Can bitcoin hold gains, as U.S. regulators target crypto companies?
By Frances Yue
Hello! Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Binance, the world's largest crypto exchange, was sued by the Commodity Futures Trading Commission Monday for alleged violations of the federal laws governing commodities markets.
It is the latest action U.S. regulators have taken against crypto companies, as they doubled down efforts to increase oversight of the fledgling industry, after the collapse of several major companies resulted in billions of losses for investors.
Still, bitcoin had a remarkable run for the first quarter, up 70% since the start of the year, though it's still down 60% from its all-time high in 2021. I wrote about possible reasons behind the rally here and here.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.
CFTC sued Binance
The CFTC alleged that Binance failed to register with the agency, despite its "solicitation of and reliance on customers located in the United States to generate revenue and provide liquidity for its various markets," according to a filing with the federal court in Illinois Monday.
The lawsuit filed by the CFTC is "unexpected and disappointing", a Binance spokesperson told MarketWatch on Monday via email. The company has made significant investments over the past two years to ensure that the company does not have U.S. users active on its platform, the spokesperson said.
U.S. regulators are "flexing their muscles and showing that, hey, even if you are not crypto businesses within the US, even if you're offshore, we have the power to come up to you and regulate," said William Cai, co-founder and managing partner at Wilshire Phoenix.
Still, markets have largely brushed off the CFTC-Binance lawsuit, according to analysts at crypto trading firm QCP Capital. The lawsuit is likely to end in a way similar to when the CFTC in 2020 sued another crypto exchange BitMEX, which was later ordered by the U.S. District Court for the Southern District of New York to pay a $100 million penalty, analysts at QCP noted.
CFTC alleged then that BitMEX operated an unregistered trading platform and violated multiple CFTC regulations, including failing to implement required anti-money laundering procedures.
"In any case, the multiple open US government vs. Crypto lawsuits are almost impossible for markets to price or time, and we believe markets will only react once the final decision is imminent," analysts at QCP Capital wrote.
Macroeconomic conditions could have a more significant impact on bitcoin price in the near term, as investors look for any signs that may signal the U.S. being in a recession, according to the analysts.
It remains unclear how bitcoin, which was created in 2009, might perform in a recession, noted the analysts.
Wilshire Phoenix's Cai echoed the point. "A huge move up in crypto is unlikely to be sustained, until we see much better improved macroeconomic conditions for all markets," Cai said.
SBF pleads not guilty to new charges
Sam Bankman-Fried, founder of bankrupt crypto exchange FTX, pleaded not guilty to five new federal charges in court on Thursday, including one count of conspiring bribery to Chinese government officials.
The U.S. Attorney's Office for the Southern District of New York wrote in an indictment unsealed Tuesday that Bankman-Fried in 2021 transferred over $40 million worth of cryptocurrency to Chinese government officials. He allegedly directed the payment in an attempt to unfreeze trading accounts in Beijing tied to Alameda Research, his crypto hedge fund, according to the prosecutors.
In December, the U.S. attorney for the southern district of New York charged Bankman-Fried with eight counts of criminal securities, commodities and wire-fraud charges, money-laundering charges, and conspiring to rip off his customers and investors.
Crypto in a snap
Bitcoin gained 2.4% in the past week and was trading at around $27,962 on Thursday, according to CoinDesk data. Ether picked up 0.3% in the same period to around $1,843.
Biggest Gainers Price %7-day return
Kaspa $0.03 86.1%
XRP $0.54 27%
Mask Network $6.37 25.6%
Flare $0.04 14.8%
Stellar $0.10 14.8%
Source: CoinGecko
Biggest Decliners Price %7-day return
Stacks $0.93 -20.6%
SingularityNET $0.41 -16.7%
Aptos $11.05 -16.6%
Optimism $2.21 -13.3%
Toncoin $2.09 -12.7%
Source: CoinGecko
Crypto companies, funds
Shares of Coinbase Global Inc. (COIN) went down 3.5% for the week to around $63.96. MicroStrategy Inc. (MSTR) gained 5.8% thus far on the week, to $278.52.
Crypto mining company Riot Blockchain Inc. (RIOT) declined 3.2% to $9.17 as of Thursday. Shares of rival Marathon Digital Holdings Inc. (MARA) dropped 7.7% to $7.81 over the past week. Ebang International Holdings Inc. (EBON) traded 5.7% higher over the past week to around $7.09.
Overstock.com Inc. shares (OSTK) advanced 3% to $20.09 over the week.
Shares of Block Inc. (SQ), formerly known as Square, rallied 10.4% to $68.31 for the week thus far. Tesla Inc. (TSLA) shares rose 1.9% to $195.87.
PayPal Holdings Inc.'s (PYPL) stock added 2.4% over the week to trade at around $74.28. Nvidia Corp.'s (NVDA) edged up 0.7% to $273.91 for the past week.
Advanced Micro Devices Inc. (AMD) shares dipped 2.3% to $98.01 for the week.
Among crypto funds, ProShares Bitcoin Strategy (BITO) edged up 0.2% over the week to $17.24Thursday, while counterpart Short Bitcoin Strategy ETF (BITI) dipped 0.3% to $21.11. Valkyrie Bitcoin Strategy ETF (BTF) lowered 0.1% over the past week to $11.01, while VanEck Bitcoin Strategy ETF (XBTF) went down 0.3% to $28.05.
Grayscale Bitcoin Trust (GBTC) retreated 0.6% over the past five days to $15.81 on Thursday.
-Frances Yue
Must-reads
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 30, 2023 16:17 ET (20:17 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.