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SBF trial underway, Mashinsky trial set, Binance’s market share shrinks: Hodler’s Digest, Oct. 1-7

Sam Bankman-Fried trial is underway, Alex Mashinsky trial data is set, and Binance’s market share shrinks.
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Sam Bankman-Fried trial is underway, Alex Mashinsky trial data is set, and Binance’s market share shrinks.

Top Stories This Week

Opening arguments begin in Sam Bankman-Fried trial

The trial of former FTX CEO Sam SBF Bankman-Fried kicked off on Oct. 4 in New York after jury selection began the previous day. Assistant United States Attorney Thane Rehn told jurors that SBF used FTX customer funds to enrich himself and gain credibility among politicians through donations. The defendant blamed a downturn in the crypto market. But he had committed fraud. That is what the evidence in this trial will show. You will hear from his inner circle. His girlfriend will tell you how they stole money together, Rehn said. SBFs attorney Mark Cohen said the girlfriend, former Alameda Research CEO Caroline Ellison, and Changpeng Zhao, CEO of rival cryptocurrency exchange Binance, share some of the blame for the downfall of FTX. Check out our detailed recap on Sam Bankman-Fried’s first week at trial.

Alex Mashinskys jury trial scheduled for September 2024

Alex Mashinsky, former CEO of crypto lender Celsius, will be tried on charges of fraud and market manipulation in September 2024, a judge decided on Oct. 3. Mashinsky will remain free on $40 million bail, subject to travel and financial restriction, in the meantime. Celsius filed for bankruptcy in July 2022 and Mashinsky was arrested in July of this year. He is accused of defrauding investors out of billions of dollars. The United States Commodity Futures Trading Commission, Securities and Exchange Commission and Federal Trade Commission all have active suits against Mashinsky as well. Former Celsius chief revenue officer Roni Cohen-Pavon pleaded guilty to four criminal charges in September.

Binance spot market share drops for 7th consecutive month

Cryptocurrency exchange Binance is continuing to lose market share for the seventh month in a row. Analysts say HTX (formerly Huobi), Bybit and DigiFinex were the beneficiaries of Binances slide. According to an analysis by CCData reported by Bloomberg, Binances share of the spot market fell from 38.5% in August to 34.3% in September. On the derivatives market, Binances share fell from 53.5% to 51.5% in the same period. Ongoing struggles with regulators in the United States were identified as one cause of Binances market share decline, but they also pointed out the end of the exchanges zero-fee trading promotion for major trading pairs and Binances withdrawal from the Russian market, which made up 7% of its traffic.

Alameda sent $4.1B of FTT tokens to FTX before crash: Nansen report

A report shared with Cointelegraph by blockchain data analyst Nansen shows that FTX moved $4.1 billion worth of its native FTT tokens to Alameda Research between Sept. 28 and Nov. 1, 2022. FTX and Alameda Research controlled around 90% of the FTT supply. Nansen suggested that the companies were using them to prop up each others balance sheets. FTX also transferred $388 million in stablecoin to Alameda Research during the same period. Data implied that Alameda Research would not have been able to go through with its offer to Binance CEO Changpeng Zhao to buy out that exchanges FTT holdings at $22 on Nov. 6. Alameda Research CEO Caroline Ellison made the offer on X (formerly Twitter) as the two entities scrambled to control the turmoil sparked by revelations of irregularities in their balance sheets. FTX filed for bankruptcy days later.

Valkyrie backtracks on Ether futures contract purchases until ETF launch

Asset management firm Valkyrie said in a filing with the U.S. Securities and Exchange Commission (SEC) on Sept. 29 that it will not purchase Ether in advance of receiving approval for its exchange-traded fund (ETF). Valkyrie had previously told Cointelegraph that it planned on allowing investors exposure to ETF futures before launching its combined Bitcoin and Ether Strategy ETF in early October. Not only that, Valkyrie said it would sell the ETH futures it had already bought. Valkyrie is among several financial firms that are expected to begin offering ETH futures ETFs soon. The SEC has delayed decisions on several of them. Observers say it may be due to concerns about a U.S. government shutdown.

Winners and Losers

At the end of the week, Bitcoin (BTC) is at $27,880, Ether (ETH) at $1,640 and XRP at $0.52. The total market cap is at $1.07 trillion, according to CoinMarketCap.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Trust Wallet Token (TWT) at 18.11%, Avalanche (AVAX) at 17.5% and Render (RNDR) at 17%. 

