Crypto News

Binance Bombshell: CEO CZ Takes Shocking Exit, Confesses Wrongdoing

Last Tuesday, Chanpeng Zhao (CZ), the CEO and founder of Binance, the largest cryptocurrency exchange in the world, stepped down from his position and pleaded guilty to violating the US Bank Secrecy Act and admitting his guilt to several criminal and civil charges.

At the same time, Binance admitted its guilt of allowing clients from the U.S and other unsanctioned countries to use its exchange without the proper ‘Know your customer (KYC)’ and has agreed to pay a staggering $4.3 million fine which is one of the biggest in the history of the U.S. Department of Justice. The enforcement of 'Know Your Customer (KYC)' is becoming a regulatory necessity for many crypto firms, obliging customers to authenticate their identity across various industries. In the context of cryptocurrency, this measure is crucial to thwart any unlawful activities, such as fraud or money laundering.

Zhao is going to be sentenced on February 23rd, 2024, and federal prosecutors have asked if he can be made to stay in the U.S until after his court hearing as he is a citizen of the United Arab Emirates (UAE) but they have not insisted for him to have pre-trial detention. Prosecutors are arguing that because Zhao has little ties with the U.S., and has significant wealth abroad, he may very well not come back if he decides to leave the country. Xhao’s lawyers are insisting, that remaining in the U.S., would create hardship for him and his family.

A decision by District Judge, Richard Jones on this matter, will remain until November 27th, 2023, when he will be allowed to return to the U.A.E but must ensure he is back in the U.S. by February 10th, 2024. In the meantime, Richard Teng has been announced as the new CEO of Binance.

On Tuesday's trading session, Binance's native token, BNB, experienced a decline of slightly more than 17% after the news and closed at $225.5, a decline of a little under 11% on the day.

Massive Security Breach: Millions Vanish in KyberSwap Decentralized Exchange Hack

A staggering cyber assault on the decentralised trading exchange KyberSwap, saw thieves make off with a huge sum of nearly $50 million in cryptocurrency from its coffers. The security breach, which transpired last week, substantially reduced the total value locked (TVL) on the platform. The TVL plummeted from approximately $80 million to a mere $7.78 million following the incident, prompting KyberSwap authorities to urgently advise all holders to withdraw their digital assets from the compromised wallets.

The hackers demonstrated a focus on specific cryptocurrencies, absconding with significant amounts of Ether (ERC20), Wrapped Ether (wETH), and USDC. Their loot included $20 million worth of Arbitrum, $15 million in Optimism tokens, and $7 million denominated in Ethereum. Notably, initial investigations suggest that the breach did not stem from vulnerabilities within KyberSwap's approval computer code; rather, it appears to be linked to an attack on the liquidity provider pools.

Following the heist, the audacious hackers communicated with KyberSwap, hinting at negotiations with a message stating, "Negotiations will start in a few hours when I am fully rested." A subsequent taunting message inquired about the allure of Ontario at this time of year, a tactic commonly employed by assailants targeting exchanges. Curiously, the hacker has fallen silent since. In a bid to recover the stolen funds, KyberSwap has extended an olive branch, expressing a willingness to negotiate and offering a 10% bounty on the stolen funds if returned by 6 am UTC on Saturday, November 25th. In just this month, decentralised finance (DeFi) hacks have resulted in the theft of $290 million, contributing to approximately $1.2 billion for the year thus far.

Ex-Terra Chief on the Hot Seat: Stares Down Extradition Amidst a Barrage of Fraud Charges!

Ex-Terra CEO and founder, Do Kwon, is confronting potential extradition to either the United States or South Korea following approval from a court in Podgorica, Montenegro. This decision, validated through a post on the judiciary’s website, follows Kwon's arrest in March and his current 4-month prison sentence for documentation forgery. Despite his attempt to appeal, the rejection upheld the appropriateness of the sentence. The final verdict on Kwon’s extradition lies with the Montenegrin Justice Minister.

