Unchained - Bitcoin's Price Dropped After Iran's Attack on Israel. Is ‘Uptober’ Canceled? - Ep. 713

Episode Date: October 4, 2024

October started with hopes for “Uptober”—a positive price trajectory in October—in the Bitcoin community, since, historically, Bitcoin has performed well this month. But things took a turn when geopolitical tensions in the Middle East escalated, raising concerns about how that could affect Bitcoin’s price this month.  In this episode, André Dragosch, European Head of Research at Bitwise, talks about how Bitcoin typically responds to geopolitical shocks, whether this could present a buying opportunity, and how major events like the U.S. elections might shape Bitcoin’s future. Show highlights: How Bitcoin’s reacted to the geopolitical escalations Why André believes this is a buying opportunity How there was a macro capitulation after the beginning of the unwind of the Japan carry trade in August Whether Bitcoin can truly act as a safe haven asset How the clientele of ETFs have changed the market structure for Bitcoin Whether ‘Uptober’ is canceled How Andre expects Bitcoin will perform depending on the winner of the U.S. elections Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! Polkadot Mantle’s FBTC Guest André Dragosch, European Head of Research at Bitwise Bitcoin as a Safe-Haven: Hedging Against Geopolitical Risks Links Previous coverage of Unchained on the recent market movements:: Investors Ditch Bitcoin, Scoop Up Gold, as Iran-Israel Tensions Escalate $500 Million Liquidated From Crypto Markets Cools ‘Uptober’ Enthusiasm Unchained:  Bitwise CIO Matt Hougan’s thread on how bitcoin & gold have performed BlackRock’s bitcoin report  Timestamps: 00:00 Intro 01:14 How Bitcoin's price reacts to geopolitical tensions 03:17 Whether this could be a buying opportunity 08:54 Macro capitulation after the start of the Japan carry trade unwind 11:02Can Bitcoin act as a safe haven asset? 16:12 How ETFs have changed Bitcoin's market structure 20:28 Is ‘Uptober’ canceled? 24:17 Bitcoin’s future based on U.S. election outcomes 28:45 News Recap Learn more about your ad choices. Visit megaphone.fm/adchoices

I think these geopolitical risk events very short-term in nature, and they only, usually, at least, historically, they have a very short-term effect, which is why I think it's rather a buying opportunity. Hi, everyone. Welcome to Unchained. You're no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started coming crypto nine years ago, and as the senior editor at Forbes was the first Metriameter Porter to cover. cryptocurrency full-time. This is the October 4th, 2024 episode of Unchained. FBTC is the fastest-growing Omni-Chane BTC asset this summer. Join FBTC Points-inspired campaign where you can hold FBTCC to earn sparks, lucrative yields, and token drops, all on your Bitcoin. Pocod is the original and leading layer zero blockchain with over 2,000-plus developers, and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem.

Join the community at PogoDOT.network slash ecosystem slash community. Today's guest is Andre Drey Gosh, European head of research at Bitwise. Welcome, Andre. Thank you so much and happy to be on the show, Laura. Thank you. The crypto or more specifically, Bitcoin community, came into October chanting the phrase October based on how previous octobers have tended to be quite positive for Bitcoin. However, that was before Iran, launch.

200 ballistic missiles toward Israel on Tuesday, and that is an escalation of tension in the Middle East. Our hurts go out to all of those affected. We definitely saw some people on crypto Twitter who were personally affected by this. However, obviously, this is a crypto podcast, so we will be focused on a very narrow aspect of this geopolitical situation, and that is to see what takeaways we can draw from how Bitcoin generally performs around geopolitical events. So, Andre, after this attack on Israel, what happened to the price of Bitcoin? Yes, I think after or during the attack, you could already see that there was some kind of safe haven flow, right?

Flow into gold. So gold was pushed up and Bitcoin sold off, which was somewhat unexpected, right? Because as you mentioned, everyone was expecting up tover, right? So I think sentiment going into this geopolitical escalation was relatively high. And we also saw this in our crypto asset sentiment index that we calculate in house. In fact, we've been at the highest level of sentiment since March, 24, right, when we reached the latest all-time high. And so I think any kind of increase in uncertainty, be it geopolitical or economic, right, I think any kind of increase in uncertainty could have led to this kind of sell-off, right?

because sentiment was already high and definitely the market was right for a kind of pullback. And yeah, so gold rallied, so safe end flows, Bitcoin sold off. But, and I mean, my personal opinion is, I don't want to spoil you, but like my personal opinion is this is rather a buying opportunity and we can go into the reasons why. Yeah, go ahead, explain that. So looking at past geopolitical risk events, events, right, such as, I mean, the Iran-Israel conflict is one of these, right? So geopolitical risk events, I mean, how do you measure them, right?

