SEC - Page 275

Fidelity Digital Assets recently released its “Q2 2023 Signals Report” on July 18, expressing a positive outlook for Ether (ETH) in both the short and long term.

While the investment firm is optimistic about Ether’s performance in the coming months, it doesn’t necessarily believe that the current bullish trend will be sustained.

To assess the accuracy of Fidelity’s analysis, let’s compare it against network and market data.

Fidelity’s bullish outlook for Ether is supported by several factors.

First, the report highlights the network’s higher burn rate compared to coin issuance, which has resulted in a net supply decrease of over 700,000 Ether since the Merge in September 2022.

Additionally, the report points to an increasing number of Ethereum addresses transacting for the first time, indicating healthy network adoption.

Furthermore, the report mentions a 15% rise in the number of active Ethereum validators during the second quarter, indicating increased participation in securing the network.

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The anticipated upgrade of the leading decentralized exchange (DEX), Uniswap, is another potential bullish factor for the Ethereum network.

Uniswap v4 is expected to introduce features such as programmable buttons, native ETH support, and a singleton contract, which could improve the efficiency and cost-effectiveness of smart contracts.

If the upgrade includes the implementation of EIP-1153, it could help Ethereum regain market share lost due to high gas fees. Presently, Ethereum’s total value locked has decreased to its lowest level since April 2020.

The upgrade could also boost decentralized application activity, which has declined recently, as indicated by decreased usage of platforms like Uniswap, 1inch Network, MetaMask Swap, and OpenSea.

Despite these positive indicators, derivatives metrics have remained flat, signaling caution among professional traders.

Ether quarterly futures currently trade at a premium of 4% compared to spot markets, below the neutral threshold. This suggests reduced enthusiasm for leveraged bullish positions on ETH.

Additionally, investor sentiment may have become overly optimistic due to Ether’s 59% gains year-to-date.

A survey of North American cryptocurrency investors revealed that 46% named Ether as the top contender to surpass Bitcoin.

However, it’s important to note that the survey did not inquire about the likelihood of any coin eventually flipping Bitcoin.

While Fidelity’s analysis provides valid reasons for its bullish stance on Ether’s performance over the next 12 months, it acknowledges the challenges posed by high gas fees and reduced interest from leverage buyers in the short term.

These factors increase the chances of Ether’s price breaking below the current bullish channel support.

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FTX Australia, the local subsidiary of the bankrupt crypto exchange, has had its financial license canceled by the Australian financial services regulator.

The announcement was made by the Australian Securities and Investments Commission (ASIC) on July 19, and the cancellation came into effect on July 14.

However, FTX Australia will still be allowed to provide limited financial services until July 12 next year, as it wraps up its dealings with clients.

ASIC emphasized that FTX Australia is obligated to make arrangements for compensating clients until the specified date.

The exchange had approximately 30,000 retail clients and served 132 local companies, making the compensation process a significant undertaking.

In November of the previous year, ASIC had already suspended FTX Australia’s Australian Financial Services (AFS) license, which allowed the exchange to create derivatives and foreign exchange contracts for its local clients.

This suspension occurred shortly after the Bahamian-based parent company, FTX, filed for bankruptcy on November 11, 2022.

Following FTX’s bankruptcy filing, voluntary administrators from KordaMentha, an investment and advisory firm based in Sydney, were appointed to aid in the restructuring of FTX Australia and its subsidiary, FTX Express.

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In a recent report submitted to a United States bankruptcy court, the restructuring chief for FTX’s global entity disclosed that approximately $7 billion in liquid assets had been recovered.

However, an estimated $8.7 billion worth of customer assets were allegedly misappropriated, indicating a significant shortfall.

There have been reports suggesting that FTX may re-launch as an entirely new exchange.

The restructuring team has been engaging in discussions with potential parties interested in providing financial backing for this potential reboot.

If successful, this relaunch could offer a fresh start for the troubled exchange.

As FTX Australia grapples with the cancellation of its financial license, it faces the challenging task of winding down its operations and compensating its clients.

The aftermath of the bankruptcy filing and the potential re-launch of FTX pose both uncertainties and possibilities for the future of the exchange and its stakeholders.

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The cryptocurrency industry has experienced significant growth in terms of employment despite notable instances of cryptocurrency failures.

Research conducted by K33, a crypto research startup, reveals a substantial surge of nearly 160% in the number of individuals working in crypto-related positions since 2019.

