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Off Chain 6/1/23: Multichain's Missing CEO and a 20% Discount on Bitcoin
302 Plays1 year ago
In this week's episode of Off Chain, we cover the following stories:
- $587M worth of Optimism ($OP) tokens unlocked yesterday
- Crypto Bridging Protocol Multichain ‘Unable to Contact’ CEO Zhaojun
- Bitcoin was trading at ~20% discount on Binance Australia this week
- Binance are Reportedly Cutting 20% of its Workforce
Recommended![CBDCs: The [Dark] Future of Money (Part 2 of 2) image](https://media.zencastr.com/cdn-cgi/image/width=112,quality=85/image-files/61fc0461fb20e00040aeb09e/5b9f1396-2a8e-418d-82a0-30fd00969266.jpg)
Transcript
Introduction and Key Web3 Stories
00:00:12
Speaker
Hello and welcome to the Decrypting Crypto Podcast. It's June 1st, 2023, and this is Off Chain, your weekly recap of the biggest stories in Web3. I'm Matthew Housebarbie, and as always, I'm here with Austin Knight. How you doing, Austin? Doing well, Matt. Yeah, wild times.
US Debt Ceiling Impasse: Market Reactions
00:00:30
Speaker
We've got some interesting stuff to talk about this week. I'm excited to jump into it.
00:00:35
Speaker
Yeah. I mean, it seems like we've got a few important things happening outside of crypto as well. It seems as though, touch wood, the debt ceiling impasse is going to be breached, at least in the US, or at least kicked down the road till 2024. It seems like we're making progress there. I think it's just now about to go to the Senate, right? It's like the final piece.
00:01:01
Speaker
Looks like your your country is not going to go bankrupt just yet, Austin. Yeah, I guess I guess that's a good thing. I there is a part of me that's like, you know what, like, let's just default and see what happens. By the dip. By the dip. Oh, yeah, it's really it's a it's a very
00:01:25
Speaker
kind of, it's a wild situation. And I think this whole debacle with the debt ceiling illustrates to me more than anything, more so how much financial markets can be just held in the hand of a small few for political maneuvering, things like that. I think it's fair to say, I don't think anyone across Republican or Democrats
00:01:51
Speaker
in isolation would be okay with the US defaulting on its debt, right? It'd be really catastrophic for a number of reasons and would be a terrible look for both parties to be honest.
Federal Reserve Rate Hikes Speculation
00:02:04
Speaker
And this really is just all about, you know, infighting power struggles and trying to get that pound of flesh in an opportune time.
00:02:14
Speaker
But yeah, it seems like markets are kind of responding positively. I saw today, Eurozone inflation, not including the UK, of course, dropped by way more than anticipated. It's down to 6.1% right now, which is a good thing. Looks like we may even, the kind of the odds of the Fed
00:02:40
Speaker
increasing rates at the next, which I think is the next review is in the next week or two, is potentially increasing, or at least now they're shifting the narrative towards, this isn't necessarily going to be a pause, it's going to be a break. Some semantic play there. But we've got a lot of fun stuff crypto related to talk about today.
Binance's Market Challenges and Australian Exit
00:03:02
Speaker
We've got a straight up
00:03:04
Speaker
hilarious story that you're going to be covering in the world of DeFi, Austin. We're going to be talking a little bit about token unlocks and what's been going on with optimism, the layer two blockchain. I'm going to talk just a little bit about like the significance of token unlocks and how you should think about that if you're holding in particular DeFi tokens.
00:03:28
Speaker
And then we're going to kick things off with, man, what feels like a bad weekend news for, for, for Binance in general, which we kind of said last week as well. Right. Yep. All right. Let's kick things off.
00:03:52
Speaker
Bitcoin was trading at a 20% discount on Binance Australia this week. That's right, Bitcoin was trading for cheaper than the market rate on Binance's Australian arm of their exchange.
00:04:08
Speaker
Now, before you get overly excited here, if you weren't already aware, Binance has been facing some challenges with its banking partners, which we covered last week and I think around about a month ago where Binance was struggling in the UK, Canada, and now Australia.
00:04:29
Speaker
This led to them announcing that they will be exiting Australia as well as Canada. And earlier in May, Binance announced that Australian customers, and I think this is the most important part of all of this, won't be able to deposit AUD, Aussie dollars, and in some cases withdraw AUD from the exchange. And this in itself has caused, over the past week,
00:04:59
Speaker
a liquidity crunch in AUD trading pairs. So things like AUD BTC trading pairs. It's worth noting though that customers could still like on and off ramp using credit or debit cards, but
00:05:17
Speaker
as you can imagine, there's a ton of friction in doing that, especially in any kind of size. So that has been a real issue.
