Ledn’s Weekly Hodl: Staying Power
Week of Monday June 26th
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Bitcoin Market Analysis
Bitcoin closed last week up +15.73% at $30,480. It was the week with the highest traded spot volume since March 20th. The move came on the back of the Blackrock ETF announcement, as well as positive commentary from the Federal Reserve, and positive developments in the Coinbase and Binance legal proceedings.
From a technical perspective, the fact that bitcoin closed last week above the $30k resistance level is very positive. If it can close this week above $30k, it should bode well for a potential continuation. In terms of near term catalysts, the first deadline for the SEC to make a decision on the application is August 12th, 2023. There are also other applications on the list, like Ark Invest’s Spot Bitcoin ETF application - so we could be hearing from the SEC on a spot Bitcoin ETF decision even sooner.
In terms of technical levels, we are now monitoring the $30k level as support, and below that we track the 200-week moving average price, currently at $26,719. In terms of resistance, the next key level is at $35k.
Weekly Hodl: Staying Power
After a coordinated onslaught of regulatory action against the crypto industry during the first half of the year, the tune among U.S. regulators and government officials seems to have changed. In this week’s blog we explore possible reasons why, and what it could mean for the industry.
Too late and too hard
U.S. regulators have been on a crusade against the crypto industry during late 2022 and 2023. Here are just a few examples:
On December 15th, 2022, the SEC doubled down on its decision to reject Grayscale’s application for a spot bitcoin ETF.
On March 9th regulators seized Signature Bank and Silvergate bank. Both of which were instrumental to the crypto industry.
The desire to de-bank the crypto industry was most evident when regulators forced prospective buyers of Signature Bank to give up all of its crypto businesses. This happened to be one of the biggest and most profitable lines of business in the bank. In other words, it forcefully de-banked a large percentage of the industry by closing the banks that served the industry.
On March 13th the SEC announced that it would be growing its crypto enforcement division - even before any crypto-specific rules were published:
This was another attempt to “regulate by fear”, rather than by dialogue with the industry.
On June 5th and 6th, the SEC and 10 U.S. State Regulators launched a coordinated attack against Coinbase and Binance:
Said differently, after failing to protect Americans from actual frauds in the industry, American regulators decided to double down on the firms that were most suited to comply and shape a regulatory framework. It is going after the best managed, best capitalized, and best suited-to-comply firms, after most of the weak and bad players have been already washed out.
Their actions came too little too late, and they weren’t targeted to the firms that created the problem in the first place (most are already bankrupt).
You get what you ask for
Nobody wants to live where they don’t feel welcome. U.S. and Canadian regulators created an unclear and unpredictable regulatory environment for many players in the crypto industry. The global community and the industry reacted as you would expect.
The move by North American regulators was clearly perceived as a strategic error by the rest of the world. Within days, regulators in Europe, the Middle East, Europe, the Caribbean, and Latin America announced plans to attract crypto companies with straight-forward regulatory frameworks. We covered this in our “One country’s trash is someone else’s treasure”.
Similarly, within weeks, some of the top crypto companies in the space announced their international expansion plans - away from North America.
On April 20th, Coinbase announced its expansion to Bermuda, and touted further international expansion plans:
On May 2nd Coinbase announced the launch of its “International Exchange” that would offer perpetual futures on Bitcoin and Ethereum to its clients from its Bermuda-based entity.
Also on May 2nd, Gemini announced its own international exchange offering, based out of Singapore.
On May 9th, Ledn announced its regulatory approval from the Cayman Islands Monetary Authority:
That’s just to name a few - dozens if not hundreds of other companies did the same or are in the process of doing so.
In a matter of days, thousands of planned jobs, and hundreds of millions of dollars of potential investment capital got redirected from North America to welcoming international jurisdictions.
The Pivot
The response from international regulators and industry participants was loud and clear. And it appears that U.S. regulators and politicians had a change of heart on the week of June 5th.
June 8th: SEC Chairman saying that Coinbase and Robinhood “know how to register”
June 14th: The SEC’s request to freeze Binance U.S. assets was denied
June 15th: Blackrock Spot Bitcoin Trust (ETF) application filing:
For context, Blackrock has a track record of 575 approvals and one rejection on its applications.
June 15th: Industry and public backlash on SEC over only “regulated” exchange comments during congress hearings:
June 21st - Jerome Powell publicly admitting that they recognize payment stablecoins as a form of money, and that cryptocurrencies like Bitcoin have “staying power”
June 23rd - The U.S. Court of Appeals ordered the SEC to respond to Coinbase’s request for rulemaking within 120 days:
June 24th - Coinbase’s arbitration case victory against the SEC:
The largest asset manager in the world filing for a spot Bitcoin Trust, and the U.S. Federal Reserve admitting that bitcoin has “staying power” are monumental events.
Just four weeks ago the SEC took legal action against Coinbase, the very same company that Blackrock has listed as its custodian and spot market data provider on the Spot Bitcoin Trust application 10 days later.
Just like the regulatory onslaught leading up to June 5th felt coordinated, the wave of recent positive events has a similar feel.
What caused the change of heart? I think it was a combination of how quickly other countries “opened their arms” to the industry, how the industry fought back and responded by quickly expanding elsewhere, and ultimately, the public opinion backlash of going “too hard, and too late” against the industry.
Bitcoin has staying power, and it can no longer be ignored by Central Banks. Hodl.
Notice for Canadian Residents: As of January 4, 2023, Canadian clients will no longer be able to take out new B2X loans.
As of February 1, 2023, Canadian clients will no longer be able to open a new BTC or USDC Savings Account, deposit BTC or USDC to existing Savings Accounts or earn yield on any existing BTC or USDC Savings Account balances.
Notice for U.S. Residents: Effective March 1, 2023, U.S. clients will not earn interest on any BTC and/or USDC balance in their Savings Accounts and/or Legacy Savings Accounts.
This article is intended for general information, educational and discussion purposes only, it is not an offer, inducement or solicitation of any kind, and is not to be relied upon as constituting legal, financial, investment, tax or other professional advice. This article is not directed to, and the information contained herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to law or regulation or prohibited by any reason whatsoever or that would subject Ledn and/or its affiliates to any registration or licensing requirement. This article is expressly not for distribution or dissemination in, and no Ledn product or service is being marketed or offered to residents of, the European Union, the United Kingdom, the United States of America or any jurisdiction in Canada, and such product or service may only be marketed or offered in such jurisdictions pursuant to applicable laws or reliance on regulatory exemptions. A professional advisor should be consulted regarding your specific situation. Digital assets are highly volatile and risky, are not legal tender, and are not backed by the government. The information contained in this publication has been obtained from sources that we believe to be reliable, however we do not represent or warrant that such information is accurate or complete. Past performance and forecasts are not a reliable indicator of future performance. Any opinions or estimates expressed herein are subject to change without notice. This article may contain views or opinions of the author that do not necessarily reflect the opinions, standards or policies of Ledn. We expressly disclaim all liability and all warranties of accuracy, completeness, merchantability or fitness for a particular purpose with respect to this article/communication. Read our Disclaimers at https://ledn.io/legal/disclaimers
