Binance Archives - Taking Stock

January 11, 2024January 11, 2024

SEC finally approves Bitcoin ETF

After years of regulatory rejection, the U.S. Securities and Exchange Commission on Wednesday 10th January 2024 finally approved the Bitcoin EFT.

It has approved what are known as ‘spot’ Bitcoin Exchange-Traded Funds (ETFs), which can be purchased by anyone from pension funds to retail investors. This now means that some of the biggest asset managers in the world, including BlackRock and Fidelity can trade a crypto related ETF.

Now, instead of using a crypto asset exchange such as Binance, Coinbase or Kraken to purchase and hold a token like Bitcoin, traders can now trade a ‘spot’ Bitcoin ETF for direct exposure to the digital asset market.

It may also mean that investors could pay lower fees than they would if they bought the digital currency from a crypto exchange directly.

Basically, it is now cheaper than ever to buy Bitcoin – but is this positive for the long-term?

Crypto fans can now invest in Exchange-Traded Funds (ETFs) – but what exactly are they?

A Bitcoin ETF allows investors to buy a product that tracks the price of Bitcoin through the same method they already use to buy stocks and other existing products. This also reduces additional worry of managing their crypto related holdings, which typically involves maintaining a cryptocurrency wallet and a safe storage system to safeguard that investment.

But what exactly is an ETF?

ETFs are holdings or portfolios that allow investors to ‘bet’ on multiple assets, without having to buy any themselves. Traded on stock exchanges like shares, their value depends on how the overall portfolio performs in real time.

An ETF could comprise a combination of gold and silver bullion, for example, or a mixture of shares in both big technology and energy companies. Some ETFs already contain Bitcoin indirectly – but a spot Bitcoin ETF will buy the cryptocurrency directly, ‘on the spot’, at its current live price, throughout the trading day.

Bitcoin, the first cryptocurrency

Based on an idea by someone called, Satoshi Nakamoto, Bitcoin was the first cryptocurrency and remains the most valuable and famous to-date. Its price is often seen as a barometer for the whole industry of thousands of other coins (altcoins), tokens and products built on the same blockchain technology.

**Art illustration of Bitcoin blockchain**

And with an influx of new money, many expect a surge in interest in cryptocurrency technology in general.

How will the decision affect cryptocurrency adoption and is this decentralisation as originally intended?

Some say this decision shows the existing ‘old financial school’ establishment is finally taking Bitcoin seriously, at least as a speculative asset. For those who consider Bitcoin legitimate ‘digital gold’, what better proof could there be than the biggest wealth-management institutions flocking to buy, and now overseen by regulators?

Others say cryptocurrency is about rejecting traditional financial systems in favour of a decentralised, people-powered alternative. And investment bankers buying Bitcoin just to get rich on U.S. dollars is not what Satoshi Nakamoto had in mind.

But judging from the chatter on social media, the prevailing sentiment is expecting the new cash injection will make existing Bitcoin investors and owners rich.

What are the risks to future investors?

It is possible to lose all of your investment

The price of Bitcoin can change rapidly and often without warning or explanation – it is a volatile asset. So investors will need to be aware when investing in ETFs linked to a digital coin.

But ETFs are often sold as high-risk, high-reward products anyway. It is EXTREMELY high risk – don’t do it if you don’t understand it and even if you do, or think you do – BE CAREFUL! These products can rip the shirt off your back!

Cyber-crime risk

Another potential risk is cyber-crime. Bitcoin and other cryptocurrencies have been the subject of huge and costly attacks that have seen crypto companies drained of sometimes hundreds of millions of dollars overnight. And if the likes of Blackrock become major holders of Bitcoin, their cyber-security will be tested in ways never before. Let’s hope their security systems are extremely robust.

Cost of mining coins

Another downside is the heavy cost to the environment is that Bitcoin use a massive number of powerful computers around the world, to process transactions on the blockchain ledger and to create coins – this is known as mining.

Renewable energy use is growing – but it remains to be seen how investment companies will tackle the environmental cost of Bitcoin.

Be careful

ETFs are here now – but BE CAREFUL when entering a Bitcoin related ETF trade or investment, or any type of ETF for that matter. If it goes wrong, you will lose your money, and quickly.

Your money is at HIGH risk!

Bitcoin chart as at 12pm January 11th 2024

January 2, 2024January 2, 2024

Some of the stock market’s biggest gains in 2023 came not from crypto but from crypto related businesses

For true cryptocurrency bulls, the most lucrative investments in 2023 were in the stock market.

