CoinLoan Weekly: Strong week for BTC, growth catalysts, crackdown criticism
After two days in the region of $22,000, BTC zoomed up. A surge that started on Wednesday, February 15, culminated in a peak of $24,898.77 the next day. Then on Friday, February 17, the price sank below $24,000 and jumped again, allowing BTC to start the weekend at over $24,780. It fluctuated around the level until Monday, February 20, when it dipped and climbed above $24,900 in the late hours.
Last week, BTC reached several 6-month highs before retreating late on Thursday. On Tuesday, February 14, weak CPI data and stablecoin regulatory issues were eclipsed by investors' high spirits, resulting in "a bit of a euphoric rally," according to Kaiko's Riyad Carey. Then, cryptos headed downward following the Fed’s hawkish remarks, the news of a lawsuit filed by the SEC against the Terraform Labs founder, and the wholesale prices report, which showed that inflation was not cooling fast enough to appease the regulators. Nevertheless, the Fear & Greed Index has been in the greed zone since Wednesday, February 16.
At press time, BTC is trading at $24,883, with 24-hour growth of +1.5% and a 7-day gain of +14.1%.
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Ether opened the week with a dip to $1,471.55 and took off. It reached $1,555 the next day, shot above $1,660, and reached a 7-day high of $1,718.51 on Thursday, February 16. Although sellers pulled it back below $1,640 the next day, ETH was back at over $1,700 by Saturday, February 17. It stayed close to the level through the weekend, dipped on Monday, and sprang back.
On Tuesday, February 15, Ether's annualized daily net inflation rate reached -2.772% — a record low — according to Glassnode’s estimates. The change in its supply, both upward and downward, has sped up over the past month, and further acceleration could prove bullish for the price. Last week’s low also coincided with the highest gas price in 7 months — 64 Gwei — which has since halved. According to Crypto News, as the base price grows, so does the burn rate. Furthermore, the activity on the network is on the rise, with TVL reaching $54 billion, as opposed to $35 billion at the beginning of 2023.
At the time of writing, ETH is worth $1,697.45, with a 24-hour change of +0.5% and a 7-day rise of +12.6%.
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Like the two leading coins, XRP gained ground following a decline. On Wednesday, February 15, it erased Monday's losses, rising above $0.38. Moving further upward, XRP hit a 7-day high of $0.401523 on Thursday, February 16 and reversed. It returned to $0.399 on Saturday, February 18 and spent the weekend close to $0.395. On Monday, February 20, XRP slipped and rebounded past $0.40.
Despite the predominantly positive sentiment, XRP’s gains paled compared to BTC and ETH, partly as its growth potential hinges on the protracted legal battle with the SEC. A judgment favoring Ripple Labs would spark a rally, with some analysts predicting a rise to $1 in a few days. Last week, the XRP community launched the #RelistXRP Twitter campaign urging Coinbase to list the token again. According to the exchange's amicus brief submitted in November 2022, it delisted XRP due to legal considerations but viewed it positively overall. Meanwhile, the top 100 investors on the BSC blockchain still hold a significant amount of XRP — worth over $27.7 million — in their wallets.
As of this writing, XRP is trading at $0.396177, with a 24-hour increase of +1.6% and a 7-day climb of +6.5%.
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Bitcoin at $25K lifts investors' spirits
Last week, the crypto market seemed poised for another dramatic rally. On Thursday, February 16, the Bitcoin price grew past the psychological threshold of $25,000, touching $25,230.24 for the first time since June 2022. It then retreated slightly, but the nearly 50% rise year-to-date should suffice to motivate investors to return.
Since the November 9 plunge triggered by rumors of FTX's downfall, the coin has gained 60.3%. Meanwhile, the total market cap of all cryptos has approached $1.2 trillion.
Ed Moya, a senior market analyst at OANDA, anticipates "a major move in Bitcoin" in light of "a major wave of institutional money coming into the exchanges over the past week, $1.6 billion, according to data from Lookonchain." A significant share of this influx comes from stablecoins, including Circle's USDC. Moya has also highlighted Bitcoin's relative resilience compared to other risky assets.
The runner-up, Ether (ETH), jumped to as high as $1,718.51 last week. This level was last seen in September 2022 following the Merge. So far this year, the coin has gained nearly 40%.
