Issue: 06-05-2024

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2
EXECUTIVE SUMMARY
In Bitcoin markets we continue to see traders seeking a price equilibrium,
as they adjust to the new rate of supply of BTC on the market from
mining and absorb the increasingly complex messages about inflation
and interest rates from macro economic indicators.

BTC last week fell to a new local low, before sharply correcting, and in the
past week has experienced fluctuating market sentiment, even though
major altcoins remained stable above their April lows.

A key development was the observed activity among Bitcoin whales, as

indicated by the Exchange Whale Ratio, which suggests potential selling
pressure as this cohort of investor has been seen putting Bitcoin onto
exchanges, with the possibility that they might be about to sell. That said,
historically, most of the aggressive selling has come from the more
price-sensitive short-term holders, that is those who have owned BTC for
155 days or less. For this group, the realised price is $58,700, and in
current markets this seems to be acting as an important support level.
Judging from the short-term holder Market Value to Realised Value ratio,
selling seems to be waning.

Further support can also be seen in the fact that this post halving period
has resulted in a notable decrease in volatility. The significant drop in
Bitcoin's implied volatility suggests the market is settling, with a reduced
expectation of drastic price movements. The volatility risk premiums for
both Bitcoin and Ethereum have narrowed dramatically, indicating a
realignment of market expectations towards a more stable and
predictable environment.

This comes as the current economic landscape means the Fed continues
with its cautious and deliberate approach, maintaining rates at 5.25-5.50
percent, and now also slowing down the pace of reduction of assets on
its balance sheet, and hence increase demand for treasuries.

Inflation remains persistent with the latest data from the employment
cost index rising faster than expected, as the tightness in the labour
market means employees can demand higher wages due to inflation. The
availability of jobs however has not correspondingly risen, which has
caused consumer confidence, regarding the labour market, to dip.

Indeed, supporting this was a Bureau of Labor Statistics report showing a

drop in job openings to their lowest level in three years and a deceleration
in wages.
In crypto news last week Binance founder Changpeng Zhao was
sentenced to four months for money laundering and sanctions violations;
and Hong Kong witnessed the debut of new spot Bitcoin ETFs, marking a
significant step forward in the region's adoption of crypto assets, even if
the initial take up was slow.

And finally Tether, the world’s largest stablecoin issuer, reported a record
$4.52 billion profit in the first quarter of 2024, and revealed net equity of
$11.37 billion, reflecting its robust financial position.

Have a good trading week.

INDEX

1. WHAT’S ON-CHAIN THIS WEEK? 6-19

- BTC Hits New Range Lows 7-11
- Bitcoin Volatility In A Post-Halving Environment 12-19

2. GENERAL MACRO UPDATE 20-29

- Fed Maintains Interest Rate, Announces Slower Pace of Asset Reduction 21-23
- Rising Employment Costs Challenge Fed's Rate Cut Plans 24-26
- US Job Openings Hit Three-Year Low as Labour Market Cools 27
- US Job Growth Moderates, Wage Growth Decelerates as Labour Market Seeks
Stability 28-29

3. NEWS FROM THE CRYPTOSPHERE 30-35

- Binance Founder Changpeng Zhao Sentenced To Four Months In Prison 31-32
- Tether Reports Record-Breaking First Quarter Report 33-34
- Hong Kong Bitcoin ETFs Record $8.5 Million in First-Day Volume 35
WHAT’S ON-CHAIN
THIS WEEK?

6
 BTC Hits New Range Lows
It was a tumultuous week for Bitcoin, as the world’s largest crypto asset saw a close below range
lows on Tuesday, April 30th, before quickly reversing, and closing back within the range by
Friday, May 3rd. The week also saw market sentiment fluctuating significantly, but major
altcoins did not close below their April 13th lows.

Figure 1. BTC/USD Daily Chart. (Source: Bitfinex)

Last week proved to be BTC’s most tumultuous period since November 2022, recording the
steepest pullback for this entire cycle with BTC dropping 23 percent below its current cycle high
(which is also the BTC all-time high) to form a local low around $56,700. The current move now
surpasses the September 2023 correction for this cycle which was a 21.7 percent decline.