While Bitcoin rallied over 150% for the year, shares of Coinbase, Marathon Digital, MicroStrategy and the Grayscale Bitcoin Trust, which are all tied closely to the digital currency, did substantially better, rising more than 300% in value. Bitcoin miner Marathon Digital soared some 688%.

Outperform

Not only have these stocks outperformed primary cryptocurrency, but they’ve been among the biggest gainers across the whole U.S. stock market. In the universe of publicly traded U.S. businesses with a market value of at least $5 billion, the four Bitcoin-tied stocks were among the eight best performers, according to analysts.

Boom or bust?

The crypto boom represents a major recovery from 2022, when coin prices plummeted, taking related equities down with them. A year highlighted by hedge fund collapses, crypto lender failures and crippling losses at miners was punctuated in November 2022, when crypto exchange FTX spiralled into bankruptcy, leading to the arrest of founder Sam Bankman-Fried on fraud charges.

Guilty of fraud — **A jury in New York convicted Bankman-Fried on seven criminal counts**

Bankman-Fried conviction

In 2023, a New York jury convicted Bankman-Fried on seven criminal counts, setting the 31-year-old former billionaire up for a possible long-stretch behind bars. Weeks later, Changpeng Zhao (CZ), founder of crypto exchange Binance, pleaded guilty and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice. He faces a possible prison sentence of 18 months or longer.

By the time of Bankman-Fried’s conviction and Zhao’s plea deal, the damage to the broader crypto market had mostly been realised, and investors were looking to the future. One of the biggest drivers for bitcoin this year was an easing of the Federal Reserve’s interest rate hikes, which created a more attractive case for riskier assets, but only marginally.

Bitcoin halving due May 2024 & ETF’s

Prices were also bolstered by the upcoming Bitcoin halving, which takes place every four years and is scheduled for May 2024. In the halving process, the reward for mining is cut in half, capping the supply of bitcoin.

Additional buying was sparked by the potential for a flurry of bitcoin exchange-traded funds popping up in the new year.

Marathon

Among companies closely tied to Bitcoin, the best-performing stock this year was Marathon, a mining firm that just eclipsed that market cap level last week thanks to a 125% surge in December as of Tuesday’s close. On Wednesday, the shares surged another 15%.

Last year at this time, Marathon was hanging on by a thread. The company was in the midst of a quarter that ended with a loss of almost $400 million on sales of just $28.4 million because of tumbling bitcoin prices

Mining

Bitcoin mining is an expensive operation because of the high energy costs required to operate the supercomputers. A drop in bitcoin prices means a sharp reduction in the money producers make selling the coins they mine, even as their energy bills get little relief.

Outside of the mining universe, the best-performing crypto stock in the U.S. this year is Coinbase, which has soared some 386% into 2023 year end.

Coinbase

As the only major publicly traded crypto exchange in the U.S., Coinbase has long been a popular way to buy and trade cryptocurrencies in its home market. But with the struggles at Binance, the largest exchange in the world, Coinbase picked up useful market share during non-U.S. trading hours, according to a report from research firm Kaiko in late November 2023.

Shortly after Zhao’s plea deal, Coinbase CEO Brian Armstrong reportedly said that the news amounted to ‘a vindication of the long-term strategy that we’ve taken to focus on compliance, make sure we were building a trusted company.’

Coinbase’s revenue and stock price are still way below where they were during the heyday of crypto trading in 2021, when retail investors were jumping into the market to buy all sorts of digital currencies, including gimmicks like Dogecoin.

But the business has stabilized following drastic cost-cutting measures starting last year and extending into early 2023.

Will 2024 be an outstanding year for crypto?

November 23, 2023November 24, 2023

Who’s now in charge at Binance?

Binance is still open for business and is now being run by, Richard Teng. But who is the new boss of Binance?

Mr Teng, from Singapore joined Binance just over two years ago as the chief executive of the Singapore business. That was the year when Binance came under a Justice Department investigation, and as regulatory scrutiny of the company and Zhao intensified. Richard Teng was rapidly climbing the ranks in the background.

He only stayed in his original position as the Singapore CEO for five months, according to his LinkedIn page, before he was promoted to regional head of Europe, Asia and the Middle East and North Africa in April 2023.

Mr Teng later moved to become head of regional markets in May 2023 before he was appointed to the top job on Tuesday 21st November 2023.

In announcing his successor, Mr Zhao called Mr Teng a ‘highly qualified leader‘, adding that ‘with over three decades of financial services and regulatory experience, he will navigate the company through its next period of growth’.

