Welcome to this week’s Crypto Investor!
Brazil has a new president, but it remains to be seen how Lula’s return to power will impact the country’s growing crypto industry. According to Chainalysis, Brazil has one of the world’s highest rates of crypto adoption (ranking seventh worldwide). This summer, a record-breaking 12,000-plus Brazilian companies bought crypto, indicating that the sector is making inroads in the world’s 12th-largest economy. Earlier this month, the country’s largest digital bank, Nubank, even announced that it was unveiling its own cryptocurrency.
Leftist president Luiz Inácio Lula da Silva has gone on record saying the government should “monitor the impact of the crypto market on the health of the financial system.” He believes Brazil’s central bank should draw up regulations to prevent illegal use of crypto for money laundering and fraudulent trading. “Crypto assets have grown a lot in recent years and… deserve the attention of the authorities,” he said.
In this newsletter, we have a round-up of the latest crypto news along with a look at the role of crypto super PACs in the upcoming midterm elections.
Fun fact: Today is also the 14th anniversary of the iconic Bitcoin white paper penned by Satoshi Nakamoto, a pseudonymous figure whose identity we still don’t know.
Over 400 crypto venture funds launched in 2022
The crypto winter has lasted so long that some are mulling if this is just a crypto ice age. There’s some hope for optimism though: more than 400 venture funds focused on crypto got off the ground this year, raising more than $120 billion.
Do Kwon faces a $57 million class-action lawsuit
Earlier this year, the co-founder of Terraform Labs oversaw the dramatic collapse of the algorithmic stablecoin TerraUSD (UST), which erased billions of dollars from investors’ pocketbooks. Now more than 350 of those investors are suing Do Kwon in a class-action lawsuit filed in Singapore, asking the founder to pony up $57 million. The first hearing is scheduled for November 2.
Plaintiffs say the UST stablecoin was supposed to be pegged 1-to-1 to the U.S. dollar and insulated from market volatility. That didn’t pan out, and now they’re suing Kwon for allegedly making “fraudulent misrepresentations” about the stablecoin.
Experts: Crypto is not a hedge against inflation
With inflation continuing to soar worldwide, crypto’s promise of serving as a hedge against inflation has proven to be false, some argue. That’s because crypto prices have continued to depreciate over time, something Bitcoin advocates once promised wouldn’t happen.
Others aren’t so quick to give up yet. “We just don’t know yet.. until we see more of a track history with it,” financial planner Anjali Jariwala told CNBC Make It.
“It’s tricky because it’s supposed to act like a currency, it’s taxed like property and some people compare it to a commodity. At the end of the day, it really is its own asset class that doesn’t have a pure definition,” Jariwala said.
Crypto miners are in trouble
It’s a tough month for crypto miners. Crypto markets are down, Bitcoin prices are plummeting, and miners are facing high energy costs. Now, investors have pulled out of Bitcoin miner Argo Blockchain’s goal of raising $27 million, causing the company to say it might shut down.
Elon Musk’s Twitter takeover boosts Dogecoin
Ever since Elon Musk came aboard as “Chief Twit,” Dogecoin’s price has been rallying. In a rare bit of good news, its price nearly doubled this month, though there is no news yet about how Twitter will be integrating the popular memecoin into its platform yet.
Crypto is financing 20% of all terror attacks
An official from the United Nations sounded the alarm this week when she declared that up to 20% of all terror attacks are now being financed by cryptocurrency.
The midterm elections are heating up, and crypto super PACs (political action committees) are playing a key role in some races around the country. In June, a new crypto super PAC called Crypto Freedom PAC registered and quickly began mobilizing more than $4 million for campaign ads and other ways to prop up pro-crypto candidates across America. While roughly half of its funding, or $2.2 million, has gone toward opposing Republican candidates, the super PAC has also been targeting Independent candidates in Utah.
It’s important to remember that super PACs do not face restrictions on how much money they raise, since they do not directly give money to candidates or political parties. This often means they can inject a large sum of money in ads without being directly tied to a candidate.
But who’s funding the mysterious Crypto Freedom PAC? It’s allied with the conservative, anti-tax Club for Growth, and one of the largest donors is the billionaire Jeffrey Yass, a political mega-donor and co-founder of the Susquehanna International Group, a trading and tech firm headquartered in Pennsylvania. In the 2022 midterms, Yass and his wife became the country’s fifth-biggest donors, sitting directly behind another crypto heavyweight: Sam Bankman-Fried, the billionaire founder of crypto exchange FTX. Among the issues Yass supports are fighting taxation and critical race theory, while supporting charter schools.
This summer, Yass donated 100 Bitcoin, equivalent to nearly $2 million dollars at the time, to Crypto Freedom PAC. This was the largest Bitcoin political donation in the country’s history.
The PAC went on to bankroll a number of ads, including one supporting pro-crypto Republican candidate Blake Masters, a protégé of businessman Peter Thiel. Masters is running for senator of Arizona with the support of former president Trump.
One of the first ads the super PAC ran was against Masters’ Republican opponent Jim Lamon, claiming he took money from Chinese companies in one of his businesses. “There’s nothing wrong with making money – unless the currencies change color,” the ad blasted.
Recently, the group has also funded an attack ad against Evan McMullin, an Independent candidate for senator in Utah, claiming the outwardly Independent candidate has been siding with Democrats.
It’s not clear how much influence these ads might have, but in tight races, they are something to watch closely. And with the crypto industry pumping more than $80 million in Washington, it’s clear the crypto industry is increasingly a big spender in elections – and it is now competing with the energy, healthcare, and tech industries for greater influence over policy.
This article originally appeared in the Crypto Investor newsletter.