Crypto regulation looms, but bitcoin rallies. here’s why

[ad_1]

Good morning! Welcome to Distributed Ledger. Meet Frances Yue, crypto reporter at MarketWatch.

US regulators have stepped up efforts to increase oversight of the crypto industry. Over the past few days, the U.S. Securities and Exchange Commission shut down crypto exchange Kraken’s staking program, issued a Wells notice to warn stablecoin issuer Paxos that it may staking subject to legal action and proposed a rule that could make it harder for many asset managers to invest client money in digital assets.

Still, bitcoin has posted a major rally since Wednesday, up more than 14% to briefly trade above $25,000 on Thursday, the highest level since June, according to data from CoinDesk. Several other major cryptocurrencies also rose, with Ether hitting as high as $1,740 on Thursday, the highest level since September.

In this episode, I sat down with a few industry participants to help explain the potential reasons for the rally.

And as always, find me on Twitter at @FrancesYue_ to share your thoughts on crypto, this newsletter, or your personal stories with digital assets.

Why crypto surged?

“I see no fundamental reason for the strength in crypto asset prices” over the past two days, said David Tawil, president and co-founder of ProChain Capital. Maybe it’s the crypto ecosystem’s way of telling the SEC “do what you want, we’ll keep doing what we do,” Tawil said.

Still, recent actions by U.S. regulators could have been worse, especially after the collapse of crypto exchange FTX in November resulted in billions of dollars in customer losses, said CoinRoutes co-founder Ian Weisberger. . “It would have been 10 times worse if the SEC had come out and asked Coinbase to remove all of these coins from the list saying they are securities,” Weisberger said.

The SEC targeted specific companies, but issued no outright bans on crypto services, Weisberger said. “I think people are realizing now that even the SEC knows they can’t override because they fear a backlash, like they can’t go too far,” Weisberger said.

James Butterfill, head of research at CoinShares, said a recent survey by the company showed that SEC actions are a top concern among investors, while fear of a government ban has diminished.

“Regulating rather than banning narrative is in some ways a positive outcome as it will help legitimize the crypto industry,” Butterfill wrote to Distributed Ledger via email.

From a technical standpoint, bitcoin’s mid-week rally compressed some traders’ short positions, with the resulting momentum carrying the cryptocurrency above the $24,000 resistance level. said Jan Sammut, Vice President of Marketing at Origin Protocol.

It should also be noted that during the last rally, bitcoin outperformed most other cryptos, Weisberger noted. “Reading between the lines, we believe the SEC recognizes that bitcoin is not specifically under its jurisdiction, but proof of coins like Ethereum, as well as staking and lending products are,” said Weisberger.

SEC Chairman Gary Gensler has said bitcoin is the only cryptocurrency he is willing to publicly label a commodity.

Bitcoin’s recent strength also contrasts with the stock market’s weakness on Thursday, even though the two assets often traded in tandem. The Dow Jones Industrial Average closed down 1.3% on Thursday and the tech-heavy Nasdaq Composite fell 1.8%.

The rule proposed by the SEC

The SEC voted 4-1 on Wednesday on a proposal that would expand the types of assets investment advisers are required to hold using qualified custodians, according to a Wall Street Journal report.

According to Christopher Avellaneda, a partner at law firm Schulte Roth & Zabel, the rule could make it harder for some companies to hold crypto assets and reduce the number of companies registered investment advisers can work with when investing. their clients’ money in crypto. .

The SEC’s proposed rules are generally open for comment for 60 days after publication, Avellaneda noted.

Paxos has stopped hitting the BUSD

Paxos said on Monday it would stop minting new BUSD, a dollar-pegged crypto issued by the company and marked by the world’s largest digital asset exchange, Binance, following an order from the Department of Foreign Affairs. New York State Financial Services forcing him to stop hitting him.

The stablecoin issuer also said it received a Wells Notice from the SEC on Feb. 3. The notice said the SEC was considering recommending action alleging Paxos failed to register the BUSD, as collateral.

Read: Crypto exchange Binance hit by major outflows. here’s why

Kraken ends US staking

Last week, the SEC accused crypto exchange Kraken of failing to register its staking program as a security. Kraken ended its staking program in the United States and agreed to pay $30 million to settle the charges, without admitting or denying the allegations, according to a statement released Thursday.

Read: Crypto staking: what it means, why it matters and how a crackdown will change investing.

Staking, which allows users to earn rewards by using their existing token holdings to verify transactions, is a feature of proof-of-stake blockchains, such as Ethereum ETHUSD, -1.51%, Solana SOLUSD, – 1.74% and Cardano ADAUSD, -0.62%.

Read: Crypto industry fears staking ban, as some turn to bitcoin: ‘It’s always been on the safe side of regulation’

Crypto at a Glance

Bitcoin gained 10.7% last week and was trading at around $24,484 on Thursday, according to data from CoinDesk. Ether advanced 7% over the same period to reach around $1,680.

Biggest Winners Prizes % 7 Day Return Floki $0.00006 109% Bitget Token $0.49 98% Mina Protocol $1.08 31% Loopring $0.47 25% WhiteBIT Token $4.10 24% Source: CoinGecko as of Feb 16 12.2% Chiliz $0.14 -11.8% The Sandbox $0.76 -11.5% Axie Infinity $10.65 -10.8% Frax Share $10.93 -10.8% Source: CoinGecko as of Feb 16 Crypto Companies, Funds

Shares of Coinbase Global Inc. COIN, -5.41%, gained 10% on the week to around $65.36. MicroStrategy Inc. MSTR, -4.82% is up 14% so far on the week, at $284.80.

Crypto mining company Riot Blockchain Inc. RIOT, -4.50% jumped 12.6% to $6.43 on Thursday. Shares of rival Marathon Digital Holdings Inc. MARA, -9.31%, rose 22% to $7.21, over the past week. Ebang International Holdings Inc. EBON, +2.29% advanced 16% over the past week and was trading at $8.35.

Overstock.com Inc. shares OSTK, -5.75% rose 5.2% to $21.65, during the week.

Shares of Block Inc. SQ, -4.91%, formerly known as Square, gained 3.2% to $78.52 for the week so far. Tesla Inc. shares TSLA, -5.69% fell 2.6% to $201.00.

PayPal Holdings Inc. PYPL, -1.51% slipped 2.2% on the week, to trade at around $76.80. Nvidia Corp. NVDA, -3.35% lost 1.5% to $219.81 last week.

Advanced Micro Devices Inc. shares AMD -5.99% was down 3.8% at $80.15 for the week.

Among crypto funds, ProShares Bitcoin Strategy BITO, +1.79% jumped 12.8% on the week to $15.36 on Thursday, while its counterpart Short Bitcoin Strategy ETF BITI, -1.67% plunged 12.8% on the week. 12% to $25.91. Valkyrie Bitcoin Strategy ETF BTF, +1.67% rose 12.8% over the past week to $9.76, while VanEck Bitcoin Strategy ETF XBTF, +1.69% rose 13% to 24 $.84.

Grayscale Bitcoin Trust GBTC, -2.30% gained 13% in the past five days to hit $11.89 on Thursday.

must read

[ad_2]