But there are ways to measure them, such as the geopolitical risk index, right? By Matteo and Lolo, I can't pronounce his name because I think it's an Italian name. So he came up with a methodology to make. measure geopolitical risk events or periods of heat and geopolitical risk. And he came up with a methodology based on news, right? It's essentially a news count of stories related to geopolitical risks, so armed conflicts, terrorist attacks, and so on. And so he calculates this index.

And what we did, we took this index, right? And we only looked for the top 20 major geopolitical events based on this index. Because, I mean, you can also just choose any kind of interesting headline and your analysis. But I think this is more, yeah, this is more like a quantitative fundamental approach. And so we took this index. We look at the top 20 major geopolitical risk events. And then we calculated the performance before and our stuff. right of Bitcoin.

Yeah, and just for the audience to know, he's referencing a report that he published in July called Bitcoin as a safe haven hedging against geopolitical risks. Exactly. And yeah, so what we did there was we looked at these top 20 major geopolitical events and then Bitcoin performed relatively positive. On average, it performed very positive. I mean, if you take any kind of random window, right,

performance window, any kind of random window, a hundred-day window, for instance. And you plot like the average performance across these random windows, you always get an upward trend, right? But we even factored this in and subtract this kind of average, random average across like random 100-day windows.

And still, like, even factoring this in, that Bitcoin essentially is moving up in the load over the load term, right? You can see that after five to 10 days after these major geopolitical risk events, you can see a slight underperformance. Bitcoin's performing below average, but then above average thereafter, meaning so you may have some short-term underperformance, but then medium to long-term performance.

I mean, even after 10 days, right? So that's why I said at the very beginning, I think these geopolitical risk events very short-term in nature, and they only, usually, at least, historically, they have a very short-term effect, which is why I think it's rather a buying opportunity. Yeah, so the theory might be that there are certain people who, like the people who are selling maybe view Bitcoin as more speculative asset. And so that's why in that moment they sell. But then there might be like another cohort that at that time sort of either understands or doubles down on their view of Bitcoin as a safe haven for these types of instances. And so that's why the new kind of, well, that's why then the new baseline basically goes up once you have like some time baked. And is that kind of maybe one hypothetical of what's actually happening?

during these times. I think what you usually see is during these geopolitical selloffs, right, during this increase in uncertainty. Usually weak hands, right, paper hands, letters hands, however you want to call them. They usually dump big coins, right, dump crypto assets in general and sell at the loss, right? They essentially throw in the towel and exit the market.

But the moment, the majority of these short-term holders, weekends does that you usually have the kind of tactical bottom right in the price so some kind of seller extortion because if there are no sellers left right the price bottoms

and so I don't think we had like huge seller extortion but we saw a flash out of these weekends more recently during this geopolitical risk events maybe just two observations so we saw the highest amount of

exchange transfers, obviously short-term holders in loss to exchanges, the highest since August, 5th of August, where we had the low, right, the last low. And also, for instance, we had the highest amount of Bitcoin futures loan liquidations, right, forced liquidations, also highest since 5th of August. So these two metrics tell me, but there are also other metrics, that you have some kind of short-term Selma Xshajoshin at least flushed out of these weekends. And this is very typical for this kind of for a kind of tactical bottom. Okay. And just about the August 5th, that was when we saw part of the Japan Yan carry trade unwind.

Exactly. I mean, it was like, for me, this was the perfect tactical bottom. Because it wasn't only a bottom in crypto sentiment, but also bottom in macro sentiment. What do I mean by macro sentiment? So what we also measure is, apart from this crypto asset sentiment index, we also measure cross-asset risks appetite within like traditional financial markets, equities, bonds, fx, commodities and so on. And during this yen carry trade on one, during this seller of 5th of August, right,

you had a massive macro-capulation. So global growth expectations and cross-asset risk appetite, they plunged to the lowest level since COVID. It's since March 2020. And so there was a massive macrocapulation in traditional financial markets, but also in crypto markets. So our crypto asset sentiment index, it plunged to the lowest level since November 2022, right, when FTX collapsed.

