First Mover Asia: Crypto Platform Freeway’s Lack of Transparency Should Have Been a Red Flag

Prices: Bitcoin heads for its first monthly gain since July, but it’s not exactly the «Uptober» that some bulls may have imagined. This week brings the Federal Reserve’s next monetary-policy meeting and a key update on the U.S. employment situation.

Insights: The spirit of DeFi is based on open-source code, and yet Freeway’s strategy to generate returns was a black box, a red flag for many in the space.

Prices

By Bradley Keoun

It may not exactly be the «Uptober» that some crypto bulls were hoping for, but bitcoin (BTC) is up 6.1% in October, its first positive month since July.

The largest cryptocurrency’s break above $20,000 last week for the first time in 18 days – driven by liquidations of traders who had bet on further price declines; a so-called short squeeze – has rekindled a bullish mood. But analysts at Coinbase Institutional’s research arm warned Friday that signals from the price charts look «mixed at best.»

«While bulls might be newly inspired, prices may not be in the clear,» the Coinbase analysts wrote. «We don’t believe the investment narrative has necessarily changed.»

Crypto traders, along with counterparts in traditional finance, will be looking ahead to the Federal Reserve’s next monetary-policy meeting, set to conclude Wednesday. Based on pricing from the CME exchange, traders in futures contracts on federal funds are almost certain the U.S. central bank will raise interest rates by 75 basis points (0.75 percentage point) this week, but there’s growing speculation that officials may downshift to a slower pace of increases in December. (All things being equal, faster price increases tend to be bad for prices of risky assets like bitcoin.)

This week also will bring the U.S. jobs report for October, set to be released by the Labor Department on Friday. Economists estimate the economy added 195,000 jobs during the month, a slowdown from September,s 263,000 increase but still a robust pace. Strong growth might keep pressure on the Fed to keep ratcheting rates higher.

«With the macro backdrop still in flux, it remains to be seen whether this rally will continue,» Greg Cipolaro, head of research for the bitcoin-focused investment firm Nydig, wrote Friday.

Insights

Crypto Platform Freeway’s Lack of Transparency

By Sam Reynolds

In a video that’s now been removed from YouTube, Joel Krueger, who claimed to be the chief investment officer of the British insurer Aon, said that crypto staking platform Freeway was able to consistently generate returns through some sort of “strategy” despite rising interest rates, inflation, or any other sort of economic malaise.

And what is that strategy? Well, it’s highly diversified and managed by a team of experienced professionals, he said in the now-removed video. It’s worked in the past and will work in the future. Just take Krueger’s word for it; there’s no need to explain anything. The company recently paused withdrawals.

Freeway has presented what amounts to a black-box strategy. You can’t see what’s in this magic box, but you just need to trust that it works. This isn’t the spirit of decentralized finance (DeFi).

Any project that wants to be serious about not being considered a scam posts code onto GitHub. Open-source code lets you peer inside a project and see how it runs.

All the major DeFi projects do this, like Uniswap and Pancake Swap – and any up-and-coming DeFi project that wants to be taken seriously, like Tranchess, or even fairly small and obscure ones like OpiumProtocol (with a market cap of less than $2 million).

Just because the code is published on GitHub doesn’t mean developers can’t do a rug-pull and abscond with funds.

Terra was an open-source platform, and it failed. The difference is that investors, by analyzing the code, should have been aware of market risks. It doesn’t mean that there wasn’t enough information about Do Kwon and the project for investors to consider; it wasn’t a black box project, just a translucent one. This doesn’t disprove the notion that within open source software there’s strength through transparency.

If Freeway were open source, it would mean that someone with experience in code could ensure the public understands how the platform works. Freeway would be able to explain exactly how yield is generated, and the whole thing functions. The project would pass a cursory due diligence test.

You wouldn’t need to take the word of a supposed ex-insurance CIO that this platform could beat the market.

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