๐Ÿค– AI under siege from US government

All Things Flooz newsletter is for innovators, creators and traders.


8 min read โ€ข Jun 15, 2023

Talking points

  • ๐Ÿ“‰ Stablecoin to collapse?

  • ๐Ÿšจ Bankrupt exchange allows withdrawals

  • ๐Ÿค– AI under siege from US government

๐Ÿ‘€ Market Outlook

The crypto market has taken a battering this week and combined with all the FUD currently circulating, it isnโ€™t helping matters. This week we also had the release of US data, which saw a rate hike pause for the first time this year.

So, what can we expect from the market next ๐Ÿฉธ

The consensus seems to be unclear with $BTC in an area of dropping below $24K and also recovering back to the $26K mark, but during these times it is vital that you have a plan and stick to it.

Remember, you have to get through the bad to get to the good. Hang in there!

๐Ÿ“‰ Stablecoin to collapse?

It seems FUD is hitting again, this time with Tether USDT stable coin deciding to play a little game of cat and mouse with its United States dollar peg.

Market observers were left on the edge of their seats as the price of USDT took an unexpected plunge by 0.3% to approximately 0.997, causing quite a stir among crypto enthusiasts.

So, what caused this momentary deviation in the Tether universe?

Well, it all boils down to an interesting situation in Curve's 3pool, a popular decentralized finance stablecoin pool that holds a massive amount of liquidity in the top three stable coins: , , and

Normally, each stablecoin carries an equal weightage of around 33.1% in Curve's 3pool, creating a harmonious balance. However, trouble started brewing when USDT's weightage skyrocketed to a staggering 73.8%, leaving the other stablecoins in the dust.

This unusual turn of events indicates that traders have been ditching USDT in favor of its stablecoin counterparts, DAI and USDC. It's like a game of hot potato, where everyone suddenly decided that USDT was no longer their favorite token to play with. This isn't the first time USDT has caused such chaos; it previously reached a weightage of over 50% during the infamous FTX collapse in November 2022.

On top of this, it seems that the exchange and stablecoin problems over the last year have been taking its toll on investors. And to be honest, we canโ€™t blame them. Navigating the crypto world and avoiding the dangers that appear everyday is tough and exhausting.

But wait, it doesn't stop thereโ€ฆ

It turns out that a mysterious whale address named CZSamSun was at the center of this USDT rollercoaster.

CZSamSun boldly borrowed a whopping 31.5 million USDT and swiftly exchanged it for USDC, causing the whole Tether universe to tilt momentarily. Utilizing 17,000 Ethereum and 14,000 staked Ethereum (stETH) as collateral, this audacious borrower transformed the borrowed sum into USDC through the 1inch Network.

The plot thickens as CZSamSun then made eye-popping deposits of $10 million and $21 million to Aave v2 and v3, respectively.

This daring individual then decided to take out a 12 million USDT loan from v3 and deposited it right back into v2.

Talk about playing with fire!

And just when you thought things couldn't get any crazier, another address (0xd2...0701) swooped in 20 minutes later, mortgaging a staggering 52,200 staked Ether (stETH) through Aave v2.

This mysterious entity then borrowed a jaw-dropping 50 million USDC, all thanks to the USDT/USDC price difference.

As this thrilling drama unfolded, the slight deviation in USDT's price had a domino effect on the USDC/USDT trading pair on Binance. The pair skyrocketed to a breathtaking new yearly high of $1.0034, leaving traders gasping for breath.

The current uncertainty surrounding Tether's USDT has led to a net outflow of over $200 million from its market cap. Learn more about how the crypto traders took profits from this DeFi pool imbalance in this CryptoSlate article.

Fortunately, Tether's Chief Technology Officer Paolo Ardoino quickly took to Twitter to ease the crypto community's fears. Ardoino assured everyone that this depeg scare was nothing more than a blip on the radar and that Tether is fully prepared to redeem any amount necessary. To lighten the mood, he even shared a "FUD meme" to poke fun at the market rumors surrounding Tether's depeg.

This hair-raising incident comes just a couple of months after the infamous USDC depeg debacle, which sent shockwaves through the investment world. Back in March, USDC's value plunged below $0.90 as Circle, the company behind USDC, revealed it had over $3 billion stuck with Silicon Valley Bank.

Thankfully, Circle managed to gather enough capital to swiftly repeg USDC to the dollar within two days. However, the panic that ensued forced many traders to bid farewell to their USDC holdings at a loss.

In the ever-changing world of cryptocurrencies, it seems that stability is merely an illusion. As traders buckle up for the next twist and turn, one thing is for certain: when it comes to stablecoins, expect the unexpected and always protect your assets.

๐Ÿšจ Bankrupt exchange allows withdrawals

In line with the spiraling FUD within crypto currently, the U.S. arm of the popular crypto exchange Bittrex is finally opening its doors for customer withdrawals following their bankruptcy.

This comes after a recent ruling by a Delaware bankruptcy court, granting Bittrex the permission it sought to let customers access their holdings once again. Talk about a victory for the crypto community - to an extent.

