demise has also worsened an already severe liquidity crisis in the industry. Crypto exchange Gemini and lender Genesis are among the firms said to be impacted by the fallout from FTX’s insolvency.
Last week, veteran investor Mark Mobius told CNBC that bitcoin could crash to $10,000 next year, a more than 40% plunge from current prices. The co-founder of Mobius Capital Partners correctly called the drop to $20,000 this year.
Nevertheless, Draper is convinced that bitcoin, the world’s largest cryptocurrency, is set to rise in the new year.
“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC.
Draper, the founder of Draper Associates, is one of Silicon Valley’s best-known investors. He made successful bets on tech companies including Tesla, Skype and Baidu.
In 2014, Draper purchased 29,656 bitcoins confiscated by U.S. Marshals from the Silk Road dark web marketplace for $18.7 million. That year, he predicted the price of bitcoin would go to $10,000 in three years. Bitcoin went on to climb close to $20,000 in 2017.
Some of Draper’s other bets have soured, however. He invested in Theranos, a health startup that falsely claimed it was able to detect diseases with a few drops of blood. Elizabeth Holmes, Theranos’ founder, has been sentenced to 11 years in prison for fraud.
Draper’s rationale for bitcoin’s breakout next year is that there remains a massive untapped demographic for bitcoin: women.
“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.
Crypto has long had a gender disparity problem. According to a survey conducted for CNBC and Acorns by Momentive, twice as many men as women invest in digital assets (16% of men vs. 7% of women).
“Retailers will save roughly 2% on every purchase made in bitcoin vs dollars,” Draper added. “Once retailers realize that that 2% can double their profits, bitcoin will be ubiquitous.”
Payment middlemen such as Visa and Mastercard currently charge fees as high as 2% each time credit cardholders use their card to pay for something. Bitcoin offers a way for people to bypass the middlemen.
However, using the digital coin for everyday spending is tough, since its price is very volatile and the coin is not widely accepted as currency.
“When people can buy their food, clothing and shelter all in bitcoin, they will have no use for centralized banking fiat dollars,” Draper said.
“Management of fiat is centralized and erratic. When a politician decides to spend $10 trillion, your dollars become worth about 82 cents. Then the Fed needs to raise rates to make up for the spend, and those arbitrary centralized decisions create an inconsistent economy,” he added. Fiat currencies derive their worth from their issuing government, unlike cryptocurrencies.
Meanwhile, the next so-called bitcoin halving — which cuts the bitcoin rewards to bitcoin miners — in 2024 will also boost the cryptocurrency, according to Draper, as it chokes the supply over time. The total number of bitcoins that will ever be mined is capped at 21 million.
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Sen. Sherrod Brown (D-Ohio) made a plea to the Treasury Department on Wednesday to draft legislation that would set up surveillance and regulatory measures over the crypto industry following the collapse of FTX.
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SAN SALVADOR, El Salvador — El Salvador’s government announced Tuesday that it will make a second buyback of its sovereign debt bonds maturing in 2023 and 2025 as it tries to calm market concerns that it could default on its debt.
The government set the maximum for the repurchase at $74 million. The 2023 and 2025 bond offerings were $800 million each.
In September, the government bought back $565 million of those bonds.
President Nayib Bukele said via Twitter that the September repurchase “was so successful that we have decided to launch ANOTHER OFFER for the remainder of the 2023 and 2025 bonds.”
The debt was issued by previous administrations in 1999 and 2004.
El Salvador last year became the first country to make the cryptocurrency bitcoin legal tender, drawing criticism from international lenders. The International Monetary Fund asked the government to reverse that decision, but Bukele dismissed the request and said the country would issue bonds denominated in bitcoin, something that has still not happened a year later.
Bukele’s government has also invested heavily in bitcoin, which has since plummeted in value.
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The abrupt and rapid collapse of the FTX cryptocurrency exchange has caused a shock in the crypto space.
The fall, in a few days, of a company valued at $32 billion in February, ended up casting suspicion on the entire young industry of financial services, based on the Blockchain technology.
Confidence in the industry is at an all-time low. Retail investors have fled, while institutional investors, linked to FTX and its sister company Alameda Research, are still determining their losses from their exposure to Sam Bankman-Fried’s empire.
