This month in crypto: “one trillion dollars…”

Well, the big news this week is that Bitcoin has done a Dr Evil and hit a $1 trillion market cap for the first time since December 2021.

In fact, as I type this, Bitcoin’s price is around $52,000, which is only about 24% off its all-time high of $69,044 set in November 2021.

Usually, when a big price surge like this happens it’s impossible to know the real reason why. You get lots of plausible-sounding narratives from lots of talking heads, but ultimately, it’s a mystery.

Not this time.

This time there is a clear reason for Bitcoin’s run… the Bitcoin ETFs. 

Turns out they weren’t a “buy the rumour, sell the news” event after all. 

(Although it’s a massive shame that those of us un the UK are banned from investing in them. See last month’s issue: This month in crypto: US Bitcoin ETFs banned in the UK.)

As Bloomberg’s Senior ETF Analyst, Eric Balchunas points out, BlackRock’s Bitcoin ETF alone now has over $5 billion assets under management (AUM), which puts it in the top 7% of all ETFs.

And it’s achieved that status in just 23 days of trading.

In fact, BlackRock and Fidelity’s Bitcoin ETFs are by far the most successful ETF launches of all time, as you can see in Balchunas’ tweet below:

Now, with the massive success of these Bitcoin ETFs, people are already looking for the next big thing…

Which is, inevitably, the Ethereum ETFs.

I covered the idea back in November, when BlackRock and Fidelity both filed for Ethereum ETFs. See: Ethereum ETFs incoming.

Well, things have really heated up since then…

Eight of the 11 Bitcoin spot ETF providers have now filed to create Ethereum ETFs.

And what’s really interesting is that the Securities and Exchange Commission (SEC) may have its hands tied in eventually approving them.

Last Week SEC chair, Gary Gensler admitted that he couldn't avoid approving the Bitcoin ETFs after the SEC lost to Grayscale in court.

From Fortune:

Gensler still didn’t seem very excited to be discussing the Bitcoin ETFs approved by his agency on Jan. 10.

And he doubled down on previous remarks that approving the investment vehicles didn't equate to the agency changing its mind about Bitcoin’s potential risks, merely that it was a reaction to the August decision in Grayscale v. SEC where the agency, according to Judge Neomi Rao, “failed to reasonably explain” why it had previously approved Bitcoin futures products but not spot ETFs.

“While we had denied two dozen of these, a court in Washington said we did not get that right, and it got remanded to us. The most sustainable thing to do is to approve these given the court ruling,” Gensler told Bloomberg News.

Well, here’s the thing…

The Ethereum spot ETFs can now use the exact same method to get approved.

That’s because, in October 2023, the SEC approved nine Ethereum futures ETFs.

So, if it denies these Ethereum spot ETFs, they will be able to use the exact same arguments in court that Grayscale did to get its Bitcoin spot ETF approved.

It might take a while to play out, but logically, the outcome should eventually be the same.

And, as I said in this article:

Ethereum ETFs could eventually have a major draw over Bitcoin ones: dividends.

Let’s not forget that Ethereum recently moved from a proof-of-work (PoW) consensus to a Proof-of-Stake (PoS) one.

And aside from reducing its energy usage by 99.99%, the switch to PoS also means people who secure the network by staking their Ethereum now get rewarded for doing so.

In fact, the 8^th biggest crypto by market cap (Lido Staked Ether) is just a liquid staking product for Ethereum.

So, if the big asset managers start holding vast amounts of Ethereum for their ETFs, it would be crazy for them not to also set up network validators and make an additional 3%-5% return on their holdings.

And once one of those big ETFs started passing on a percentage of those rewards to holders of the ETF as dividends, then the others would all have to follow suit or lose business.

So, in the long run, Ethereum ETFs will pay out dividends, which could make them extremely popular.

If those Bitcoin ETFs do get approved, it’s going to be very interesting.

Which could be a major reason why Ethereum’s price growth has kept pace with Bitcoin’s since the start of the year.

Year to date, Bitcoin is up 19.6%, while Ethereum is up 21.1%.

So, that’s the main story this month. But there have been a few smaller stories that are definitely worth a mention.

Starting with…

Craig Wright might finally have to stop claiming he’s Satoshi Nakamoto 

If you’ve been in crypto a while, you’ll have probably seen news stories about Craig Wright claiming to be anonymous Bitcoin creator, Satoshi Nakamoto… and suing anyone who says otherwise.

You also might remember the whole Bitcoin Cash debacle back in 2018, which some people credit with the long crypto winter. Or contributing to it at least.

Let me see if I can dig up any of my old commentary for context.

Okay, here we go…

I’ve found an article I wrote back in 2019 when the Craig Wright drama was at its peak. And, it’s a pretty fun article, so I’m just going to post it here in full, typos and all.

Let’s take a journey back in time to 2019…

Satoshi Nakamoto is Lisa’s tiger

Homer: Not a bear in sight. The Bear Patrol must be working like a charm.

Lisa: That’s specious reasoning, Dad.

Homer: Thank you, dear.

Lisa: By your logic I could claim that this rock keeps tigers away.

