Bitcoin
Bitcoin and the bankruptcy of FTX
NEW YORK, NEW YORK – AUGUST 11: Former FTX CEO Sam Bankman-Fried arrives for a bail hearing in… [+] Manhattan Federal Court on August 11, 2023 in New York City. (Photo by Michael M. Santiago/Getty Images)
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Let me share the background story and mechanics of Bitcoin and FTX.
Short selling Bitcoin is not possible in the US due to securities regulations. This is one aspect of securities law that has left me somewhat perplexed. Overall, shorting Bitcoin is the worst financial decision for any investor, given that Bitcoin is the best performing asset of the last decade. At the same time, individuals must have the ability to express any opinion they wish in the financial markets. Therefore, the current ban on selling Bitcoin in the US is a mistake.
It is permitted to sell stocks in the US as accredited investors can do so through their brokerage accounts. As Bitcoin matures as an asset class, regulation will change and eventually Fidelity will allow long and short positions. But we’re not there yet. Outside the US, it is possible to sell Bitcoin short. This explains why exchanges like FTX were domiciled in the Bahamas. The exchange handles all the details of handling short positions on the back end, similar to how stock exchanges today handle stock lending, where short sellers borrow shares and buy them back later.
Bankruptcy and asset freeze
When FTX collapsed, all of its depositors lost access to their funds. My opinion is that FTX depositors got what they paid for. They did not exercise the necessary due diligence before holding their funds on a cryptocurrency exchange. Moving your Bitcoins to cold storage would have avoided all the problems with freezing FTX assets. So the big takeaway here is that Bitcoin fixes this natively. By its very design, Bitcoin has built-in encryption and security that ensures the safety of funds. This is the main point.
The recovery
When FTX filed for bankruptcy, all assets were dollarized. This means that the bankruptcy estate converted the value of all deposits to their dollar value at the time of the petition. Therefore, if John Doe had a bitcoin valued at $20,000 at the time of bankruptcy, the estate would file its claim as $20,000 rather than 1 BTC. This is the amount that the estate will seek to recover for John Doe, knowing that the assets it uses for this recovery are still bitcoin. Two things happened since the bankruptcy filing that caused the value of the bankruptcy estate to increase.
First, Sam Bankman-Fried (SBF) has invested in a number of ventures outside of cryptocurrency. In fact, that was the problem: he took deposits from customers and made all kinds of investments without their consent. Most of these investments were worthless, but he invested $500 million in Anthropic, a generative AI startup. This is a huge investment for a startup and it has paid off as this startup is now worth several times the initial investment. In this strange turn of events, generative AI saved FTX from collapse.
Second, the value of bitcoin (and many other cryptocurrencies) has increased since the time of the bankruptcy filing. Depending on when you purchased, bitcoin increased 2 to 3 times from the date of bankruptcy. And so the property is now worth more and is therefore able to recoup its original depositors.
There’s an interesting wrinkle here. Ownership subsidizes returns between different cryptocurrencies. Since you pay in dollars, your obligation is only to the dollar value of the initial shares. So in John Doe’s example, the estate owes him $20,000, not one Bitcoin. If that Bitcoin doubles to $40,000, then the equity can use the excess profits to cover the losses of other depositors who invested in the worst-performing cryptocurrencies. This peculiarity of the bankruptcy code allows strong currencies to subsidize weaker ones.
Bitcoin has lost out on an asset rally fueled by positive comments from the Federal Reserve, while a tight US election race casts doubt on whether Donald Trump will get the chance to implement his pro-crypto agenda.
The digital asset fell 2.4% on Wednesday, following a Fed-fueled surge in an index of megacap tech stocks Magnificent Seven by one of the largest margins in 2024. The token retreated further on Thursday, changing hands at $63,750 as of 6:10 a.m. in London.
Bitcoin
‘This is huge’ — Billionaire Mark Cuban issues ‘incredible’ Bitcoin and crypto prediction amid price slump
Bitcoin
Bitcoin
came back with a vengeance this year when former President Donald Trump Cryptocurrency boosts US presidential election in November with ‘revolutionary’ plan.
The price of bitcoin has surged to more than its all-time high in recent months, surpassing $70,000 per bitcoin and triggering a wave of mega-optimistic predictions about the price of bitcointhough it fell again this week, falling below $65,000 after the Federal Reserve kept interest rates steady.
Now, as Elon Musk suddenly breaks his silence on bitcoin and cryptocurrenciesBillionaire investor Mark Cuban called a California plan to digitize 42 million car titles using blockchain an “incredible step forward” and “huge” for cryptocurrencies.
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Mark Cuban, famous Shark Tank investor and billionaire owner of the NBA team Dallas Mavericks, has… [+] called a cryptocurrency update “amazing” amid bitcoin’s price slump.
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The California Department of Motor Vehicles (DMV) has digitized 42 million car titles using blockchain, it was reported by Reuters, through technology company Oxhead Alpha on the Avalanche blockchain and designed to detect fraud and facilitate the securities transfer process.
“This is an incredible development for crypto,” Cuban, best known as an investor on TV’s Shark Tank and owner of the Dallas Mavericks NBA team, posted on X, joking that U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler could sue the state as part of his hostility toward cryptocurrencies and blockchain technology.
“The reason this is huge for crypto is because people who hold the tokens will have an app with an Avalanche wallet,” Cuban said. “Tens of millions of Californians having and using a crypto wallet in the next five years, or however long it takes, normalizes the use of wallets and crypto.”
John Wu, president of Avalanche developer Ava Labs, told Reuters that California’s DMV is “creating a wallet that you can download on your phone.”
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Bitcoin’s price has rallied this year, triggering a wave of bullish bitcoin price predictions from… [+] people like billionaire Mark Cuban.
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Last month, Cuban predicted that if the US dollar falls as the global reserve currency, bitcoin could become “a global ‘safe haven’” and a “global currency.” potentially sending the price of bitcoin to a much higher level.
According to Cuban, bitcoin could become what its most ardent supporters “envision” — a means “of protecting our economies… This is already happening in countries facing hyperinflation.”
The price of bitcoin has skyrocketed over the past year, largely due to the world’s largest asset manager, BlackRock, leading a bitcoin attack on Wall Street.
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Bitcoin (BTC) miner Riot Platforms (RIOT)’s second-quarter loss widens to $84.4 million as costs rise
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At a national bitcoin conference in Nashville, Donald Trump finally laid out some of his crypto policy proposals, including a long-awaited part of his plan — building a strategic bitcoin reserve. CNN’s Jon Sarlin explains what it is and why the crypto industry wants it.
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