In the United States, Kwon is grappling with multiple fraud charges related to Terra Luna's significant collapse in March 2022. During that period, the company experienced a staggering loss of nearly $45 billion in market capitalisation within a week, triggering a widespread crypto crash. The allegations against Kwon involve orchestrating a "multi-billion dollar crypto asset securities fraud." This unfolded as TerraUSD (UST), Terra's stablecoin, failed to maintain its $1 peg to the U.S. Dollar, leading to a massive sell-off by investors.

Efforts to salvage the stablecoin, including the Luna Foundation Guard (LFG) selling significant amounts of the company’s Bitcoin, proved futile, resulting in the depletion of Bitcoin reserves. Kwon faces charges of negligence and fraud for failing to communicate effectively with investors and address the issue. The U.S. Securities and Exchange Commission (SEC) charged Kwon and Terraform Labs in March 2023 for making false and misleading statements.

Kwon vehemently denies all allegations, attributing his company's downfall to a black swan event and claiming he acted in good faith. Additionally, charges in South Korea involve the issuance of an unregistered financial security. Prosecutors in South Korea have frozen $185 million in assets and indicted Kwon’s former co-founder, Daniel Shin, for breach of market law violations in April of this year.

In Other News

• JP Morgan Warns: ETF Approval Could Trigger Massive $2.7 Billion Exodus from Grayscale Bitcoin Trust

• Bittrex Global To Shut Down Operations Abruptly: Ceases All Business Activities on December 4th

• OpenAI's Shocking Reversal: Sam Altman Returns to Helm Amidst Swirling Controversy and Resounding Backlash (more on this below)

Crypto Analysis

Bitcoin

Bitcoin is once again exhibiting the characteristics of a roller coaster ride, a pattern that has persisted for the past few weeks. Recently, a robust bearish daily candle drove prices down to the lower boundary of the consolidation range at $35,632. However, a subsequent large green bullish candle swiftly propelled the cryptocurrency back up into the consolidation range, this being the complete opposite of two weeks ago. To sustain the overarching uptrend, a crucial requirement is a bullish breakthrough and a daily close above the resistance level of approximately $38,000. This marks the third attempt to breach this level, favouring an upside break, especially considering the multiple tests around this threshold.

Examining the technical indicators, the 100-day exponential moving average (EMA) is progressively diverging from the 50-day EMA. Despite a slight bearish divergence noted in the daily chart last week, a noteworthy hidden bullish divergence is evident, as illustrated in the first chart.

Shifting attention to the monthly chart, the price comfortably maintains a position above the 0.382 Fibonacci retracement level at $35,922. This level is measured from the November 2021 all-time high at $69,000 to the November 2022 major low of $15,476. Notably, there is a lack of significant resistance at the 50% level, suggesting that a break above the current level could pave the way for a move to the 0.618 level at $48,553. While such a development may unfold gradually, continuous weekly market monitoring will be essential.

TOTAL Chart (Including Bitcoin, Ethereum, Altcoins & Stablecoins)

When I last analysed the total chart some time back, I observed a promising double-bottom formation that aimed to breach the upper trendline—a crucial point of reference on the chart. We did indeed witness an upward breakout, marking a notably dramatic ascent. Now, the focus shifts to our current position, seeking key upward points of interest, potential turning points, and resistance levels.

Starting with the daily chart for preliminary insights: the price exhibits strong bullish momentum, steadfast at the highs. Despite a temporary downturn this week, it occurred on light volume. Moreover, the price remains comfortably above the 10-day Exponential Moving Average (EMA). The 100 and 50 EMA's are expanding, hidden bullish divergence unfolded over recent weeks, and the Stochastic RSI hovers just above oversold territory. With the RSI in mid-range, there's an indication that the overall cryptocurrency market still has room for growth.

On the downside, the initial level to monitor involves a break and close below the upward-sloping black line denoting the hidden bull. Shifting the focus to the monthly chart, the 0.236 fib level at $1.26 trillion posed significant resistance, aligning with the earlier-discussed double bottom.