The drop was triggered by a series of macroeconomic events as well as developments within the
cryptocurrency sector. In the crypto markets, the debut of spot Exchange-Traded Funds in Hong
Kong, anticipated to bolster BTC’s market presence, had a soft start. In addition, the market was
impacted by news that Binance Founder and former CEO Changpeng Zhao, received a four-month
prison sentence.

Further exacerbating the situation, on the macro front, an uptick in the US Employment Cost Index
and renewed focus on the trajectory of interest rates following the Federal Reserve's Federal Open
Market Committee meeting contributed to downward pressure on Bitcoin's price, which fell to a low
of $56,711 on May 1st (refer Figure above).

7
 However, as the week unfolded, additional economic data indicating a cooling labour market
alleviated some of the bearish sentiment in the market, as traders wagered that rates would
drop later this year. This shift helped BTC stage a recovery from its earlier lows, climbing back
to around $64,000.

Figure 2. Bitcoin Short-Term Holder Realised Price (Source: LookintoBitcoin)

The Short-Term Holder Realised Price (STH-RP), calculated as the realised capitalisation of
Bitcoin acquired by this cohort, divided by the total coin supply currently stands at around
$58,700. This metric has historically acted as a crucial support and resistance indicator. For
instance, it served as support in March 2023, June 2023, and January 2024, and as resistance
in April 2022, November 2022, and October 2023. Notably, periods following the breach of
these levels have typically seen increased price volatility. As was seen in the past week, the
STH-RP acted as support once again with recent price action bouncing back from this level.

8
 Figure 3. Exchange Whale Ratio (Source: CryptoQuant)

Bitcoin’s trajectory has been notably bearish since it recorded a new all-time high in March 2024,
before dropping back below even its previous cycle high of around $69,000. A critical indicator in
this regard is the Exchange Whale Ratio, which measures the ratio of large deposits by major
holders (whales) to total deposits on exchanges. A recent spike in this ratio indicates that whales
have been moving their holdings to exchanges, possibly to sell, exerting downward pressure on
prices. Hence, any correction might stop once the ratio stabilises. This would indicate that LTHs
and whales have finished distributing their supply at least for the time being. We have also
previously covered how long-term holders and whale wallets have been distributing their BTC
holdings in the current BTC range.

While whales are significant players, the more aggressive market responses often emanate from
short-term holders. According to the Realised Loss breakdown (see below), these investors
currently dominate selling pressure. The age band realised price distribution shows the selling
pressure coming mostly from coins held from one week to one month (1w-1m). The spot price
reacts sensitively to changes in the one-week to one-month cost basis as recent buyers, being
more price-sensitive, are likely to sell under market stress.

9
 Figure 4. Realised Loss by Long-Term Holders (LTH) and Short-Term Holders (STH)

The Market Value to Realised Value (MVRV) ratio for one-week to one-month holders typically
dips into the 0.9 to 1 range during bull market corrections, indicating a market decline of zero to
negative 10 percent below these investors' average cost basis. Currently, with the cost basis of
these holders at $66.7k and the price hovering between $60k and $66.7k, we see indications of
a local bottom formation. Having said that, if we see a sustained break below this MVRV level, it
could trigger widespread selling.

Figure 5. Bitcoin MVRV (1w-1m)

10
Currently, the Short-Term Holder MVRV (STH-MVRV) ratio is 0.96. When the STH-MVRV dips below
one, it typically precedes a market recovery. This indicates that selling pressure from short-term
holders may be waning, a sign that sellers could be nearing exhaustion.

Supporting this potential turnaround is the Bitcoin Fundamental Index (BFI), an index which
assesses various aspects of Bitcoin’s network health, including transaction volume and wallet
activity, and aims to gauge the overall market. BFI which shows an inflection point suggesting an
upward trend may be on the horizon.

Figure 6. Bitcoin Fundamental Index. (Source: Swissblock Technologies)

The current position of the index indicates that selling pressure is waning, while network growth
has surpassed levels observed at previously identified market bottoms. This potential for positive
movement hinges largely on liquidity expectations, which makes future decisions of the FOMC
meeting crucial.

11
 Bitcoin Volatility In A Post-Halving
Environment
In exploring the immediate aftermath of the Bitcoin halving event on April 20th, 2024, it is clear
that the halving acted as a resolution-of-uncertainty event, significantly impacting the
volatility and market dynamics of cryptocurrencies. Following the halving, Bitcoin implied
volatility (BVIV) experienced a significant decrease, a 24.2 percent drop from 74.54 to 56.47.
This shift is indicative of expected market sentiment towards future price fluctuations, but
was not mirrored by substantial price movements, suggesting a stabilisation effect.

