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When market speculators say they hope the correlation between bitcoin and traditional assets will fade, it’s certainly not in the way of the week that just ended! Indeed, while the stock markets welcomed the latest US consumer price index data published yesterday, the cryptocurrency market remained exceptionally stable.
The price of bitcoin quickly realigned itself after briefly crossing the $26,500 threshold following the release of the latest US CPI data. Despite what could have been a boon for risk assets, cryptocurrency markets remained cautious, awaiting further comments from the US Federal Reserve. Predictions of a halt to the Fed’s rate hike cycle following the June 14 FOMC meeting intensified after the CPI announcement. According to CME Group’s FedWatch tool, the odds are now over 90%. Ahead of the Fed meeting, bearish options linked to Bitcoin are more expensive than bullish options, indicating some nervousness in the market.
The US Securities and Exchange Commission (SEC) has requested a further four months to respond to Coinbase’s request for regulatory clarification on cryptocurrencies. The request follows an injunction from the U.S. Court of Appeals for the Third Circuit. Although the SEC has not yet decided how to respond to Coinbase’s request, it expects to be able to issue a recommendation within 120 days. However, the application has been described by the SEC as “without merit”. Paul Grewal, Coinbase’s General Counsel, reacted by claiming that the SEC is persisting in error by claiming that it has not yet decided on any new regulations, despite statements to the contrary by SEC Chairman Gary Gensler. The SEC’s request for a delay comes as it has filed a lawsuit against Coinbase for offering unregistered securities and operating an unregistered securities exchange.
Faced with this regulatory limbo, Singapore-based cryptocurrency exchange platform Crypto.com announced on Friday that it will end its institutional service for US customers on June 21. The platform justified this decision by limited demand from US institutions in the current market landscape. Institutional investors, who will no longer be able to use Crypto.com’s service, are large accredited clients with more capital to invest than typical retail customers. The company, which is a well-recognized brand in the cryptocurrency space and has released a commercial with actor Matt Damon in 2021, has also stated that this decision will have no impact on its retail app, used by over 80 million users worldwide. The announcement comes as the US market becomes increasingly difficult for cryptocurrency companies, following recent SEC lawsuits against major cryptocurrency exchange platforms Binance and Coinbase.
Under the same theme, Binance.US, the US subsidiary of Binance, has announced that it will become a “crypto-only” platform, suspending dollar transactions, including deposits and withdrawals. The decision, announced last Thursday, comes as the company faces increasing pressure from the SEC. Binance.US has informed its customers that its banking partners are preparing the temporary suspension of fiat currency withdrawal channels. As a result, the company has encouraged its customers to withdraw their USD by bank transfer. Binance will now begin withdrawing USD trading pairs, while continuing to support stablecoin pairs. Any remaining USD on the platform after June 15, 2023 can be converted into stablecoin that can be withdrawn on-chain. Despite these changes, the company has confirmed that crypto trading, staking and withdrawal operations will continue. For now, it’s unclear whether these changes will be permanent.
A week after the SEC filed charges against Binance, the company filed several motions in the U.S. District Court for the District of Columbia in opposition to the suit. Binance’s lawyers, including Daniel W. Nelson, argue that there is no risk to Binance’s customers’ assets and question the timing of the SEC’s charges, which coincide with a lawsuit targeting Coinbase. They also point out that the implication of the securities laws was overlooked by the SEC and that the action was improperly authorized by the Commission. They claim that Binance has been interacting with the SEC since 2021, but only learned in February 2023 that it was potentially the target of an investigation related to the Binance.US platform. The lawyers believe that the SEC should not be allowed to cause harm to the US and the world by applying the draconian measures it is seeking on the basis of an incomplete dossier and an accelerated timetable.
Then, just today, Binance.US and the SEC agreed to work on a settlement that will allow the exchange platform not to freeze all of its assets. According to Bloomberg, U.S. District Judge Amy Berman Jackson referred both organizations to a magistrate to work towards a compromise to protect customer funds without having to shut down the platform. Before making her final ruling on the SEC’s motion for a temporary restraining order, Judge Jackson indicated that both parties needed to resolve the situation with the magistrate judge. She also noted that the SEC and Binance.US seemed “not that far away” from reaching an agreement on the issue. The SEC had filed an emergency motion for a temporary restraining order against Binance.US on June 6, after accusing Binance CEO Changpeng CZ Zhao of accessing Binance.US customer funds.
The organizations behind several popular cryptocurrencies, including Solana (SOL), Polygon (MATIC) and Cardano (ADA), have responded to the SEC’s recent accusations that these currencies are securities. According to the SEC, these tokens are among many other cryptocurrencies allegedly offered and traded on non-compliant cryptocurrency platforms. Following these accusations, the prices of these three crypto-currencies fell by around 30% each within a week. However, Input Output Global (IOG), the company behind Cardano, was the first to defend the regulatory status of its currency, claiming that ADA was never a security under US securities law. For its part, the Solana Foundation declared that it “disagrees with SOL’s characterization as a security”. Finally, Polygon Labs, the company behind Polygon, tried to distance MATIC from the US markets, pointing out that Polygon was developed and deployed outside the US.
While the U.S. is waging a veritable battle to the cryptocurrency industry, just the opposite can be observed in Hong Kong. With the aim of positioning itself as a cryptocurrency hub, Hong Kong launched its Virtual Asset Trading Platform (VATP) manual earlier this month. The Securities and Futures Commission (SFC) has provided guidelines for crypto companies wishing to operate in the country and will oversee all licenses. According to an explanation of the guidelines by Gilbert Ng and Chris Lee, the idea is to offer a one-year trial period to companies operating in the country. These companies will then be able to apply for an operating license in 2024, if they meet all the conditions. Companies will be allowed to operate if the SFC determines that they have “genuine business operations and practices”. Hong Kong’s guidelines seek to impose more responsibility on operators, or the individuals who run cryptocurrency exchange platforms. These individuals will have to pass an aptitude test. Finally, the manual stipulates that companies that “actively market to Hong Kong residents” fall under the regulators’ jurisdiction.
In the face of numerous lawsuits on U.S. soil, MicroStrategy’s Michael Saylor believes the U.S. crypto industry is gearing up for a Bitcoin-centric future. In an interview with Bloomberg, the latter claimed that the SEC’s recent statements “lay the groundwork” for Bitcoin’s next rise. According to Saylor, “regulatory clarity will spur Bitcoin adoption by eliminating the confusion and anxiety that is holding institutional investors back.” “The public is beginning to understand that Bitcoin is the next Bitcoin,” said Saylor. “The next logical step is for bitcoin to multiply by 10, and then by 10 again.” He believes that the regulatory crackdown on stablecoins and other tokens will likely return Bitcoin’s long-term dominance to more than 80% of the total crypto market.
Bitcoin’s dominance index currently stands at 49%, its highest level in over two years.
The supply of Bitcoin on exchanges has reached its lowest level since February 2018, according to data from blockchain analytics company Santiment. A significant drop has recently taken place following SEC prosecution – with 6.4% of supply leaving platforms over the past week. Supply has been steadily declining since 2020, when it peaked at the depths of a bear market at the time, according to the data. This suggests that traders and investors are continuing to withdraw their Bitcoin from platforms in favor of self-guarding, according to Santiment.
The Bitcoin price continues to explore the lower regions of its trading range. The obvious support is currently at $25,000. Everyone is now awaiting the FED’s interest rate decision today and the effect it will have on the markets.
Rivemont Investments, manager of the Rivemont Crypto Fund.
The presented information is as of June 14th, 2023, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