So sentiment was over-barish. And for me personally, it was essentially a perfect setup. When we hit below 50K, I think, was 50K, a year's dollars in Bitcoin, right? I think the likelihood, well, it was very asymmetric because you had so much seller extortion, downside risks were relatively limited, right? While upside, it's not upside risks, right?

It's upside opportunities were really huge, right? Because, I mean, you already saw that because of this plunge in macro sentiment, right? Because of macrocapulation, I mean, you had increasing odds of the Fed Pivot, right, for Fed Pivot, which actually happened in September. Right. And this was actually the trigger that led to the Fed Pivot, essentially. Yeah, yeah. So in a moment, we're going to talk a little bit more about what all this means for Bitcoin's reputation as digital gold, but first, a quick word from the sponsors.

you make this show possible. FBTC is an Omni-Chane BTC asset, contributed by Mantle Network and Antalpha Global. Launched in early July, FBTC's TVL has already passed $125 million, making the fastest-growing BTC asset this summer. FBTC's points-inspired campaign, Sparkle, has officially started, with lucrative and sustainable yields, plus points and token airdrop from Babylon,

Mantle's new token cook, and more. FBTC is the BTC solution, you've been waiting for. Visit fbtc.com slash ongoing hyphen campaign today. Back to my conversation with Andre. So it was interesting how we talked earlier about how in the times of like right, right at the moment of these geopolitical risk events, Bitcoin does not act like digital gold. Someone who helps you out with the podcast pointed out or wondered if part of that is because none of these incidents have yet escalated to major wars that, you know, massively disrupt global trade or have other kind of like global effects. And I wondered, you know, what you thought

would happen if something like that, you know, in terms of Bitcoin's behavior, if something like that were to occur. I think for the time being, like, if we say, okay, Bitcoin is a safe haven asset, it's probably not the whole truth, right? I mean, Bitcoin is still a volatile asset, right? The realized volatility of Bitcoin is around 50% per annum, which is still relatively high compared to traditional assets like equity, like gold, right? But I think what's very positive about Bitcoin is the character of Bitcoin has been changing, right, itself. It used to be very risky asset, even more risky than it is today, right? We used to have like 200, 300, 300% realized volatility in 2012, right? But what we observed quantitatively is,

realized volatility essentially decreased structurally. There's a structural trend and realized volatility trending down with every halving. The average volatility per halving epoch, right, has decreased every time with every halving. Because of increasing scarcity. So my hypothesis is with each new halving gold, a Bitcoin becomes more gold. like, right, and less like risky asset. So essentially, so that's my hypothesis is Bitcoin will converge in terms of realized volatility towards gold's volatility in the loan term, right?

We're not there yet because, as I've said, I mean, the realized volatility is around 50% and gold's volatility is around 20% to 30% depending on like the market regime. But so we're not there. yet, but we're approaching like this kind of safe haven characteristic. So less volatility. And I mean, volatility is not always

bad, right? Because we have upside volatility, which is good, right? And we have downside volatility, which is rather bad. But we know that there's a skew, right, in Bitcoin's return profile. Because Bitcoin trends upwards, so there's positive skew.

And I mean, you can We can also talk about the portfolio case. When you add Bitcoin to a portfolio, you can also see that like it doesn't really, it increases like the average performance of a portfolio significantly, but it doesn't really increase the volatility significantly or drawdowns, right, max drawdowns. So you see this positive skew, right,

when you add Bitcoin to the portfolio. But yeah, long story short, I think the character of Bitcoin is changing. It's not a safe haven. has it yet, but it will probably converge to one in the lower run. Okay. Yeah. And you started to reference this tweet thread that we had discussed before

recordings. I'll just describe it for the audience. The CIO of Wismet-Hogan tweeted that, you know, the way that Bitcoin and gold have performed, sorry, I should explain. So he basically had this comparison of a traditional 60-40 portfolio to what it would look like if you added, I think it was like 1% Bitcoin, 2.5% Bitcoin, 5% Bitcoin, and then the same for gold. And the analysis showed that Bitcoin boosted returns without increasing risk, while gold, lower risk, and only kind of move the needle in returns like one percentage point.