Binance Layoffs and CEO Controversy
00:05:27
Speaker
They've been struggling with liquidity. And as a result, the AUD Bitcoin trading pair kind of felt this particularly acutely. So on Tuesday of this week,
00:05:42
Speaker
which was May 30th. BTC was trading at around about $5,000 cheaper, so around about 20% compared to other exchanges. And in a statement to Reuters, a Binance spokesperson said the following, due to the recent removal of fiat on-ramp services by our payment processor's banking partner,
00:06:04
Speaker
Some Australian users have been withdrawing their AUD holdings from the platform in advance of the off-ramp closure on June 1. I'm going to just interject here. June 1 is today. So this is kind of like the D-Day for all of this kicking off.
00:06:24
Speaker
As a result, AUD pairs have experienced less liquidity, which has impacted their pricing. We will be delisting remaining AUD players in line with the closure of fiat off-ramp services. Now, Binance isn't the only one facing issues with banking partners, but it's definitely another big blow for what is the world's largest exchange.
00:06:51
Speaker
And on top of this, on the note of big blows for the exchange, it was broke yesterday by I think Woo Blockchain that they are reportedly cutting 20% of its workforce. By the end of June, I think, was what's reported. They have around 8,000 people that are employed.
00:07:15
Speaker
So that is a significant amount around about 15, 1600 people. It's been confirmed by several anonymous internal employees. And for quite a while it hadn't been, I mean, it just hasn't necessarily been explicitly denied by Binance.
00:07:35
Speaker
However, Susie came out on Twitter with his typical four response saying this is, this is fud. And I find this kind of bizarre actually, Austin. So he says,
00:07:49
Speaker
That a load of this is fired Binance has a quote bottom out and he says we should probably rename it something else program We constantly say goodbye to people who are not strong fits with the company Many of them are great people or high performance that may not fit our unique culture situation small example working from home is not for everyone
00:08:13
Speaker
This, quote, program is constant. I push for it on a weekly basis. There are no percentage of people we have to push out. I also push for cost cutting, servers, flights, meals, et cetera, every week too. Well, Austin, that's a whole lot of people that working from home is not cut out for. What do we think about this?
00:08:35
Speaker
Well, first off, I mean, the fact that Binance has 8,000 employees and they're cutting 20% of them, those are some interesting numbers to me. 8,000 sounds like a lot of people, right? I don't know how many of those people may be sort of in customer support or account management or
00:08:56
Speaker
whatever but like that's for example you know if thousands of those are engineers or designers or whatever that sounds like a lot to me yes um nevertheless one thing i will say is especially over the course of the past year and a half ish i have become absolutely repulsed
00:09:12
Speaker
by the sort of fake apology virtue signaling messages that CEOs post when they do layoffs where they're like, you know, I took full responsibility. And the hardest thing I've ever done in my life was to say goodbye to 20,000
00:09:31
Speaker
people today or whatever. I really, really dislike that. I think that it shows a lack of ownership when a CEO or an executive team tries to purchase social currency by acting like they... I'm sure that they do feel bad, but I think that many, many of these messages have gone.
00:09:55
Speaker
way too far. My favorite of which was, you know, how we had equitable layoffs. But I would say that CZ is pretty well in the opposite extreme here. And I felt like this was a pretty, I don't know, grotesque way
00:10:17
Speaker
To you know depart with twenty percent of your workforce because basically what he's saying here is again i think he's not taking ownership. In this case either like you know going to the virtue signaling extreme that is not taking ownership for the real impact that you're having on you know on the people that you're laying off but also.
00:10:38
Speaker
for the impact that has had on your business and the weaknesses or vulnerabilities of your business. I think actually the same thing is happening here, even though he's at the opposite extreme, which is that he's almost kind of, the way that I read into this is he's trying to say like, oh, there's nothing wrong with our business. Like this is just our sort of typical process of getting rid of 20% of our people that are low performers or that work from home isn't for them.
00:11:06
Speaker
And it's like, I don't buy that for one second. I mean, one of those people as well, but it'd be just, it'd be so, I don't even know how I'd feel. I'd of course be angry. I'd just, at that point, would I even be shocked? Probably.
