Welcome back 👋. Each edition we cut through the noise and explain what’s driving crypto. This edition, hackers pulled off the largest theft on record while US regulators are using this as a chance to renew the CLARITY Act talks.

- Validator Digital

Bitcoin traded between about $79,000 and $85,000 for most of the two weeks, and the Fed held interest rates steady on October 28. Hackers hit Binance the next day, and bitcoin fell from about $81,000 to as low as $76,300 on October 30. Bitcoin ETFs (funds that trade on stock exchanges and hold bitcoin) lost a net $427.9 million over the period, and ether ETFs lost $548.8 million.

👀 What to Watch Next

Americans vote in the midterm elections today, November 3, and the results decide who controls Congress when the CLARITY Act comes back up. Binance reopens withdrawals on more networks today. And the Fed’s next rate decision is December 9, after two officials voted for a hike in October.

What Happened
On October 29, North Korean hackers stole $6.3 billion in crypto from Binance, the world’s largest crypto exchange. Blockchain analytics firm Elliptic called it “almost certainly the single largest known theft of any kind,” about six times the largest bank robbery on record. Binance says the hackers posed as recruiters and had an engineer download a fake coding test that infected a work computer, breaking into the company’s systems rather than the blockchain. Binance has since replaced about 98% of the stolen crypto with its own money and reopened withdrawals after a 45 hour freeze.

Following the Money
A blockchain is an open ledger: every transaction is public and permanent, so every stolen coin is being followed. The hackers can’t simply spend the money. Investigators and blockchain analytics firms watch every move in real time, and the FBI has published more than 600 of the hackers’ addresses so crypto companies can block them. Stablecoin issuers like Tether and Circle have already frozen about $2.7 billion of it. The rest can be stopped when the hackers try to turn it into cash through an exchange.

Why It Matters
If you keep crypto on an exchange, your money depends on two things: the exchange’s security and its reserves, the money it holds to cover what customers own. Binance’s security failed, but its reserves covered the loss, and on November 2 it published proof that customers’ bitcoin, ether, and other major coins are backed one for one.

The Bottom Line
Crypto absorbed the largest theft in history with Binance customers’ balances intact, and every stolen coin remains visible on the blockchain.

Binance Hack Renews the Push for US Rules on Crypto Exchanges
CFTC Chair Michael Selig blamed "unregulated offshore exchanges," and an industry group asked Congress to put exchanges under the CFTC. Both changes are in the CLARITY Act, stuck in the Senate since September.

Wall Street's Settlement Hub Starts Putting Stocks and Treasuries on Blockchains
DTCC, the firm behind nearly every US stock trade, now lets 20 firms including JPMorgan and Citi hold 34 stocks, funds, and Treasuries as tokens that move at any hour.

US Regulators Approve Ripple’s Bank for Holding Crypto
On October 26, US bank regulators approved Ripple’s new bank, which will hold the dollars backing Ripple’s $2.5 billion digital dollar, RLUSD, and store crypto for its customers. With a national bank charter, Ripple can serve customers in all 50 states under one set of federal rules, just as Circle has since July.

Crypto Industry Spends More Than $200 Million to Sway the Midterms
Fairshake and its two partner groups spent about $152 million through October 14, according to federal filings. Tuesday's results decide who writes the next crypto laws.

Bitcoin Held $76,000 Twice After the Binance Hack
Bitcoin fell after the Binance hack and bounced off $76,000 twice, on October 30 and November 3. Trader Doctor Profit calls $76,000 bitcoin’s key support and says the broader bull market remains intact.

Last edition’s recap showed how a blockchain records who owns what. Blockchain 201 covers what else it can do.

If a transaction is a single line in the record book, a smart contract is a set of instructions written into the book: “if this happens, then do that” rules the network follows automatically. It works like a vending machine: you choose an option, press a button, and the machine does exactly what it was built to do, with no clerk in the middle. Smart contracts create tokens, handle payments, and run entire apps, including every tokenized fund in this edition.

Most tokens are made by smart contracts, while coins like bitcoin and ether are built into their own blockchains, and the difference between the two is where we go next.

Next Week: What Are Tokens vs. Coins?
Last Week: 101 Recap

What story from this week are you watching most closely? Hit reply and let us know.

See you next week,

Don’t speculate, validate.
- Validator Digital

Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This newsletter is for general educational purposes only, is not individualized, and as such should not be construed as investment advice.