Your Crypto Rights (Binance): A manifesto for how the crypto industry needs to evolve, with a priority on your rights as an investor.
Investor Takeaway: Binance, which makes up part of our Future Winners portfolio, is once again leading the charge with a future-focused take on crypto regulation. We agree with all ten points. Read them.
A six-minute explainer video on DeFi, courtesy of Wall Street Journal.
Investor takeaway: Remember, the platform that most DeFi is built upon is Ethereum, which is why we buy and hold ETH for the long term.
One of the many hallmarks that define this specific period of time is the high propensity of everyday people to be involved in the financial markets.
Pandemic lockdown restrictions have inspired millions of people to earn a living from home, and memories of the great financial crisis have solidified an invaluable lesson that every person needs to have a working knowledge of financial assets, lest they end up the proverbial small fish.
As you probably recall, this came to a head in January, when fresh retail traders dreamed for just a moment that they would be able to stick it to the man and get back at Wall Street by buying GameStop shares that were being heavily shorted by several hedge funds.
However, they quickly learned that you can’t beat the devil at his own game.
Since then, there have been many stocks that have soared beyond reasonable value because of gangs of traders dubbing them memestocks for various reasons.
Among these gangs are the AMC ape squad, who seem quite convinced that the illegal practice of naked shorting, in which traders are selling stocks short without first borrowing the necessary supply, is the root of rampant price manipulation.
Yesterday, I had the pleasure of joining a unique Twitter Spaces call in which a simple solution was proposed for further inspection by the community, and yes it involves blockchain.
As we know, naked shorts are the exact kind of problem that the transparency created by open ledger technology could easily solve.
These days, it’s far more common to see young projects raising money from the public by creating a new coin rather than through following the traditional means of financing.
However, for legacy corporations who were born before the proliferation of Satoshi Nakamoto’s innovation, it’s far more difficult to migrate to an open source model.
The call yesterday featured a venture capitalist named Marc Cohodes, who invested in Overstock, which happens to have built the tZero exchange for regulated digital assets.
The proposal involved giving investors one digital token on tZero for every common share of AMC stock.
These new tokens would need to be imbued with some sort of utility, such as a free movie viewing or even an AMC discount in order to avoid being classified as unregistered securities.
Adam Aron, the president, CEO and chairman of AMC Entertainment Holdings, Inc., who has a reputation for being open-minded and has recently embraced crypto payments for movie tickets, would need to propose the idea to shareholders, who would then vote on the proposal. If they voted to approve the idea, the tokens would be airdropped to all AMC holders.
The idea is that any short sellers who did not actually borrow the stock would not have access to these tokens, and therefore when their options expired, their nakedness would be revealed.
In short, when their debts are recalled by the broker, they would have no choice but to pony up the new security tokens, which they would then need to purchase from the open market in order to make good on their debt.
Of course, being who they are, the diamond hands community would likely demand such a high price for these new tokens that it could literally bankrupt the alleged perpetrators.
Alternatively, it could vindicate them in the event of their innocence, but either way, it would put this entire saga to bed.
But will it work?
To me, this sounds like a rather brilliant solution that could essentially hasten the migration to fully tokenized and fairer financial markets, something we have been dreaming of for nearly a decade.
If implemented, we may finally see the spirit of the GameStop movement finally realized, because although you can’t beat Wall Street at their own game, crypto in fact is an open arena on neutral ground with a level playing field.
For his part and mine, Cohodes did express interest in hearing honest feedback on why this may or may not work, and for this reason, I’d love to open it up to you, our readers, at least those of you who’ve made it this far, to weigh in with your thoughts.
So do feel free to reply to this message, or hit me up on social media with any questions, comments or insights, because I’d love to hear them.
In the meantime, I want to take this opportunity to present you a unique bit of research produced by analyst Gerald Votta. In this piece, the author takes a fresh look at the mystery of who created bitcoin, adding another candidate to a short list.
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Life’s too short to take this stuff seriously.
(Click to spread this meme.)