So, you know, he basically said that it seemed like for the amount of risk that you're taking, like Bitcoin is better, although of all the caveats about how, you know, past performance is not indicative of a future result, et cetera. But I did want to ask you, because we kind of talked a little bit about how the nature of Bitcoin itself is changing. And obviously this year, we've seen kind of a huge change in who holds Bitcoin with the introduction of spot Bitcoin ETFs in the United States. And I wondered if you thought that that lent itself to any kind of change in behavior or if moving forward, we might even see greater effects from that. So I think, okay, this may become too complex, but like,

It's definitely important. So I think from a pure market microstructure, I think if you have more diverse types of investors, right, it's always a good thing for volatility. It always dampens volatility. Because for instance, take a short-term trader, right, and a pension fund, right? A short-term trader might think like, okay, I'm selling because of this technical signal, right? The pension fund may think,

like, oh, it's a more attractive entry point for the low run. You know, I'll buy, right? The short-term trader sells, the pension fund buys, right? They are very different in terms of investor profile. The one is more short-term, has a more short-term horizon, right, investment horizon. It uses different kind of information, while the pension fund probably uses, yeah, also different kind of information that has what's more important, that's a different investment horizon, right?

right and so ets in nature i think the the clientele of ets is more buy and hold long run and long run passage investors right not like short-term traders although you have to admit and if you're if you're really honest of course there's still lots of retail participation in these products right and also in europe u.s in general but the key theme is you get more heterogeneity among the investor types, and this will definitely dampen volatility in the long run. And this, we can talk about different kinds of theories, right? Efficient market hypothesis assumes every investor type is the same, right? Same kind of information, the same investment horizon.

But the reality is more like what like Epictas formulated, I think, at the 90s, fractal market hypothesis. You have heterogeneity among investors, right? you have different investor types, different investment information sets, right, different investment horizons. And that's usually a good thing. And many people say like market microstructure specialists say, the moment you have huge consensus in the market, you have these sell-offs, right?

You have these price spikes, sellers, but also like upward spikes. So, but because investors become homogeneous, right? they trade on the same kind of information they trade very short-termish so you have these price bikes you have instability if you have this sense in the market right more heterogeneity different types of investors different investment horizons it becomes more stable the market becomes more stable less volatile which is somewhat like contradictory or somewhat yeah oh not not to my mind It seems obvious, whereas everybody's thinking the same way, then, yeah, it's hurt mentality. And so on.

It needs to see this price back. So long story short, I think the ETFs in general, they will lead to more heterogeneity among the investors. Because obviously, institutional investors, and we do have more institutional investors with these ETFs, according to the latest 13F filings. So around 20% institutional investors. And this will dampen volatility because you have suddenly different types of investors, not only retail. Yeah. Yeah.

And it does seem BlackRock is picking up on the same thing. They did release a report that described Bitcoin as what they called it unique diversifier against global risks. We're kind of coming up on time. So I'm going to just mention that and move on to just ask you directly, given everything that we discussed and also this ongoing conflict in the Middle East, how do you think that will affect Bitcoin's price action? How do you think it will affect the October trend that we've seen historically? So maybe it's not trendy anymore, but I'm still, I still believe in October.

Because like the way I see it is sentiment has reset it to neutral. It's not over Polish anymore, right? We're back to neutral levels. So we had some kind of sense. sentiment reset, which is good, right, because it was good that we had this kind of pullback. And at the same time, I mean, geopolitical risk, and we just talked about this, right, in very short term in Asia, usually they're buying opportunities because on average, at least historically, Bitcoin has been up, right, after around 10 days and following. And so because up October, it's called October for a reason, because October has been the third best month historically among the 12 months right the best months has has been November and I think

May has been the second best but October has been the third best month and September was the worst so my personal expectation is Q4 we continue to rally we continue to recover from these geopolitical risk events we are transitioning from a macro side to a more positive macro environment right with a fat pivot, PBOC pivot, right, and so on, the monetary policy stimulus in general. Plus, our analysis show that the halving effect has just started to pick in around August and now becomes increasingly more significant,

increasingly more positive, a tailwind for Bitcoin. And you can also see in other on-chain data, like the decline in liquid supply and so on. So illiquid supply has reached a new old time eye, which is totally consistent with like the harbing effect intensifying, right? And so I think the combination of, let's say, money printing, right? And by the way, money supply has, global money supply has already reached new old time eyes and is accelerating, right? Yeah, and apparently that's also correlated positively with the Bitcoin price.