While there are lessons to be learned from this disaster which threatens the entire sector, it is an understatement to say that it will take a long time to regain the lost confidence.
Billionaire Mark Cuban has not lost faith, though. He continues to believe in the industry and assures that there is still a lot of value in the sector, despite the fall of FTX. He believes that crypto has its place and that you just have to look at the big picture.
“Separate the signal from the noise,” Cuban told TMZ. “There’s been a lot of people making a lot of mistakes, but it doesn’t change the underlying value.”
Cuban said that, as long as consumers have viable options in the crypto world, he doesn’t foresee the currency going in the tank.
The Dallas Mavericks owner is currently the subject of a class action lawsuit related to the bankruptcy of crypto lender Voyager Digital, which he had promoted in a partnership signed in October 2021. This partnership between Voyager Digital and the Dallas Mavericks had one mission: to promote cryptocurrencies by making coins more accessible through educational and digital programs.
“Cuban and Ehrlich, as will be explained, went to great lengths to use their experience as investors to dupe millions of Americans into investing — in many cases, their life savings — into the deceptive Voyager platform and purchasing Voyager earn program accounts (“EPAs”), which are unregistered securities,” the class action lawsuits said, also referring to Stephen Ehrlich, who was CEO of Voyager.
“As a result, over 3.5 million Americans have now all but lost over $5 billion in cryptocurrency assets.”
Voyager filed for bankruptcy as collateral damage of a credit crunch caused by the sudden collapse of sister cryptocurrencies Luna and UST on May 9.Millions of customers have lost their savings. Assets of Voyager Digital had been purchased by FTX, as part of the mortgage lender’s liquidation process.
“A basic question. Why have I invested in crypto?” Cuban wrote on Twitter on November 13. “Because I believe smart contracts will have a significant impact in creating valuable applications. I have said from day 1, the value of a token is derived from the applications that run on its platform and the utility they create.”
A smart contract is a piece of computer code that determines the terms of a transaction (loans, trading, etc.) and doesn’t rely on any third party.
“What has not been created is an application that is ubiquitous. One that is obviously needed by everyone and they are willing to go through the learning curve to use. Maybe it never comes. I hope and think it will,” Cuban continued.
The billionaire then compared the crypto industry to the streaming industry, implying that bad ideas are likely to perish while good ones will prevail.
“The best analogy I can use is the early days of streaming. The shit people had to do to listen to a 16k stream of music was insane. An internet subscription for your dial up modem. Download the provider client. Download a tcp/ip client. Download the streaming client,” he argued. “Click on a batch file on a website. Make sure it all worked together. All while being laughed at for just not turning on your radio or tv.”
He concluded on a note of optimism.
“But for in office or out of market it was worth it. It started as niche in 1995. Now realize that Smart Contracts are about 5 years old.”
Cuban is involved in several crypto projects, including the very select Bored Ape Yacht Club, which represents a collection of over 10,000 online images of monkeys striking funny poses. Bored Apes are the most expensive non-fungible tokens (NFTs).
He is what many called in the crypto space an Ethereum maximalist, which means that he strongly believes in the potential of the second largest crypto ecosystem after Bitcoin. Ethereum is considered the internet of the crypto industry which aims to disrupt traditional financial services.
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This is an opinion editorial by Don McAllister, a technologist who has made several video tutorials on Bitcoin.
At its inception, bitcoin was worthless; it had no monetary value. Early adopters could mine hundreds, if not thousands of bitcoin on simple laptops. As such, there was no need to enumerate it in other units than whole bitcoin. The Bitcoin protocol was designed to accommodate smaller fractional units but there was no need to use them in the early days as tens, hundreds and even thousands of bitcoin were the norm. The first known purchase using bitcoin was 10,000 bitcoin for a couple of pizzas.
Using whole bitcoin to enumerate was logical and necessary. As bitcoin adoption and its monetary value increased, there was still no need to use the smaller fractions of bitcoin — these fractions being the bit and the sat. A single bitcoin can be divided into 1,000,000 bits or as small as 100,000,000 sats (short for satoshis).
