Weekly Crypto Wrap: 8th June 2023

TLDR

• Crypto is bigger than any one company or any one person.
• Join us on June 14th for our crypto tax webinar with Koinly.
• A guide to transferring your crypto from Binance to BTC Markets.
• SEC regulatory actions targets Binance & Coinbase.
• BTC, ETH & XRP show resilience in the face of regulatory scrutiny.

BTC Markets in the news

“Crypto is bigger than any one company or any one person.”

The US Securities and Exchange Commission (SEC) recently targeted major cryptocurrency exchanges Binance and Coinbase, causing ripples across the global crypto market. Binance and its CEO are accused of misleading investors and mishandling customer funds while Coinbase has been charged with operating as an unregistered securities exchange, broker, and clearing agency.

Our CEO Caroline Bowler, was asked to weigh in on the implications of the enforcement actions by the SEC. She stated that is important not to “conflate these cases” as they involve different circumstances. She noted that Coinbase “has been transparent about their desire to fulfil US regulations on crypto” while Binance operates “without a head office, with decisions fully centralised with their CEO, accused of infractions like FTX. Market manipulation and comingled client assets are alarming accusations, for investors expecting to trade on fair and transparent markets.”

While the period ahead may be tumultuous for both organisations and their clients, Bowler believes that the crypto industry is resilient and will endure. It is important to note that the functionality and use cases of cryptocurrencies like Bitcoin and Ethereum remain unaffected. Bowler commenting that “crypto is bigger than any one company or any one person – we’ve been shown that repeatedly. I am also firmly of the belief that we are still in the early days for cryptocurrency.”

In Australia, the crypto industry will closely observe the US cases, and BTC Markets is optimistic about the future of regulation in the country, as we align with financial regulators and supports appropriate standards for crypto clients. Read the full article on Stockhead.com.au.

BTC Markets announcements

Join us for the "Crypto Tax in 2023: What's New?" webinar.

Save the date and mark your calendars for an exclusive live stream on Wednesday, June 14th, from 11am to 12pm AEST.

BTC Markets and Koinly have joined forces to provide you with the most up-to-date information on crypto tax regulations in Australia.

To stay informed and gain valuable insights, visit our blog or register now to secure your spot.

BTC Markets wins Finder 'Crypto Trading Platforms Customer Satisfaction Award 2023'

In Finders annual survey, BTC Markets emerged as the top crypto trading platform. We received exceptional ratings for both our user-friendly interface and excellent customer service. Read more about the award here.

Looking to transfer your crypto from Binance to BTC Markets?

We have created a comprehensive guide on transferring your cryptocurrency from Binance to your BTC Markets account. Follow our step-by-step instructions to ensure a seamless transfer process.

Commonwealth Bank Australia (CBA) implements payment restrictions to cryptocurrency exchanges.

Effective immediately, CBA will either decline or temporarily hold certain payments to cryptocurrency exchanges for a period of 24 hours. CBA also plans on introducing a monthly limit of AU$10,000 for customer payments to cryptocurrency exchanges, if the Bank can verify that these payments are intended for purchasing cryptocurrencies. You can find CBA’s full statement here, and the AFR's industry analysis of the news here.

Mobile app withdrawals testing.

We've just started usability testing for our latest major and long-awaited mobile app feature: AUD and crypto withdrawals.

If you'd like to join other BTC Markets clients and have your say on this feature, click the link below and register to join the BTC Markets mobile testing group.

Register as a tester now!

The week ahead

June 9th: China's Inflation Rate and Canada's Unemployment Rate will be released.

June 13th: Australia's Westpac Consumer Confidence Change, NAB Business Confidence, UK's GB Claimant Count Change and Unemployment Rate, Germany's ZEW Economic Sentiment Index, and the US Core Inflation Rate will be announced.

June 14th: United Kingdom's monthly GDP and United States' Producer Price Inflation reports will be published.

June 15th: The United States' Federal Reserve Interest Rate Decision, FOMC Economic Projections, and the Fed Press Conference, along with US monthly retail sales figures, will take place. Additionally, Japan's Balance of Trade, the Euro Area's Deposit Facility Rate, the ECB Interest Rate Decision, and the ECB Press Conference will occur.

