CoinLoan Weekly: Growth despite negativity, crackdown on Binance, Silk Road BTC
Price dynamics
BTC price
Bitcoin traded shy of $28,000 on Monday, March 27, before sinking to $26,945.15. The next day, the price dove deeper, bottoming out at $26,777.57. BTC reached above $28,570 the next day, hit a 7-day high of $29,021.35 on Thursday, March 30, and dipped again. Subsequently, the price wobbled slightly around $28,500 through the weekend and slid to $28,100 on Monday, April 3.
The Crypto Fear and Greed Index showed a slight improvement in investors' appetite within the greed zone. The coin has gained over 26% over the past month, clinging to around $28,000 since mid-March. According to trader and author Glenn Goodman, the Fed's "injection of new money into the economy" makes people "brave enough now with this new liquidity to get back into what they consider big, profitable companies […] and likewise, in the crypto market, they're going for what are considered the safer cryptos, which are Bitcoin and Ethereum."
On Monday, April 3, BTC and other cryptocurrencies dipped on the news of a production cut by OPEC+ amid rising oil prices. According to Barron's, the move stoked fears of stronger inflationary pressures that may prompt aggressive measures from the Fed. That impact highlighted BTC's susceptibility to macroeconomic factors and its correlation with the stock market and the broader risk sentiment.
At press time, BTC is trading at $27,848.06, with a 24-hour loss of +0.4% and a 7-day change of +2.5%.
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ETH price
Ether initially climbed to $1,780 and rolled back below $1,710. It rose above $1,780 on Tuesday, March 28, and touched $1,825 the next day before diving to $1,767.27 on Thursday, March 30. Friday trading pushed the coin above $1,820, where it spent most of the weekend. On Monday, April 3, ETH rebounded from around $1,770, reaching $1,833.99 in the late hours.
ETH wrapped up the first quarter of 2023 with a gain of 55%. Since the low of nearly $880 in June 2022, its price has more than doubled despite a spate of adverse events, including interest rate hikes and regulatory pressure in the US. Furthermore, according to Santiment, ETH whales have continued accumulating the coins.
Ethereum's Shapella – Shanghai and Capella – upgrade is now slated for April 12. It will enable withdrawals from Ethereum 2.0 staking contracts, which now hold over 18 million coins. The mechanics of the upgrade should prevent gas price spikes, as it imposes a per-block limitation on withdrawals, and divides the selling pressure into three phases. It should peak in the first three days after the upgrade, based on Arcana Research's estimates.
At the time of writing, ETH is worth $1,806.45, with a 24-hour gain of +1.5% and 7-day growth of +5.1%.
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XRP price
The Ripple token price rocketed from under $0.450, rising smoothly through the first three days of the week. Its growth culminated in a 7-day high of $0.57664 on Wednesday, March 29. It then slid to roughly $0.540 and barely moved until Saturday, April 1, when it dipped to $0.503. On Sunday, April 2, XRP rose again, briefly reaching above $0.527. Monday, April 3, did not bring significant change.
Despite the absence of new developments in the SEC vs. Ripple case, investor hopes of a favorable verdict brought dip buyers back. As a result, XRP led altcoins in inflows, with $800,000 directed into XRP-focused investment products over the period. This surge put the token ahead of all cryptos, with the exception of BTC.
Meanwhile, Ripple's Chief Legal Officer, Stewart Alderoty, warned that "words have consequences, even for unelected senior bureaucrats." Commenting on the SEC's stance, he tweeted, "Suddenly, now saying that you haven't prejudged every crypto (with the exception of BTC) as a security after being called out for publicly prejudging every crypto as a security doesn't unring the bell."
As of this writing, XRP is trading at $0.497016, with a 24-hour loss of -2.8% and a 7-day change of +3.4%.