However, as bitcoin has increased in value to tens of thousands of dollars for a single bitcoin, a reset is well overdue for how we quantify value using the Bitcoin protocol. A reset is needed to foster familiarity for new adopters as bitcoin edges ever closer to being used as a medium of exchange.
We are still so early in the bitcoin adoption cycle. Although it’s estimated that up to 100 million people hold the asset, most people yet to adopt bitcoin are both suspicious and confused as to what bitcoin actually is. At this point in the adoption cycle, it’s probably safe to say that the vast majority of individuals introduced to bitcoin in the retail space will never accumulate one whole bitcoin.
As bitcoin issuance slows down and as institutional investors jump in and as the price invariably increases, this will only be reinforced over time. If you hold one or more bitcoin at this point in time, you’re in a very fortunate position that will be unattainable for most individuals moving forward. Not even every millionaire in the world will be able to own a single bitcoin. It’s estimated there are over 50 million millionaires in the world, but there will never be more than 21 million bitcoin.
To be honest, bitcoin is a terrible name. For the uninitiated, a bitcoin could be a reference to a physical object, i.e., a bit coin. Obviously, bitcoin is a digital asset, but this is in conflict with its name. In addition, bitcoin can be used to describe two things: the monetary network (Bitcoin) and the monetary asset (bitcoin).
Bitcoin the monetary network is one of the largest and most secure computer networks in existence. It is the core technology that provides the necessary framework and communications channels for bitcoin transactions and runs on thousands of nodes around the globe. The Bitcoin network is unparalleled for reliability and security.
Bitcoin, the monetary asset, is both confusing and alien to those who have yet to adopt it. Its current high value leads many people to think they cannot afford to adopt bitcoin or that they have missed the boat. This is because most people still hear about bitcoin priced as whole units with an unaffordable price tag.
Even though current early adopters of bitcoin are comfortable breaking down bitcoin and using eight decimal places, e.g., 0.00002345 or 2,345 sats, this method is completely alien and off-putting to non-holders.
To understand why, let’s apply some of the mechanisms and nomenclature of bitcoin to familiar fiat currencies. Let’s start by applying this existing method of bitcoin enumeration to the U.S. dollar.
Let’s invent an imaginary USDcoin.
USDcoin = 100,000,000 cents. (Let’s ignore the fact that in reality, 1 dollar = 100 cents.) Now let’s say that the USDcoin has been adopted and is used as a medium of exchange. Imagine the average person walking into a store to purchase a fridge and seeing it priced as: Fridge = 0.00030000 USDcoin or 30,000 cents.
This is totally alien and unfamiliar. So let’s banish the USDcoin moniker completely.
Instead, let’s enumerate using dollars at their actual value of 1 dollar = 100 cents.
So 30,000 cents = $300.00.
See how much more familiar and comfortable that feels?
You have the dollar symbol so you can instantly see it as dollars and you have the decimal point so you can clearly differentiate between dollars and cents.
So a USDcoin is 100,000,000 cents or $1,000,000 dollars.
Why use the USDcoin label at all? Everything can be enumerated in dollars and cents. Instead of 3 USDcoin you have $3,000,000 dollars.
Why do we impose the former methodology on new entrants to bitcoin? It’s totally alien and unfamiliar, but this is exactly what we are expecting people to adopt with bitcoin.
Bitcoin = 100,000,000 sats.
If adopted as a medium of exchange, the fridge would be priced as: fridge = 0.00030000 bitcoin or 30,000 sats.
Instead, let’s keep the bitcoin moniker for the Bitcoin network and start to use “bits” for the currency and remove the complexity.
100 sats = ₿1.00 or 1 bit.
The fridge would now be priced as: 30,000 sats = ₿300.00.
See how much more familiar and comfortable that feels? The ₿ symbol has been historically used to enumerate whole bitcoin and is highly familiar to people. I would suggest that we now adopt the ₿ symbol for bits. It’s highly unlikely anyone will confuse whole bitcoin with bits. If you see a price tag of ₿300.00 you’re not going to think it’s 300 whole bitcoin. If you want to deal in whole bitcoin, you can go back to eight decimal places, e.g., 3.09367835 BTC.