Exactly. And so we know that, I mean, we know for a fact that periods of global money supply expansions, right, are associated with Bitcoin bull markets, right? And periods of money supply contractions are associated with Bitcoin bear markets, right, in crypto bear markets. So this is definitely very bullish, right? The U.S. has just joined the party, right? And two money suppliers just stabilized, decreasing, but not at new all-time highs, right? But the feds, I mean, just cut rates, so liquidity will follow. And I think that's a really bullish macro setup.

And we can also see it quantitatively. I think the market, Bitcoin itself, doesn't care so much about these global growth wars, right, whether China's a recession or yes, U.S. will, might be in a recession. It doesn't even care so much anymore from a pure performance perspective. while in fact the US dollar, Montreal policy, and other coin specific factors like the harling are becoming more important. So I think we really entering this really bullish face now. Okay. Yeah. I find it interesting, everything you're saying because I feel like people have been noting how this is a different cycle. And so just from what you've described,

it almost feels like this is saying like it's becoming more similar to previous cycles. But I have to ask you before we go, because this is all the talk nowadays. What do you think the U.S. presidential election will do for the price of Bitcoin, depending on the outcome? Do you have any predictions or projections? So we ran some numbers. We crunch some numbers. So, I mean, at least performance-wise, right?

I think Trump is the preferred candidate for the crypto market. Because if you look at the sensitivity of the top 10 crypto assets, so Bitcoin, and so on. Solana, if you look at the performance sensitivity to the betting odds, right, Trump, Paris betting odds, then there's a positive correlation to Trump odds. So rising Trump odds are associated with positive performance, crypto asset performance, across the board, across every crypto asset of these top 10 and vice versa. So, I mean, most of these sensitivities, they're not. statistically significant yet.

It's 1% towards Trump on Polymarket, interestingly, because a few days ago, I feel like it's a few days ago it was different. Interesting. But like, so the way we, we try to forecast this price effect is if Trump wins or Harris wins, right? The probability, right, will rise from 50% to 100%.

So we can take this delta, which is around 50% points, right, depending on where the odds are, but like, it's around 50 percentage points. And so you can calculate based on the sensitivity to that delta, right, to this change in odds, you can also calculate the performance. And so that's why, as I was saying, it's around 10% in the immediate aftermath, because it will rise from 50% to 100%, right, immediately. And so what's also interesting, at least based on these observations, is like, mean coins they're the most sensitive right like those which somewhat makes sense because i mean if i mean

it's quite likely if drunk becomes rather than because he wants to install this bitcoin slash crypto advisory council right they're they'll probably write very pro crypto regulation and so maybe this kind of rationale market rationale makes sense that meme coins appear to be most sensitive to these also. Yeah, a couple of things. So first, interestingly, while Polly Market has Trump up by one cent, predicted, says it has 55 cents for Kamala and 49 for Trump. So that's interesting in terms of that divergence. And Kalshi is about to launch its own prediction betting or presidential betting. So we'll see what happens with that market. But one other thing that I wanted to note was that because Donald Trump talked about Elon Musk being named the like efficiency.

are or whatever it was. Then later, Elon Musk tweeted a picture of like, well, it said it was some kind of, it looks like governmenty. And it said like the Department of Governmental Efficiency, DOGEE. And he had the Shiba Eno from Doge coin. So, yeah. You think that's related. That's why Doge is so much more sensitive to these animals.

I mean, who knows? Maybe. Maybe. Maybe. But, you know, I was like, of course, he has to tweet that. Anyway, well, this has been a very fascinating discussion. Thank you so much for coming on Unchained. Thank you.

Thank you, Laura. And don't forget, next step is the weekly news recap today presented by Wondercraft AI. Stick around for this week in crypto after this short break. Pocod is the original and largest layer zero blockchain with over 2,000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for, the ecosystem. Upgrading the infrastructure with eight times higher transaction throughput and twice as fast block times, tailored core time for the needs of every protocol, trustless bridges to multiple chains, and revise tokenomics with a token burn to reduce inflation. Perfect for GameFi and

DeFi to build, grow, and scale. Get your Web3 ideas to market fast. Think big, build bigger with with Pocodot. Join the community at Pocodot.network slash ecosystem slash community. Welcome to this week's Crypto Roundup. In today's recap, the SEC files an appeal in the ripple case. Bitwise moves to launch an XRP ETF and North Korean IT workers infiltrate the crypto industry. We'll also cover the CFTC's latest recommendations on tokenized shares, eigenlayers token launch, and the controversies around FTX's bankruptcy plan. Plus, World Liberty Financial opens up KYC verification, the SEC's enforcement director steps down, finance founder Z is released from jail, and Mango Markets agrees to destroy its MNGO tokens in a settlement.

