The Only Way Is Up

Hi! In today’s edition:

• 💰 BTC’s bitter losses

• ⚖️ Memecoins get a pass 

• 🦊 MetaMask off the hook

• 🔥 Bybit fallout: Are exchanges really solvent?

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Bitcoin Falls Below $80K as Market Sell-Off Intensifies

Bitcoin continued its decline on Friday, dropping 8% to $79,400, its lowest level in more than three months.

The OG cryptocurrency is now down 25% from its mid-December all-time high as investors retreat from risk assets amid global market uncertainty and regulatory concerns.

According to crypto price-tracking platform SosoValue, $275 million flowed out of spot bitcoin ETFs, reflecting weaker institutional demand. Meanwhile, $890 million of crypto liquidations took place during the 24 hours to 2 a.m. ET on Friday, with bitcoin long positions making up a significant portion, according to CoinGlass data.

Meanwhile, ETH and SOL were each down by around 10%.

Broader risk-off sentiment has been fueled by U.S. President Donald Trump’s proposed tariffs, geopolitical instability, and the $1.5 billion hack last Friday at Bybit, the largest exploit in crypto history.

Analyst Kyle Chassé pointed to the unwinding of the cash-and-carry trade as a major driver of bitcoin’s downturn. The strategy was used by hedge funds that bought spot bitcoin ETFs while shorting BTC futures on the CME to collect low-risk yield. As market conditions changed, the premium on futures collapsed, making the trade unprofitable and forcing funds to unwind their positions rapidly.

“The same trade that kept Bitcoin stable on the way up is accelerating the crash now,” Chassé said, noting that more than $1.9 billion of BTC had been sold in the past week, alongside a drop in CME open interest. 

He warned that volatility would remain high as leveraged positions continued to liquidate, adding: “ETF outflows = more forced selling, but this flush will eventually set up the next leg.”

Memecoins Are Not Securities, SEC Says

The U.S. Securities and Exchange Commission has formally stated that memecoins do not qualify as securities, signaling a hands-off approach to their regulation. 

In a statement published on Thursday, the SEC’s Division of Corporation Finance described memecoins as tokens inspired by internet culture, characters, or trends that lack utility or financial backing, placing them outside the scope of federal securities laws.

The announcement echoes remarks made earlier this month by SEC Commissioner Hester Peirce, who leads the agency’s Crypto Task Force. Peirce previously said most memecoins did not meet the Howey Test’s definition of a security, adding: “People must decide for themselves, not look to Mama Government to bail them out when they do something that turns out badly.”

Despite its revised stance on memecoins, the SEC warned that fraudulent or misleading memecoin projects could still face enforcement action if they attempted to disguise securities by labeling them memecoins. The agency said it would assess “the economic realities of the particular transaction” in such cases.

SEC to Drop Enforcement Case Against MetaMask

The U.S. Securities and Exchange Commission has agreed in principle to end its lawsuit against Consensys’s MetaMask wallet, according to an announcement by Consensys CEO Joseph Lubin on Thursday. 

The decision marks another step in the SEC’s shift away from its previously enforcement-heavy approach to crypto regulation.

The lawsuit, filed last June, accused MetaMask of acting as an unregistered securities broker through its staking services. The SEC’s move came just weeks after it informed Consensys that it would end its investigation of Ethereum 2.0, a probe that the company had challenged in court last April.

Lubin emphasized the significance of the decision, saying on X: “We were committed to fighting this suit until the bitter end but welcome this outcome.” He also credited the SEC’s new leadership under Acting Chair Mark Uyeda for its “pro-innovation, pro-investor path.”

The SEC’s decision to end the suit adds to a growing list of crypto cases the regulator has recently dropped, including actions targeting Coinbase, Uniswap, Robinhood Crypto, OpenSea, and Gemini.

How the Bybit Hack Reveals an Industry Still Striving for Transparency

After North Korean hackers stole 400,000 ether from the Bybit crypto exchange last week, CEO Ben Zhou and the rest of the team moved quickly to reassure clients that their money was safe and that the exchange was solvent. 

In an X Spaces discussion on Feb. 22, a day after the attack, Zhou said his chief financial officer had told him: “Yes, we have enough treasury to cover [the loss].” 

Zhou went on to say he was not sure “how much liquidity [was] in which tokens” and “if we have enough ethereum” to process an anticipated wave of withdrawals.

However, the actual story is a bit more complicated. It appears that the company could have been left with a $385 million hole in its exchange wallets before remedying it with loans from industry partners. 

Although it is commendable that Bybit was able to temporarily plug the gap so quickly, the initial shortage highlights the fact that current industry standards for transparency, particularly proofs of reserves, are lacking for crypto exchange customers.

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• 🔥 MetaMask is expanding its wallet to support Bitcoin and Solana, rolling out a redesigned mobile app, a MetaMask-linked Mastercard, and a gas fee-free transaction feature to compete with emerging rivals.

• 💸 Bybit’s hackers laundered more than $480 million of stolen ETH by swapping it into bitcoin, mainly using ThorChain, as the FBI confirmed that North Korea’s Lazarus Group was behind the $1.5 billion attack.

• 🇺🇸 U.S. House Democrats are set to introduce a bill known as the Modern Emoluments and Malfeasance Enforcement (MEME) Act to ban senior government officials and their families from profiting off personal memecoins after President Donald Trump’s eponymous token lost more than $12 billion in value, impacting an estimated 800,000 investors.

• 🐶 Solana-based memecoin launchpad Pump.fun is seeing a steep drop in tokens graduating to Raydium, as the memecoin market cools following controversial celebrity token launches and a broader price slump.

• ⚡ Coinbase’s layer 2 Base cut block times to 200 milliseconds on its testnet using Flashblocks, a tenfold speed improvement that is expected to roll out on mainnet in Q2.

• 💳 Uniswap integrated off-ramp services from Robinhood, MoonPay, and Transak, allowing users in over 180 countries to cash out crypto directly into bank accounts.

• 📉 BitMEX is reportedly seeking a buyer and has enlisted investment bank Broadhaven to explore acquisition options as competition in crypto derivatives trading heats up.

• ⚖️ The U.S. Securities and Exchange Commission on Thursday dropped its enforcement case against Coinbase, signaling a policy shift away from its previous stance that most crypto tokens were unregistered securities.

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