Economic Calendar (tradingeconomics.com)

https://tradingeconomics.com/calendar

Market reflections

Australia

In a surprising move, the RBA raised the cash rate by 25 basis points to 4.1% in June, following a similar rate hike in May. This decision defied market expectations for a pause in rate increases. The RBA cited persistently high inflation and an uptick in wage growth as the primary drivers behind the decision. These rate increases have amounted to a total of 400 basis points since May 2022, elevating borrowing costs to their highest level in nearly a decade.

The RBA has identified the risk of inflationary pressures, particularly driven by service price inflation. While the goal remains to bring inflation back within the target range of 2-3%, policymakers acknowledge the challenges in achieving a smooth economic transition. The committee emphasises its unwavering commitment to returning inflation to target and pledges to take necessary actions to achieve this goal.

The Australian economy experienced a notable decline in productivity, which experts believe will have significant implications for inflation and the possibility of further interest rate hikes. Economists predict that this decline, coupled with accelerating wages, will lead to higher prices, and increase the likelihood of the cash rate reaching 4.85%.

Despite signs of a slowdown in economic growth, the first quarter of 2023 saw weaker-than-expected expansion, with a growth rate of 0.2%. This was primarily due to reduced household spending and a decrease in dwelling construction, as reported by the Australian Bureau of Statistics. Furthermore, the annual growth rate dropped from 2.7% to 2.3%, signalling expectations of a further slowdown soon.

Global

North America

The US manufacturing sector continues to face challenges, with seven consecutive months of contraction indicating efforts to align production with demand. Despite this, positive employment figures and a resilient labour market support consumer confidence and domestic spending, contributing to overall economic expansion.

However, the US trade deficit reached a six-month high of US$75.6 billion in April 2023, signalling those imports exceeded exports. Various factors led to the decline in exports, while imports increased during the period. This trade deficit has significant implications, affecting the nation's balance of payments, currency value, and industry competitiveness. Addressing these imbalances and promoting export growth will be crucial for achieving a more sustainable trade position. Balancing trade dynamics and implementing effective policy measures are essential to foster a resilient and balanced trade environment for the US economy.

In Canada, the Ivey Purchasing Managers' Index suggests a second consecutive month of economic slowdown, with challenges in job growth, inventory management, and rising prices. The US and Canadian economies are interlinked through trade relationships, and the US trade deficit's contraction may have implications for both countries. The moderation in the US services sector's growth momentum could potentially impact overall economic performance in both countries.

Asia

The decline in China's trade surplus and significant contraction in exports indicate challenges for the Chinese economy. The weak global demand, weakening domestic consumption, soft commodity prices, and a stronger US dollar contribute to the decline in exports.

The sharp decline in China's exports in May, far exceeding expectations, is a concerning trend. It indicates a significant decrease in export volumes, which could impact China's economic growth and its position in global trade. The decline in exports raises concerns about the health of the Chinese economy and its ability to sustain growth in the face of external challenges.

Euro Area

The Euro Area experienced a decline in consumer price inflation, falling to 6.1% in May 2023, below the European Central Bank's target. This was primarily due to lower energy prices and a slowdown in various cost pressures. The unemployment rate in the Euro Area reached a record low of 6.5% in April 2023, indicating a tight labour market and a decrease in the number of unemployed individuals. Germany's trade surplus also expanded in April 2023, reaching EUR 18.4 billion, driven by increased exports to the EU, the US, and China.

These developments suggest a mixed economic picture for the Euro Area. While lower inflation may alleviate concerns about rising prices, the unemployment rate at a record low indicates a tight labour market. Germany's trade surplus expansion reflects robust export performance, particularly to key trading partners. However, the lower-than-targeted inflation rate raises questions about the effectiveness of monetary policies in stimulating economic growth.

