Weekly Market Update: U.S. Regulatory Hammer Continues to Fall

Another week dominated by the arcane machinations of US regulatory moves on crypto. Based on the charts, the market appears to be saying “OK, Binance US is probably toast and the resulting loss of liquidity isn’t great”. It also says “That’s all you got against Coinbase? bring it on!”.

The recent price pullbacks seem to be a culmination of much lower liquidity across all coins and HODLer fatigue. However, critical support for the 20 week moving average for BTC seems to be holding at this time. Sadly the correlation between equities and crypto remains broken, probably due to the SEC actions.

In wider economic news, there are more indications that the global economy is faltering. The prices of key commodities like Oil and Coal continue to fall. There are worrying signs for next year’s global wheat crop and China news continues to disappoint. 

In more positive news, India’s economy continues to impress and US inflation appears to be easing. 

In New Zealand retail activity continues to fall and economists are divided on whether we are now in a technical recession. We will find out on Thursday when the data is released. 

Tellingly, the sentiment in the crypto market has held steady despite all of the regulatory headwinds holding just in fear territory.

Most coins declined this week, with those targeted by the SEC posting the largest declines. The market seems either wary or fatigued, possibly both. Regardless, below are some trend highlights:

• At the time of writing BTC was down 5%, while ETH dropped 8%, XRP was only down 2%.
• Coins named as securities by the SEC are down more, BNB down 17% while, ADA, SOL and Matic were all down ~23-27%
• The market was so sour, we didn’t have a gainer this week. 😭 Apecoin (APE) was our biggest loser of the week, down 31%. 

View all top gainers: Visit the top gainers page to find out more. 

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Highlights from the crypto space

After we pushed publish on last week’s news, the SEC also sued Coinbase for selling unregistered securities.

Coinbase reiterated their position to take on the SEC and fight the good fight. And because Coinbase sued the SEC first with a writ of Mandamus, the judge in that case has waded in.

Coinbase aren’t alone in calling out the SEC either. And the market response… well, only in crypto…

 The SEC also filed for a freeze order on Binance US, TLDR; this was a direct message to CZ to keep his hands off customer funds. In a weird twist, Binance’s lawyers are saying that Gensler once offered to be an adviser to Binance. 

The repercussions of the SEC move against Binance continue on. It looks like Binance US has effectively lost US banking.

In response they have already changed their Terms of Service, the positive spin is it allows them more flexibility to list and delist assets. 

In direct response to the SEC moves, Robinhood has delisted all the assets the SEC claims are securities. 

Kaiko has put out a deep dive on the SEC charges against Binance. There is a lot in their report however, this analysis of Alt coin wash trading on Binance US as they launched into the US is…. stark?

In the Ripple vs SEC case, the SEC has lost its bid to keep comments the former SEC director made redacted. Known as the Hinman documents, they will be released on Wednesday NZ time and are expected to show how the former commissioner arrived at the view that ETH (and XRP) were not securities. 

In the midst of all this enforcement, there was a proposed draft Crypto market structure bill put forward in the US. Here is a quick review of what it all means.

And some lawmakers have introduced a bill to get rid of Gary Gensler. 

Meanwhile, Hong Kong is seeing all this US noise as an opportunity. Once again, they are open for business.

Cathie Wood’s Ark Invest also saw an opportunity and snapped up some cheap COIN (Coinbase stock). Call that bullish.

All of this regulatory action has also had a distinct impact on global BTC supply. Glassnode data shows a marked shift in Bitcoin supply away from the US predominantly to Asia.

USDC issuer Circle, has obtained a Major Payments Institution licence from the Singaporean regulator. Circle has also just recruited the former head of the CFTC, Heath Tarbot to be its chief legal officer. 

Kraken launched an NFT marketplace on Polygon’s layer 2 network.

Custodian Bitgo has made a bid to purchase struggling Canadian custodian Prime Trust.