Traditional financial background

Prior to joining Binance, Mr Teng worked in the more traditional financial sectors as a director of corporate finance at the Monetary Authority of Singapore (MAS) and a chief regulatory officer of the Singapore Exchange (SGX). He then moved on to the become chief executive of the Abu Dhabi Global Market (ADGM), an international financial centre in the United Arab Emirates, where he stayed for six years. The ADGM regulates the trading of digital assets.

In a statement on Wednesday 22nd November 2023, Mr Teng said he was honoured to take this position, adding that he would focus on reassuring Binance’s 150 million users about ‘the financial strength, security and safety of the company’.

Despite this, Mr Teng has reiterated that Binance is ‘here to stay‘, adding that company’s foundation stands ‘stronger than ever’.

November 23, 2023November 24, 2023

Binance battered as CEO Changpeng Zhao (CZ) pleads guilty to U.S. federal charges

Binance chief Changpeng Zhao pleaded guilty Tuesday to criminal charges and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents.

The plea arrangement with the U.S. government resolves an investigation into the world’s largest cryptocurrency exchange.

Zhao said Tuesday in a post on X, that he had ‘made mistakes’ and ‘must take responsibility’. He said Richard Teng, the company’s former global head of regional markets, is the new CEO of Binance.

Action taken against Binance

The action against Binance and its founder was a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission (SEC) was absent.

Treasury Secretary Janet Yellen reportedly said in a release Tuesday 21st November 2023 that the cryptocurrency exchange permitted ‘illicit actors’ to make transactions that supported activities such as terrorism and illegal narcotics and that it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.

Plea deal

Zhao personally pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement. The DOJ is also recommending that the court impose a $50 million fine on Zhao.

Zhao has been released on a $175 million bond secured by $15 million in cash and has a sentencing hearing scheduled for 23rd February 2024.

Continue to operate

Binance will continue to operate but with new strict rules. The company will be required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money-laundering standards. The company is required to appoint an independent compliance monitor.

The case against Binance shows that three criminal charges were brought against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy. Binance has agreed to forfeit $2.5 billion to the U.S. government, as well as to pay a fine of $1.8 billion.

SEC takes aim too

The SEC targeted the company with a lawsuit in June 2023, alleging that Binance was running an illegal securities exchange and mishandling customer funds.

The SEC also challenged rival crypto exchange Coinbase with a similar lawsuit, alleging it is operating as an unauthorized securities exchange, broker and clearing agency.

And on Monday 20th November 2023 the SEC sued Kraken, alleging that the exchange commingled $33 billion in customer crypto assets with its own company assets, creating the potential for a significant risk of loss to its users.

Crypto fraud — **Binance battered as CEO Changpeng Zhao (CZ) pleads guilty to federal charges, steps down.**

In the charges brought against Binance by the SEC, the agency accused Binance of ‘commingling’ billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now bankrupt and disgraced crypto exchange FTX. The founder of FTX, Sam Bankman-Fried was convicted of fraud and now awaits sentencing.

EC Chair, Gary Gensler reportedly said, ‘Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law’.

Binance origin

Started by the Chinese-born entrepreneur in 2017, Binance went from being a relatively obscure name to being a major force in crypto in a matter of weeks. Binance remains the world’s largest crypto exchange globally, processing billions of dollars in trades every year.

While its holding company is based in the Cayman Islands, Binance doesn’t have a global headquarters and Zhao frequently resisted calls to create one, saying he wanted the platform to run on a ‘decentralized’ operating model.

UK ban

In 2021, the U.K.’s Financial Conduct Authority (FCA) barred Binance’s U.K. unit from operating in the country, saying it wasn’t authorized to carry out regulated activities. More recently, Binance scrapped plans to pursue a full U.K. license after the regulator said its ‘know-your-customer and anti-money-laundering’ controls didn’t meet its requirements.

Binance and Zhao filed a motion in July 2023 to dismiss the CFTC’s suit. The U.S. arm of the exchange is also pushing back on the SEC’s lawsuit, filing a protective order against what they call the SEC’s ‘fishing expedition’.

Crypto industry concern

Of particular concern for the crypto industry are the implications of the crypto crackdown for a myriad of altcoins or tokens and blockchains, not just the exchanges.

The SEC maintains that several of the tokens Binance and Coinbase offer on their platforms such as: Solana’s SOL, Cardano’s ADA , and Polygon’s MATIC are all securities that should have been registered.