But most normal people will never need (or be in a position) to transact in whole bitcoin. If they are fortunate enough, they can transact in millions of bits. Remember 1 BTC is ₿1,000,000, so 3.09367835 BTC is ₿3,093,678.35. This is what we do with USD or GBP: we use millions of units, e.g., $1,000,000 or £1,000,000.
We need to move away from talking about the price of bitcoin in bitcoin and start talking about the bit price, just as we talk about things priced in dollars or pounds. Let’s leave the name Bitcoin for the network and let’s focus on bits.
Adopting bits to enumerate bitcoin has other benefits. A bit is a “bit” of a bitcoin. People are more likely to associate the word “bit” with bitcoin and are more likely to understand that a bit is a part of a bitcoin. A “sat” means nothing to the average person.
If this terminology is adopted by exchanges, people will perceive lower prices because bitcoin would be priced in bits making bitcoin appear more affordable. People would be encouraged to buy and spend in bits.
As previously mentioned, nothing new is required. No changes are needed to the underlying monetary asset or Bitcoin network. Bits are already built in and they were included for a reason. Do you really think the fact that they mirror dollars and cents, or pounds and pence, is a coincidence? I think Satoshi Nakamoto was already looking to the future when bits would become the new global currency and built this familiarity into the protocol.
This is a guest post by Don McAllister. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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Don McAllister
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The Golden State Warriors were named in a lawsuit Monday alleging the bankrupt cryptocurrency exchange FTX used the reigning NBA champions to fraudulently promote its platform.
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FTX’s new CEO said on Saturday that the bankrupt crypto exchange is looking to sell or restructure its global empire, even as Bahamian regulators and FTX squabble in court filings and press releases about whether the bankruptcy filing should proceed in New York or in Delaware.
“Based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the United States, have solvent balance sheets, responsible management and valuable franchises,” FTX chief John Ray, said in a statement.
Ray, who replaced FTX’s founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on Nov. 11, added that it is “a priority” in the coming weeks to “explore sales, recapitalizations or other strategic transactions with respect to these subsidiaries, and others that we identify as our work continues.”
Ray’s statement came with a flurry of Saturday morning filings in Delaware bankruptcy court. In those filings, FTX asked for permission to pay outside vendors, consolidate bank accounts, and establish new ones.
The exact timing of a possible sale is unclear. FTX indicated that it has not set a specific timetable for the completion of this process and said that it “does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.”
Both FTX and Bahamas securities regulators are seeking jurisdiction over the bankruptcy process in two different U.S. courts. Last week, Bahamian regulators moved potentially hundreds of millions of “digital assets” from FTX custody into their own, acknowledging the deed in a press release after FTX attorneys accused them of doing so in an emergency court filing.
Ray singled out some of the company’s healthier subsidiaries for praise. One example was LedgerX, a Commodity Futures Trading Commission-regulated derivatives platform. LedgerX was one of the few FTX-related properties that are not a part of its bankruptcy proceedings and remains operational today. The platform, which FTX acquired in 2021, lets traders buy options, swaps and futures on bitcoin and ethereum.
The new FTX CEO asked that employees, vendors, customers, regulators and government stakeholders “be patient” with them.
FTX said in a filing that there could be more than one million creditors in these Chapter 11 cases.
FTX and its accountants had identified 216 bank accounts, across 36 banks, with positive balances globally. Cash balances across all entities totaled some $564 million, with $265.6 million of that in the custody of LedgerX on a restricted basis.
FTX attorneys also want to employ a “cash pooling system,” merging all the cash assets of each disparate FTX entity into one consolidated balance statement and in new bank accounts, which FTX is currently in the process of opening.
Notably, FTX attorneys wrote that they were “working, and will continue to work, closely with [existing FTX banks] to ensure that prior authorized signatories do not have access” to any prior FTX accounts that will continue to be used. Prior reporting and court filings have indicated that Sam Bankman-Fried held nearly absolute control over cash management and account access.
FTX’s bank accounts reflect the global influence of the crypto-asset empire. Institutions in Cyprus, Dubai, Japan and Germany held a wide array of global currencies. FTX subsidiaries held more than a dozen accounts at Signature Bank, an American institution that made an aggressive foray into servicing crypto customers in 2021. With the exception of one Bank of America account for Blockfolio, major American banks are unaccounted for on the list. Blockfolio was acquired by FTX in the summer of 2020.