00:11:22
Speaker
Probably
Leadership Concerns at Binance
00:11:23
Speaker
not. I also want to interject a little bit and share a tweet that has been kind of going around a fair bit. I remember when CZ shared this tweet from back in November, November 2022. Oh, yes, I know where you're going with this. A lot of companies. And he just tweets, beware of platforms that, one, offer high APYs and or two, have layoffs
00:11:49
Speaker
if you don't do risk management now, don't blame others for the consequences later. And it's just, I remember at the time thinking, you know, that's going to come back to haunt you. No, no doubt. And also what a horrible take, right? Like, no one wants to do layoffs. And I think that some of the market conditions haven't exactly helped with with a lot of this. But
00:12:10
Speaker
It's just really not great. I think the way this has all been dealt with, and it's just a pattern of sidestepping any criticism right now that's happening, which is a giant red flag for anyone in this space.
00:12:30
Speaker
I agree. That's the thing that worries me. I would say actually the most about Binance. Put all of these yellow flags and red flags aside that have made their way through the media and Binance pulling out of certain regions or freezing exchanges and things like that. All of that to the side. A leadership
00:12:54
Speaker
that consistently does not address or take ownership of real problems that are being pointed out to them, that is a real concern because it's a sign of hubris and blindness to problems, right? And thus a potential inability to fix a problem when the real scary problems arise, right? So
00:13:20
Speaker
Whether or not Binance is in a situation where they're sort of facing down real problems, I think you and I, Matt, we're both pretty comfortable saying like the jury is definitely still out on that, even though there might be some blood in the water.
00:13:36
Speaker
But what we do know is that I think CZ's, at least his public behavior, has kind of waded into the territory of being a bit concerning because if the real detrimental problems are not there right now,
00:13:53
Speaker
in the event that they do arrive, I think he's demonstrated some leadership qualities that would indicate that those problems aren't going to be adequately addressed when they do arise. And so that's what's making me feel weird about finance. I've always felt a little bit
00:14:10
Speaker
weird about how he has behaved publicly with these types of things. But like, in the past, it wasn't like real issues that they were facing down. It was more him kind of like gloating when, you know, other competitors faced issues. And I felt that that was, you know, a little immature, a little bizarre. But, you know, it's like, well, Binance is winning, so whatever. But now when they're starting to face issues to see him not pivot toward, you know, a little bit more humility and self-reflection and ownership, I think that is concerning.
00:14:39
Speaker
Straight out the Dokuan playbook, I believe. Our favorite. Oh, yeah. Oh, yeah. All right.
MultiChain's Operational Crisis
00:14:47
Speaker
Talking about disasters, let's jump into what is quite possibly the most crypto story I think I have ever come across. Let's jump in now, Austin.
00:15:00
Speaker
unable to contact. Those are the words that the team from MultiChain have said when describing the situation with their CEO, Zhao
00:15:12
Speaker
I'm pronouncing that correctly. That's right. Multi-chain are currently unable to contact their CEO. He has gone MIA. And this is causing some serious problems for them. We'll get into what exactly those problems are. But if you're not familiar with multi-chain, they are one of the largest
00:15:31
Speaker
bridging protocols in the crypto ecosystem. They were known as any swap before they suffered an $8 million exploit back in 2021, but now they are known as multi-chain, and they're pretty big. Their total transaction volumes exceeded $100 billion earlier this year, and they facilitate the exchange of tokens across multiple networks
00:15:56
Speaker
allowing for ecosystems such as finance chain, avalanche, polygon, and ethereum to interact with each other. On Wednesday they suspended their cross-chain routes. Why? Because they're unable to contact their CEO who has access permissions that are necessary for server maintenance. So basically their CEO has gone MIA nowhere to be found and they're like uh he kind of has like the
00:16:25
Speaker
the keys, the login info to maintain our servers. And so we're not able to do that right now. So we're going to have to shut down some of our services. Isn't it a beautiful thing? Decentralization like when you can just build this wonderful decentralized protocol with a single point of failure that is a human probably the biggest liability of a point of failure that has ever existed on Earth. So it's just you cannot write this stuff.
00:16:55
Speaker
Um, but the pot thickens, I believe. It does. So from multi-chain's Twitter, they have said, quote, in the past two days, the multi-chain protocol has experienced multiple issues due to unforeseeable circumstances. The team has done everything possible to maintain the protocol running, but we are currently unable to contact our CEO and obtain the necessary server access for maintenance. What a quote, right Matt?
00:17:20
Speaker
When they say the team has done everything possible, do you think they're just all in a room trying different variations of passwords? Like, what's his daughter's name? Try that with the number one after it. Try password 10. They're in the millions now of numbers that they're adding on to just random strings of text. Guys, we're out. We're out fresh out of ideas here. We don't know what to do.