Is the crypto winter ending?
While the market seems eager to turn the page of decline, it has a long way to go compared to late 2021. Back then, in November, Bitcoin hit its all-time high of $69,044.77, and it needs to more than double to regain it.
The same is true for Ether, which was worth $4,878.26. Meanwhile, the total market cap was nearly three times as large at over $3 trillion. Expecting crypto to reclaim those levels soon is a tall order, particularly as the market is steeped in alarming news.
The FTX bankruptcy has taken a toll on many companies, with more casualties expected to emerge. Furthermore, the Securities and Exchange Commission (SEC) is cracking down on digital asset providers in the US, urging the government to tighten the rules. Yet Moya believes that despite the uncertain future of stablecoins, "many are not expecting regulators to crush the entire space."
Another potential driver of the appetite for risk assets is short covering. As CNBC's Hakyung Kim explains, this term describes a situation "when a short seller buys back shares in order to close out an open short position — returning borrowed shares — in an attempt to limit losses. This also drives up further the price of the underlying security."
Finally, the regulatory pressure may not be a strong selling signal on its own. For example, on Wednesday, February 15, investors bought BTC, crypto-correlated stocks, and ETFs despite the US crypto crackdown.
US crypto crackdown makes overseas hubs more attractive
According to Bloomberg, the latest crackdown attempts by the US regulators have dimmed the country's appeal as a crypto hub. The spate of probes aimed at pushing crypto to the fringe of finance prompts businesses to consider other, friendlier jurisdictions.
Among such locations are Europe, the UAE (Dubai), China (Hong Kong), and Singapore. Their advantages over "regulation by enforcement" include more favorable legislative efforts and tax regimes. That is the critical takeaway from Bloomberg's interviews with over a dozen executives, analysts, investors, and former regulators. In their opinion, the US government is more keen on stifling rule-bending attempts than on devising new legislation tailored to the crypto market.
Zhuling Chen, RockX CEO and founder, mentioned growing anxiety "given the increasing level of regulatory scrutiny and enforcement we have seen." His Singapore-based crypto staking company has been contacted by multiple investors from the US, including hedge funds, mutual funds, and small CeFi platforms. "Whoever has interest and wants to stay in crypto will choose friendlier countries, where the rules are clear," Chen concluded.
On February 9, the SEC (Securities and Exchange Commission) announced charges against Kraken, which agreed to a $30 million settlement and suspension of staking services in the US. Shortly afterward, Paxos Trust Co., which issues stablecoins like PAX and PAXG, ceased minting BUSD due to the orders of New York state's regulator and the SEC's intention to file a lawsuit.
Across the pond, the Basel Committee on Banking Supervision (BCBS) has obliged EU banks to cap their cryptocurrency holdings in light of inherent exposure risks. On February 9, the bloc also published new draft rules obliging banks to keep their digital asset holdings fully backed with capital until December 2024. This legal draft is yet to receive parliamentary approval.
On Wednesday, February 15, it came to light that the SEC had charged Terraform Labs and its founder and CEO, Do Hyeong Kwon (aka Do Kwon), with securities fraud involving Terra USD and LUNA. Two days later, the regulator came down on former NBA star Paul Pierce for shilling a little-known cryptocurrency. Pierce agreed to pay over $1.4 million in penalties for failing to disclose the amount received for promoting EthereumMax on Twitter. Previously, Kim Kardashian got fined $1.26 million for shilling the same token on Instagram.
Backlash is brewing
Last week, crypto executives and evangelists took to Twitter to criticize the SEC's aggressive maneuvers. Jesse Powell, Kraken's founder and former CEO, tweeted, "Operation Chokepoint 2.0 is in full effect. It's no coincidence that every financial regulator in the country is attacking mundane, respectable, domestic crypto businesses in the past week. There is no interest in supervising crypto. Everything being done is to shut it down."
Meanwhile, SEC Commissioner Hester Pierce issued a statement addressing the regulator's crypto custody proposal. This document questions its "workability" and timing due to the sheer scope of implications for investors, advisors, and custodians. Describing the timeline as overly aggressive, Pierce also mentioned jurisdictional concerns and other potential setbacks.