Crypto Investor Newsletter: Brazil’s Lula on Crypto + US Midterms and Crypto

by Arthur · October 31, 2022

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 affect 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 12,000-plus Brazilian companies bought crypto, indicating the sector is making inroads into the world’s 12th largest economy. Earlier this month, the country’s largest digital bank, Nubank, even announced that it is unveiling its own cryptocurrency.

Leftist President Luiz Inácio Lula da Silva has gone on record saying that 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 the 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 summary 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 written by Satoshi Nakamoto, a pseudonymous figure whose identity we still do not know.

Over 400 crypto venture funds were launched in 2022

The crypto winter has lasted so long that some are wondering if this is just a crypto ice age. However, there is some hope for optimism: more than 400 crypto-focused venture funds launched 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 algorithmic stablecoin TerraUSD (UST), which wiped billions of dollars from investors’ wallets. 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 2 November.

Plaintiffs say the UST stablecoin was intended to be pegged 1-to-1 to the US 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 rise worldwide, crypto’s promise to serve as a hedge against inflation has been proven false, some argue. That’s because crypto prices have continued to fall over time, something Bitcoin advocates once promised would not happen.

Others are not so quick to give up just yet. “We just don’t know yet… until we see more of a track story with it,” financial planner Anjali Jariwala told CNBC Make It.

“It’s difficult because it’s meant to function as a currency, it’s taxed as property and some compare it to a commodity. At the end of the day, it’s really its own asset class that doesn’t have a clean 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, prompting the company to say it may shut down.

Elon Musk’s Twitter Takeover Boosts Dogecoin

Ever since Elon Musk came on board as “Chief Twit”, Dogecoin’s price has risen. In a rare bit of good news, the price nearly doubled this month, although there is no news yet on how Twitter will integrate the popular memecoin into its platform just yet.

Crypto funds 20% of all terrorist attacks

A UN official raised the alarm this week when she declared that up to 20% of all terrorist attacks are now funded by cryptocurrency.

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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 was registered and quickly began mobilizing more than $4 million for campaign ads and other ways to support pro-crypto candidates across America. While about half of its funding, or $2.2 million, has gone to opposing Republican candidates, the super PAC has also targeted independent candidates in Utah.

It’s important to remember that super PACs don’t have limits on how much money they raise, since they don’t give money directly to candidates or political parties. This often means they can inject a large amount of money into ads without being directly linked to a candidate.

But who is funding the mysterious Crypto Freedom PAC? It is allied with the conservative, anti-tax Club for Growth, and one of its biggest donors is billionaire Jeffrey Yass, a political megadonor and co-founder of Susquehanna International Group, a trading and technology firm headquartered in Pennsylvania. In the interim period of 2022, Yass and his wife became the country’s fifth largest donors, sitting right behind another crypto heavyweight: Sam Bankman-Fried, the billionaire founder of the crypto exchange FTX. Among the causes Yass supports are anti-taxation and critical race theory, while supporting charter schools.

This summer, Yass donated 100 Bitcoin, equivalent to nearly $2 million at the time, to the Crypto Freedom PAC. This was the largest political Bitcoin donation in the country’s history.

The PAC went on to bankroll a number of ads, including supporting pro-crypto Republican candidate Blake Masters, a protégé of businessman Peter Thiel. Masters is running for senator in 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 was taking money from Chinese companies in one of his businesses. “There’s nothing wrong with making money – unless the currencies change color,” the ad says.