00:17:43
Speaker
They're like DMing him on Instagram or something. Oh, what's that bar that he usually hangs out with? Send somebody down there to the bar. Maybe he's just stuck there. I don't know. Surely they could just hack his ledger, right? Can't ledgers just be hacked now? I thought that was the thing.
00:18:02
Speaker
Yeah, cut off his credit card, maybe he'll show up.
Impact on Lesser-known Blockchains
00:18:09
Speaker
So yes, without the access to the servers for maintenance, the remaining team, they just can't keep the bridges online for a long list of blockchain services, including
00:18:21
Speaker
Just before you read these out, Austin. This is, hands down, my favourite part of this story. I will give you one ETH for any of these chains that you have even heard of.
00:18:35
Speaker
Oh, yeah, not at all. Nevertheless, they exist. Yeah. So, yes, Keft Chain, Public Mint, Dino Chain, Red Light Chain, Dexit, Pekta, HPB, Onus, Omex, Findora, Plank. I haven't heard of any of these, but it is Red Light Chain. Like, listen, I have done my fair bit of de-janning and I have not even come across any of these. Like, what the hell are they even supporting these things for?
00:19:05
Speaker
Ah, dear. Well, on top of that multi-chain, they have a native token called multi, and it has lost nearly half its value in the past seven days.
Speculation on MultiChain CEO's Detainment
00:19:14
Speaker
Bullish. Very bullish. Yeah. There are some real concerns over this. Now, as of right now, and after days of rumors and searching, the CEO is still nowhere to be found. And he's got like big media outlets reaching out to him.
00:19:33
Speaker
It's wild. Now, this is where things get a little interesting, Matt. Some of the rumors that are going around, I don't know if you've seen this, they're saying that he may have been Jack Maude. Oh, no. You don't want to get Jack Maude. If there's anything that does not want to happen to you, you do not want to get Jack Maude. Oh, wow. Yes. Now, if you're not familiar with what happened to Jack Maude,
00:20:02
Speaker
Well, gosh, it must have been like a couple of years ago now, right? Yeah. He was at a conference where he very, very, very sort of, I would say subtly criticized the Chinese banking system.
00:20:19
Speaker
And I think subtle is even harsh. Yeah. Yeah. It was like really, really, really, you know, understated what he said. You had to read between the lines big time.
00:20:34
Speaker
to pull out the criticism of the CCP. And then Jack Ma was one of the wealthiest people in China, one of the wealthiest people in the world, always was viewed as one of the most powerful people in China and a huge influencer within the CCP because of his sort of business dealings with Alibaba and everything like that. He disappeared and he came back and he was a cheerleader.
00:20:58
Speaker
for the CCP. Well, has it even relegated to just being a teacher now? I think it's like his. Yeah, like, yeah, poor Jack Ma. So anyway, people don't want to get Jack Ma. But last week, rumors surfaced that Chinese authorities had arrested actually several
00:21:18
Speaker
multi-chain executives, including their CEO. So now it's all starting to come together. Now, the arrests still haven't been confirmed or denied by Chinese authorities, but Binance was forced to respond to the news and they even suspended certain token deposits as a result of it.
00:21:38
Speaker
And on top of that, Chinese officials are rumored to have taken control of a 1.6 billion dollar wallet belonging to the company. So maybe that's where our multi-chain CEO is.
00:21:51
Speaker
Yeah, this is now like jogging my memory a little bit. I seem to remember a couple of weeks ago, there was one of the people that I followed, because I used to use multi-chain. I think it was probably like the most used cross-chain bridge for the long part, certainly through DeFi, like the DeFi summer and late into 2021. And now the past few months, it's been kind of terrible and you got better services like Orbiter and all of those other ones.
00:22:20
Speaker
Um, so I kind of have a bunch of people in my Twitter feed, right? The, from when I was using, um, blockchain and I see someone saying something about like some funds, uh, moving from like the treasury and it looking really suspicious. I'm just like Googling this, uh, as we, Oh yeah. Okay. Panic over. Right. Hold on. Deep. Right.
