Good morning Here’s what happens:
Prices: After a morning surge, Bitcoin spent the day in its recent range well above $30,000.
Insights: goods or security? Former CFTC chairman Timoth Massad says the decision can wait.
Bitcoin ignores inflation data
Immediately following a somewhat surprising drop in June’s Consumer Price Index (CPI) on Wednesday, Bitcoin appeared to be heading for better days before slipping back into the shadows where it has been well below $31,000 for almost a month.
The largest cryptocurrency by market cap recently traded at $30,357, down 0.8% in the last 24 hours. BTC surged in the hour immediately following the CPI release, a smaller-than-expected 3% gain and down from the previous month’s 4% as investors quickly lost their enthusiasm. On-chain data this morning showing that two wallets — marked as US government property and linked to confiscated bitcoin holdings from the Silk Road marketplace — exchanged 9,825 bitcoin ($301 million) in three transactions ) moved may have outperformed the upbeat inflation report.
With a few blips, Bitcoin has hovered between $30,000 and $31,000 most of the time since June 20 as investors worried about renewed hawkish rate hikes that could plunge the economy into a deep recession. Federal Reserve officials have repeatedly said they intend to raise interest rates by 25 basis points (bps) later this month after interrupting a year-long diet of tightening monetary policy in June.
Those worries and often confusing macroeconomic data trumped the euphoria that erupted in early June after BlackRock, the world’s largest wealth manager, and other financial services giants applied for elusive spot Bitcoin ETFs. The SEC, which has denied several such filings over the past two years, is unlikely to make a decision any time soon, leaving markets unsure of the next price catalyst. Still, sentiment has turned bullish over the past week as two respected research groups believe BTC could surge to $120,000 or more by the end of 2024 and other signals, including CoinDesk’s Bitcoin Market Indicator, are pointing higher.
In a Telegram message to CoinDesk, Strahinja Savic, head of data and analytics at Toronto-based crypto platform FRNT Financial, noted that the supply of BTC, which has been flat for more than a year, has collapsed over the past two years All-time high has peaked at nearly 70%. “This data suggests that the currently dominant Bitcoin investor is the long-term hodler,” Savic wrote. “This cohort is likely to be less sensitive to macroeconomic considerations.”
Ether also rose after the CPI release before falling to last change hands at $1,870, down 0.6% from the same Tuesday. Other major cryptos were mostly down, with MATIC and AVAX, the tokens of smart contracts platform Polygon and Avalanche, falling more than 4% and 2%, respectively. The Crypto Market Index, a measure of how crypto markets are performing, fell 1.9%.
Equity markets liked the sound of falling inflation better than cryptos, with the tech-heavy Nasdaq Composite falling 1.1%, and the S&P 500 and Dow Jones Industrial Average (DJIA) also declined. Traditional safe haven gold edged higher.
FRNT’s Savic noticed a reversal in stocks and cryptocurrencies, a trend that started months ago. “We’ve seen correlations between bitcoin and traditional assets falling in the run-up to this CPI release, and that’s been a strong theme in 2023,” he wrote.
Tim Massad’s incremental approach to crypto regulation
Regulators don’t have to immediately decide whether crypto is a security or a commodity, former Commodity Futures Trading Commission Chair Timothy Massad said on CoinDesk TV’s “First Mover” show on Wednesday.
Paraphrasing a Wall Street Journal editorial he co-authored with former Securities and Exchange Commissioner (SEC) Jay Clayton last week, Massad said the CFTC and SEC create basic investor and market protection standards for exchanges through a self-regulatory organization could as an incremental step before determining the status of digital assets.
“We’re consciously saying that we don’t need to solve this to put in place some basic investor protection standards,” Massad said. “We’re not saying it’s not an important issue. It is, and I don’t want to limit the SE C’s ability to say that this (crypto) is (and) is a security that really needs to be upheld. But we say: Look, today we have platforms on which things are traded – maybe it’s securities, maybe it’s commodities. Set standards to protect client assets, prevent fraud and manipulation, and prohibit conflicts of interest that require reporting and recording of information.”
Massad and Clayton’s recommendations come at a potentially pivotal time in the short history of cryptocurrencies and amid an ongoing legal battle between the CFTC, which views cryptocurrencies as a commodity, and the SEC, which views them as a security. Both authorities have filed multiple lawsuits against exchanges and other major crypto organizations, testing the applicability of the current regulations, but have left investors and entrepreneurs deeply unsettled about the future of crypto in the US, which has largely fueled global interest in the space. Last month, the SEC sued Binance and Coinbase, alleging that the exchanges violated securities laws by, among other things, offering unregistered securities.
Some observers believe that US overreach could shift the balance of the crypto world to cities abroad with friendlier regulatory frameworks, including Hong Kong, which has recently eased trading for retail investors, Singapore and Abu Dhabi, which aims to become a global digital hub asset hub.
Massad said the phased approach would provide at least some reassurance as the various cases weave through the courts and authorities continue to debate the nature of crypto. “Cases filed by the SEC and CFTC are not going to take us to comprehensive investor protection standards quickly,” he noted.
Massad said Congress could apply the incremental standards as a kind of test to any platform that trades bitcoin or ether, which account for more than two-thirds of the total value of the crypto market. “There isn’t a platform that matters that doesn’t trade both tokens,” he said. “So that’s the catch. It’s the way of saying, “Here are the intermediaries to whom these standards apply without having to clarify what is and isn’t a security.”
He added, “We’re going to say, ‘Look, this can still be taken to court, and let’s require these platforms to provide some basic disclosures about a token before listing it for trading.’ And that will actually help us figure out what a security is. You can’t really answer what a security is unless you know if there is a common enterprise behind it and what management efforts people are making to increase its value? Do we need disclosure to find out?”
US CPI inflation eased to 3.0% yoy in June from 4.0% in May. Joe Kelly, CEO and co-founder of Unchained, shared his take on Bitcoin. Timothy Massad, former CFTC chairman and current director of the Digital Assets Policy Project at Harvard Kennedy School, discussed the re-enactment of crypto legislation by Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (DN.Y.). And Will Robinson, senior researcher at Alliance DAO, commented on the future of Web3 gaming.