Similarly, Ethereum's implied volatility (EVIV) decreased by 15.9 percent, moving from 61.94 to
52.08, even as its price showed a slight upward trend during the post-halving adjustment period.
This pattern indicates a broader market adjustment to reduced uncertainty following the halving.
The comparative analysis of implied and realised volatilities, particularly the sharper decrease in
Bitcoin's implied volatility relative to its realised volatility, underscores a significant recalibration of
market expectations concerning risk and reward.

Furthermore, the changes in spot-volatility correlations for both Bitcoin and Ethereum reveal a
decrease in the magnitude of correlations, with Bitcoin's one-week spot-vol correlation moving to
-20 percent from -56 percent. This decline suggests a lesser degree of linkage between price
levels and volatility, and more of a reduction in market uncertainty.

The volatility risk premium (VRP) for both Bitcoin and Ethereum have now seen dramatic
reductions. Bitcoin's VRP collapsed to 2.5 percent from 15 percent, and Ethereum's to 8.5 percent
from 18 percent post the halving. Volatility risk premium (VRP) reflects the tendency for implied
volatility to surpass realised volatility. This discrepancy between what is anticipated in terms of
volatility (implied) and what actually transpires (realised) constitutes the risk premium. Essentially,
VRP quantifies the premium that investors demand as compensation for the additional risks
associated with the uncertain future volatility of asset returns.

This concept is integral to understanding market dynamics and investor behaviour, particularly in
environments characterised by uncertainty. Investors use the VRP as a critical gauge in their
decision-making processes, calibrating their risk exposure based on the expected volatility
compared to historical trends.

The significant narrowing of the VRP indicates a realignment of market expectations to a more
stable and predictable environment post-halving, in sharp contrast to the price action on May 1,
2024, which saw Bitcoin falling to a range low. The market consensus seems to be that future
volatility may be less than previously anticipated, following the halving. A possible reason for
Ethereum VRP to drop less, is that the SEC’s ETF decision on May 23, 2024 acts as an additional
uncertainty for the ETH price. This also confirms that VRP captures the premium related to future
uncertainty.
12
In summary, the Bitcoin halving not only adjusted the supply mechanism of Bitcoin but also played
a crucial role in recalibrating crypto market dynamics and investor expectations. The decrease in
VRPs and changes in correlations indicate a market trending towards stability, where future
uncertainties are considered with less concern. This reflects a broader expectation of more
predictable market conditions post-halving.

Appendix

Since the Bitcoin halving until the recent market move on May 1, call it the “post-halving
adjustment period”, Bitcoin implied volatility, measured by BVIV, went sharply down to 56.47 from
74.54. This 24.2 percent volatility fall was not accompanied by strong price action as can be seen
in Figure 7 below.

Figure 7. BTCUSD (Bitfinex) and BVIV (Volmex)

Similarly, Ethereum implied volatility decreased 15.9 percent from 61.94 to 52.08 during the
same time window, as shown in Figure 8, while the price moved only slightly upwards.

Figure 8. ETH/USD (Bitfinex) and EVIV (Volmex)

13
The downturn trend in implied volatility during the post-halving adjustment period was steeper
than the realised 1-month volatility, measured by BVRV1M, as can be seen in Figure 9.

Figure 9. BVIV (Volmex) vs BVRV1M (Volmex)

Ether volatilities followed a similar pattern as Bitcoin vols, as shown in Figure 10 below.

Figure 10. EVIV (Volmex) vs EVRV1M (Volmex)

Lastly, we saw major changes in spot-volatility correlations as shown in Figure 11 and Figure 12
below.

Figure 11. BVCORR1W (Volmex)

14
 Magnitude of Bitcoin spot-vol 1-week correlation, BVCORR1W, went down to negative 20
percent from negative 56 percent, while that of Ethereum decreased in magnitude to 18
percent (negative) from 54 percent (negative).

Figure 12. EVCORR1W (Volmex)

During the post-halving adjustment period, Bitcoin volatility risk premium (VRP) crashed to 2.5
percent from 15 percent while Ether VRP went down to 8.5 percent from 18 percent.

