By Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International
BTC closed last week at about $27,000, a 3.5% decrease from the $28,000 price at the end of last week. It dropped to about $25,500 on Monday, slightly moving upwards to $26.394 late Tuesday, after the SEC announced it is suing Binance and Coinbase, the world’s largest crypto exchanges by volume, for trading securities it deemed as being unlicensed in the US. Trading volumes remain at low levels, with BTC on-chain volume decreasing by 13% during May. The data suggests a difficult moment for the digital asset market in attracting investors and maintaining high trading volumes.
This can be attributed to two main factors. First, the difficult macroeconomic conditions are leading investors to adjust their positions in anticipation of announcements at the next FED meeting on June 14. While the CME futures expects with 80% probability that there will be no new rate hike at the next meeting, investors are still cautious as monetary policy expectations have changed rapidly from one day to another.
Second, the SEC is bearing down hard against exchanges. The US regulator contends that most digital assets qualify as securities and exchanges have been selling them to American investors without being appropriately registered in the U.S. The recent action being taken by the SEC against Binance and Coinbase caused a decline in the market, followed by a slight rebound during Tuesday.
The actions of the US regulator could push many exchanges outside the country, similar to what has transpired in Canada. It could benefit the Asian market, which is moving toward a friendlier environment for digital assets. As of June 1, the Japanese government lifted a ban on stablecoins and the Hong Kong government legalised the trading of cryptocurrencies by retail investors. Hong Kong asset manager First Digital is introducing a new stablecoin, for example, that will be pegged to the U.S. dollar.
These moves underlie attempts by Asian regulators to attract new investors in the digital asset market, a shift in attitude to the recent past, especially in China where cryptocurrency trading and bitcoin mining have been restricted.