Get The Litepaper

Binance Plots Path for (Media) World Domination

Happy Friday. It’s May 6, 2022.

The markets are not much brighter than they were yesterday, which is hardly a surprise to seasoned market participants. After the Fed’s FOMC call on Wednesday, stocks and cryptos went north. On Thursday, they erased all those gains and more. And today, stocks and cryptos are down anymore.

We take this to mean that when anything positive happens, we should just head for the hills. That’s not financial advice, by the way. We’re just feeling down and depressed about the state of the markets.

Here’s a sign of how the market is looking: Polygon is just four cents away from a sub-$1 price per coin. Pretty wild, especially considering its prominent positioning in the TVL wars. It’s now sitting below Shiba Inu and Tron… man.

Don’t worry, we’re not going to just harp on the state of Polygon, guys. We’re pretty agnostic here about how bad things are: Bitcoin (-1.2%) and Ethereum (-1.6%were both in the red today. Solana (-2.5%), which just a few days ago was the fourth-largest coin ex-stables by market cap, was looking prime to fall behind an even-more distressed Terra (-6.8%)

In fact, the only way that you had a good day today is if you were an owner of Tether, USD Coin, or UST. Spoiler alert: these investments were little-changed today! Hm. I wonder why? Oh wait…

Sure, Tron (+18%) hodlers also had a great day. The coin trended on the site all day, which can be largely credited to the Tron DAO launching its new stablecoin. We’re going to be covering this development on Monday, along with why Tron looks like it’s building a Terra-esque war machine. If we just said a bunch of words that don’t register with you, that’s fine… we’ll take it slow. Just remember to check your inbox… Monday evening. (NOT CLICKBAIT.)

All that aside, the star of today’s edition is Changpeng Zhao and Binance. The crypto exchange and its iconic founder wrote a pretty wild check to Elon Musk. You can see what for, along with some two cents and theories for why they did, in our top story below. And, keeping consistent with the theme, we’ve got a story about Nvidia having to make a check out to a regulatory agency for a crypto-related reason…

Here’s how the market is looking going into the weekend:

Bitcoin (BTC)
Ether (ETH)
Binance Coin (BNB)
Ripple (XRP)
Solana (SOL)
Terra (LUNA)
Cardano (ADA)
Dogecoin (DOGE)
Avalanche (AVAX)
Polkadot (DOT) 


Binance Counts Itself Among Elon’s Twitter Posse

Binance Counts Itself Among Elon’s Twitter Posse Featured Image

Elon Musk is all the rage in headlines these days, which can be credited in-part to his plan to take social media giant Twitter private in a $44 billion deal.

However, the world’s richest man doesn’t have $44 billion in cash to hand out. Though he could sell his billions worth of Tesla, the truth is that he probably prefers to enlist the help of some friends in financing his ambitious takeover. 

A new disclosure offers some insight into those friends, who will fetch a stake in a soon-to-be-private version of Twitter. Among them are goliaths of venture and private equity — Marc Andreesen and Ben Horowitz, Sequoia, Larry Ellison, Fidelity, Brookfield, and others. However, some unconventional members of the group demonstrate the unconventional ends that Musk has gone to in order to secure funds for this buyout.

A Saudi Arabian prince, the wealth fund of Qatar, a Dubai-based venture fund, and a crypto exchange.

The last part is no joke. The world’s largest crypto exchange, Binance, has pitched in $500 million as part of Musk’s go-private deal. The exchange’s CEO, Changpeng Zhao, said that it was “a small contribution to the cause.” Ultimately, Zhao’s contribution is the fourth-largest allocation, so that’s one helluva contribution.

We reckon by now that you might be asking, “Well, what does a crypto exchange have any business investing in a social media platform for?” Well, at the least, it offers them a place at the table (and a place to deploy capital which will likely yield some hefty Elon-esque rewards.)

Twitter has already made a meaningful embrace of blockchain and web3 technology, with support for crypto payments and NFT profile pictures. The company’s former CEO also talked shop on a decentralized alternative to Twitter which was being trialed. While Musk has been a vocal proponent against some of how Twitter has prioritized funky features over real meaningful change, Binance and Twitter mutually have an angle in bringing crypto into the mainstream in spite of Musk’s skepticism.

In truth, though, Binance’s contribution also feeds another goal: in an era where fintechs (namely its competitors) want to create their own media ventures, Binance has decided to simply buy into ones that people already care about. 

The company tee’d off its acquisition of media properties in December 2019 when it acquired DappReview, a small and scrappy media venture covering decentralized applications. Months later, it paid to acquire CoinMarketCap, a leading crypto data site. Though terms were not detailed, Cointelegraph indicates that it was “rumored to have cost Binance $400 million.” The acquisition gave Binance one of the most popular sites in the world of finance.

Even more recently, the exchange became one of the largest owners of Forbes after replacing withdrawn capital commitments. They spent $200 million in that transaction and, as part of it, will help inform the company’s “crypto and blockchain strategies.”

You can see the dots we’re helping you connect, we presume. So what’s the takeaway? Tl;dr: Binance is playing with global crypto domination on the mind. This $500 million check to get a stake in Musk’s Twitter is just further evidence of the company’s financial mite. Whether it’ll transform it into a media giant too is harder to say, but the company’s dominance in the industry is undeniable.