Figure 13. BTC VRP (red), ETH VRP (orange) and VRP difference (green)

15
Options market movements with regards to the previous week’s macro announcements

Following the dovish tilt in the statements from both the Federal Open Market Committee
(FOMC) and the Quantitative Risk Assessment (QRA), the recent rally in USD has been
tempered, while market sentiment has edged into fear territory, dropping just below the neutral
50 mark as BTC hit range lows.

Figure 14. Bitcoin Fear & Greed Index Between Range High and Range Low

In the cryptocurrency derivatives market, perpetual funding rates have remained negative
across major options exchanges, indicating a lack of leverage on the bullish side.

Figure 15. BTC/USD 4H Aggregate Chart. (Source: VeloData)

16
Open Interest and Cumulative Volume Delta data indicates that traders of perpetuals continued
to long BTC on the way down on May 1st, before the $60,000-$61,000 range low level was
lost. At that point the market saw approximately $1 billion longs closed at market either
because of stops or liquidations and breakout shorts of approximately $200 million based on
delta values below $60,000 opened at market. It must be noted that these shorts could also be
options or spot market participants hedging positions, or entities using arbitrage strategies.
This resulted in BTC having an extended period of negative funding, even though open
interest (OI) was still relatively high, especially in comparison to the April 13 low, following one
of the largest single day BTC leverage wipeouts ever.

On May 2nd and 3rd, the funding rate for BTC went negative for two consecutive days on an
aggregate basis for the first time since January 2023 (as per VeloData above). Current funding
however has turned decidedly positive at 5.8 percent for BTC and 9.71 percent for Ether. It's
worth mentioning that positive funding rates are typically observed during bull markets. An
interesting observation from 2021 highlights this trend: throughout the entire first half of the
year, negative funding rates on an aggregated basis for two consecutive days occurred only
once. This rarity underscores the general market sentiment and momentum during bullish
market conditions. It’s also important to note that negative funding rates in the past week was
not necessarily because of a lot of short open interest on perpetual positions on Centralised
Exchanges, but was rather because the period between May 1st and May 3rd saw very high
spot demand and was also the period where we had significant net positive ETF flows ($378m)
for the first time in the past three weeks with GBTC recording positive inflows for the first time
since the trust was converted into a spot Bitcoin ETF (above $63m). (refer Figure below)

17
Figure 16. Spot Bitcoin ETF Daily Flows. (Source: FarsideUK)

18
Surprisingly, despite these bearish signals, Solana has seen a significant price jump of over 10
percent since Friday, even as its perpetual funding rates remain negative, suggesting that spot
purchases rather than futures are driving the rally.

In BTC options, the short-term outlook has seen a decrease in open interest, with one-week
options seeing a drop in OI, even as the March 2025 contracts have ticked higher by 7.5 percent,
which we believe is an indication of investors either hedging shorts as we broke down below
range lows or using the BTC dip as a buying opportunity to bet on long-term price appreciation.
Ether shows a similar trend, with negative to low funding rates extending into late May and a
slight increase in longer-term futures.

Glassnode's Bitcoin Accumulation Trend Score indicates an uptick in net outflows across all
wallet cohorts throughout April but especially amongst long-term holders, pointing to persistent
sell-side pressure.

Trading flows highlighted more selling in September options, particularly the 80k/90k/100k calls,
with some of the activity involving September 60k vs. 90k call spreads. Post-Non-Farm Payroll
(NFP) data last week, volatility curves steepened into the weekend but remained lower than
intra-week spikes and continue to downtrend post the halving.

19
GENERAL MACRO
UPDATE

20
Federal Reserve Maintains Interest Rate at
5.5 Percent, Announces Slower Pace of
Asset Reduction
In last week’s Federal Open Market Committee (FOMC) meeting, the Fed decided to hold
interest rates steady at 5.25- 5.50 percent, a target rate that has been in place since July last
year. The decision reflects ongoing efforts to temper inflation without further economic
contraction. As part of its strategy, the Fed also announced a slowdown in the pace of the
reduction of its assets on its balance sheet.

Figure 17. Federal Reserve Assets : Securities Held Outright (Source: Federal Reserve)

Starting in June, the redemption cap for Treasury securities will be lowered to $25 billion monthly,
down from the previous $60 billion. However, the cap on mortgage-backed securities redemptions
will remain unchanged at $35 billion per month. Any surplus from mortgage-backed securities
principal payments will be redirected into Treasury investments.