In the UK, crypto purchases from adverts will soon come with a 24 hour cool off period before delivery. 

In Australia, CBA is planning to put a 10k monthly spend limit on money sent to digital asset trading platforms (ie exchanges).

The value of BTC to the Turkish Lira, a currency that has declined 60% against the USD in the last 2 years alone, is up 98% year to date against BTC. Talk about a store of value.

Starting off with global news 

The World Bank has revised up global GDP to 2.1%. Its analysis predicts that advanced economies will be particularly sluggish.

🌎 Macro news TLDR: … .China continues to struggle, the Fed expected to pause. 

Oil prices hit $70 per barrel on news that the US and Iran are close to negotiating a deal on crude imports. 

Another sign of waning global demand, global coal prices are now at a 2 year low. 

U.S. economic news

Next week the FOMC will meet to announce any changes to the Fed Funds rate. Markets are 90% in favour of a hold and have been for some time.

The best guess is the messaging will be something like holding rates for now but the possibility of more raises remains.

The US posted a smaller than expected trade deficit of $74bn, notably imports from China were at there lowest in 17 years. A key measure of unemployment, US jobless claims unexpectedly increased potentially signalling a softening of the labour market.

Earlier today the US CPI data was released for May, it was slightly better than the 4.1% expected, coming in at 4% annualised. Core CPI also posted a decline month on month, coming in at 5.3% annualised. 

Meanwhile, in Europe

According to Eurostat, Europe was in a technical recession for Q1 23. They also said central bank actions are curbing growth prospects…that was the point. 

The OECD is predicting that the UK will have the highest inflation rate in all advanced Economies.

In Ukraine news, the bursting of the Kakhvka dam near Kherson will likely have global ripples as the flooding affects large tracts of Ukraine’s wheat producing region. Added to that, dry conditions might hamper their winter wheat production

And in Asiapac…

In a move designed to get the Chinese people spending rather than saving, the State owned banks have been told to lower the deposit interest rates.

This is seen as a move to try to restimulate the faltering domestic economy. The reason for this became clear a day later when China’s customs bureau announced a 7.5% YoY slump in exports due to the US/Europe slow downs and onshoring activity.

Factory Gate prices (PPI) also fell 4.6%. Late Tuesday, the PBoC cut its short term (repo) lending rate, with forecastings betting this will flow through to longer term rates as they attempt to stimulate their economy. Commodity suppliers to China (like Australia & NZ) will also be nervous. 

Taiwan’s exports are down 14% from a year ago, however there are signs that things are turning around.

India’s central bank (the RBI) held its key lending rate for the second straight policy meeting, and signalled that they will remain restrictive for some time to curb inflation. Their CPI for May fell too.

Japan continues to confound, posting Q1 GDP growth of 0.7%. However, Machine Orders and Producer Prices are both down. 

Pakistan’s worries are not over yet, their government is attempting to put together a budget that will keep the IMF happy enough to release the bailout money. 

Australia posted their Q1 GDP numbers and they weren’t flash; 0.2% vs the 0.3% expected. Productivity is declining, as are household savings, down to 3.7% as the cost of living increases.

After last weeks surprise OCR increase, Australian Consumer sentiment is in the doldrums. Their balance of trade also decreased, primarily due to reduced export volumes. Next year’s wheat crop is forecast to decline by a 1/3 due to El Ninõ. 

Ahead of Thursday’s GDP numbers, Stats NZ have published the May Retail Spending numbers. These show a 1.7% decline vs April and are believed to be a signal of the pressure on household spending.

MBIE data shows that immigration numbers are getting back to pre-Covid levels, which will in turn fuel demand for all sorts of things like housing.

In some positive news, the NZ current account deficit is getting smaller, we are still spending more than we are earning, only less so.

On Thursday New Zealand’s GDP data will be published, economists are split on whether we are now in a technical recession or not. 

That’s a wrap for this week. Thanks for reading!

Stay tuned for the next update.

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