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Cryptocurrency news
Cryptocurrencies move up despite Binance crackdown
Last week, investors were spooked by legal action against Binance, its CEO Changpeng "CZ" Zhao, and Chief Compliance Officer Samuel Lim. The Commodity Futures Trading Commission (CFTC) filed that lawsuit with a Chicago federal court on Monday, March 27. Yet the leading coins wobbled only briefly.
The market has since recovered. Late on Monday, April 3, the pioneering coin was 1.1% up over the past seven days, while ETH had gained 2%. The same dynamics dominated the top 30, save for Binance's BNB, which was 4.7% down. The total market cap had risen from $1.15 trillion to $1.22 trillion, according to CoinGecko.
CFTC vs. Binance
The CFTC, the leading US derivatives regulator, has accused Binance of unauthorized derivatives trading. According to the lawsuit, Binance committed a crime by offering futures, swaps, and options on major cryptocurrencies to US clients without registering with the agency.
The document reads, "Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to 'block' or 'restrict' customers located in the United States from accessing its platform."
Other accusations include failing to use adequate Anti Money Laundering (AML) and Know Your Customer (KYC) measures. According to the CFTC, Binance has knowingly eluded or helped customers elude US regulators and even traded against its own clientele.
The world's largest crypto exchange has responded by calling the lawsuit "unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years." Its spokesman added, "Nevertheless, we intend to continue to collaborate with regulators in the US and around the world. The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime."
Zhao tweeted "4," implying that Binance had been disadvantaged. Previously, he used that number in reference to "FUD, fake news, attacks, etc."
Fourth straight month of rising crypto investments
In March, investors continued pouring capital into digital-asset products. As per CryptoCompare estimates, AUM (assets under management) rose by almost 11% compared to February and 60% compared to November, totaling $13.4 billion. That change marked the fourth straight month of growth.
Bitcoin accounted for the largest share of investments – in mid-March, its dominance hit 72%, the highest level in nine months. Bitcoin-based and Ether-based investments rose by 14% and 6.25%, respectively. Meanwhile, products in the "other" category saw a 13.3% decrease in assets.
US government sells $215M worth of seized Silk Road BTC
According to a court filing made public on March 31, the US government sold over $215 million worth of BTC last month. Those funds had been seized from the Silk Road darknet marketplace. The document says 41,490 BTC ($1.1 billion) are left to dump.
In November 2021, US law enforcement seized $3.36 billion worth of BTC affiliated with Silk Road. That happened after hacker James Zhong pled guilty to one count of wire fraud. In 2012, he manipulated the Silk Road transaction system to stash 50,676 BTC. Back then, one BTC cost around $10.
Subsequently, Zhong kept his identity and holdings hidden for a decade until their value rocketed to $3.3 billion. The filing explains, "The defendant had in his possession multiple computer servers, virtual private networks, among other things, enabling him to commit the offense."
Silk Road was used for the illicit trading of drugs and other goods before it was shut down in 2014. Its founder Ross Ulbricht was given a life sentence in 2015. The document states, "With respect to the 51,351.89785803 Bitcoin forfeited in the Ulbricht case before Judge Schofield, the Government has begun liquidating (selling) it."
The first transaction took place on March 14, when it "sold 9,861.1707894 BTC (of the 51,351.89785803 BTC) for a total of $215,738,154.98." The Government's net proceeds totaled $215,522,416.83.
Impact on the market
The US authorities intend to dump the remaining BTC throughout the year in four batches. Considering the state of the market, there are fears of the BTC price taking a hit. When the US government transferred over $200 million worth of bitcoin to Coinbase (COIN) on March 9, BTC was volatile – within 24 hours, it rose by almost 10% before eliminating those gains.
However, Kaiko researcher Conor Ryder has noted that less leverage in the BTC market could prove favorable, helping the coin resist the "sell pressures better than it did in the wake of last spring's Terra crash." In 2022, with fewer investors owning wallets with over $1,000 worth of BTC, the market was characterized by "weaker hands and greater leverage." Now, Ryder says, "There should be a quicker bounce back if there's sell pressure."