State of crypto

Following a week of market turbulence triggered by regulatory actions from the Securities and Exchange Commission (SEC) against major cryptocurrency exchanges Coinbase and Binance, the global crypto market experienced some disruptions. Bitcoin faced a decline of 5.12% on Monday in response to the SEC's lawsuit against Binance. However, it quickly rebounded on Tuesday, gaining back 5.84%, and has since stabilised around the US$26,200 mark after the announcement of the Coinbase lawsuit, showing the resilience of the crypto market.

During the last trading week, the cryptocurrency market showed mixed results. Bitcoin ended the week down by 3.38%, settling at US$27,115.21. Ethereum, on the other hand, closed just slightly in the red at US$1,890.01, representing a marginal loss of 0.98%. XRP defied the trend and closed the week in the green for the third consecutive week, registering an impressive gain of 11.18% closing at US$0.5359. Similarly, Litecoin followed suit with a 3% gain, reaching US$94.19.

Bitcoin's market capitalisation experienced a decline of 1.66% over the week, closing with a dominance level at 47.52%. The total cryptocurrency market capitalisation closed lower, losing 1.74% and ending the week with a valuation of US$1.107 trillion. 

Moving to the year-to-date performance, Bitcoin is up 59.71%, currently trading at US$26,390 with Ethereum trailing closely behind with a 53.68% yearly gain, trading at US$1,838. XRP has remained stable, up53.08% for the year, trading at $0.5188 followed by Cardano up 30.76%, trading at $0.3214. Lastly Litecoin is showing a gain of 26.92% and trading at US$89.02.

*Prices are accurate as of 10:00 AM AEST, on 08/06/2023.

Alt action

Swift and Chainlink (LINK) collaborate to connect financial institutions to blockchain networks.

Swift and Chainlink have formed a groundbreaking collaboration with over a dozen financial institutions to explore the integration of blockchain networks. Swift will partner with prominent players such as DTCC, ANZ, BNP Paribas, and Citi to test the transfer of tokenised assets across different blockchains using Swift's infrastructure.

Chainlink, a leading provider of real-world data to blockchains, will facilitate connectivity across public and private blockchains for these experiments. The partnership aims to unlock efficiencies, reduce costs, and streamline settlement processes in capital markets, attracting more investors to private markets and enhancing liquidity.

This collaboration is significant for both the involved financial institutions and the broader crypto industry. Sergey Nazarov, co-founder of Chainlink, believes that the involvement of banks, which possess substantial capital, is crucial for the industry to surpass the trillion-dollar mark.

Currently valued at over a trillion, the crypto market could experience substantial growth with increased adoption from banks and their clients. The partnership signifies a step towards exploring blockchain's potential in traditional finance, showcasing the feasibility and benefits of integrating blockchain networks into the existing financial infrastructure.

Successful outcomes from these experiments may lead to wider adoption of blockchain technology in the financial industry and accelerate the growth of the crypto market.

LINK is currently trading at US$5.885.

Trade LINK now on BTC Markets

The Big 3

Bitcoin resilient in the face of regulatory scrutiny.

The recent enforcement actions by the SEC against Binance and Coinbase have had notable effects on the market. Binance experienced a significant decline in net transfer volume, while Coinbase's shares opened 20% lower. However, Bitcoin and Ether have shown resilience, with both experiencing gains of 5% and 4% respectively in the 24 hours following the SEC announcement. This could indicate that investors believe in the long-term value and potential of cryptocurrencies, as they are behaving more as commodities than securities.

In parallel, Lightning Network payments are gaining momentum. Amboss, a Lightning data provider, has introduced the LINER index to showcase the cost advantages of the Lightning protocol over traditional financial institutions. The LINER index provides businesses with insights into the annualised costs and potential yield of setting up Lightning accounts, allowing them to compare these figures with traditional payment processors like Visa. This data can incentivise businesses to adopt Lightning payments, overcoming perceived complexity and offering potential savings in payment processing expenses.

These recent developments indicate that the crypto market is resilient, with investors maintaining their belief in the long-term value of digital assets. Regulatory actions against specific exchanges do not diminish the intrinsic value of assets like Bitcoin and Ethereum, and the adoption of technologies like the Lightning Network further strengthens the case for the future of cryptocurrencies.

Trade BTC now on BTC Markets

Ethereum gas fees cool down after meme coin May.

