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Crypto in times of recession 🌋
US recession fear looms over crypto markets. Was BlackRock behind $PEPE pump & dump? Elon Musk claims credit for OpenAI. Celeb-backed tokens more likely to be a scam? FTX leadership are suing SBF.
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Crypto has seen the Covid pandemic, banks collapsing, and green frogs rising in popularity 2000x overnight but not a recession.
Yes, Bitcoin was born in 2008, during the "Great Depression," but the crypto industry has never experienced a recession, and we might be heading towards one - there's a 68% chance.
In early May, Treasury Secretary Janet Yellen warned that the US may run out of cash by 1 June if the debt limit isn't suspended or raised.
Then Biden warned that 'the whole world is in trouble' if the US defaulted on its debt.
And now, Harvard economics professor Kenneth Rogoff, who previously served as the chief economist at the International Monetary Fund (IMF), has warned that the same could spark a global financial crisis.
What about crypto meltdown in 2022?
Research suggests the lack of insurance for depositors on crypto platforms led to fear among retail and institutional clients, leading to heavy withdrawals and a liquidity crunch.
Federal Reserve Bank of Chicago says that the collapse of ecosystem giants such as Terra, Three Arrows Capital (3AC), and FTX caused the bank runs. Withdrawals by crypto whales and large account holders, including institutional clients, created a liquidity crisis that sparked the bank run👇
What else do we learn from the report?
Although large customer withdrawals accelerated the crisis, crypto lending firms offering high yields through risky investments were the real culprit. Unlike banks, these lending platforms offered no security or insurance against such failures, and as a result, customers panicked during the downturn in the market.
How would crypto react if recession where to become a reality?
There's a chance of Bitcoin becoming a safe haven and a top 3 asset - along with Gold, US Treasurys.
"If it's a recession driven by a worsening of the banking crisis, it could end up a boon, as crypto is increasingly being seen as a viable alternative to legacy financial systems," Rich Rosenblum, CEO of market maker GSR.
Maybe it's the survival of the fittest and the resilient.
But if things are going to be like the 2020 crisis when Bitcoin went all the way up to 900%, no one's complaining.
Bitcoin halving can also help make things better.
It happens in four-year cycles, and whenever Bitcoin goes through a halving event, where its new supply gets cut in half, the Bitcoin price shoots up like a rocket ship, soaring to new heights, and the crypto world gets all hyped up!
But a correction comes along, bringing Bitcoin back down to reality.
TTD Blackrock 🪨
A BlackRock Fund wallet address withdrew 1.27 trillion PEPE ($1.98 Million) from Binance to four addresses on May 18.
But that’s not it. There is a trail that goes back.
What’s the history we know? Blackrock + PEPE
Bought 1 Trillion PEPE when it was worth $244K on April 21.
Sold all 1 Trillion of them when it was worth $2.63 Million on May 5.
$2.39 Million in profit (10x).
This thread #MustRead
And they bought PEPE?
TTD Scam 🙅♀️
Two former SEC economists—Joshua T. White and Sean Wilkoff released a new research report titled "The Effect of Celebrity Endorsements on Crypto" and it says that celebrity endorsements can be a red flag.
They studied involved 21 celebrity endorsements including that of Lionel Messi Floyd Mayweather, Snoop Dogg, Paris Hilton, and Kevin Hart.
“Celebrity-endorsed ICOs are associated with a 23-26 percentage point increase in scams through September 2019 and a 39-40 percentage point increase in fraudulent ICOs through April 2023.”
Celebrity endorsements increase the amount of money raised in initial coin offerings (ICOs) and the likelihood of the token being added to an exchange.
But according to the research, endorsements from celebrities whose profession matches the ICO product are less likely to be fraudulent.
TTD Blockquote 🔊
Elon Musk, the man with ∼140 Million Twitter followers. He also owns it #fyi.
"I am the reason OpenAI exists. It wouldn't exist without me.”
Elon Musk co-founded OpenAI with Sam Altman, Greg Brockman, Ilya Sutskever, John Schulman, and Wojciech Zaremba in December 2015.
In an interview with CNBC’s David Faber, Musk ain’t modest about his contributions. To tech. To world. To life. Never.
TTD Numbers 🔢
The amount FTX paid for acquiring stock-clearing platform Embed.
What’s the problem? The deal made prior to bankruptcy.
After FTX filed for bankruptcy, the judge in charge of the proceedings approved the sales of Embed and other assets of FTX, but the top bidder for the platform offered just $1 Million.
What are FTX lawyers saying:
“The bidders had figured out what the FTX Group and FTX Insiders did not bother to assess prior to the Embed acquisition, namely, that Embed’s vaunted software platform was essentially worthless.”
So what now? FTX leadership are suing former CEO Sam Bankman-Fried, co-founder Zixiao Wang, and former senior executive Nishad Singh alleging lack of due diligence.
TTD Surfer 🏄
A panel of British lawmakers are proposing the trading of crypto assets should be regulated as gambling rather than a financial service.
One of Australia’s big four banks, Westpac, announces efforts to combat crypto fraud activities aimed at reducing losses from scams.
US bankruptcy court approves Voyager's liquidation plan, to repay $1.3 Billion to creditors either in crypto or in cash after 30-day waiting period.
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The Token Dispatch is a daily newsletter that takes you on a 4-5 minute drive through the wild west of the Crypto World. Daily in your email inbox @13:00 GMT. Almost always.