The subsequent resistance level emerges around the 0.382 fib level at $1.59 trillion, boasting a confluence of resistance from previous price action and a marked wick indicated by the black arrow on the chart. While the 50% level lacks compelling interest and isn't a technical fib level, it warrants attention as the midpoint between bull and bear extremes on the major time frame, from the all-time highs to the December 2022 low.

Capturing my attention, however, is the 0.618 level on the monthly chart, marked by substantial confluence with major resistance. Four monthly bars showcase either swing highs or substantial wicks at this level. I eagerly anticipate providing further analysis as we either ascend to pertinent levels or experience a breakdown.

Cardano (ADA)

We find ourselves at a crucial juncture in ADA, as we approach a noteworthy point of interest tied to the monthly swing high, a topic we'll delve into shortly. Let's initiate our analysis by examining the daily chart. Revisiting the October price action reveals a conspicuous bounce off a substantial support level at around $0.24. A triple bottom formation ensued, propelling the price upward. Within a span of just five days, ADA shattered the swing high within the consolidation zone, demarcated by the green rectangular pattern, thereby compensating for a month of lateral price movement. This underscores the significance of scrutinising the number of bullish or bearish candles within a region, as it can serve as an indicator of the likelihood of a breakthrough, as evidenced here.

In the ongoing current developments, a sequence of higher highs is evident. However, caution is warranted, as there are signs of a potential slowdown, marked by negative RSI action and horizontal resistance, as depicted in the daily chart. The 100 and 50 daily EMAs are exhibiting positive trends, with a discernible widening, signaling optimism. Over the past few weeks, a hidden RSI bull has emerged. Notably, the volume remains low during this congestion phase which could signal a possible build-up leading to a decent move in either direction.

Shifting our focus to the monthly chart, a compelling scenario emerges, echoing the earlier mention of parallel resistance and a monthly swing high at $0.46. Breaking above and securing a monthly close beyond this level could pave the way for ADA to attain the next 0.236 fib level at 0.89, constituting a movement of over 100% from the current position. This kind of possible large move cannot be understated. Three black arrows on the chart emphasise a substantial area of confluence, complemented by a green rectangle between the 0.236 and 0.382 fibs, denoting a significant confluence of resistance, as highlighted by the five prominent wicks on the chart.

Should ADA indeed breach the monthly swing high just mentioned, a thorough reevaluation of the chart will be imperative. Conversely, a breach below the recent trend channel shown on the daily chart would serve as the initial indication of negative price action, potentially signaling a more extensive retracement. Monitoring these key indicators will be pivotal in navigating ADA's current market dynamics.

Macro News & Analysis

Germany’s Debt Brake and their €60bn Budget Hole

Similar to the US’s debt ceiling, Germany has a constitutional limit on fiscal spending called the debt brake, which limits the government budget deficit to 0.35% of GDP. For comparison, US deficit to GDP is over 6% for 2023.

Two weeks ago a ruling by Germany’s constitutional court invalidated the reallocation of leftover pandemic funds to finance their budget. This has left a €60bn ($65) hole in Germany’s finances, forcing the government to suspend major spending plans on green initiatives and industry support.

The crisis has renewed cross party desire to reform the self imposed spending limit as Germany feels the consequences of a decade of chronic under-investment.

Germany’s tri-party coalition government are currently working on a solution to the budget crisis. Solutions being discussed include spending cuts and tax rises, raising the debt limit or suspending the debt brake for certain initiatives.

Whilst this will be politically challenging, it’s reassuring to see that even conservatives recognise the need for reform as Germany teeters on the brink of another recession and years of economic stagnation.

Netherlands Elect Far-Right Populist Party

Last Wednesday saw a snap election in the Netherlands, following the collapse of their government over disagreements on immigration policy. The election revealed a surprising shift to the right, with far-right Party for Freedom getting the most votes but falling short of a majority.

Party for Freedom leader and populist Geert Wilders’ extreme views on immigration have kept him under 24-hour security protection for years. In order to form and lead a coalition, he will have to tone down his rhetoric and policy stance, a negotiation process that could take several months.