The average gas (transaction) fee on the Ethereum network has dropped substantially in the first week of June after reaching a multi-month high in May, owing to a surge in meme coins and bot activities.

The average gas fee has decreased to US$7.34*, an almost one-third drop from last month’s high of US$20. In terms of Gwei — a denomination of Ether that represents one-billionth of one ETH — the daily median gas price has decreased to 24 Gwei from a peak of almost 140 Gwei last month, according to Dune Analytics.

The meme coin craze started in late April and took off in May, leading to multiple new coins entering the market and, as adventurous investors rushed to trade, Ethereum gas fees surged above a one-year high.

A prominent reason for the rise in the Ethereum gas fees was the surging popularity of meme coins being traded on decentralised platforms, with most centralised exchanges hesitant or declining to list the assets due to valid compliance concerns. 

What is a meme coin?

A meme coin is a cryptocurrency term for popular currencies, sometimes depicted with comical or animated memes, that are supported by enthusiastic online traders and followers. While meme coins may be deemed fun, they are also highly risky investments which may hold little or no intrinsic value. 

*Gas fees average price as of 05/06/2023.

How Ethereum survived its biggest test

On April 12, the highly anticipated Shanghai software upgrade was implemented on the Ethereum blockchain, providing a crucial test for the cryptocurrency. This upgrade allowed Ethereum investors to withdraw their staked cryptocurrency, unlocking their rewards for securing the network. The release was met with excitement and anticipation from software engineers and crypto investors worldwide.

The successful release of the Shanghai upgrade brought about celebration and relief. Participants were able to withdraw their staking rewards, totalling approximately US$36.7 billion worth of ether. The upgrade's success positively impacted the price of ether, pushing it above US$2,000 for the first time in nearly a year. Concerns about heavy selling pressure post-upgrade were eased as the amount of Eth entering the market from withdrawals was lower than expected.

Overall, the completion of the Ethereum upgrade demonstrated the resilience and potential of ETH. The successful transition to a Proof-of-Stake system and the smooth withdrawal of staking rewards showcased the maturity and strength of the Ethereum network.

Read more: How Ethereum survived its biggest test, Jessica Sier, AFR.

Trade ETH now on BTC Markets

XRP – Ripple advocate, attorney John Deaton, weighs the odds on Ripple v SEC.

Attorney John Deaton, a strong advocate for Ripple, predicts that the chances of the U.S. Securities and Exchange Commission (SEC) winning against Ripple are less than 3%. Deaton believes there is a 25% chance that the U.S. District Judge will rule in favour of Ripple and a 50% chance of a "splitting the baby" ruling, where XRP may be considered an unregistered security before 2018.

Recent revelations from the Hinman documents, which suggest cryptocurrencies can transition from securities to commodities, further support Ripple's case. Deaton argues that even if Ripple is found in violation, it would not apply to secondary market sales. The final decision from Judge Torres is expected before September 30.

Regarding Ripple's native XRP token, Deaton speculates that a positive ruling could drive its price to a range between US$2 and US$10. Additionally, there are rumours of Ripple considering an IPO following the conclusion of the lawsuit.

The unsealing of the Hinman documents not only benefits Ripple but also has broader implications for the industry, challenging the SEC's classification of cryptocurrencies as securities and potentially bolstering Coinbase's future litigation against the SEC.

The outcome of the Ripple case holds weight for the industry, establishing a legal precedent and potentially forcing the SEC to reconsider its regulation approach.

Ripple CEO, Brad Garlinghouse, criticised SEC Chair Gensler's "pro-innovation" stance, highlighting inconsistencies within the agency.

Trade XRP now on BTC Markets

Crypto news

SEC given mandate to respond to Coinbase's request within specified timeframe.

The U.S. Court of Appeals for the Third Circuit has ruled in favour of cryptocurrency exchange Coinbase, compelling the Securities and Exchange Commission (SEC) to address Coinbase's rulemaking petition. The petition, submitted in 2022, seeks formal rulemaking to establish clearer regulatory requirements for the digital assets sector. Coinbase argues that the existing regulations are inadequate.

