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Crypto Boom Amid Chaos: Bitcoin Soars, Industry Titans Fall

Last Updated December 17, 2023 11:12 AM
Teuta Franjkovic
Last Updated December 17, 2023 11:12 AM

Key Takeaways

  • Crypto industry faces transformation, shaped by regulatory pressures.
  • The downfall of figures like Sam Bankman-Fried and Changpeng Zhao highlights the changing power dynamics within the industry.
  • Financial giants backing Bitcoin ETF underscores crypto’s drive for mainstream adoption.

The resurgence in the price of Bitcoin coincides with renewed interest from major financial institutions in digital currencies. Crypto enthusiasts are celebrating the end of a prolonged period marked by low prices and business failures. However, this surge in optimism is occurring amid a turbulent moment for the cryptocurrency industry.

During the previous boom in crypto prices, the industry was dominated by influential figures such as Sam Bankman-Fried and Changpeng Zhao, rival billionaires known for their online disputes that could sway market trends. Presently, Bankman-Fried, the founder of the FTX crypto exchange, and Zhao, who led the world’s largest crypto firm, Binance, both find themselves facing potential prison time following parallel falls from power.

Bankman-Fried and Zhao Sidelined, Industry Enters New Era

Bankman-Fried was recently convicted by a federal jury on fraud and conspiracy charges related to the collapse of FTX. Shortly  after, Zhao pleaded guilty to a money laundering charge and committed to relinquishing control of Binance. These legal developments mark a significant downfall for both influential figures in the cryptocurrency industry.

With both Zhao and Bankman-Fried sidelined, a competitive landscape has emerged. Crypto entrepreneurs, Wall Street executives, and government regulators, are all seeking to shape the industry’s next phase. This contest for influence holds the potential to determine the survival of cryptocurrencies in the United States, where a regulatory crackdown has created challenges for the industry.

Certain executives claim that the cryptocurrency space needed to rid itself of figures like Zhao and Bankman-Fried, characterized as aggressive entrepreneurs who prioritized growth over compliance. They see this purge as essential to garnering support from regulators and the public.

Coinbase Eyes Leadership as Industry Faces Compliance Crossroads

Following Zhao’s guilty plea, Brian Armstrong, the CEO of US-based crypto exchange Coinbase, regarded the case as a pivotal moment for the industry. On social media, Armstrong expressed optimism, , “We now have an opportunity to start a new chapter. This industry should be built right here in America, in a compliant way, under US law.” 

However, the cryptocurrency space still contains companies engaging in risky business practices and lacking transparency regarding their experimental products. Despite the call for compliance, challenges persist in ensuring industry-wide adherence to regulatory standards and responsible business conduct.

Cryptocurrency has always had influential leaders. The original vision behind Bitcoin, the most valuable digital currency, was articulated by someone using the pseudonym Satoshi Nakamoto. This mysterious identity became a brand in itself.

As the cryptocurrency world expanded, new centers of power and influence emerged. Zhao founded Binance in 2017, transforming it into the world’s largest marketplace for trading experimental coins. The exchange’s significant size and global reach elevated Zhao to Twitter stardom, amassing over eight million followers. He often lawsuits and allegations of illegal conduct as disinformation spread by adversaries of the crypto industry. 

In this landscape,  Zhao’s , who actively appeared on billboards and magazine covers, cultivating an image as a responsible figure willing to help the fledgling industry collaborate with regulators. 

Ultimately, both Zhao and Bankman-Fried experienced a downfall. Bankman-Fried could spend decades behind bars when he is sentenced in March. On the other hand,  Zhao could receive a more lenient sentence, with prosecutors likely to request approximately 18 months. These legal developments mark a significant turn for two influential figures in the cryptocurrency industry, signalling the consequences of their respective falls from grace.

Crypto Giants Face Regulatory Scrutiny in the Wake of Leadership Changes

A new generation of executives is already emerging as prominent advocates for the cryptocurrency industry. Paolo Ardoino, a vocal crypto enthusiast with a substantial online following, recently assumed the role of chief executive at Tether, overseeing one of the most popular digital currencies. Meanwhile, Richard Teng, a key executive within the exchange who had been groomed as Zhao’s successor, has taken over at Binance.

On paper, Teng represents a contrast to Zhao. While the Binance founder adopted an antagonistic stance toward regulators, Teng brings a background as a veteran of the Monetary Authority of Singapore, the country’s central bank.

The future of Binance remains uncertain. As part of a recent settlement, the company agreed to pay a $4.5 billion fine to various government agencies. It will also have a US monitor embedded in the business for the next three years.

Coinbase As The Last Man Standing

Arguably, one of the most prominent beneficiaries of the current restructuring in the crypto industry is Coinbase’s Armstrong. He recently stated that Bitcoin “may be the key to extending western civilization.”

Despite the SEC suing Coinbase, the company’s share price has nearly trebled over the past six months. This suggests investors continue to see potential in Coinbase’s role within the evolving cryptocurrency landscape.

Coinbase has strategically positioned itself to capitalize on a potentially transformative development in the crypto industry—the potential approval of an exchange-traded fund (ETF) that tracks the price of Bitcoin.

Recently, Bitcoin’s price surged to over $43,000. This meant it reached its highest level since a wave of bankruptcies shook the industry last year. Much of this optimism is driven by growing confidence that the SEC could soon approve a spot Bitcoin ETF. This would trade on traditional stock exchanges, potentially attracting new capital to the industry.

In preparation for this development, Coinbase has entered into an agreement to custody the Bitcoin that would underlie an ETF offered by BlackRock, one of the world’s largest asset managers. BlackRock is among several major financial firms, including Fidelity, that have submitted applications to offer this investment product. This move positions Coinbase to play a key role in facilitating the integration of Bitcoin ETFs into traditional financial markets.

Wall Street and Crypto Forge Partnership in Seismic Industry Shift

Once sworn enemies, Wall Street and the crypto industry are merging as evidenced by the recent collaboration between Coinbase and BlackRock. This partnership marks a turning point, signalling potential salvation for the crypto industry after a challenging year of bankruptcies and arrests.

This collaboration is just the beginning, and it will worth seeing how the relationship between Wall Street and crypto evolves in the coming years. Will Wall Street’s involvement legitimize and stabilize the crypto market, or will it lead to more regulation and control? Only time will tell, but one thing is certain: the crypto world is no longer an isolated island. It is now firmly intertwined with the traditional financial system.

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