Liquidity Dries Up as Bitcoin Dips Below $67K

The Breakdown First Five - Tuesday, June 11, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. Crypto Sanctions Expansion

A dramatic expansion to crypto sanctions power has been inserted into a must-pass Intelligence funding bill. Senator Mark Warner has led the Intelligence committee to add language which would grant broad power to apply secondary sanctions to  "foreign digital asset transaction facilitators." This likely expands beyond exchanges to cover miners, validators and might even cover software developers. Lobbyists are alarmed and are engaging with lawmakers.

4. Fidelity Plugs into Onyx

Fidelity International has joined the JP Morgan Tokenized Collateral Network, tokenizing shares of a money market fund. Press releases cite improved speed, round the clock settlement and reduced cost. Keerthi Moudgal, head of product at Onyx said the money market fund shares would have otherwise been “prohibitively complex” to use as collateral, implying that RWA tokenization is expanding the types of acceptable collateral assets in tradfi. 

3. Sifu Strikes Again

A protocol designed by serial crypto bad guy 0xSifu aka Michael Patryn has been hacked. That guy has the worst luck. This time around it was UwU Lend being drained for around $20M. The malicious wallet was funded through Tornado Cash, so I guess technically we don’t know their identity. UwU was a fork of an outdated version of Aave, complete with the bugs that have since been patched. 

2. Private Mempools Slashed

The Solana Foundation has cut more than 30 validators from their delegation program, effectively defunding those operations. The dust came over the discovery that private mempools were being operated to allow for sandwich attacks. Solana’s war against MEV flared up in March as Jito decided to shut down its mempool function for the good of retail users. The enforcement approach to MEV protection has riled up decentralization maxis in the ETH camp. 

1. Liquidity Thins Overnight

Bitcoin has dropped another 3%, falling below $67,000 as liquidity dissipates. Monday’s ETF flow data flipped negative, with $65M in net outflows. This breaks a 19-day positive streak, the longest since the ETFs began trading. While sentiment is negative, many experienced traders are noting that Bitcoin has consistently dropped ahead of the FOMC. Wednesday’s Fed decision will also coincide with inflation data, a double dose of event derisking.