In their report titled “The Emerging Crypto Industry,” K33 estimates that the total headcount of crypto professionals reached nearly 190,000 individuals in 2023, compared to approximately 73,000 in 2019.

The industry experienced its peak in terms of staff numbers in 2021, surpassing 211,000 professionals. This growth coincided with Bitcoin’s impressive performance, reaching an all-time high price of $68,000 in November 2021.

While the number of crypto employees has seen a reduction of approximately 11% since 2021, it remains significantly higher than four years ago.

This increase appears to align with the fluctuation of Bitcoin’s price, which surged over 300% from its average annual price of around $7,200 in 2019.

The findings of K33 are supported by data from various major industry players.

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For instance, Kraken, a prominent cryptocurrency exchange, has witnessed a 150% rise in staff numbers since 2019, according to Pranesh Anthapur, the firm’s chief people officer.

Similarly, Trezor, a major hardware wallet company, has increased its headcount by 120% since 2019, as reported by CEO Matej Zak.

These companies prioritize long-term talent retention and development, even during bear markets.

Kraken’s Anthapur highlights the significance of securing the right talent to navigate the challenges of disrupting traditional finance.

Trezor’s Zak emphasizes their focus on building and retaining talent over cyclical hiring and firing based on short-term market trends.

Despite the overall growth in employment, the cryptocurrency industry has also witnessed layoffs at various firms, including Coinbase, Binance, Crypto.com, Dapper Labs, and Kraken.

Binance, in particular, reportedly laid off more than 1,000 employees recently, following a 20% reduction in staff announced in May.

Interestingly, while some major firms have engaged in significant layoffs, other crypto giants have maintained relatively small workforces.

Tether, the issuer of the world’s largest stablecoin, employs only around 60 individuals, according to a company spokesperson.

They emphasize a cautious approach to hiring, prioritizing employee well-being and future prospects, and demonstrating a track record of not downsizing staff even during previous downturns in the crypto market.

Overall, despite the challenges and setbacks faced by the cryptocurrency industry, the number of people employed in crypto-related roles has experienced substantial growth, indicating the continued interest and potential of the industry.

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Crypto firms and influencers operating in the United Kingdom may soon be required to include disclaimers on crypto-related memes to ensure compliance with advertising laws.

The Financial Conduct Authority (FCA), the country’s financial regulator, recently released proposed guidance on social media financial promotions, specifically targeting promotional memes and financial influencers, also known as “finfluencers.”

The FCA highlighted the presence of promotional memes from crypto firms that many people are unaware are subject to its promotional rules.

While promotional memes are particularly prevalent in the crypto sector, the FCA emphasized that any form of communication could be deemed a financial promotion.

Considering crypto investments as high-risk, the FCA permits their advertisement to retail investors but imposes certain requirements, such as the inclusion of risk warnings and a ban on investment incentives.

According to the FCA, in the fourth quarter of 2022, 69% of financial promotions on websites or social media from authorized firms were either amended or withdrawn following the regulator’s intervention.

To update its existing 2015 guidance and provide clearer expectations for marketers regarding promotions, the FCA initiated this consultation.

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The FCA also expressed concern about the growing number of finance-oriented influencers promoting financial products without sufficient knowledge, particularly targeting younger audiences.

It warned influencers that promoting financial products without adequate expertise could result in legal consequences, including up to two years of imprisonment, an unlimited fine, or both.

The law applies not only to promotions originating outside the UK but also those that may impact the country.

To support its stance, the FCA referred to a report indicating that over 60% of individuals aged 18 to 29 follow social media influencers, with three-quarters expressing trust in their advice.

A 2021 FCA survey revealed that 58% of respondents under 40 cited social media hype and news as reasons for investing in cryptocurrencies, which the regulator deems a high-risk product.

In summary, the FCA’s proposed guidance aims to ensure compliance with advertising laws by requiring disclaimers on crypto memes and warning financial influencers about the legal consequences of promoting financial products without sufficient knowledge.

This move intends to safeguard consumers, especially younger individuals who may be influenced by social media endorsements.

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National Australia Bank (NAB) has become the latest major bank in Australia to take action against certain cryptocurrency platforms due to the high risk of scams in the industry.

NAB announced a series of measures on July 17 as part of its “bank-wide scam strategy” to protect customers from fraud.

In addition to stopping millions of dollars in payments between March and July 2023, NAB will implement blocks on “some cryptocurrency platforms” to safeguard customers from scams.