Lastly, in our fun bits, we dive into the unexpected prison partnership between Diddy and Sam Bankman-Fried. Thanks for tuning into the weekly news recap. Let's begin. SEC appeals Ripple case. The U.S. Securities and Exchange Commission has filed an appeal against the August 7 ruling in its case against Ripple, claiming the decision conflicts with decades of Supreme Court precedent. The SEC's spokesperson said that the agency believes the district court's judgment misinterprets securities law and that it's prepared to make its case to the Second Circuit Court of Appeals.

In the original ruling, Ripple was fined $125 million, far less than the $2 billion initially sought by the SEC. Bitwise registers XRPETF. Just a day before the SEC announced its appeal in the Ripple case, asset manager Bitwise filed for an XRP-focused exchange-traded fund in Delaware. On September 30th, Bitwise registered a trust named Bitwise XRP ETF, with the state's division of corporations, marking an important first step toward launching the fund. Although this filing is not a guarantee of SEC approval, it indicates Bitwise's intent to offer a spot XRP ETF, which has never been approved before.

The SEC has been embroiled in a legal battle with Ripple over whether XRP qualified, as an unregistered security, meaning this new ETF proposal could face regulatory challenges. North Korea's infiltration of the crypto industry exposed. A recent investigative report by CoinDesk has revealed that over a dozen blockchain companies inadvertently hired IT workers from North Korea, exposing themselves to significant cybersecurity and legal risks. Using fake IDs and resumes, these workers managed to pass interviews and reference checks and infiltrate reputable crypto projects such as Phantom, Sushi, YerN Finance, and Cosmos Hub. One of the more striking findings is that North Korean IT workers not only perform typical

job functions, but in some cases also funneled earnings back to Pyongyang, potentially funding North Korea's nuclear weapons program. According to a 2024 United Nations report, these IT workers generate up to $600 million annually for the regime. CoinDesk's investigation also linked some of these workers to crypto hacks. including a $3 million attack on the sushi protocol. As one blockchain developer noted, everyone is struggling to filter out these people. Underscoring the widespread nature of the scheme,

CFTC subcommittee pushes forward recommendations on tokenized shares. A subcommittee of the U.S. Commodity Futures Trading Commission has advanced recommendations that could allow firms like BlackRock and Franklin Templeton to use tokenized shares of their money market funds as collateral in trading. according to Bloomberg. The recommendations which involve the use of distributed ledger technology for holding and transferring non-cash collateral have now been passed to the full committee for

further review and a vote later this year. If approved, the guidelines could bring tokenized assets closer to mainstream use in the financial system, allowing businesses to pledge tokenized shares for capital efficiencies. Black Rock's Beetle token, which recently became the largest tokenized Treasury Fund is already being accepted as collateral by some crypto prime brokers such as Falcon X. Eganlayers' eigen token unlocks for trading. Eganlayer's native token, Igen, officially became transferable on Monday night, marking a much-awaited event for the Ethereum-based restaking protocol. Although the token was airdropped months ago, users had been unable to trade or sell it until now. Following its debut, the token quickly

gained momentum, rising to a price of $4.32 and a fully diluted valuation of $7,000,000. $7.2 billion, according to coin market cap. However, it went down dramatically on Wednesday as the broader markets stumbled. This unlock allows eigen to be traded, transferred, and staked, opening the door for developers to build actively validated services on the protocol. As of now, 60 AVS projects are reportedly in development aiming to leverage eigenstaking to drive decentralized services. However, the tokens launch wasn't without controversy. Critics raised concerns over the lack of transparency regarding early investors being allowed to stake locked tokens and earn rewards. This practice was not initially disclosed, causing confusion about the actual circulating supply.

In response, EigenLayer updated its documentation and reassured users that future rewards would be balanced between investors and general stakers. FTX bankruptcy plan faces criticism over shareholder payouts. The FTX bankruptcy estate recently revealed plans to set aside up to $230 million, or 18% of recovered assets, for preferred shareholders, sparking backlash from creditors. The announcement came after the deadline for creditors to vote on the reorganization plan, leaving many frustrated by the last-minute disclosure.

