Here’s what happened in crypto today. The markets continued with volatile movements that decoupled the price action of cryptocurrencies from equities markets. The recent downturn in the crypto market appears connected to the Federal Reserve’s June 14 presser where Fed Chairman Jerome Powell revealed that the central bank would pause rate hikes for June.
While this move aligned with investors’ expectations, the crypto market actually reversed course and resumed the sell-off that has been in play for the past three weeks.
In the press conference after the June 14 announcement, Powell stated,
“Nearly all Committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2 percent over time.”
Bitcoin (BTC) price started June 16, trading above $25,000, but then briefly retracted below $25,000. Analysts correctly predicted that a drop to $25,000 was inevitable based on the current state of BTC derivatives data. Bitcoin’s dip below $25,000 happened for the first time in 3-months but has since regained the key price level.
Following Powell’s interest rate pause, options data on June 15 highlighted potential BTC price downside.
The muted crypto price action and lack of a bullish response to the rate hike pause could be the lingering effect of the SEC’s charges against Binance and Coinbase exchange coupled with new Tether (USDT) drama.
Crypto sector regulation is still the main threat
On June 5 and June 6, the United States Securities and Exchange Commission filed civil lawsuits against two of the largest centralized exchanges in crypto, Binance and Coinbase. The SEC claims that 61 different cryptocurrencies, representing $100 billion in value, are securities.
Other top crypto tokens specifically mentioned as securities include Binance USD (BUSD), Binance Coin (BNB), Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS) and COTI.
The recent SEC action adds to a long history of disputes, misconceptions or mistrust over the actual use case of digital assets. After the FTX implosion, some feel U.S. lawmakers are angry with the crypto industry. The most recent battle is centered on how centralized exchanges can use customer funds.
Not all lawmakers are comfortable with Gensler’s actions. United States Rep. Warren Davidson (OH) introduced the “SEC Stabilization Act” into the House of Representatives on June 12. The bill would remove Gensler as Chair and redistribute power amongst a committee.
Coinbase has also filed a lawsuit against the SEC to call for clarity on cryptocurrencies. In a response on June 14, the SEC said it would take 120 days for the commission to make a recommendation on crypto rulemaking.
Crypto investors take shelter in stablecoins
The ongoing crypto market volatility has sent users to seek shelter in stablecoins. Since the start of 2023, over 500,000 wallet addresses have added Tether.
Tether’s dominance has led t an all-time high market capitalization of over $83.5 billion on June 15. While the stablecoin issuer has minted $16 billion in USDT in 2023 alone, a single $1 billion mint on June 12 led to Tether’s chief technology officer Paolo Ardoino having to clarify that the mint was for cross-chain swaps.
The Tether CTO was in the news again on June 15 after USDT slightly de-pegged by 0.3%. The loss of the dollar peg seemed to be triggered by the Curve 3pool imbalance which saw USDT weighted at 73.8% vs USD Coin (USDC) and Dai (DAI). Despite the de-peg Tether remains convinced that it can redeem any amount required by market participants.
Markets are edgy in these days, so it’s easy for attackers to capitalize on this general sentiment.
But at Tether we’re ready as always. Let them come.
We’re ready to redeem any amount.
— Paolo Ardoino (@paoloardoino) June 15, 2023
With heavy macro headwinds, upcoming rate hikes and low volume, it is likely the volatility in crypto will remain for the foreseeable future.
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