⚖️ Take it to court!

ICYMI: Crypto custodian BiT Global took action against Coinbase last week for delisting wBTC. 

Coinbase first announced its decision to delist wBTC back in late November, just a few months after it launched cbBTC, its own wrapped bitcoin. 

Growing up with a parent who was a lawyer, I was always told there are three sides to every story: Each party’s own side and then the truth. 

Last night, Coinbase responded to BiT Global’s suit, and both parties have made some, well, interesting arguments. 

Coinbase’s filing centers around Justin Sun, who’s been linked to wBTC since August. Basically, the firm said that wBTC failed its listing standards because of the “unacceptable risk” Sun poses due to his “material involve[ment].”

“Consistent with that process, Coinbase conducted careful diligence, including asking BiT questions about who ultimately owned and controlled BiT. BiT refused to answer, presumably to conceal Mr. Sun’s role, much as it has done here. At the conclusion of its diligence, Coinbase concluded that Mr. Sun’s affiliation with—and potential control over—wBTC presented an unacceptable risk to its customers and the integrity of its exchange,” it said in its filing Tuesday.

BiT, on the other hand, argued that Coinbase had ulterior motives to delist wBTC, which is to throw around its weight as one of the top exchanges — forcing users to only have access to its own wrapped bitcoin offering, rather than enabling a choice between the two.

“Having achieved the network effects that were its goal, it has now embarked on an effort to use that power to replace cryptocurrencies created by others with its own knock-off versions—with Coinbase taking short term-losses to keep profits for itself longterm as its knock-off gains market share. And wBTC is Coinbase’s first target,” BiT argued last week.

BiT claims that this is “a tale as old as Silicon Valley,” and mentions that Google, Microsoft and Facebook have all tried to take out the competition. 

“A centralized platform gains more and more users from a first mover advantage. It creates a moat for itself using network effects which lock those users into its platform. And then it starts changing the rules that got it there. After the bait-and-switch, smaller entrepreneurs find themselves the victims of a corporate goliath that sees their innovations merely as a resource to be grabbed by any means possible and absorbed into itself,” it said.

Coinbase, however, argued that the exchange makes up for a “de minimis (less than 1%) portion” of wBTC traded. Per Coinbase, there’s not enough evidence to justify a court executing a temporary restraining order to force the exchange to keep hosting wBTC. 

A hearing in California is set for later today, so we’ll soon see how both arguments play out.

— Katherine

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• Meanwhile, more than 11,000 BTC ($1.15 billion) net has been pulled from wBTC across November and December. 

• Coinbase's alternative has gained 7,660 BTC ($804 million).

• Pudgy Penguin coin PENGU is working on a bounce after falling as much as 83% following yesterday’s airdrop, from $0.05 to $0.01141. Current price: $0.03265.

• USD floor prices for Pudgy NFTs have also shed 60% directly after the drop, with BAYC reflipping Pudgys for market cap.

• Arbitrum has surpassed BSC for stablecoin supply after gaining 13.7% in a week. Arbitrum is now third behind Tron and Ethereum with $6.93 billion, per DeFiLlama.

💦 Water water everywhere

MicroStrategy is sucking most of the air out of the room right now. But there are even bigger forces at play.

As debate rages over whether Saylor is a once-in-a-lifetime financial genius or just another overleveraged trader, stablecoins are bringing even more liquidity to crypto.

At least, that’s in terms of raw dollar value being pumped into the space right now. 

MSTR has now spent $17.5 billion on bitcoin in the past two months alone, as shown by the orange areas on the chart below. Most of that cash has come from buyers of its infamous zero-percent convertible bonds.

MicroStrategy’s purchases can then be viewed simply as accepting dollars with one hand and plowing them into bitcoin with the other. Fast and cheap liquidity in return for exposure.

In the same period, bitcoin ETFs in the US have gained an additional $16.5 billion in net inflows. ETH ETFs have otherwise net added $3 billion, and together those flows are in blue on the chart.

ETFs follow much the same process as MicroStrategy but without the bonds. They take investor cash to buy an equivalent amount of bitcoin or ether, passing on exposure to shareholders minus a fee.

And then there’s stablecoins. Since mid-October, stablecoins issuers have collectively minted an additional $30.8 billion tokens. Over 92% of those inflows have gone to USDT and USDC.

Outside of Sky’s USDS and the more exotic alternatives that have emerged, such as Ethena’s USDe and Usual’s USD0, stablecoin managers generally take US dollars, buy short-dated Treasurys and other cash equivalents and then issue the same amount of fresh token supply to whomever wired them cash. 

Obviously, stablecoins flows aren’t really the same thing as ETF inflows or MSTR’s cash pipeline. 

But they do represent something similar: a widespread urge to enter crypto markets across a multitude of avenues.

That’s now to the tune of almost $68 billion in the past nine weeks — easily the biggest liquidity wave on record, at least by my count.

— David

• Australia’s securities regulator sued Binance, arguing that it “exposed” hundreds of customers to risky products. 

• Are you ready? Bloomberg ETF analyst Eric Balchunas said they expect a “wave” of crypto ETF filings next year.

• The Treasury Department sanctioned two individuals and an entity linked to laundering crypto for North Korea.

• Deutsche Bank is looking to solve some compliance issues for public blockchains, Bloomberg reported. 

• Galaxy Research said that rising NFT volumes show that the market’s coming back.

Q: How can you tell that crypto’s checked out for the year?

When the 2025 prediction posts run out.

When you finally don’t see thinkyboi threads on your timeline, overintellectualizing chatbots and memecoins, and hyping the inevitable rise of the US as the one true crypto superpower, you’ll know we’re all completely tapped for the year.

Still, you better believe that we’ll send our predictions to your inbox sometime soon. 

— David

The narratives start to lose momentum. 

We’re kind of seeing that happen right now, honestly. Yes, bitcoin is still carving out new all-time highs but it’s getting harder and harder to see a prominent narrative outside of “2025’s gonna be a good year for crypto.” 

I’m not judging anyone. It’s okay to check out and get ready for some non-crypto-related downtime to prepare for the next part of this cycle. 24/7 trading is great until there’s burnout!

My prescription: Touch grass (or snow) and breathe in some fresh air. 

— Katherine