At a point when financial gurus were poised to anticipate a potential price increase for Bitcoin BTC $25,705, an unexpected stumble hit the crypto market. The trigger was the SEC’s allegations against Binance exchange, which has fueled a speculation among some experts that the low tide of BTC’s price hasn’t yet hit the rock bottom.
On the 5th of June, Bitcoin touched a 60-day trough at $25,744. This had investors on edge about a potential steeper fall in price, especially since Bitcoin was already wrestling with a $26,600 resistance prior to the SEC’s news.
Ether ETH $1,816 mirrors Bitcoin’s predicament. Despite soaring above the $2,100 level following the Shapella upgrade, it hit a 7-day bottom of $1,794 on May 24. This drop coincides with a reduction in Ether’s gas fees post the May memecoin buzz.
The Debt Ceiling Conundrum Impacting Risk Assets
On June 5, the SEC, under Chairman Gary Gensler, issued 13 accusations against Binance and its leader, Changpeng “CZ” Zhao. The commission contends that Binance has flagrantly violated U.S. securities laws, thereby pocketing billions of dollars.
The legal battle, instigated in the District Court for the District of Columbia, delivered 13 allegations against Binance, and classified 12 distinct cryptocurrencies as securities, including Algorand ALGO $0.14. This listing raised eyebrows since Gensler had previously hailed Algorand as a “great technology” back in 2019.
Other cryptos specifically called out in the lawsuit comprise Binance USD BUSD $1.00, Binance Coin BNB $277, Solana SOL $20, Cardano ADA $0.353, Polygon MATIC $0.8253, Filecoin FIL $4.23, Cosmos ATOM $10.00, The Sandbox SAND $0.52, Decentraland MANA $0.45, Axie Infinity AXS $6.61, and COTI.
Binance was quick to publicize an official retort to the lawsuit on Twitter, shortly after the SEC’s complaint saw the light of day.
This recent SEC move escalates the long-standing tussles, misunderstandings, and skepticism regarding the practical utilization of digital assets. Following the fallout of the FTX, there’s a sense that U.S. legislators harbor a grudge against the crypto sphere. The ongoing dispute revolves around how centralized exchanges manage customer funds.
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While crypto prices continue to show a strong correlation with the Dow and S&P 500, most leading banks are still forecasting a severe recession to hit the U.S. by 2023. However, this hasn’t hindered major stock indices from clocking yearly highs in the wake of the U.S. debt ceiling agreement.
But the Binance news is magnifying the chasm between equities and Bitcoin. Drawing from an analysis by the U.S. Bank, which covers over 1,000 data points, investors remain doubtful about the current economic climate.
In the words of Terry Sandven, Portfolio Manager, Chief Equity Strategist at U.S. Bank, “Better-than-forecasted earnings, particularly in sectors oriented towards growth, have been key in buoying equity prices.”
The Pulse of TVL and Volume
The Total Value Locked (TVL) metric is a trusted barometer to analyze the health and sentiment of the crypto markets. As reported by DeFiLlama, the TVL across all protocols dipped by 1% in the last 24 hours, showing a $116 billion loss since April 5, 2022.
Paired with this tightening liquidity in the market, exchange inflows indicate a surge in sell-side pressure with a noticeable lack of buy-side pressure outside of stablecoins. Given these formidable macroeconomic obstacles and a low trading volume, it appears that the crypto market will keep wrestling with volatility for the time being.