This week was a mixed one, marked by bullish and bearish patterns in the price action of major crypto assets, including bitcoin and ethereum. A noteworthy development included the rally in bitcoin (BTC), which bucked the bearish pressure and rallied above $28,000. The bullish trend remains despite enforcement actions from the Securities and Exchange Commission in the United States (SEC). Meanwhile, after months of evading authorities, Terraform Labs founder Do Kwon has been arrested in Montenegro.
Coinbase vs. the SEC; Is another long-running fight coming up?
Amid the bitter battle over crypto gambling launched by the SEC a few weeks ago, Coinbase continues to mount a defense. On Monday, March 20, the US stock exchange filed a petition with the SEC, explaining why participation services should not be classified as securities.
In February, the regulator charged Kraken for offering staking services before settling for $30 million. The exchange was also forced to discontinue its staking services as part of the deal with the watchdog. The SEC further conveyed its intention to take action against other crypto-staking services in the country. This development was a warning to Coinbase, which also provides staking services. As such, the exchange took note and initiated steps to address potential regulatory concerns.
However, it is worth noting that the conflict between Coinbase and the SEC extends beyond cryptocurrency staking services. The exchange has been the subject of regulatory scrutiny by the agency for some time. Three days after Coinbase’s request was made public, the exchange revealed that it had received a Notice from Wells. Indicates the regulator’s intent to take legal action against the exchange for alleged violations of securities laws.
Coinbase became the second company to receive a Wells Notice from the SEC in six weeks. The agency previously issued a similar notice to Paxos, saying that BUSD, a stablecoin, was a security. Soon after, Coinbase CEO Brian Armstrong urged US citizens to back politicians who support cryptocurrencies. In his opinion, this could help develop favorable regulations that support cryptocurrencies in the country.
Justin Sun gets hit in latest series of enforcement actions
The SEC regulator has also filed charges against Justin Sun, a serial entrepreneur and founder of Tron, and three of his companies. They accuse Sun of violating securities laws, illegal promotion of crypto assets, market manipulation, and fraud.
In response, Justin Sun challenged the SEC’s recent move, saying its allegations are baseless. Sun believes the complaint is “without merit,” adding that the SEC’s stance on cryptocurrencies needs some improvement. He joins a list of crypto players lamenting the SEC’s recent crusade against crypto entities.
Amid these actions, the SEC argues that it is necessary to officially warn Americans about investing in cryptocurrencies. The agency noted that most platforms that facilitate trading and investing in “crypto asset securities” have not received proper approval. Therefore, they lack adequate consumer protection measures.
The broader US regulatory climate remains a concern
Overall, the broader regulatory climate regarding cryptocurrencies in the United States remains a cause for concern.
A March 21 report noted that the IRS may be taking preliminary steps to enforce a tax framework for non-fungible tokens (NFTs) and collectibles. The tax authority has submitted a proposal on the matter and is seeking public comment.
The White House has also released a report indicating that cryptocurrency assets present challenges for the average American consumer. The 513-page report claims that most digital assets lack intrinsic value, raising concerns that the US government may be actively seeking to undermine the industry.
Do Kwon arrested
The arrest of Terraform Labs co-founder Kwon Do-hyung, commonly known as Do Kwon, also dominated headlines.
On March 23, Filip Adzic, Montenegro’s Minister of the Interior, revealed that Montenegrin police had arrested an individual vaguely identified as Do Kwon in Podgorica, Montenegro’s capital and largest city. According to Adzic, the individual was arrested at a Podgorica airport while in possession of forged documents.
Adzic noted that an official announcement would be made soon after his identity was officially confirmed. The disclosure was corroborated in subsequent reports that surfaced on Saturday, March 25, when videos of Kwon and Han Chang-Joon, an associate of his, surfaced. In the clips, Kwon is seen leaving a Montenegrin court in handcuffs and accompanied by some police officers.
Following Adzic’s disclosure, US prosecutors in New York filed 8-count indictments against Do Kwon bordering on wire fraud, securities fraud, and commodity fraud, among others. Last month, the US SEC charged Do Kwon and Terraform Labs with fraud.
Bitcoin Recovers $28,000 Amid Enduring Rally
Despite the regulatory climate in the United States, bitcoin continued to lead the broader crypto market towards recovery, taking advantage of concerns around a deteriorating banking sector.
The asset’s continued rally pushed it back above $28,000 for the first time in more than nine months. This uptrend positioned bitcoin as one of the highest-return risk assets this year, securing a spot on Goldman Sachs’ list of highest-yielding investment assets.
Despite this comeback, renowned but pseudonymous cryptanalyst Capo of Crypto remains bearish on the coin, a stance he has held since last year. According to Capo, the inability of the broader market to rally along with bitcoin when it broke above $25,000 suggested a case of market manipulation or overvaluation of the asset.
Given this postulation, Capo predicted that bitcoin and other crypto markets could pull back from spot rates.
However, on-chain data revealed that long-term bitcoin holders continue to hold onto their assets despite rising prices and warnings from Capo of an impending crash. Data from Glassnode showed that the number of BTC tokens that have been sitting dormant for over ten years recently hit an all-time high of 2,673,268 BTC. This demonstrates a strong belief among long-term holders.
The bears took advantage of the macro climate in the United States to fiercely oppose bitcoin’s rally on Wednesday. The crypto community expected a 25 bps rate hike from the Federal Reserve on March 22. Despite the drop in inflation, the crypto market contracted with the rate increase. BTC fell more than 6% to $26,700 before recovering in the second half of the week. As the uptrend resumed, a CryptoQuant report revealed that the realized price of BTC rose and a close above $20,000 seemed likely on the back of rising demand.
Bitcoin’s promising position and the trajectory of the US economy resulted in renewed optimism from former Coinbase CTO Balaji Srinivasan. As a result, he made a bet with popular but pseudonymous Twitter personality James Medlock that there would be hyperinflation in the United States. Srinivasan believes this would push bitcoin prices to $1 million by June, as the dollar depreciates.
At press time, BTC is changing hands at $28,222, up 4.11% in the past week after hitting a high of $28,868 on March 22. If the uptrend continues, BTC could rally to record new highs in Q1 2023 above $29,000.
