SEC crackdown on Binance, Coinbase ‘can’t stop’ Bitcoin as it trades above US$26,000

Bitcoin fell 2% from June 2 to June 9 to trade at US$26,598 at 7:45 p.m. Friday in Hong Kong. The world’s largest cryptocurrency by market capitalization has traded below US$30,000 since April 19. Ether fell 2.83% over the week to US$1,842.

It was a tumultuous week for the crypto industry after the U.S. Securities and Exchange Commission sued Binance’s U.S. wing for 13 charges related to securities violations, including the unregistered offers and sales of the BNB and BUSD tokens and activity related to its Simple Earn and staking programs.

The SEC sued Coinbase exchange on Tuesday, a day after initiating its lawsuit against Binance. The regulator alleged that Coinbase made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities since at least 2019. 

“It is obvious that the SEC is currently on the hunt for crypto companies. This goes back to the collapse of FTX in 2022, as U.S. regulators would embarrass themselves if a similar scenario were to repeat itself without intervention,” Jonas Betz, crypto market analyst and founder of consultancy firm Betz Crypto, told Forkast in a LinkedIn response.

“It is very likely that more exchanges will be targeted in the coming months. However, going for the big dogs like Binance and Coinbase first seems strategically clever as smaller companies will automatically adapt their activities to the new rules indicated by the outcome of the lawsuits.” 

Following the lawsuits, Bitcoin briefly dipped to a weekly low of US$25,493 on Tuesday but recovered above US$26,000 the same day.

“The rapid recovery of crypto prices is due to two reasons. First, lawsuits can’t stop decentralized systems like Bitcoin and Ethereum and therefore do not pose a direct threat to cryptocurrencies. Second, even though the U.S. is an influential global player, these lawsuits should have little impact on other jurisdictions around the world. While holders of U.S. cryptocurrencies sold their shares in a short-lived market panic, many took the opportunity to buy cryptocurrencies at a discount, thus the market quickly recovered,” wrote Betz. 

James Wo, the founder and chief executive officer of crypto investment firm DFG, said that market confidence did not take a significant hit from the lawsuits, unlike the panic selling caused by FTX’s collapse.

“If it falls below US$26,000 again this week, it could be considered a short-term downtrend. Another price to watch is the previous high of US$28,000-28,500. Its break-through can be seen as a short-term bullish signal,” wrote Wo to Forkast.

Lucas Kiely, the chief investment officer of digital asset platform Yield App, said that the SEC’s crackdown occurred given its failure to prevent the FTX collapse and warned of the potential of a more aggressive approach by the regulator.

“It remains unclear if more exchanges will be targeted in this crackdown. However, it is evident that the SEC is taking a more aggressive approach towards regulating the crypto industry, which may result in more legal actions against other exchanges that fail to comply with securities laws,” Kiely told Forkast.

Kiely added that the market’s quick recovery occurred as buyers saw an opportunity to buy the dip.

“Some analysts believe that this is a sign of growing maturity in the cryptocurrency market. In previous years, negative news from regulatory bodies would have caused more significant price drops.” 

Adding to global investor concerns, the Eurozone economy officially entered recession as it shrank 0.1% in the first quarter of 2023, compared to preliminary estimates of a 0.1% growth, pressured by high inflation and borrowing costs. 

Mike Ermolaev, founder of blockchain PR firm Outset PR and the author of the interview series ‘Crypto Opinion with Mike Ermolaev,’ said that a bull run could occur if the SEC loses the lawsuits. 

“[The SEC’s actions] appear to be an attempt to cripple the sector, especially in light of the new lawsuit against Coinbase. While cryptocurrency will undoubtedly recover, the road to redemption will be more challenging than ever. Moreover, we must not discount the possibility that unfair regulations could drive crypto into the shadows, taking a significant step backward,” wrote Ermolaev to Forkast.

The global crypto market capitalization stood at US$1.1 trillion on Friday at 7:45 p.m. in Hong Kong, down 3.5% from US$1.14 trillion a week ago, according to CoinMarketCap data. With a market cap of US$515 billion, Bitcoin represented 46.7% of the market while Ether, valued at US$221 billion, accounted for 20%.   

See related article: It’s a fight for the future of money in the US, says Christopher Giancarlo

Notable Movers: LUNC, XRP

Terra’s Luna Classic (LUNC) token was this week’s second-biggest gainer in the top 100. LUNC rose 15.27% to US$0.00009811. The token started picking up momentum on Sunday, a day before proposal #11548 passed, which will provide a test environment for the price re-pegging of USTC.

XRP, the cryptocurrency powering the XRP Ledger’s real-time gross settlements, was the week’s second-biggest gainer. XRP rose 2.3% to US$0.5274, as investors became less concerned with Ripple’s ongoing lawsuit with the SEC after the regulator filed two similar lawsuits against Binance and Coinbase.

See related article: Why the US is waging war on Binance, Coinbase

Next Week: Can Bitcoin stay above US$25,350?

Investors await the release of May’s core Consumer Price Index in the U.S., scheduled for next Tuesday. The inflation data will be published a day before the Federal Reserve’s next interest rate decision on Wednesday, where the Fed is expected to pause its interest rate hikes for the first time in over a year, according to over 90% of economists polled by Reuters.

European investors are anticipating the European Central Bank’s next monetary decision, set for next Thursday. Following seven consecutive rate hikes, the bank is expected to hike its key lending rate by 25 basis points, even as higher borrowing costs start to take a toll on the European economy.

A weekly close above US$27,600 in Bitcoin would signal more uptrend, while a close below US$25,350 means more bearish momentum, Johnny Louey, a crypto research analyst at trading platform LiquidityTech Protocol told Forkast in a Telegram message.

Yield App’s Kiely said that he only expects significant upward momentum after a close above US$30,500.

“Multiple closes above this number and we could be at the onset of a new bull market. It could trade in the mid-term as low as US$24,000. If it breaks that level, it could continue to trade downwards,“ wrote Kiely.

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