The Fed balance sheet has decreased in size from a peak of $9 trillion during the pandemic to
$7.5 trillion. The ongoing reduction process has not yet significantly impacted the market, but this
new policy adjustment might exert some downward pressure on yields, as the market becomes
more confident about rates not climbing towards 5 percent, and in turn increasing demand for
Treasuries, pushing prices up, and yields down.

21
 Figure 18. US 10-Year Treasury Yield (Chart Source: TradingView)

Since the Wednesday announcement, the yield on the benchmark 10-year Treasury note dropped
by 3.8 percent to reach 4.512 percent on Friday. The Fed has not specified an end target for its
balance sheet reduction but anticipates completing the process around 2025, and stabilising its
holdings between $6 trillion and $6.5 trillion.

When questioned about whether the reduction in the Fed's asset holdings contradicts its
commitment to maintaining higher interest rates, Fed Chair, Jerome Powell emphasised that this
moderated pace of asset reduction is not at odds with the Fed's restrictive monetary policy.
Instead, it's intended to stabilise asset management and avoid market disruptions, similar to those
experienced in 2019. In September 2019, a liquidity shortfall in the US repo market occurred due to
simultaneous large-scale Treasury settlements and quarterly corporate tax payments, which
significantly drained bank reserves. The Federal Reserve intervened by conducting repo
operations to inject liquidity and stabilize market rates

Regarding the outlook for future rate cuts, Powell highlighted the significance of long-term
economic trends, but recognised the recent economic data reported during the first quarter of
largely sticky inflation and a slowing labour market, and said he "took the signal.” He stated, "It’s
likely to take longer for us to gain confidence that we are on a sustainable path to two percent
inflation," emphasising the need for a cautious approach in determining when to implement policy
changes.

22
Current economic conditions, like interest rates weighing on the housing market, a cooling job
market, and stabilising oil prices, are expected to eventually influence upcoming economic data, and
should contribute to an easing in inflation. However, waiting too long until the Fed is confident to
cut rates carries the risk of escalating unemployment and slowing economic growth, both of which
can deteriorate quickly once they start.

23
Rising Employment Costs Challenge Fed's
Rate Cut Plans

Figure 19. Compensation in Private Industry and Government (Source: Bureau of Labor
Statistics)

The employment cost index has outpaced expectations in the first quarter, while consumer
sentiment regarding the labour market has deteriorated, adding further complexity to the
question of when the Fed will be in a position to cut rates.

The employment cost index, increased by 1.2 percent in the first quarter, up from 0.9 percent in
the previous quarter, and exceeded consensus forecasts of just a one percent rise.

This rise in employment costs is linked to a significant recovery in core service inflation, excluding
housing, which is an important indicator for the Fed in assessing inflation. This trend of an
increasing cost of employment does not align with the Fed’s goals of achieving price stability.

24
Figure 20. Consumer Price Index - Services Excluding Housing (Source: Macromicro, Bureau of
Labor Statistics)

This rise in employment costs is linked to a significant recovery in core service inflation, excluding
housing, which is an important indicator for the Fed in assessing inflation. This trend of an
increasing cost of employment does not align with the Fed’s goals of achieving price stability.

For employees however, this data spells good news as their wages and benefits are rising faster
than inflation, and has contributed to consistent strong spending patterns. The wage increases
pose a challenge for the Fed as it attempts to balance a robust job market with inflation control
efforts.

Figure 21. US Conference Board Confidence Index

A separate report from the Conference Board last Tuesday revealed a decline in consumer
confidence in April, with the index dropping to 97, marking its lowest point since July 2022,
influenced by higher gasoline prices and dwindling job prospects.

25
This level is below the average index score of 101.9 typically seen at the onset of recessions.
Moreover, the labour differential index, which measures the ease of finding jobs, reached its lowest
point since last November, further highlighting the strain felt in some parts of the economy.