It hasn't been an easy road for Bittrex, though. The exchange filed for bankruptcy back in May, and its legal battle to restore customer access faced fierce opposition from the U.S. government. The government claims that Bittrex still owes millions of dollars for violations related to sanctions. However, in a Tuesday ruling, Judge Brendan Shannon gave the green light to Bittrex U.S. and its affiliates, allowing them to enable customer withdrawals for undisputed, noncontingent, and liquidated claims.

Now, before we get too carried away, let's be clear about one thing: this ruling doesn't settle the ownership dispute or determine whether customer claims take priority over the government's.

There may still be some clawbacks in the future, adding a dash of uncertainty to the mix. But for now, let's celebrate the fact that Bittrex customers can finally regain access to their cryptocurrency assets and fiat currency on the trading platform.

According to Patty Tomasco, a partner at the law firm Quinn Emanuel, who represents Bittrex, the platform will be up and running for withdrawals starting Thursday, June 15. So as you are reading this, if you have any assets on Bittrex, you can now go and withdraw!

It's worth noting that Bittrex faced a frenzy of withdrawal activity earlier this year when it announced plans to shut down its U.S. operations. In fact, millions of dollars were withdrawn from the platform. This eventually led to the unit filing for bankruptcy on May 8. However, despite the usual freeze on transactions during bankruptcy proceedings, Bittrex argued that it wanted its customers to have swift access to their funds, without getting tangled in lengthy legal battles.

Bittrex isn't alone in its struggles. Other well-known crypto exchanges, such as Binance and Coinbase, have also faced their fair share of regulatory challenges. In the case of Bittrex, U.S. regulators accused the exchange of violating federal law by operating an unregistered securities exchange.

It seems like these exchanges are constantly navigating choppy regulatory waters in their quest to provide reliable and compliant services to their customers.

The crypto world is a wild ride, and Bittrex's journey from bankruptcy to reopening for customer withdrawals is just one example of the twists and turns that await us.

As we eagerly await the outcome of the ownership dispute and potential clawbacks, let's take a moment to appreciate the resilience of the crypto community and the evolving landscape of digital assets.

๐Ÿค– AI under siege from US government

In a truly bipartisan move, U.S. Senators Josh Hawley and Richard Blumenthal joined forces to introduce a bill that could spell trouble for artificial intelligence (AI) companies.

The bill, unveiled on June 14, seeks to eliminate the special protections currently enjoyed by AI companies under the Communications Decency Act of 1996 (CDA). Brace yourselves for a potential shake-up in the insanely popular AI world!

So, what exactly is this controversial Section 230 of the CDA?

It's a provision that shields online service providers from liability for user-generated content. In simpler terms, it's the legal safeguard that allows platforms like social media sites to avoid being held responsible for the posts, comments, and other content shared by their users. It also provides immunity from prosecution as long as reasonable efforts are made to remove illegal content once discovered.

However, opponents of Section 230 argue that it grants online service providers a free pass, relieving them of the responsibility to monitor and moderate the content they host. The recent ruling by the U.S. Supreme Court rejected changes to Section 230 in a lawsuit that aimed to hold social media companies accountable for damages caused by their alleged promotion of terrorist-related content.

According to the court's opinion, social media platforms cannot be held liable for the suggestions made by the algorithms that dictate content recommendations any more than email or cellular service providers can be held accountable for the messages transmitted through their services.

It's a complex issue that delves into the question of where the line should be drawn between platform responsibility and user accountability.

But here's where things get interestingโ€ฆ

It remains unclear whether Section 230 applies to generative AI companies such as OpenAI and Google, the masterminds behind ChatGPT and Bard, respectively. During a recent Senate hearing, OpenAI CEO Sam Altman expressed uncertainty about the applicability of Section 230 to his company.

When pressed by Senator Hawley, Altman pondered the hypothetical scenario of allowing people harmed by AI to testify in court and raised the question, "Can't people sue us?"

The absence of specific language regarding generative AI in Section 230 opens up a Pandora's box of debates. The crux of the matter may revolve around how "online service" is defined. After all, generative AI technologies like the GPT API are deeply integrated into various industries, including cryptocurrency and blockchain. If Section 230 does apply to generative AI, it could prove challenging to hold businesses or individuals accountable for the consequences of misinformation or poor advice generated by AI models.

High-profile figures such as Elon Musk have been raising their concerns about AI and its impact on the future of technology.

Obviously, this is an extreme statement from Elon and we assume he is joking, but the point remainsโ€ฆ Is AI going to become a problem in the world or will it be a helping tool like many see it currently?

The outcome of this bill and its potential impact on AI companies is uncertain. The debate around Section 230 and its implications for AI technology is likely to continue, as lawmakers and industry leaders grapple with the intricacies of regulation and responsibility in the ever-evolving landscape of AI.

Either way, we will be preparing for an intriguing battle as the fate of AI protections hangs in the balance. The future of AI regulation is far from settled, and the journey promises to be nothing short of captivating, It is literally man vs robot.

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