Interpreting California Governor Newsom’s New Pro-Crypto Executive Order

On Wednesday, California Governor Gavin Newsom signed an executive order “to spur responsible Web3 innovation, grow jobs, and protect consumers.”

This one came by surprise.

A press release published online by the Governor’s office points out that Newsom’s order is intended to build on “President Biden’s recent actions to bring regulatory clarity to these emerging products and services.” They also cite Pitchbook data (never seen this before in an executive order (EO) or press release from a government) that shows that venture backed blockchain and crypto companies have nearly doubled.

Then, they jump the shark: Newsom and Co. have a seven point plan with this EO. Rather than waste your time trying to wrap this up, we decided to interpret these critical points for you:

“Create a transparent and consistent business environment for companies operating in blockchain.”
The current guidance on how web3 companies or protocols should operate sucks. California wants to change that because there’s a financial impetus (growing companies = more jobs = hotter economy.)

“Collect feedback from a broad range of stakeholders & create a regulatory approach”
In order to do that, this EO suggests that the government will give empathy a try. Given the capital at risk in California’s economy, we actually believe they will hear out companies on their concerns and desires. Among other things, they might actually look at ways they can sew crypto and blockchain tech into the state’s operations.

“Collect feedback from a broad range of stakeholders for potential blockchain applications and ventures.”
Though similar to the former point, this point insinuates that the state wants to understand crypto technologies more. They also want to offer a stage for people to voice concerns with the tech.

“Engage in a public process and exercise statutory authority to develop a comprehensive regulatory approach…” and “Engage in and encourage regulatory clarity”
Tl;dr: Stability will help things grow. California recognizes that as America’s chief GDP producer, it has room to flex in the Federal regulatory sphere. By creating a more firm regulatory framework for crypto in California, there might be room to export that framework federally.

“Explore opportunities to deploy blockchain technologies to address public-serving and emerging needs…”
This one kind of speaks for itself. The state of California wants to better understand how the technology could help state agencies. In order to figure that out, it says it’ll engage with companies, academics and researchers, and communities to help try new things.

“Identify opportunities to create a research and workforce environment…”
California has been riding on the success of Silicon Valley (its tech capital) and Los Angeles (its social capital) for decades. However, other states are serving competition. One incumbent reason why people might come to California is if education programs specific to web3/crypto crop up, which create a pipeline to innovation hubs (whether new or old.)

If you want to read the entire executive order, you can do so here.

So, observations? Ultimately, this executive order feels like it has a markedly “nicer” tone to it than the Biden-imposed order which was published not too long ago. It also feels like the state of California is marketing itself as embracing the tech, which is what many regulators and Federal officials say they do also (whilst stacking major regulators with more and more hires and more and more opaque responses/language.)

However, as Max Moncaster from the Twali newsletter indicates, “[executive orders] lack legal staying power.” Though they can be flimsy, they represent “an important role in directing early government action.” In order to get to a more stable place for crypto, though, the state of California and Federal regulators will have to do a lot more than issue promises and sign their name on dotted lines. They’ll actually have to legislate, write some laws, and be accountable to a multi-trillion dollar industry.


Nvidia Pays Fine For Failing to Disclose Crypto Mining Revenue

The crypto industry hates the SEC. Now, Nvidia does too.

The computer hardware giant, which ranks among the most valuable companies in the world by market cap, will have to make a $5.5 million check out to the Securities and Exchange Commission after it “allegedly failed” to disclose that crypto mining had an impact on its revenue.

The regulators pointed out two disclosures, citing high revenue growth out of the company’s gaming division. The company reportedly failed to acknowledge that the revenue had little to do with gaming at all. The SEC calls that “omission misleading” because “it created the impression that Nvidia’s gaming sector was not significantly affected by cryptocurrency mining”, according to the handsome folks at Blockworks.

In all seriousness, most of Nvidia’s gaming business demand being driven by Ethereum mining was apparently only a surprise to members at the SEC. During a portion of the period that the regulator alleges that Nvidia made a material omission of information, the stock nearly doubled. Look at this graph:

Sure, maybe Nvidia failed to disclose it in their statement, but everybody circa 2018 knew full and well that the GPU shortage was as a result of scores of retail depthgrobblers hoarding GTX 1080s so that they could scrape away at the blockchain for nuggets of Ethereum Classic, Bitcoin Gold, and some other small proof of work (meaning: you have to mine it using a graphics card to get it) sh*tcoins. That graph, by some measures, is evidence of it. Investors piled into Nvidia in the early days of the crypto-caused GPU hoarding. As we can see though, Nvidia’s stock didn’t really take off until after the pandemic. 

Overall, $5.5 million is a small price to pay for the multi-billion dollar Nvidia. However, it’s such a scrappy and — in all seriousness — harmless omission. There’s not a whole lot that you can take away from this story other than the demonstrable lengths to which the SEC is willing to crack down on misleading or lackluster information (so at least that’s a positive takeaway here.) In their case, it could be worse… they could be Elon Musk!