FTX Update

FTX Creditors Left Out of the Conversation While SBF Defends His Bond

The scoop: FTX plans to relaunch its international arm and cancel claims on its native token, FTT. The exchange's creditors have criticized the draft reorganization plan, leading to potential delays in restructuring. Meanwhile, SBF is facing legal issues and is contending that being sent to jail would violate his First Amendment rights.

Trying Again: FTX's bankruptcy administrators have proposed to relaunch the exchange exclusively for non-U.S. users and organize creditors into different classes. The priority of assets will be based on "waterfall priorities."

Not So Fast: The draft plan has been criticized by creditors, who say they were not consulted and describe the plan as merely "ideas." The official committee of unsecured creditors thus called for a more transparent and collaborative approach. They also criticized the excessive professional fees in the bankruptcy process, amounting to over $330 million. The friction could delay restructuring plans, and the creditors may reject any plan that doesn't include their substantive input.

Lawyering Up: U.S. prosecutors have sought to revoke SBF's $250 million bond after accusing him of attempting to "intimidate" a witness by providing quotes to a New York Times reporter. In response, SBF's lawyer countered that his client's communication with the reporter was not intended to manipulate the case, but was rather a lawful exercise of his First Amendment rights to free speech and the press. Taking legal action against SBF for speaking with the media could raise first amendment rights issues, they claim.

WHAT WE'RE WATCHING

📈📉 Bitcoin volatility hits multi-year low. Long term volatility (180 days) is especially small. Why? That’s hard to say. Sometimes low volatility is caused by low trade volume, and sometimes low trade volume is caused by low volatility. Sometimes they aren’t even related at all. We think that the very small, gradual price movements upward are likely signaling to traders that there just isn’t very much opportunity in the market right now, leading to low volume, leading to low volatility.

🔽 Last week’s digital asset trading volumes reached a paltry $915M; well below the $1.5B weekly average of 2023. We also saw digital asset investment outflows of $21M.

⚡ Coinbase follows Binance’s lead and announces they will be adding Bitcoin Lightning network support to their platform…though, no hard date is set. This news came in response to a rather spicy tweet from Jack Dorsey accusing Coinbase of ignoring Bitcoin and Lightning, asking “what ‘crypto’ is a better money transmission protocol and why?”

Coinbase CEO Brian Armstrong’s reply: “We’re looking into how to best add Lightning. It’s non-trivial, but I think worth doing. I’m all for payments taking off in Bitcoin. Not sure why you think we’re ignoring Bitcoin - we’ve onboarded more people to Bitcoin than probably any company in the world.”

⛏️ According to new research from Galaxy Digital, Bitcoin’s 30D trailing hashrate grew 49% over the first half of 2023 (249 EH to 370 EH). Comparing this to the first half of 2022, where hashrate growth was only 22%, we can see that the rate of growth is also increasing.

MICROSTRATEGY

MicroStrategy Buys 450 More Bitcoins; Considers $750M Stock Sale to Purchase Even More

In Short: MicroStrategy has reported a profitable Q2 2023, with $22.2 million in net income. The recovery from a net loss of $1.1 billion in the same period in 2022 was mainly due to a reduced digital asset impairment loss.

A Strong Quarter Amid Bitcoin's Surge: MicroStrategy's holdings in Bitcoin reached 152,800 bitcoins by July 31, 2023, following a substantial addition in Q2. This, along with a favorable market environment, helped the company swing to profitability. The company also plans to sell up to $750 million in stocks for Bitcoin acquisition and other purposes.

The Facts:

• MicroStrategy net income for Q2 2023: $22.2 million

• Total Bitcoin holdings: 152,800 bitcoins, worth $4.5 billion

• MicroStrategy stock share price up nearly 200% at $434.98

• Bitcoin acquired for $347 million in the quarter, with plans to sell up to $750 million in stocks for further acquisition

Kang's Statement: "Our bitcoin holdings increased to 152,800 bitcoins as of July 31, 2023, with the addition in the second quarter of 12,333 bitcoins being the largest increase in a single quarter since Q2 2021," said MicroStrategy CFO Andrew Kang. He also highlighted the "promising backdrop" of institutional interest and regulatory clarity for Bitcoin that fueled the company's strategic investments.

POLL

Last Week, we asked:

Do you support Elon Musk in his attempt to make Twitter/X.com into a financial services platform?

55% of you said ‘No’, while 45% said ‘Yes’.

IN THE LOOP

🔗 July’s total adjusted on-chain volume for BTC decreased by 13.1%. That’s from analyses performed by The Block’s research director @lars0x.

🚕 Uber says it is looking to support Bitcoin. Uber CEO Dara Khosrowshahi told Bloomberg, “…(W)ith time, as the exchange mechanism becomes less expensive and becomes more environmentally friendly, I think you will see us leaning into [accepting Bitcoin]”.

💵 Stablecoin Tether announced their 2023 Q2 excess reserves reached $3.3B. That’s an increase of $850M over the second quarter, putting their total exposure to US Treasury bills at $72.5B.

Today’s newsletter was written by Colin Aulds and edited by Jordan.