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Crypto enthusiasts are wrong to target Gary Gensler

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Laws in the United States are the problem. Cryptocurrency advocates should focus on changing them — and, in the meantime, consider moving to the European Union.

The animus of the entire crypto world is focused on Securities and Exchange Commission Chair Gary Gensler.

Critics argue that he paints cryptocurrencies with too broad a brush. They argue that he gaslights well-meaning entrepreneurs by encouraging them to “come in and register,” knowing his process is set up for them to fail. They argue he knows new rules are needed but prefers to enforce impractical rules in order to stifle the industry altogether. And, of course, under his leadership, the SEC filed an enforcement action against Coinbase, arguing several top coins, including Polygon’s MATIC, Solana’s SOL and others are securities largely because their issuance involved capital formation, despite their necessity in operating underlying networks.

And it’s not just naysayers in the peanut gallery. The campaign is costing the United States dearly. Venture capital investment in the U.S. crypto industry has fallen this year compared to the European Union. America is losing its lead, and time is of the essence.

The cynical explanation for Gensler’s position is political. Gensler taught a course on blockchain at MIT and is on tape explaining how not all tokens are securities, so he presumably understands the nuances of digital assets. Rather, he is playing dumb to implicitly support the agenda of Massachusetts Senator Elizabeth Warren, who is mobilizing an “anti-crypto army” and has been informally deputized by the administration of President Joe Biden to define crypto policy. If Biden wins the presidency again, perhaps this will help Gensler earn an appointment as Treasury secretary.

In response, lawmakers are piling on with bills proposing to fire him. Representatives Warren Davidson and Tom Emmer introduced the “SEC Stabilization Act,” which proposes removing Gensler and restructuring the agency to make it less partisan.

This would be misguided — not because Gensler is in the right, but because his positions are not clearly wrong under current law.

The U.S. approach to securities law relies on the Howey test, which asks whether buyers have an “expectation of profit to be derived from the efforts of others.” Of course, buyer expectations can be influenced by but are not entirely in the issuer’s control. They might also be affected by trends in the market, groupthink or even whimsy. The benefit of this approach is that it is hard to game. But the cost is a “Schroedinger’s cat” paradox, wherein the very act of perception by third parties determines whether a token is a security or not. This deters capital formation by imposing enormous risk on entrepreneurs and users that is inherently out of their control.

This paradox is put in relief by the EU’s landmark Markets in Crypto-Assets (MiCA) legislation. The regulation acknowledges that utility tokens are not all financial instruments and prescribes clear and practical requirements for disclosure and behavior that legitimate projects are able to follow.

The EU defines securities based solely on factors in the control of the issuer, namely the structure of an instrument itself and the way it is marketed. This explains how MiCA so cleanly allows for utility tokens while the U.S. struggles with simply defining them.

This difference really matters. For example, imagine you are an entrepreneur issuing a governance token for a protocol that entitles holders to vote for changes to open-source software. In the EU, under MiCA, you can publish a transparent white paper and do your best to dispute any mischaracterizations. In the U.S., you can do the same, but you have no guarantee it’s enough.

If bad actors have conditioned buyers to expect profits from tokens writ large, you may be stuck. And since every new wave of technology gets hijacked by bad actors like Sam Bankman-Fried, there will always be bad actors who condition buyers when capital formation is most important for driving society forward.

As a result of the U.S. paradox, firing Gensler might provide temporary relief, but it would not necessarily solve the problem — which is a lack of clarity and adaptability. There is no guarantee that Gensler’s replacement will necessarily reach a different conclusion.

The only comprehensive solution is new legislation that refines the U.S. definition of a security or carves out a separate framework for digital asset issuers and exchanges. Until we see serious efforts at that, a sword of Damocles will forever hang over the U.S. crypto space, always just one election or chair away from being cut.

Cryptocurrency

Layer-1 Assets Rally as Market Anticipates Trump’s Pro-Crypto Administration: CryptoQuant

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The promise of a pro-crypto regulatory environment led by the incoming administration of the United States President Donald Trump has triggered a positive effect among cryptocurrencies, with the native assets of layer-1 blockchains raking in substantial gains.

According to a CryptoQuant report, crypto assets like XRP, TRX, Toncoin (TON), SOL, ADA, the native assets of Ripple, Tron Network, The Open Network, Solana, and Cardano, respectively, have witnessed significant rallies since the conclusion of the U.S. presidential elections.

Layer-1 Coins on the Rise

Ripple’s native cryptocurrency, XRP, has surged over 120% to $1.40 since the elections, crushing the $1 mark for the first time in three years. Data from CoinMarketCap shows the asset is up more than 166% monthly and 25% daily, a growth partly fueled by a resignation update from the U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler.

The SEC and Ripple have been involved in a legal battle for years, and Gensler’s departure could ease the digital asset infrastructure developer’s concerns.

The rise in the value of XRP coincides with decentralized exchange (DEX) activity on the network hitting a new all-time high and total active addresses spiking to the highest daily level since early 2024. CryptoQuant found that DEX volume on the XRP Ledger (XRPL) reached $3.5 million on November 15, with participation from 80 traders. Ripple launched this new automated market maker DEX in May to support the chain’s limit order book DEX.

Tron Network’s native token, TRX, also hit a multi-year high of $0.20 and is up almost 10% weekly. Tron has witnessed a steady growth in transaction activity, driven by the use of Tether (USDT). This year, the network’s daily transaction count rose to a new high of 10 million, while the total supply of USDT hit a record high of over $60 billion.

