Crypto Roundup: Exchange Errors, Updates, and Lawsuits

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The cryptosphere has been buzzing lately, and it’s hard to keep up with all the newsworthy events. That’s why we’ve created this crypto overview to make sure you stay up to date with all things crypto. This roundup covers lawsuits, upcoming blockchain updates, and exchange failures so you can learn more about what’s happening in the cryptocurrency world. Let’s dive into it.

Closure of crypto exchanges

Our roundup begins with an overview of the latest crypto exchange drama. Many exchanges have recently closed, especially filing for bankruptcy. One of the most notable is Three Arrows Capital (3AC), the first domino to fall. 3AC was a crypto hedge fund that focused on crypto lending and investing.

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A series of bad investment choices drove them out of business and loan swaps with 3AC followed; The founders of 3AC disappeared shortly after filing for bankruptcy. Celsius and Voyager Digital also participated in crypto lending before filing for bankruptcy. This is just speculation, but part of the problem may be that crypto exchanges are trying to act like banks.

At its core, crypto is a decentralized asset. The crypto has been around for over a decade and has never shown long-term price stability. Crypto lending frenzy started after the 2021 highs, but crashed during the price correction. Presumably, these lending operations tried to treat crypto as fiat currency, which has more or less uniform value.

As crypto evolves under the inevitable incoming regulations, we will likely continue to see lending operations. This first wave of failures should be a warning that investors should now keep in mind. Meanwhile, correlation does not mean causation; it is not known exactly what causes the error in all these exchanges. From what we know, it’s likely a combination of factors, including mismanagement, hacks, and government regulation.

Next, in the crypto overview, there is a backup suggestion. It hasn’t been discussed much in the popular media, but you can use exchanges without having your crypto in their wallet. If you buy a cold wallet, i.e. a hardware wallet, you can store your crypto there. Exchanges can make crypto trading easier as they provide a simple platform for it.

Decentralized financial exchanges (DeFi) like pancake swap can intimidate newcomers to the crypto space. Centralized exchanges like Binance or Coinbase offer a user-friendly interface and can also store your crypto. After the collapse of 3AC, Voyager Digital and Celsius, however, it may be time to take a step further.

When you join a crypto exchange, you agree to give them partial control over your money. This should be a purely logistical move to facilitate the exchange to open your wallet and execute trades. But as we saw after the Voyager and Celsius bankruptcies, the exchange could keep your money.

So while you can still use centralized exchanges to easily trade crypto, leaving it in your exchange wallet can have serious consequences. Sending crypto from your exchange wallet to your hardware wallet ensures that you retain ownership. This way you get the best of both worlds.

Upcoming Blockchain Updates

A few updates are coming to popular blockchain projects. For Ethereum, there is the merger with Ethereum, which the developers have delayed due to security concerns. The merger will see Ethereum move from Proof of Work (PoW) to a Proof of Stake (PoS) consensus model.

Changing consensus models is a long-term move that should lower the network’s energy needs. Ethereum fans who want to continue mining after the merger can take a closer look at Ethereum Classic. Ethereum Classic is the result of a previous hard fork on the blockchain and operates on the original Ethereum model.

Cardano’s Vasil upgrade has also undergone testing and is expected in the coming months. Despite being a PoS pioneer, Cardano (ADA) has struggled since its 2021 highs, like many other altcoins. In any case, the developers continue to upgrade Vasil. Vasil will upgrade Cardano’s smart contract protocols, scalability and interoperability. In short, this will make the blockchain faster, more efficient and able to handle larger transaction volumes.

Although the developers have not specified a release date, it is probably better. Investors may be eager to see the update roll out and may even hope it will increase the value of ADA. Ultimately, the update should succeed. The negative impact of implementing an incomplete update is far worse than waiting to get it right. This logic applies to any crypto update or technical update.

Altcoin Shiba Inu (SHIB) is also waiting for an exciting update, which the developers call Shibarium. Shibarium will bring Layer 2 functionality, essentially creating a SHIB blockchain on top of the underlying Ethereum network. On top of that, the update is expected to expand SHIB’s reach as part of an ambitious project that includes metaverse realtors and SHIB games. Shibarium does not have a specific release date, but the developers have hinted that it will be coming later this year.

Ongoing and future litigation

And now a summary of notable crypto activities. The SEC lawsuit against Ripple Labs Inc. is still in progress. The result will shake up the cryptosphere and likely shape the near future of crypto regulations. At the heart of the lawsuit is the SEC’s allegation that Ripple Labs sold XRP as “illegal unregistered security.” Ripple recently won a major court victory. Emails from former SEC Corporation CFO Bill Hinman were admitted into court as evidence.

Ripple’s lawyers say Hinman’s emails prove a conflict of interest where Hinman was willing to classify Ethereum as a “legal unregistered value.” Current SEC Chairman Gary Gensler has publicly argued for classifying cryptocurrencies as securities (except Bitcoin). The outcome of the SEC lawsuit against Ripple Labs Inc. will likely determine whether Gensler succeeds in bringing the crypto under SEC regulation in the near term.

Meanwhile, popular crypto exchange Coinbase is waging its own legal battles. After the collapse of stablecoin Terra, customers and investors condemn Coinbase’s negligence. One of the advantages that centralized exchanges should offer is that they do not list unstable or fraudulent cryptocurrencies. Coinbase is facing two lawsuits regarding stablecoins, USDTerra Classic (USTC) and GYEN (GYEN), which were not properly pegged to a dollar value. The lawsuits allege that Coinbase failed to exercise due diligence and inform investors about the nature of these crypto assets.

Finally, we end this crypto overview with a change in the dynamics of the lawsuit: one crypto exchange suing another. While customers are suing Binance for listing the now-defunct altcoins Terra and Luna, the exchange is also going on the offensive. Binance is suing Hong Kong’s Modern Media, which licenses Bloomberg content, for defamation. The lawsuit comes after Modern Media published a headline referring to Binance as a Ponzi scheme by founder Changpeng Zhao.

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