The top three altcoin losers of the week are ApeCoin (APE) at -9.5%, THORChain (RUNE) at -9.3% and Curve DAO Token (CRV) at -8.8%.

For more info on crypto prices, make sure to read Cointelegraphs market analysis.

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Most Memorable Quotations

We allowed Alameda to withdraw unlimited funds.

Gary Wang, co-founder and former chief technology officer of FTX

He told me to use Signal. He told the entire company. It also had auto-delete. […] He said it [auto-delete] was all down-side to keep messages around. If regulators found things they didnt like, it could be bad for the company.

Adam Yedidia, former FTX employee and roommate of SBF

Macroeconomic headwinds are limiting our ability to generate revenue, and in response to the current market conditions and business realities, we must reduce roles across the global business.

Pascal Gauthier, CEO and chairman of Ledger

The gravitational pull in crypto for the time being stays in BTC, with a promising event horizon down the line, still favoring aggressive accumulation.

Vetle Lundem, senior analyst at K33

Its relatively difficult to innovate in traditional finance. In crypto, its a lot better and more efficient. And in terms of cost, it is a lot more cheap. So, you can see the pace is a lot faster, and we can serve an even bigger audience than traditional finance right now.

Lennix Lai, global chief commercial officer at OKX

Banks have trillions of dollars of transactions with each other at the end of the day, but there is a cut-off time where you simply cannot transact internationally. Its a big pain point, and its also expensive and inefficient.

Akshay Chopra, vice president, head of innovation and design for CEMEA at Visa

Prediction of the Week 

Bitcoin bull market awaits as US faces bear steepener Arthur Hayes

With bond yields surging to 30-year highs, the financial markets are due for mass liquidity injections in the near future, according to BitMEX founder Arthur Hayes. This should provide the next catalyst for the crypto bull market, he said.

Why do I love these markets right now when yields are screaming higher? Bank models have no concept of a bear steepener occurring, Hayes argued. A bear steepener describes the phenomenon of long-term interest rates rising more quickly than short-term interest rates.

The faster this bear steepener rises, the faster someone goes belly up, the faster everyone recognises there is no way out other than money printing to save govt bond markets, the faster we get back to the crypto bull market, Hayes said.

FUD of the Week 

Crypto suffered 153% YoY increase in hacks and scams in Q3

Blockchain security platform Immunefi released a new report on crypto hacks and scams for the third quarter. According to the report, the number of hacks and scams increased by over 153% from July to September 2023 compared to the same period in the previous year. In Q3 2022, there were only 30 incidents, whereas there were 76 incidents in Q3 2023. A total of over $680 million of crypto was lost from scams and hacks during the quarter. The largest hack of the quarter was of the Mixin protocol, which resulted in it being drained of over $200 million, while the Multichain hack for over $126 million was the second largest. The two most targeted networks were BNB Chain and Ethereum.

Bitcoin analysts still predict a BTC price crash to $20K

Bitcoin holders were elated when the coin began October at a six-week high, but technical analysts are warning that it may be headed for a fall to $20,000 soon. According to pseudonymous Bitcoin trader CryptoBullet, the current chart shows a classic head and shoulders pattern that generally means the price is about to fall. The bottom of the left shoulder of this pattern is at around $20,000, implying that the price will fall to that point before recovering. Joao Wedson, founder and CEO of crypto trading resource Dominando Cripto, went even further, claiming that Bitcoin may fall below $20,000. According to Wedson, the current price action is forming a fractal that looks similar to the 2020-2022 period. The last time this happened, the price increased greatly in the beginning, but then collapsed back to lower levels by the end of the fractal. In Wedsons view, this implies that we may be in the early stages of a move below $20,000.

US Treasury sanctions crypto wallets as authorities crack down on fentanyl

The Office of Foreign Assets Control of the United States Department of the Treasury announced that it has sanctioned multiple wallets connected with manufacturers and dealers of the illicit drug, fentanyl. According to Deputy Treasury Secretary Wally Adeyemo, the wallets have received millions of USD funds over hundreds of deposits as payment for various Fentanyl-related criminal activities. The wallet sanctions were initiated as part of an indictment that targeted some Chinese-based chemical manufacturers. Valerian Labs, Hanhong Pharmaceutical, and Hebei Crovell Biotech were three of the parties named in the indictment.

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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2 days ago

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March 9, 2024

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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2 days ago

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March 8, 2024

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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March 8, 2024

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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