Crypto Flipsider News – Bitcoin (BTC) Drops; Lightning Network Bug; Binance Buy Banks; Robinhood’s Revenue Falls; Alameda Illiquid Assets

Read in the Digest:

Bitcoin (BTC) test $20k support as Fed hikes rates by another 75-basis point

Lightning Network deploys emergency Hotfix to repair network disruption

Robinhood’s crypto revenue fell 12% in Q3, won’t give up on crypto

Binance will buy Banks to bridge the gap between crypto and TradeFi

Bankman-Fried’s Alameda Research’s assets reportedly “entirely illiquid”

Bitcoin (BTC) Test $20k Support as Fed Hikes Rates by Another 75-Basis Point

In his November 2nd press conference, Federal Reserve Chairman Jerome Powell announced the interest-rate decision of the Apex bank. The 0.75 basis point interest rate hike caused the price of Bitcoin to tumble.

The hike, which took the Fed’s funds rate up to 3.75% – 4%, also took a toll on the price of Bitcoin. Shortly after the announcement, the price of BTC tumbled by as much as 2.1% to drop to an inter-day low of $20,087.

The 24-hour price chart for BTC. Source: CoinMarketCap

Although Bitcoin managed to recover in the hours that followed, to trade as high as $20,360, the leading crypto remains bearish. Bitcoin now trades at $20,160 and could be at risk of losing its critical $20k support.

Like Bitcoin, the stock markets reacted negatively to the update. The S&P 500 is down 2.5% on the day, the Nasdaq 3.39%, and the Dow Jones 1.55%.

Flipsider:

Despite concerns that the Fed rate hikes could negatively impact the U.S. economy, Jerome Powell has maintained that there could be even more hikes ahead.

Why You Should Care

Although the impact of the rate hikes can be seen in the drop in inflation in September, the action has taken a heavy toll on crypto and stocks.

Lightning Network Deploys Emergency Hotfix to Repair Network Disruption

The Bitcoin Lightning Network has deployed an emergency hotfix update to fix a bug that prevented transactions from going through by stopping Lightning Network Daemon (LND) nodes from parsing if they were attacked by bad actors.

The vulnerability was discovered by independent cybersecurity researchers after the recent v0.15.3. update to the Lightning Network. The bug, which stopped LND nodes from syncing, is the second critical bug experienced by the network in less than a month. 

A Twitter user with the handle @brqgoo first discovered the bug after creating a non-standard Bitcoin transaction that prevented users from opening new Lightning channels on the network.

@brqgoo’s actions disrupted large transactions on the Lightning Network. However, it was quickly discovered, and with the fast reaction of Lightning Lab developers, the exploit was fixed within three hours.

Flipsider:

Last week it was announced that Cash App users in the United States can now send and receive Bitcoin via the Lightning Network.

Why You Should Care

The quick action of the Lightning Labs development team and community members helped in preventing what would have been a major disruption to the network.

Robinhood’s Crypto Revenue Fell 12% in Q3, Won’t Give up on Crypto

As the crypto winter bites harder, the crypto and stock trading platform Robinhood, in its report for the third quarter, revealed that its revenue from crypto transactions fell as much as 12%.

In the third quarter, Robinhood’s transaction revenue fell from $58 million to $51 million. Robinhood recorded a cryptocurrency transaction revenue of $54 million in Q1 2022 and $88 million in Q1 2022.

According to the report, the 12% quarter-on-quarter decrease in Monthly Active Users (MAU) and a 24% quarter-on-quarter drop in the notional volume are the reason behind the revenue drop.

Despite the fall, Robinhood will continue to invest in the crypto market. They aim to roll out support for more cryptos, a new international retail-focused wallet, and NFT-related features.

Flipsider:

While its crypto revenue fell, Robinhood saw its options revenue grow 10% to $124 million. It also saw its equities revenue grow 7% to $31 million in Q3.

Why You Should Care

Robinhood attributed the drop in active users to customers trying to “navigate the volatile market environment.”

Binance will Buy Banks to Bridge the Gap Between Crypto and TradeFi

Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange has revealed that his company is considering buying banks as a means of bridging the gap between crypto and traditional finance (TradeFi).

He said the company could spend up to $1 billion in acquiring banks.  Acquisitions, according to the Binance chief, will help the banks increase their user base and valuation.

While Zhao did give complete details of banks on Binance’s watchlist, he explained that the exchange will consider financial institutions with local licenses. These include traditional banks and payment service providers.

He added that if the exchange does not outrightly purchase the banks, they could consider a minority investment. He hopes to reap the benefits of the increased valuation of the banks through such an investment.

Flipsider:

Zhao continues to show interest in Twitter, suggesting that Binance Pay be used as a ‘solution’ for crypto payments on the platform.

Why You Should Care

Zhao’s comments clearly highlight the increasingly close relationship between the traditional finance and crypto markets. 

Bankman-Fried’s Alameda Research’s Assets Reportedly “Entirely Illiquid”

According to a private financial document retrieved by Coindesk, $14.6 billion of assets held by Alameda Research as of June 30 were illiquid tokens. Alameda Research is the trading firm of Sam Bankman-Fried, founder of FTX.

The report shows that $3.66 billion of the company’s assets were made up of unlocked FTT. In addition, another $2.16 billion was held in FTT collateral as the third-largest entry on the asset side of the accounting ledger.

The large chunk of FTT that makes up Alameda’s balance sheet almost makes the business centrally owned and controlled by FTX. The illiquid assets held by FTX and Alameda does warrant the question if the firm’s foundation is solid.

The company also reportedly holds $3.37 billion worth of crypto in Solana, MAPS, Oxygen (OXY), Bonafida (FIDA), and Serum (SRM). However, the company also has liabilities of $8 billion, and FTX tokens make up a portion of that as well.

Flipsider:

After completing the acquisition of the bankrupt Voyager Digital, FTX’s Bankman-Fried announced that the company has another $1 billion to purchase other firms.

Why You Should Care

If the latest report is accurate, then Alameda Research and FTX are on thin ice. The effect could impact the broader crypto market if the company breaks down.

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