00:22:50
Speaker
my chain has issued 35 percent of phantom assets including 80 percent of its total stablecoin cap um oh yeah i think it's like
00:23:02
Speaker
Oh, no. Okay, this is it. It was just that the Chinese authorities control, they now control that wallet, which belonged to the treasury of like $1.6 billion. There was just like a load of really strange stuff that was happening around the run up to this. So I think this is kind of what caught my eye as well. And when you were talking about this story, but
00:23:23
Speaker
Oof, it's not looking good. I think the TLDR, I'll say for anyone listening, if you do much bridging, don't use
Optimism and Market Volatility Concerns
00:23:33
Speaker
multi-chain. Stay away from it. If you hold multi-tokens, not financial advice, but probably not going to be a great couple of weeks of volatility for you. Well, talking about volatility and tokens, let's jump into the last story we're going to cover today.
00:23:53
Speaker
For any of you that are either holders of Optimism's OP token or are fans of what is one of the largest Layer 2 blockchains, the kind of optimistic roll-up chain that serves as a scaling solution for Ethereum, something pretty big happened yesterday. So $587 million worth of OP tokens, that's the native token to Optimism.
00:24:23
Speaker
unlocked yesterday. What do I mean by unlocked? Well, in many many cases with decentralized protocols, you will, to begin with, allocate
00:24:36
Speaker
tokens to various contributors like early investors to the core team to a foundation and they will have vesting schedules attached to them so that they won't all be dumped initially but this was a very significant amount it actually accounts for nine percent of the total supply that will ever
00:25:02
Speaker
kind of be released. This more than doubled the total circulating supply of OP tokens. It's also worth just as an additional call out if you're trying to still figure out which one is optimism again. If you remember, we talked about Coinbase
00:25:20
Speaker
were building their base blockchain. They're building that on the OP stack, which is the optimism tech stack. And they will not be launching their own native token. They will actually be using the OP token as part of this. So that's another little link here. So 386 million OP tokens at a valuation of just under $600 million at the time, at least. Unlocked yesterday.
00:25:48
Speaker
In the run-up to the unlock there was a lot of discussion as to whether there would be a big sell-off.
00:25:54
Speaker
Well, that was. And the reason why I want to kind of include this, because I think a lot of people, especially when you're thinking about investing in usually DeFi tokens, we have these kind of big unlocks that happen. I remember we were talking about, was it a couple of years ago, the big Solana unlock that was happening and things like that. Typically what happens when a ton more supply comes onto the market is price goes down for a number of reasons. But
00:26:24
Speaker
One of the big things that often happens is in the run up to a big unlock, which again, you will be able to find out and I'll share some tools on how you can do this, but they're all locked into smart contracts, hopefully, that everyone can see and know when things are going to be distributed.
00:26:42
Speaker
One of the big things that happens in the run-up is nobody wants to be last out the door. So Wintermute, which many of you, if you're in the space may be familiar with, they are one of the largest, if not maybe the largest market maker in the crypto space. They were one of the big investors in optimism. In fact, they had that whole bizarre situation where the optimism
00:27:10
Speaker
team when they first launched actually sent all of their initial token distribution to the wrong wallet address, which was actually hilarious. But that piece to one side, Wintermute actually dumped $10 million worth of their OP holdings last week, which translated to around about 27% of their total OP holdings altogether.
00:27:35
Speaker
Past seven days, OP price is down 14%. That actually represents the second largest drop of any top 100 token by market cap. The only token that actually fell by a greater percentage was the wonderful meme coin Pepe. So kind of tells you in what league you are falling alongside. And that only fell by 15%.
00:27:55
Speaker
So really important to think about a lot of this. There's probably going to be a lot of volatility over the coming weeks, and it's not just optimism. I think Arbitrum had another big unlock coming. But one thing that I really love, and I don't think I've shared this, and I'm just going to say just before I mention this, no affiliation. I don't even know if they do like anything that's like paid. This is just a really great website. If you go to token.unlocks.app,
00:28:23
Speaker
You can look at any kind of token that is currently listed and it will tell you like the total supply that's circulating, when next major unlocks are coming, some info about like holder distribution, et cetera, et cetera. It can be super valuable to know because, you know, as we've seen with optimism, large token unlocks often result in large drawdowns on price. So pretty good to get ahead of this.
00:28:51
Speaker
It's a pretty awesome website. I'm a big fan of it. There's also a bunch of other places that you can have a look, but generally speaking, I would just be very wary of token unlocks in the future. All right, I think that's pretty much all we've got time for today, Austin. I know we've flown through some of this. We'll catch up as always next week. I'll see you then. Talk to you then, Matt.
00:29:35
Speaker
The contents of the Decrypting Crypto podcast should not be used and are not intended as investment advice. Please do your own due diligence before making any investment, cryptocurrency or otherwise.