Daily Spot Volume Surges

In addition, Toncoin’s value increased by 39% amid the high level of activity and stablecoin liquidity on The Open Network. Daily active addresses on the network now hover around one million, up significantly from 60,000 at the start of the year. CryptoQuant also attributed this growth to the integration of USDT on TON in April. The stablecoin has become one of the most active assets on the network, with a circulating supply above $1 billion.

SOL has rallied to an all-time high of $263, while ADA is up 160% to levels last seen in March 2024.

CryptoQuant added that the surge in altcoin prices came with a spike in daily spot trading volume. On November 11, the metric reached one of the highest levels recorded this year.

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Cryptocurrency

Why Peter Schiff Is Wrong About Bitcoin and Inflation (Opinion)

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The world’s leading cryptographic currency is trading over 40% higher than its average price on the eve of the November 5th US elections.

Analysts agree that this is owing in large part to the promises of the Trump campaign and its allies to ensure that the federal government is fair to the innovative new Internet industry. But it’s also a repeat of a historic pattern in Bitcoin’s 4-year market supply cycle.

Ark Invest’s Cathie Wood recently doubled down on her 2030 price target for Bitcoin. Last week, she told CNBC’s audience that if history continues to repeat itself, BTC will trade at $1 million by 2030.

The blockchain money industry says that’s good news for the economy as well as the secure layer of the Internet they’re building for financial transactions. But not everyone agrees.

Peter Schiff Casts Shade on Web3 Macro Economics

Peter Schiff, founder and chief strategist of the Euro Pacific macro hedge fund, said in a post on X Wednesday that money spent on Bitcoin is a “misallocation” that will lead to inefficiencies in the economy. Schiff added that larger trade deficits, a weaker dollar, and lower GDP are the health of the Bitcoin regime.

In another post Wednesday, Schiff remarked that Bitcoin will ironically become a source of inflation, even as buyers use the cryptocurrency as a shelter from dollar inflation.

How Bitcoin Helps the Fed Do its Job

Schiff may be getting tangled up in the terminology of inflation. It’s a forgivable error. Bitcoin’s role in the ecosystem is so novel it’s still difficult to comprehend, even for a capable economist like the founder of the Euro Pac.

Rising business and consumer costs from low-rate dollar environments are the inflation that cryptocurrency users use Bitcoin to protect and grow their wealth. Rising BTC prices represent the dollar’s inflation and Bitcoin’s relative deflation.

(BTC is inflationary, but far less so than the dollar when the Federal Reserve cuts rates.)

So, will more investment in Bitcoin actually goose the trade deficit with China and US dollar inflation while slowing new supplies of goods and services that people use money to buy?

Every dollar sent to Bitcoin instead of overseas to China for imports actually helps balance the trade deficit. Meanwhile, it’s not Bitcoin that causes dollar inflation; the Federal Reserve increases the dollar supply to target lower borrowing costs.

Since resolving the financial crisis of 2008, the Fed has actually been terrified that the money supply isn’t keeping up with GDP. The danger of the resulting deflation is a potential debt devaluation spiral that could mire the economy into an intractable depression.

Bitcoin actually supports the central bank in this regard by locking up excess savings in a digital economy that incentivizes participants to “hodl,” not to spend their surplus earnings.

If they were spending all that crypto market cap worth of surplus value, it could drive up prices, ceterus paribus, and make life harder for fixed-income households to manage.

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Cryptocurrency

$500M in Liquidations as Bitcoin Dumps Below $96K, Ripple Down 10% Daily

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After several days of charting new peaks and coming less than $200 away from $100,000, bitcoin’s price has taken a breather and has dropped by over four grand since Friday’s high.

Several of the high-flying altcoins on Saturday have reversed their trajectory as well, with XRP, DOGE, and ADA dumping hard from the larger caps.

CryptoPotato reported yesterday BTC’s impressive surge that resulted in the asset exceeding $99,800 on most exchanges to chart its latest all-time high. While the community was preparing for a run toward and beyond $100,000, though, the cryptocurrency lost its momentum and started to retrace.

At first, it dropped to $98,000 on Sunday, as reported earlier, but the bears kept the pressure on and bitcoin fell even further to under $96,000. Its market cap has slipped below $1.9 trillion after losing over $60 billion since Friday.

Bitcoin/Price/Chart 24.11.2024. Source: TradingView
Bitcoin/Price/Chart 24.11.2024. Source: TradingView

Many altcoins have dumped even harder in the past day, though. XRP is the leader after dropping by 11% from its local peak of over $1.6 to $1.34. ADA follows suit with a 9% decline that has taken it to under $1.

Some losses are evident from the ever-volatile meme coin sector, with BRETT down by 10%, followed by BONK (-9%), FLOKI (-8%), and WIF (-7.5%).

Dogecoin is also in the red, dropping from nearly $0.5 on Saturday morning to $0.41 now.

This substantial volatility has harmed over-levaraged traders, with nearly 200,000 such market participants wrecked in the past 24 hours. The total value of liquidated positions is up to almost $500 million. Naturally, the lion’s share belong to longs, with $383 million.

The largest single one took place on Binance and was worth over $13 million.

Liquidation Heat Map. Source: CoinGlass
Liquidation Heat Map. Source: CoinGlass
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