Figure 22. S&P 500 price action immediately after last Tuesday and Wednesday’s Economic News

Additional signs of employment weakness are also evident in other reports. The Chicago Business
Barometer fell to a 17-month low, declining from 41.4 in March to 37.9 in April, just slightly above
its two-year low recorded in November 2022. Similarly, the recent US S&P Global Flash PMI report
revealed a significant reduction in workforce numbers, particularly in the service sector, marking
the most substantial drop in employment since mid-2020.
The increase in the US employment cost index amidst falling consumer confidence and business
sentiment may suggest that businesses are feeling the pressure of inflation, leading to higher
wages but a more cautious approach to hiring. Workers and their unions are likely to demand
higher wages and employers may need to offer higher salaries to attract and retain talent, which is
evidenced in the decline in quit rates (as discussed in the next chapter). The discrepancy
between rising employment costs and cooling employment indicators suggests that employers are
competing for a limited pool of labour, which can be a sign of a tight labour market, but does not
necessarily lead to increased employment.

26
 US Job Openings Hit Three-Year Low as
Labour Market Cools

Figure 23. Job Openings, Hires and Separation Rates (Source: Bureau of Labor Statistics)

In March, the number of job openings in the US dropped to 8.49 million, marking the lowest level
in three years, as reported by the Bureau of Labor Statistics, last Wednesday, May 1st. This
decline aligns with conditions suggestive of a cooling labour market, where the gap between
labour demand and supply is beginning to narrow.

The ratio of job vacancies to unemployed individuals dipped to 1.32, moving closer to the
pre-pandemic average of 1.2. Concurrently, the quit rate decreased to 2.1 percent, returning to its
pre-pandemic norm, indicating a move towards a more balanced labour market.

A separate report also revealed a decline in the ISM manufacturing index for April, attributed to
decreased production activity and new orders. Amidst this downturn, manufacturing employment
sentiment remained subdued for the seventh consecutive month.

Notably, the prices paid subindex also experienced a significant rise, reaching its highest level
since June 2022 at 60.9, up from 55.8 in March. This increase in input costs, along with other
economic indicators point to the persistence of inflation.

27
 US Job Growth Moderates, Wage Growth
Decelerates as Labour Market Seeks Stability

Job growth in the US decelerated more than expected in April, with the annual increase in
wages dipping below four percent for the first time in nearly three years, according to the
Employment Situation report issued last Friday, May 3rd. This signals a shift toward a more
sustainable rate of employment growth as the second quarter begins.

Figure 24. Unemployment Rate and Nonfarm Payroll Employment in April 2022-April 2024 (Source:
Bureau of Labor Statistics)

US job growth eased from an average of 289,000 new jobs in the first quarter of 2024 to 175,000 in
April, below the consensus forecast of 240,000 jobs. Average hourly earnings rose 0.2 percent after
climbing 0.3 percent in March. On a year-on-year (YoY) basis, wages increased 3.9 percent, the
smallest gain in almost three years. The unemployment rate also edged up to 3.9 percent from 3.8
percent in March. The unemployment rate has consistently stayed below four percent for a
remarkable 27 consecutive months.

Despite a slower pace, the breadth of hiring improved, with the diffusion index rising to 60.4
percent in April from 54 percent in March, indicating a wider range of industries adding jobs. This
trend underscores a gradual balancing in the labour market, a positive sign for the Fed, which has
been cautious about adjusting interest rates.

The private sector contributed 167,000 jobs, while government employment increased by only
8,000, considerably below the previous three-month average of 62,000.

Stability was also observed in the labour force participation rate, which held steady at 62.7 percent,
although the employment-to-population ratio slightly declined to 60.2 percent. The median duration
of unemployment decreased from 9.5 weeks to 8.7 weeks, suggesting that job seekers are able to
find a job within two to three months.

28
This cooling in the hiring pace, while still robust, can be interpreted as beneficial with respect to
the inflation outlook. It should relieve worries about stagflation, which had been fanned by news of
a moderation in economic growth and persistent inflation in the first quarter. Financial markets,
according to the CME Fedwatch Tool, seemed to be more confident of a September rate cut and
currently foresee two potential rate cuts this year.

