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News overview 9/20: The Merge, Terra, Fidelity, Microstrategy, Ripple

The Merge update was completed without any problems. A warrant has been issued for the arrest of Do Kwon, founder of Terra. Fidelity is considering offering Bitcoin to 34 million retail customers. Microstrategy is borrowing 500 million for potential Bitcoin purchases. Is the Ripple vs. SEC case finally coming to an end?

The Merge update went smoothly

The biggest news of last week was definitely Ethereum’s The Merge update. We have reported on this event numerous times over the spring and summer. The long-awaited moment has finally arrived! The Merge update was pushed to the Ethereum network on Thursday 15th of September at around 7:40 am CET.

Technically, everything went like a dream. Ethereum seamlessly shifted from the Proof of Work consensus to the Proof of Stake consensus and continued to generate blocks as before. It was a massive win for the Ethereum community. The stakes were also high, as not only Ethereum but thousands of applications built on the platform were at stake.

What happens next? In the big picture, Ethereum is about 55% complete, according to co-founder Vitalik Buterin. The stages coming next are titled The Surge, The Verge, The Purge, and The Splurge. The Surge will improve Ethereum’s transaction capacity to a long-awaited level in 2023.

Before that, there is an update named Shanghai, which is important for Ethereum staking. Shanghai makes it possible to transfer staked ETH back to your wallet. At the moment, the staking only works in one direction, meaning that funds are locked in the smart contract for the time being.

The timeframe for Shanghai is currently around 6 to 12 months. It is likely that the details of the update will be further specified in late 2022. Ethereum developers are currently discussing of what features should be included.

There were no massive moves in the Ethereum price before or after The Merge. However, there was a sell-the-news effect of sorts, as Ethereum fell much more in the days following The Merge compared to other major cryptocurrencies.

At the time of writing, Ethereum is down -19.7% compared to a week ago. Bitcoin is down -12.7%. The crypto market has been weighed down by the strengthening of the dollar, so the reason for the decline is not due to The Merge update.

An arrest warrant for Terra founder Do Kwon

Anyone following the crypto market remembers the collapse of Terra Luna and UST in early May. The collapse of the Terra platform wiped out $60 billion in assets from the market and caused huge losses for the world’s largest crypto investors.

The Terra community launched a new blockchain just a few weeks later, from which the algorithmic stablecoins had been removed. The old Terra blockchain has also continued to live on. Last week we wrote about the extraordinary price rise of its Luna Classic token.

The Terra collapse has also led to a police investigation. So far, Terra’s founder Do Kwon has been free, but that is about to change.

The South Korean prosecutor’s office has asked Interpol to issue a red notice on Do Kwon. The same agency already issued an arrest warrant for Do Kwon last week.

Apparently, the founder of Terra is currently based in Singapore. Kwon denied a few days ago on Twitter that he was on any kind of getaway. “I am not “on the run” or anything similar – for any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide.”

For investors, this drama is of little consequence. The collapse of Luna or UST tokens will remain a blunt lesson in the risks associated with cryptocurrencies. Many of those who lost their money may want Kwon to take responsibility for their actions. Time will tell whether prosecutors have enough evidence of possible fraud.

Fidelity considers offering Bitcoin to 34 million retail investors

Fidelity is a US-based asset manager. It is one of the world’s largest services in the industry, managing over $4.5 trillion in assets. Already in 2018, Fidelity set up a separate company, Fidelity Digital Assets, to provide custody services to institutional investors interested in cryptos.

Direct crypto investments have therefore not been possible for retail investors. This is now changing. According to recent reports, Fidelity would open up Bitcoin trading to retail investors as early as November this year.

Fidelity has also expanded its cryptocurrency offering in other ways. Earlier this spring, the company launched the Fidelity Metaverse ETF and the Fidelity Crypto Industry ETF, among others. Fidelity has also launched a Bitcoin spot ETF in Canada and is one of the most enthusiastic spot ETF candidates in the US as well. So far, no Bitcoin spot ETF has been approved by the US.

News like this is significant. Fidelity has tens of millions of customers and the infrastructure in place to acquire cryptocurrencies. Among these, there are probably a couple of million potential new Bitcoin investors.

Microstrategy plans a $500 million Bitcoin purchase

US publicly traded company Microstrategy is still in a class of its own when it comes to Bitcoin holdings by public companies. Microstrategy owns 129,698 bitcoins worth around $2.5 billion at the current price. Tesla is second on the list with 10,800 bitcoins.

Microstrategy’s Bitcoin campaign was initially a huge success under the leadership of Michael Saylor. However, the company’s numerous acquisitions during 2021 have left its Bitcoin position nearly $1.5 billion below zero. This may be one reason why the company has not bought many cheap bitcoins in the 2022 dips. We’ve mainly seen a few small purchases.

But now the situation is changing. Just over a week ago, Microstrategy announced that it had raised $500 million in a share sale. The intention is to possibly fund the purchase of bitcoins – we don’t know if the company will use all the loan money for bitcoins.

There is also an interesting detail in Microstrategy’s SEC filing. Michael Saylor has stated that he has no intention of selling his company’s bitcoins. However, Microstrategy writes that bitcoins may be sold if necessary.

In the prospectus, MicroStategy added that it has no plans to engage in trading or enter into derivative contracts with its Bitcoin holding, but may sell Bitcoin as needed to generate cash for “treasury management and other general corporate purposes.”

Michael Saylor, who rose to prominence in the investment world with his Bitcoin purchases, will soon step down as CEO of the company. Microstrategy announced this in its Q2-2022 review. Saylor has held the position since 1989.

The move is unlikely to have a negative impact on the company’s Bitcoin strategy, quite the contrary. Saylor will increasingly focus on Bitcoin in the future, also in his role as a leader of the Bitcoin Mining Council, for example.

Ripple vs. SEC case to be concluded?

The Ripple vs. SEC case has faded from the headlines in 2022. While this is arguably one of the most important court cases in the crypto scene, the process has simply gone on for a very long time without any major changes one way or the other.

Now the case has finally taken steps toward the finish line. Both Ripple and the SEC have made a summary judgment presentation. Such a request is made when sufficient evidence has been presented in the minds of the various parties to allow a judgment to be entered without a trial. In addition, in this case, the parties to the case agree on the facts of the case

Watch the video below for a summary.

Jeremy Hogan notes that the presentations by Ripple and the SEC are strikingly different. The SEC has basically put together everything Ripple has said about the XRP token over the past 10 years. Ripple’s main point is the absence of an investment contract between Ripple and XRP owners, which would override the so-called Howey Test.

According to Hogan, the SEC’s focus is very much only on Ripple, the case in question. Its victory would mean nothing directly for other cryptocurrencies. Ripple’s argument, on the other hand, is so broad that its victory would be a big win for the entire crypto sector.

Ripple was sued by the SEC in December 2020 because it considers XRP to be a security. Cryptocurrencies do not fall under the category of securities, unlike equities, for example. Securities are subject to different regulations, which is why the definition is a big issue.

If the SEC gets its way, Ripple’s owners would have broken the law by bringing the security to market without due process with the SEC.

The price of the XRP token is now at roughly the same level as it was at the end of December 2020, when the SEC’s lawsuit became public.