Homer: Oh, how does it work?

Lisa: It doesn’t work.

Homer: Uh-huh.

Lisa: It’s just a stupid rock.

Homer: Uh-huh.

Lisa: But I don’t see any tigers around, do you?

[Homer thinks of this, then pulls out some money]

Homer: Lisa, I want to buy your rock.

I always loved the above scene in the Simpsons. It shows so simply how difficult it can be to disprove something that is clearly not true. 

The logic is so simple that it’s almost impossible to refute. But the idea is so blatantly ridiculous that no one in their right mind would believe it. 

It’s a very original way of showing that correlation does not imply causation. 

Confusing correlation with causation is something many, many people do. And journalists, in particular, are apt to make this mistake.

Although to be fair, I think most journalists who make this mistake do so on purpose to rile up readers. 

The Daily Mail is notorious for this in its science reporting. And the Guardian, too, which is known to put ideology before honesty. 

 But there is another way to look at that Simpsons scene. Short of taking that stone to a zoo, or shipping a tiger to his house, how could Homer prove Lisa’s rock doesn’t really keep away tigers?

He couldn’t.

He could show how ridiculous Lisa’s statement was. But in order to disprove it, he’d have to get his hands on a tiger. 

Where am I going with all this? Well, this is the perfect analogy for something that’s going on in Bitcoin right now. 

It’s taken the world of crypto by storm, and I think it’s well worth getting clued up on. Plus, it’s pretty entertaining. 

The feud that tanked Bitcoin

Satoshi Nakamoto is the man or woman who created Bitcoin. Satoshi Nakamoto was not the person’s real name, but an online pseudonym. 

Over a Decade later, and no one has managed to unmask Nakamoto’s real identity. It also seems unlikely anyone ever will, as the most likely candidate, Hal Finney is dead. 

So if you can’t prove who the real Nakamoto is, by the same token, that makes it virtually impossible to disprove someone claiming to be him. 

Enter Craig Wright, aka Faketoshi.

For a long time now, Craig Wright has claimed he is Satoshi Nakamoto. 

And just like no one can prove Lisa’s rock doesn’t keep away tigers without getting hold of a tiger, no one can prove Wright isn’t Nakamoto without getting hold of Nakamoto.

One eccentric academic claiming to be Nakamoto wouldn’t really be such a problem if he didn’t wield so much wealth and power.

But Wright is a billionaire, and owns multiple “news” outlets that report on the crypto markets. 

And what’s more, he is locked in a death spiral with Roger Ver (aka “Bitcoin Jesus”) to prove which version of Bitcoin should reign supreme – Ver’s Bitcoin Cash ABC or Wright’s Bitcoin Cash SV.

Both of these cryptos are forked forks of the original Bitcoin. They currently sit in 4^th (ABC) and 12^th (SV) place on Coinmarketcap.

This feud was responsible for crashing the price of Bitcoin back in October. Each side was buying computer power to try attack the other’s network. 

It was a mess. And the rest of the crypto world looked on in disbelief. 

You’ll notice that Bitcoin Cash SV is now ranked much lower than Bitcoin Cash ABC. 

Ver’s ABC is now worth four times Wright’s SV. The market has chosen and Ver’s vision won.

And let’s not forget, each of these cryptos is simply a fork of the original bitcoin, which is now worth $84 billion more than both Bitcoin Cash variants put together. 

Because Craig Wright lost the Bitcoin Cash fight, his side also lost a lot of money. 

People are at their most dangerous when they are close to defeat

Craig Wright is in hot water. 

Last week Coin telegraph reported that Bitcoin Cash SV miners have lost $2.2 million since its inception. 

He is getting desperate. And so he has started a legal campaign to silence anyone who says he isn’t the real Satoshi Nakamoto. 

These threats have gone out to many notable figures in crypto, including Ethereum’s co-founder Vitalik Buterin. 

But it wasn’t this lawsuit that got the community up in arms. It was Wright’s threat and bounty for Twitter user “holdonaut” that did it. 

As well as threatening to sue holdonaut he also announced a $5,000 bounty for doxing him. 

If you’re not familiar with the term “doxing”, it’s when you hack a person’s online accounts and post it all publically. Usually including their real name, address, email address, home phone number, family members, etc. 

Sometimes this will include their credit card numbers, bank details, place of employment, passwords and anything else the hackers can get their hands on. 

It is a wholly terrifying thing to do to someone. And usually it ruins their lives. 

Don’t poke the bear

Well, Craig Wright’s antics, as you can imagine, caught the attention of a lot of high-profile people in the world of crypto and things escalated.

Changpeng Zhao, the CEO of Binance which basically the biggest exchange in the world, tweeted this:

Yesterday he followed up with this:

Master piece!  You have my full support, Peter.

To be clear, I don't choose sides on technology. We let market do that. I am against fraud, such as lying to be someone. As such, it is my strong opinion that: 

Craig Wright is fraud.

The real Satoshi can digitally sign any message to prove it. This is as simple as breathing for him/her. And we have the pub key.

Until then, everyone is Satoshi, except Craig Wright!