Figure 25. CME FedWatch Tool - Conditional Meeting Probabilities

29
NEWS FROM THE
CRYPTO-SPHERE

30
 Binance Founder Changpeng Zhao
Sentenced To Four Months In Prison

Figure 26.Binance Founder Changpeng Zhao Sentenced To Four Months In Prison

● Binance founder Changpeng Zhao sentenced to four months for money laundering and
sanctions violations
● Binance agrees to $4.3 billion in fines and forfeiture, concluding the Justice Department's
case

Changpeng Zhao, founder and former CEO of Binance, was sentenced to four months in prison after
pleading guilty to violating US money laundering laws and sanctions. Seattle-based US District
Judge Richard Jones delivered the ruling, which is significantly lower than the three-year sentence
sought by prosecutors.

As part of his plea deal in November last year, Zhao agreed to step down as CEO, pay a $50 million
fine, and admit to sanctions violations linked to users in Iran, Cuba, Syria, and Russian-occupied
areas of Ukraine. Zhao's lawyers had requested five months’ probation, emphasising his acceptance
of responsibility and absence from family, but this was declined.

The sentence imposed by US District Judge Richard Jones in Seattle was significantly shorter than
the three years sought by the Department of Justice, and below the maximum 18 months
recommended under federal guidelines.

31
Binance's plea, submitted last November, acknowledged violations including anti-money
laundering, unlicensed money transmitting, and sanctions breaches, while Zhao pleaded guilty
to money laundering charges. Zhao, a dual citizen of the UAE and Canada, was released on a
$175 million bond but ordered to stay in the US.

Binance also agreed to a $4.32 billion penalty to resolve the Department of Justice's case. The
prosecution criticised Zhao’s decisions, arguing his deliberate violation of US law aimed to
attract users and build his company.

This marks the second major crypto sentencing in recent months, following former FTX CEO
Sam Bankman-Fried's 25-year prison sentence in connection to FTX’s collapse.

32
 Tether Reports Record-Breaking First
Quarter Report

Figure 27. Tether Reports Record-Breaking First Quarter Report

● Tether reported a record-breaking $4.52 billion profit in Q1 2024

● Tether's net equity stood at $11.37 billion, reflecting its growing financial strength and
stability. US Treasury holdings now exceed $90 billion, contributing to Tether's financial
stability and transparency

In Tether Holdings Limited latest attestation, for the first quarter, it increased the level of
transparency related to the company’s earnings.

The Group reported profits of $4.52 billion, of which $1 billion stemmed from its net profits from
holding US Treasuries. The remainder consisted of mark-to-market gains from holding Bitcoin and
gold.

33
 Figure 28. Tether Financial Figures and Reserves Report

Tether’s US Treasuries holdings now exceed $90 billion, including indirect exposure through
reverse-repurchase agreements and money market funds. Net equity stood at $11.37 billion, a rise
from $7.01 billion in December 2023, supported by a $1 billion increase in excess reserves, now
nearing $6.3 billion. Tether tokens are backed by Cash and Cash Equivalents at 90 percent, with
$12.5 billion USDt issued in Q1 alone. Tether's reserves amount to $110 billion, exceeding liabilities
of $104 billion by $6.26 billion.

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 Hong Kong Bitcoin ETFs Record $8.5
Million in First-Day Volume

Figure 29. Hong Kong Bitcoin ETFs Record $8.5 Million in First-Day Volume

● Hong Kong's new spot Bitcoin ETFs garnered $8.5 million in trading volume on debut, with
a total combined volume of $12 million including Ethereum ETFs
● Despite modest initial volumes compared to the US, optimism surrounds the long-term
potential of these ETFs, expected to attract institutional investors and propel Bitcoin's
mainstream adoption in Asia

Hong Kong's new spot Bitcoin ETFs saw $8.5 million volume on their opening day, after the Hong
Kong Securities and Futures Commission (SFC) approved six total spot Bitcoin and Ethereum ETFs
last week.

Three Bitcoin ETFs debuted including: ChinaAMC Bitcoin ETF, Harvest Bitcoin ETF, and Bosera
HashKey Bitcoin ETF. Including Ethereum ETFs, the total combined trading volume reached
HK$87.58 million ($12 million).

While these volumes are modest compared to US spot Bitcoin ETFs that saw $4.6 billion on their
first day, industry commentators are optimistic about their long-term potential.

The launch of Bitcoin ETFs in Hong Kong is expected to attract more institutional investors and
drive mainstream adoption of Bitcoin in the region. As the global Bitcoin landscape evolves, Hong
Kong's embrace of spot Bitcoin ETFs positions it potentially as a key player in Bitcoin's future in
Asia.
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