In another petition, FTX lawyers moved to access $9.3 million for vendor payments that FTX called “critical.” No list was provided, but the FTX motion established criteria for “critical vendor” status.
In welcome news for customers, FTX attorneys applied to the court for permission to redact “certain confidential information,” including the names and “all associated identifying information” of FTX’s customers. “Public dissemination of [FTX’s] customer list could give […] competitors an unfair advantage to contact and poach their customers,” the filing read, potentially jeopardizing FTX’s ability to sell off assets or businesses.
FTX lawyers want the proceedings to continue in Delaware. Bahamas regulators, on the other hand, claim they do not recognize the authority of those Chapter 11 proceedings and want to hold a Chapter 15 process in New York.
Chapter 15 bankruptcy is the route that the defunct hedge fund Three Arrows Capital has pursued. The implosion of Three Arrows launched a spiraling crisis that has taken down Voyager, Celsius, and ultimately FTX.
The Chapter 11 process that FTX seeks would allow for restructuring or sale of the company to the highest bidder, although it isn’t clear who that might be. Rival exchange Binance initially made an offer before pulling it. That turnaround deepened a liquidity crisis at FTX and revealed a multibillion-dollar hole.
FTX’s first hearing in its bankruptcy court case is set for Tuesday in Delaware.
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In this photo illustration of the ripple cryptocurrency ‘altcoin’ sits arranged for a photograph on April 25, 2018 in London, England.
Jack Taylor | Getty Images News | Getty Images
U.S.-based crypto company Ripple no longer derives most of its income from America and is looking to expand its reach in Europe, its top lawyer said.
Speaking in an interview with CNBC earlier this week, Ripple General Counsel Stuart Alderoty said that “effectively, Ripple is operating outside of the U.S.” today due to the fallout from its extensive legal fight with the Securities and Exchange Commission.
“Essentially, its customers and its revenue are all driven outside of the U.S., even though we still have a lot of employees inside of the U.S.,” he added.
At the same time, Ripple is expanding its presence in Europe.
The startup has two employees on the ground in the Republic of Ireland currently. It is seeking a virtual asset service provider (VASP) license from the Irish central bank so that it can “passport” its services throughout the Eurpean Union via an entity based there, Alderoty told CNBC.
Ripple also plans to file an application for an electronic money license in Ireland “shortly.” Its commitment to invest in Europe comes despite a deep downturn in crypto markets that’s been referred to as “crypto winter.”
The Irish central bank previously handed a VASP license to crypto exchange Gemini.
Ripple, which helps financial institutions move money around the world using blockchain technology, has over 750 employees globally, with roughly half of them based in the U.S. About 60 are based in its London office, which Alderoty was visiting this week during a trip to the U.K. for its annual Swell event.
In 2020, the U.S. Securities and Exchange Commission initiated a lawsuit against Ripple alleging the company and its executives illegally sold XRP, a cryptocurrency its founders created in 2012, to investors without first registering it as a security.
Ripple disputes the claim, saying the token should not be considered an investment contract and is used in its business to facilitate cross-border transactions between banks and other financial institutions.
Alderoty said he expects a ruling on the case to arrive in the first half of 2023. Final legal briefs are due by Nov. 30, after which a judge can either make a ruling or refer it to a jury trial if they find there are any issues of disputed fact.
“We are at the beginning of the end of the process in our case,” Alderoty said.
As part of the proceedings, Ripple fought to obtain documents related to a June 2018 speech from former SEC official Bill Hinman, which it says has aided its case. In the speech, Hinman says that sales of ether, a rival token, “are not securities transactions.”
Despite its tense dispute with the SEC, Ripple is still “work very closely with policymakers in the U.S.,” Alderoty said.
XRP was once the third-largest cryptocurrency, commanding a $120 billion market value in early 2018. It has dropped sharply since, however, amid U.S. regulatory scrutiny and a wider downturn in bitcoin and other digital currencies.
Last week, the shock collapse of Sam Bankman-Fried’s crypto exchange FTX sent cryptocurrencies into a tailspin. Bankman-Fried’s investment firm allegedly used FTX client funds to make risky trades, CNBC reported previously. The company spiraled into a liquidity crisis as customers demanded withdrawals and rival exchange Binance scrapped its nonbinding agreement to buy the company.