Under the court's mandate, the SEC has seven days to respond to Coinbase's petition. The SEC must indicate whether it intends to reject the request, provide reasons for its decision, or offer a timeline for reaching a decision. Coinbase's Chief Legal Officer, Paul Grewal, emphasised the importance of establishing clear rules before enforcement actions, highlighting the rationale behind their petition.

This development coincides with the SEC's lawsuit against Coinbase, accusing the exchange of operating an unregistered securities exchange. Grewal believes that the SEC's litigation indicates a decision to deny their rulemaking petition.

Additionally, the SEC must provide justifications for why the court should not oversee the case and why Coinbase should not receive regular updates on the progress of rulemaking.

The outcome of this order holds significant implications for Coinbase and the broader cryptocurrency industry. Clarity on the SEC's response to Coinbase's petition will shape the regulatory environment for digital assets. A rejection or insufficient justifications may prolong regulatory uncertainty, impeding industry growth. Conversely, engaging in formal rulemaking could establish a more transparent framework, providing clearer compliance guidelines for companies like Coinbase.

Ignoring blockchain firms in the market is a critical oversight, warns industry experts.

According to Dan Weiskopf and Mike Venuto, Portfolio Managers at Amplify ETF, overlooking disruptive blockchain companies in the current market climate is a fundamental mistake. Despite regulatory pressures, including recent lawsuits by the SEC against Binance and Coinbase, institutional investors still have reasons to remain optimistic about the crypto space. Weiskopf and Venuto believe that growth opportunities are more affordable now than in previous years.

Amplify's Transformational Data Sharing ETF (BLOK) has strategically increased its net exposure to Bitcoin miners, reaching up to 22%. This decision has contributed to BLOK's impressive year-to-date growth of over 31%. The significance of blockchain and digital assets is emphasised by Weiskopf and Venuto, who argue that failing to recognise their transformative potential is a significant error.

While Coinbase faces regulatory challenges with the SEC lawsuit, being a core holding in BLOK's portfolio, the fund also includes companies involved in the transactional aspects of the blockchain industry, such as PayPal and Robinhood. Weiskopf acknowledges the regulatory pressures on Coinbase but remains uncertain about the government's future actions in the industry.

Compliance conversations

AI cloning voice scams: impersonating family members in latest fraud

The use of artificial intelligence (AI) is revolutionising phone scams, as fraudsters employ cloned voices of individuals' relatives, making their approach more convincing and sophisticated. The US Federal Trade Commission (FTC) has issued a warning about this emerging scam, where scammers contact unsuspecting victims, pretending to be family members, and utilising AI tools to enhance their deception.

FTC Chair Lina Khan stresses the importance of early vigilance as AI tools continue to advance, highlighting their potential to "supercharge" fraudulent activities. Scammers collect voice samples from social media and use AI algorithms to replicate the voices, employing text-to-speech software to mimic the distress of the victims' loved ones. By impersonating distressed relatives, scammers manipulate victims into revealing financial information or requesting funds for fabricated emergencies.

Khan expresses concerns about the further development of voice-mimicking technology, which could lead to an increase in scams and other detrimental activities.

In 2022, there were approximately 5,100 reports of phone scams in the US resulting in around US$11 million in losses. However, this represents only a fraction of the total fraud losses, which reached a staggering US$8.8 billion, marking a 30% increase from the previous year. The latest Targeting Scams report revealed Australians lost a record $3.1 billion to scams in 2022.

ASIC has provided a checklist of common scams and ways to avoid them. To learn more, visit ASIC’s website.

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Disclaimer: The information provided in this email is for general purposes only. It should not be construed as professional financial advice from BTC Markets Pty Ltd. BTC Markets is not a financial adviser, and you should consider seeking independent legal, financial, taxation or other advice to ensure that the information relates to your unique circumstances. BTC Markets is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this information contained within this email. Past performance is not an indicator of future performance. We note that we may, at any time, change the characteristics of the product. The information provided is intended for recipients in Australia. This information is not to be reproduced without permission.

Prices are accurate as of 10:00 AM AEST, on 08/06/2023.