Preferred shareholders, including major investors such as Sequoia Capital, Temasek, and Kevin O'Leary, stand to benefit, despite usually being lower in the priority of claims during a bankruptcy. Earlier, FTX creditors had overwhelmingly supported a reorganization plan that promised to return 118% of claims. and cash based on asset values at the time of the bankruptcy in November 2022. However, some creditors argue they are still at a disadvantage given that many crypto assets have appreciated so significantly since that time.

The plan is set for a court hearing on October 7th, but recent rumors about repayments starting earlier than that contributed to a surge in the value of the FTT token over the weekend. World Liberty Financial launches, KYC. World Liberty Financial, a crypto project backed by Donald Trump, began accepting Know Your Customer Verifications on Monday. The KYC process required to ensure compliance with anti-money laundering regulations restricts access to information and participation in the project to pre-qualified individuals, particularly accredited investors in the U.S. The project aims to offer a non-transferable governance token called WLFI, which was first announced during a September 16th launch event.

By Tuesday, World Liberty Financial reported that thousands had signed up for the White List, with the project describing the response as a massive success. However, due to U.S. regulations, participation is limited for many investors. The project, promoted by Eric Trump and Donald Trump Jr., has sparked mixed reactions, with some critics claiming the initiative does more harm than good for the industry. SEC Enforcement Director Gruel steps down. Gerber Gruel, the SEC's Director of Enforcement, will step down. down from his role on October 11th, 2024.

Gruel, who has been with the SEC since 2021, led the agency's efforts in over 100 crypto-related enforcement actions, including high-profile cases against major cryptocurrency trading platforms. His tenure also saw the SEC significantly increasing the size of its crypto assets and cyber unit. Sanjay Wadwa, the current deputy director of enforcement, will take over as acting director following Gruel's departure. In a press release, SEC Chair Gary Gensler, praised Gruel's leadership, stating that he acted without fear or favor in enforcing securities

laws and protecting investors. Commenting on the sudden departure, Jake Chervinsky, chief legal officer at Variant Fund, tweeted, it's not normal for an SEC enforcement director to disappear like this. Perhaps the inevitable end to a campaign of unlawful harassment and misrepresentation resulting in many embarrassing defeats in court. Binance founder Zizi released. Changpeng Xiae Zhao, founder of finance was officially released from custody on Friday after serving a four-month sentence related to violations of the Bank Secrecy Act. Zhao, who had been in a halfway house since August, returned to the crypto world ahead of his scheduled release date.

Zhao celebrated his newfound freedom with a simple GM tweet, sparking a flood of lighthearted responses from the crypto community. Mango Markets to destroy MNGO tokens. Mango Markets has agreed to destroy its MNGO tokens as part of a settlement with the SEC, which accused the platform of offering unregistered securities and operating as an unregistered broker. Mango Dow, Mango Labs, and Blockworks Foundation will also request the removal of MNGO tokens from trading platforms and pay $700,000 in penalties. This settlement follows Mango Dow's recent vote to accept the SEC's proposal, and the entities did not admit or deny the charges. The SEC emphasized that the label Dow does not exempt projects from registration requirements.

Also this week, a U.S. judge ruled in favor of the SEC against Rivets, a crypto wallet firm for selling unregistered securities, moving the case closer to a final judgment on penalties. Time for fun bits. Diddy and SBF jailhouse buddies share more than a sell. Talk about a plot twist. Hip-hop mogul Sean Diddy Combs isn't just sharing a jail cell with crypto villain Sam Bankman-Fried. He's also borrowing his lawyer. After being hit with racketeering and sex trafficking charges, Diddy has teamed up with SBF's legal defense ace, Alexander Shapiro, to appeal his imprisonment, according to court filings. The two cellmates are now reportedly living in a barrack-style space and appear to now have more in common than just bad press. X is having a field day with the news,

with jokes flying about Diddy and SBF cooking up a new venture together from behind bars, perhaps a prison rap album funded by crypto. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to Unchained Crypto.substack.com that is Unchained Crypto.com and sign up for our free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin with help from Matt Pilchard, Juan Aronovich, Megan Gavis, Pam Ajumdar, and Margaret Korea. The weekly recap was written by Juan Aronovich and edited by Nelson Wang. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network.

For the latest in digital assets, check out markets daily five days a week with host Noelle Atchison. Follow the Coin Desk podcast network for some of the best shows in crypto.