While the specific exchanges were not mentioned, NAB’s executive for group investigations and fraud, Chris Sheehan, stated that the blocks would be imposed on “high-risk” platforms where scams are more prevalent.

Sheehan highlighted the involvement of organized transnational crime groups in cryptocurrency scams, explaining that these criminals are increasingly using cryptocurrency platforms to quickly send stolen funds overseas.

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It has been suggested that the cryptocurrency exchange Binance may be affected by NAB’s crypto blocks.

Sheehan indicated that NAB’s approach would align with the rest of the industry, following reports that other major Australian banks, including Westpac and the Commonwealth Bank, have already blocked payments to Binance.

Neither NAB nor Binance provided immediate comments in response to inquiries from Cointelegraph.

NAB reiterated the prevailing narrative among local banks, claiming that nearly 50% of scam funds reported in Australia are linked to cryptocurrency.

The bank emphasized that cryptocurrency scams pose one of the fastest-growing security threats, with Australians losing over $221 million to such scams last year.

In support of their measures, NAB cited a survey indicating that 40% of Australians are willing to accept slower payments if it means better protection against scammers.

As of now, NAB’s decision to block certain cryptocurrency platforms stands, but further information and updates are expected as the situation develops.

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The Israel Defense Forces (IDF) has incorporated artificial intelligence (AI) into its operations to select targets for air strikes and coordinate wartime logistics, amid escalating tensions in the occupied territories and with Iran.

While specific details remain classified, the IDF employs an AI recommendation system to analyze large amounts of data and identify targets for air strikes.

The subsequent planning and execution of raids are facilitated by another AI model called Fire Factory, which calculates munition loads, assigns targets to aircraft and drones, and proposes a schedule.

Human operators oversee these systems and approve individual targets and air raid plans. However, there is currently no international or state-level regulation governing the use of this technology.

Supporters argue that AI algorithms can surpass human capabilities and potentially minimize casualties.

Critics, on the other hand, caution against the potential deadly consequences of relying on increasingly autonomous systems.

Concerns arise regarding accountability and the lack of explainability in AI decision-making. Mistakes or errors in AI calculations could lead to devastating consequences, such as the unintended destruction of innocent lives.

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The IDF has gained battlefield experience with AI systems during periodic conflicts in the Gaza Strip, where it employs AI to identify rocket launchpads and deploy drone swarms.

Israel also conducts raids in Syria and Lebanon, targeting weapons shipments to Iran-backed militias like Hezbollah.

As tensions with Iran escalate, the IDF anticipates retaliatory actions from Iranian proxies in multiple fronts, necessitating AI-based tools like Fire Factory for rapid decision-making and response.

The IDF has expanded its use of AI across various units to position itself as a global leader in autonomous weaponry.

It has developed a vast digital architecture, encompassing drone and CCTV footage analysis, satellite imagery interpretation, electronic signals analysis, and other data processing for military purposes.

The Data Science and Artificial Intelligence Center, operated by the IDF’s 8200 unit, plays a crucial role in interpreting this torrent of information.

The secretive nature of AI development raises concerns about the potential for semi-autonomous systems to transition into fully autonomous killing machines, removing humans from decision-making positions.

One worry is that the rapid adoption of AI surpasses research into its inner workings. The lack of transparency in how algorithms reach their conclusions and the involvement of private companies and militaries in algorithm development further exacerbate these concerns.

While the IDF acknowledges the complexity of understanding AI decision-making, it claims that its military AI systems leave behind traceability, allowing human operators to recreate the steps taken by the AI.

Ethical concerns surround the development and use of AI in military applications.

Israeli leaders have expressed their intention to make the country an “AI superpower,” but details regarding investment and specific defense contracts remain undisclosed.

The lack of an international framework to address responsibility for civilian casualties or unintended escalations caused by AI systems is a significant challenge.

The need for rigorous testing and data training to ensure precision and accuracy in AI systems is another critical consideration.

Some experts argue that integrating AI into battlefield systems can potentially reduce civilian casualties and improve operational efficiency.

However, the risks and potential negative outcomes cannot be overlooked.

Calls have been made for the IDF to restrict the use of AI exclusively to defensive purposes, emphasizing the importance of value-based decisions that cannot solely rely on AI.

In conclusion, the IDF’s use of AI in target selection and logistics coordination presents both advantages and ethical concerns.

While AI has the potential to enhance military capabilities, the lack of transparency, accountability, and regulation raise significant questions about the consequences of relying on increasingly autonomous systems in conflict scenarios.

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