Bankman-Fried has said he got “overconfident” and “careless” as he grew FTX into a $32 billion juggernaut. He said that, to the best of his knowledge, he thought FTX had built up around $5 billion of leverage, when in actuality it was around $13 billion.
Alderoty said FTX’s bankruptcy was “a call to action for responsible economic centers to work to get it right.”
On Wednesday, Ripple CEO Brad Garlinghouse told CNBC that the idea that crypto is not regulated is “overstated.” But, he added, “transparency builds trust.”
“Crypto has never just been sunshine and roses and as an industry, it needs to mature,” Garlinghouse said on CNBC’s “Squawk Box Europe.”
Ripple is unlikely to refer to the FTX collapse and how it was handled by regulators in its case, Alderoty added.
Some of the confusion surrounding XRP stems from the company’s part ownership of the token. Ripple previously held as much as 60% of the XRP tokens in circulation. It has since reduced that amount to below half, or 49%, according to Alderoty.
Ripple generates a chunk of its sales by releasing its supply of XRP on the open market. For the last three years, it only has only sold XRP to enterprise customers rather than retail traders, Alderoty said.
As a private company, Ripple doesn’t disclose its revenues publicly. This year, the firm processed $10 billion in cross-border transactions with payment providers and other financial institutions using XRP, a token it is closely associated with.
Ripple, the company, was last valued by investors at $15 billion. XRP has a market capitalization of $19 billion, according to CoinMarketCap data.
Ripple’s European expansion drive comes in anticipation of the EU’s MiCA crypto regulations going into effect in the coming years. MiCA seeks to align rules on crypto assets across the 27-member bloc. It was passed by EU lawmakers earlier this year.
The EU has said it may still need to come up with a separate regime for nonfungible tokens, or NFTs, a specific type of digital asset that tracks ownership of art and other assets on the blockchain.
“I think MiCA’s a very good start,” Alderoty said.
The U.K. is also a priority. Ripple on Monday released a set of guidelines outlining how it thinks Britain should regulate crypto.
A bill is making its way through the U.K. Parliament that would give the financial regulator greater oversight of crypto, however this is yet to become law.
Crypto executives are hoping Prime Minister Rishi Sunak, who is a fan of crypto and so-called “Web3,” will issue regulatory clarity to make the country a more attractive place for businesses to set up shop.
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Blockstream, a company focused on scaling bitcoin, is launching a platform to connect developers, entrepreneurs, and Bitcoiners from around the world to build on Core Lightning and the Liquid Network, per a release sent to Bitcoin Magazine.
Build On L2 (BOL2) encourages developers to challenge narratives in the broader cryptocurrency space that suggest blockchain projects need to have utility tokens. Developers will focus on solutions furthering Bitcoin’s second layer while building on Core Lightning and the Liquid Network.
“The success of Lightning ultimately depends on the contributions of its community members,” explained Lisa Neigut, Core Lightning engineer. “The Build On L2 initiative brings developers, startups, and other contributors together into the same conversation to share their visions and scale Bitcoin as a wider community.”
The Liquid Network is a layer-2 scaling solution that allows the trading of multiple assets outside of bitcoin, such as USD and stablecoins, utilizing a sidechain. Core Lightning is a modular Lightning implementation that brings instant, low-cost, global bitcoin micropayments.
“Liquid allows us to build a Bitcoin native financial system. It contains the tools for maintaining a decentralized asset registry for securities issuance, where Bitcoin is the native settlement currency,” said Scott Millar, founder at SideSwap. “We hope this vision resonates with the larger Bitcoin community, and we welcome anyone looking to get started on Liquid through the Build On L2 community.”
Additionally, communities within BOL2 will host events such as hackathons, virtual networking events, project bounties, international builder tournaments, career development programs, mentoring, and AMA’s with developers.
At launch, the manifesto of BOL2 has already been signed by prominent Bitcoiners such as: Blockstream CEO Dr. Adam Back, well-known CLN node operator Zero Fee Routing, Breez CEO Roy Sheinfeld, and others.
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Shawn Amick
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