Lastly, anyone who supports BSV from a tech perspective should be attacking the fraudulent Craig Wright, who is poisoning YOUR community, and not attack the rest of the world.

Anyone thinking CW is Satoshi should read about how a private key works, ie, learn about crypto.

The #weareallholdonaut has been trending in crypto circles and a number of high-profile users have changed their likeness and twitter names to holdonaut. 

But now it’s gone even further. 

There now calls for all major exchanges to delist Bitcoin SV on 1 May. 

“The truth? You can’t handle the truth!”

So now we have come full circle. 

The community was rightfully angry at Craig Wright for suing people who disagreed with him and doxing his enemies.

But now many in the community are calling for his creation to be censored, because he is trying to censor other people. 

If nothing else, this whole Bitcoin Cash saga makes a great soap opera. 

One of the people calling for this mass delisting tweeted this:

This tweet was posted on Reddit, and it received some fantastic responses. 

But I think user “Warr1979” response summed this argument up best:

As I replied on twitter what if every government banned bitcoin on May 1st? What if they said "Sometimes we must do the hard thing, not because it is easy, but because it is right". How would we all feel? Craig Wright is a tool to put it kindly, he needs to go. This is no different than big government trying to swap their weight. I choose to ignore Craig and if I can help the people he's attacking. But no head of exchange, no crypto "influencer" should tell the masses how this should be handled. The people as a whole should. As crypto gets older it becomes more like the establishment. In the end it’s all about money and power not freedom.

Although, I guess you could argue that many individuals standing up against a billionaire megalomaniac is akin to what Archbishop Desmond Tutu was getting at with this statement:

“If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality.” 

Either way, this whole saga is an interesting microcosm of many political situations that come up over the course of history. 

If crypto really does want to create a new paradigm, how it deals with situations like this are far more important than they first appear. 

Okay and now we’re back in 2024, so what’s the latest with “faketoshi”?

An alliance of crypto heavy hitters has assembled to try and disprove Wright’s allegations once and for all.

Their members include, Jack Dorsey (the creator of Twitter), Coinbase (who Wright is suing) and fellow mega-exchange Kraken (who Wright is also suing).

And they’re currently putting Wright through the wringer in the UK courts…

From Morning Brew:

The Crypto Open Patent Alliance (COPA), a group of crypto and tech funds, brought the lawsuit against Wright to prove that he is not Nakamoto and, therefore, has no claim to the technology. It hopes to stop Wright from claiming that others’ use of bitcoin software infringes on his intellectual property.

What’s at stake?

The future of crypto. This case is a preliminary issue trial, meaning that the outcome will affect a slew of other cases involving Wright and the various bitcoin developers he’s suing, including Kraken and Coinbase.

If the court finds that Wright isn’t Nakamoto, bitcoin can continue to exist as is. But if it concludes that he is Nakamoto, Wright could make it illegal for developers to use bitcoin without his approval. The threat of legal action could scare off developers and potentially send bitcoin into obscurity, according to experts.

Will the real Nakamoto please stand up? COPA alleges that the white paper Wright put forth as evidence that he’s Nakamoto is forged. Yesterday, COPA’s lawyer called Wright’s claims a “brazen lie” and alleged that he used ChatGPT to falsify documents. Wright offered to settle last month, but COPA said no.

So, in one way, this is a slightly obscure, into the weeds story. And in another, it’s actually pretty damn important.

Either way, it’s a million times more interesting than the Sam Bankman-Fried FTX saga. That was beyond boring.

The faketoshi court case is still ongoing, so we’ll see where it’s at by the time I write next month’s issue.

Airdrop “farmer” makes $1.1 million out of thin air

I love stories like this because it shows there are people out there who manage to exploit loopholes and make upwards of $1 million without really doing any work or doing anything illegal.

Although, the person who did this might be an insider in the project, which would probably make it illegal?

From Decrypt:

The revelation has generated controversy on X, with many users speculating that the farmer was an insider.

“He is someone from the company of course,” commented user @Anseriin. “He knew what to do and when. It’s always the same pattern.”

Anyway, here’s what happened, from lookonchain:

Basically, someone made over 9,000 wallets so they could claim nearly 1% of the total airdrop for a new project on Solana… and made around $1.1 million out of thin air.

£1.4 billion bitcoin seized by UK  police from Chinese takeaway worker

And at the other end of crypto scheming and scamming we have this story, via skynews:

Bitcoin worth more than £1.4bn was seized by police after a former Chinese takeaway worker tried to buy a £23.5m Hampstead mansion, a court has heard.

Jian Wen, 42, is alleged to have acted as a "front person" to help launder some of the profits of a £5bn investment fraud carried out in China by Zhimin Qian between 2014 and 2017.

Qian bought cryptocurrency to get the proceeds out of the country before coming to the UK using the false identity Yadi Zhang on a St Kitts and Nevis passport, a jury was told.

That’s the gist of it, but if you want more detail, this Financial Times article has it.

Okay, that’s all for today.

Thanks for reading.

Harry

Full disclosure: At time of writing, I held the following cryptos: Ethereum, IOTA, Radix, Mina Protocol, Aleph Zero.

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