After the one-two punch thrown by the Securities and Exchange Commission (SEC) earlier this week, bitcoin price should have been boxed into a cul-de-sac of declining prices. But that is hardly the case.
As of this writing, it is changing hands at $26,589, up 2.3% from its price a day earlier. That figure represents minimal change from its price two weeks ago, when profit-taking from its price occurred according to Goldman Sachs.
What Gives, Bitcoin Price?
Crypto analysts are resorting to trite explanations to explain the latest price action. The SEC lawsuits were expected and priced in, they say. A more apt way to explain the price action would be to focus on the contents of the complaints. In both cases, the SEC has not slapped criminal charges against Binance or Coinbase. Instead, they have asked for disgorgement and fines as penalties.
There’s the case that crypto trading volumes in the US will affect prices. But this is not the first time that the SEC has filed a case against crypto exchanges. “[Traders are saying] We get it. The SEC hates crypto,” said Jeff Dorman, chief investment officer at Arca, on CoinDesk’s morning show. According to him, no one, meaning trading firms and investors, trades in the United States. He named OKX, Binance, and Deribit as entities that have benefitted from the exodus of traders towards Asia.
Bitcoin’s biggest trading volumes occur at Binance and Coinbase is the flagbearer of crypto in the United States. The SEC’s cases, while serious, do not change that state of affairs.
The Tether Connection
Algorithmic stablecoin Tether is never far behind when crypto prices become volatile. Its circulating supply jumped slightly, from $83.2 billion to $83.4 billion, during the SEC’s double-whammy.
More importantly, there was significant reshuffling of its tokens. FBG capital, a blockchain investment firm, deposited 44 million USDT at Binance. Another unnamed trader plonked 15.9 million USDT tokens at the same exchange. The latter appears to have purchased ether with it.
Apart from propping up prices, the move may have also helped maintain Tether’s peg because an abrupt cliff in bitcoin price would have resulted in a premium for Tether as traders scrambled to exchange their bitcoin for the stablecoin.
Is Tether The Next Target?
Speaking of Tether, there is talk that it may be the next target for regulators. That day cannot come soon enough. The stablecoin, whose peg is actually propped up by algorithms rather than reserves, is key to dismantling the existing crypto ecosystem. It mints profits because it is unregulated. As if that is enough, it latches onto prevailing narratives to demand regulatory clarity.
Earlier this week, Tether’s chief technology officer Paolo Ardoino told CNBC that top auditing agencies were unwilling to “stick their necks out” for stablecoins due to the absence of clear guidance from regulators. He also claimed that investors were moving their assets into Tether because the stablecoin is “perceived to be the holy grail of stability.”
With regulatory clarity, that grail will become a poisoned chalice. Most jurisdictions, that have either established or are establishing rules for crypto, forbid algorithmic stablecoins.