Argentina Elect Far-Right Libertarian Milei

Javier Milei, a far-right libertarian, economist, author and TV celebrity, has been elected president of Argentina with 55.69% of the vote and leading opposition Sergio Massa to concede before all the votes were counted.

Milei is a controversial figure whose policies include exterminating inflation, abolishing the central bank and adopting the US dollar, and taking a “chainsaw” to Argentina’s failing economy.

His views are polarising yet he has a strong supporter base who want change and support his desire to disrupt a status quo that has left much of the Argentine population in poverty. Inflation in Argentina has gone from 42% in 2020 to over 142% in October 2023.

OpenAI, Sam Altman & Microsoft

Sam Altman, OpenAI founder and chief executive, was fired by OpenAI’s board last week for failing to be “consistently candid in his communications”. Following the announcement, most of OpenAI’s 770 staff threatened to quit unless Altman was brought back. He was also offered a job at Microsoft, majority shareholder in OpenAI’s commercial subsidiary. Microsoft CEO Satya Nadella said they had not been informed ahead of the announcement.

Altman is now back at OpenAI after a reshuffling of its board, who are tasked with ensuring the safety of mankind rather than focusing on commercial concerns. According to a report by Reuters, Alman’s firing came after “several staff researchers wrote a letter to the board of directors warning of a powerful artificial intelligence discovery that they said could threaten humanity”.

China Considers Helping Troubled Property Lenders

In an unprecedented move by Chinese authorities, banks may be allowed to offer unsecured loans to troubled developers in order to support China’s continued property crisis, which has seen multiple defaults and is fuelling fears of contagion in financial markets.

These short term, “working capital” loans, which would usually require collateral in the form of land or assets, would enable developers to continue operations and free up cash for loan repayments.

Country Garden, now considered a penny stock in China, closed up 23.5% on the news although half of that gain was given back by Friday’s close.

The Week Ahead

This will be the last week of Fed speak ahead of December’s FOMC blackout period. Given the loosening in financial conditions since the start of the month we may hear a return to a more hawkish stance to dampen recent enthusiasm. Europe and China data will be key, as Germany deals with their budget issue and with fears around deflation in China.

Equity markets opened the week slightly lower and yields slightly higher although both have reversed in this morning’s trading session. Gold has broken $2,000 to make a new 6 month high while crude and the dollar continue to slide lower.

This Week’s Earnings

Events This Week

• European Central Bank President Christine Lagarde appears in parliamentary committee, Monday

• Australia retail sales, Tuesday

• NATO foreign ministers meet, Tuesday

• US Conf. Board consumer confidence, Tuesday

• Fed Governor Chris Waller, Chicago Fed President Austan Goolsbee speak at different events, Tuesday

• Australia CPI, Wednesday

• Reserve Bank of New Zealand policy decision, Wednesday

• Eurozone economic confidence, consumer confidence, Wednesday

• Bank of England Governor Andrew Bailey speaks, Wednesday

• US wholesale inventories, GDP, Wednesday

• Fed releases its Beige Book of regional economic activity, Wednesday

• Cleveland Fed President Loretta Mester speaks, Wednesday

• China non-manufacturing and manufacturing PMIs, Thursday

• Eurozone CPI, Thursday

• US PCE deflator, Thursday

• OPEC+ meeting, focused on finalizing output levels for 2024, Thursday

• China Caixin manufacturing PMI, Friday

• Eurozone manufacturing PMI, Friday

• UK S&P Global/CIPS Manufacturing PMI, Friday

• US construction spending, ISM Manufacturing, light vehicle sales, Friday

• Fed Chair Jerome Powell, Chicago Fed President Austan Goolsbee speak at separate events, Friday

Source: Bloomberg Markets Wrap

Final Thoughts

After the extended Thanksgiving weekend in the US and as Wall St returns, will there be enough momentum left in this rally to continue or do we see a some consolidation as tax loss selling occurs and portfolios are re-balanced? Either way, things still look set for a December Santa rally!

As always, this is newsletter is opinion and observations and nothing here constitutes financial advice or recommendations. Always do your own research and seek independent financial advice when required.