The crypto crash has winners and losers
Good morning, and welcome to Protocol Fintech. This Friday: the crypto crash’s survivors, Celsius under fire and USDT redemptions.
Off the chain
Is Tron next? That seems to be the question crypto traders are asking as the peg on its USDD stablecoin keeps slipping. Like the doomed pair of luna and UST, Tron relies on algorithms to keep TRX and USDD in balance. But unlike UST, Tron also has substantial reserves of other stablecoins backing it, and the Tron DAO Reserve has been bolstering those funds. Still, TRX has fallen nearly 30% in a week. The peg seems wobbly.— Owen Thomas (email | twitter)
Defying crypto gravity
Crypto is crashing, forcing major players like Coinbase to pull back on aggressive expansion plans. But some companies seem to be defying gravity. They’re still hiring, raising money and looking to expand despite a slump in asset prices that has only gained momentum in recent days. The downturn is upending a trailblazing and once fast-growing industry. Some are adhering to that old adage: Never waste a good crisis.
The hiring hasn’t stopped for some. Coinbase, Gemini, BlockFi and Crypto.com may be shedding jobs, but Binance, Kraken and Ripple are still on the hunt for talent.
- Binance has 2,000 openings, CEO Changpeng Zhao announced on Twitter. Binance.US, its American arm, is in the process of launching new products and services that “require talented people,” CEO Brian Shroder told Protocol.
- The company is open to recruiting employees from “different sectors,” Shroder said, “whether they had their offer canceled by Coinbase, or they were laid off by Gemini, or they're still at these companies.”
- Kraken announced it has over 500 jobs to fill, even as it reeled from a public debate over what’s been criticized as a toxic corporate culture. Ripple CEO Brad Garlinghouse announced in a tweet that the company is looking for “hundreds” of new hires — but “assholes” need not apply.
The firms that are expanding have something in common: They were ready for a meltdown. Crypto was a hot market until it wasn’t. Some companies did a much better job than others in prepping for a crash.
- One way was simply to be smart about spending, said Shroder of Binance.US, citing recent crypto marketing blitzes. “There is a reason there is no Binance Stadium. There’s a reason why Coinbase spent more on a 30-second Super Bowl ad than we did in our entire marketing budget of 2021.”
- Binance.US is about to bolster its financial position by extending a funding round it raised this spring, Shroder told Protocol.
- “Hundreds of millions spent on naming rights and Super Bowl ads don't get you very far when you can't pay your engineers,” said Melody Brue, an analyst with Moor Insights & Strategy.
- Companies like Binance and Ripple have “seasoned leadership at the helm” who understand that bear markets are “expected, planned for and healthy,” Mike Fasanello, chief compliance officer of LVL, told Protocol.
Not all crypto companies are created equal. It’s a diverse sector with revenue streams extending well beyond trading, and the downturn is offering companies a chance to differentiate themselves.
- Brue noted that a company like Ripple, as its core business is not tied to crypto trading, was “simply more prepared to weather the storm.”
- Crypto, Fasanello noted, is going through “a period of cutting the fat,” including “over-leveraged funds, Ponzi-style protocols and other digital assets that lacked proper risk management.”
Even through the coming shocks, you can see the future of crypto. The distribution of pain and gain isn’t even, favoring those who were smart enough to think ahead. “We were better-positioned going into this crypto winter,” Shroder said, “because we were very judicious with our own capital.”
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On the money
On Protocol: Circle announced that it will issue a second stablecoin, this time pegged to the euro. The euro coin will become available on June 30, and will reportedly be “fully-backed by euro-denominated reserves held conservatively in the custody of leading financial institutions” in the U.S.
State regulators are investigating the Celsius Network’s pause on withdrawals. Securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are reportedly probing the crypto lender over concerns about consumer access to account funds due to the pause.
Elon Musk and his companies are getting sued for allegedly pushing dogecoin. Musk, SpaceX and Tesla were hit with a lawsuit on Thursday by an investor who claims that Musk was part of a scheme to inflate dogecoin’s value.
India lifted its ban on Mastercard. After indefinitely banning Mastercard, American Express and Diners Club from issuing new debit or credit cards last year, regulators are now lifting the ban, saying that Mastercard demonstrated “satisfactory compliance” with local data storage rules.
A crypto lobbyist is running for a House seat in New York. Association for Digital Asset Markets CEO Michelle Bond announced the start of a campaign on Thursday. She'll be running for a seat currently held by Rep. Lee Zeldin, who will be retiring.
Bill Gates isn’t a stranger to being critical about crypto, and lately he’s turned his attention to NFTs. Spoiler: He doesn’t think they’re valuable assets contributing to the world. “Obviously, expensive digital images of monkeys are going to improve the world immensely,” he said, referring to the Bored Ape Yacht Club project.
Hester Peirce, the SEC’s most crypto-friendly commissioner, isn’t happy with the agency’s approach to spot bitcoin exchange-traded product applications, saying that its “resistance to a spot bitcoin ETP is becoming almost legendary” and that the SEC has added “crypto-specific hurdles” to what in her view should be a straightforward approval process.
After the Lummis-Gillibrand bill proposed largely handing crypto regulation over to the CFTC, some have questioned whether it could carry the load. CFTC Commissioner Kristin Johnsonhad a ready retort: “What I would suggest in response to arguments that the CFTC is the underdog in some jurisdictional fight is that I like being an underdog.”
The USDT stablecoin, also known as tether, briefly lost its peg as luna and UST collapsed. The loss of dollar parity was brief, but the pressure hasn’t let up as traders grow concerned about its reserves. Its slumping market cap shows waves of redemptions in recent days.
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Thanks for reading — see you Tuesday!