2023-05-21 16:53:44
Market situation
Last Thursday, the US stock market was red in all indexes. Stock futures also trended down. Gold and oil prices also fell slightly to around 1833 USD/ounce and 75 USD/barrel.
Without exception, BTC price also plummeted to around $19,800 and fluctuated around $19,900 in the past day. Crypto market cap falls below $1 trillion.
Although the price fell quickly, the total amount of liquidated orders was not too large. Most liquidation orders are Long orders.
Last week, the number of people filing for unemployment fell by 211 thousand people. Together with ADP’s payroll and employment report, the possibility of unemployment for the whole of February will be low. If unemployment is good, maybe the Fed will be more aggressive in raising interest rates after the next meeting.
People worry that the Fed keeping interest rates high for a long time could cause the economy to fall into a recession. This concern is also evident in the interest rates of US public bonds. The 2-year US bond has reached a yield of 5%, which is the highest level since 2009.
The chart above also shows a negative correlation between BTC price and US 2-year bond yields. High bond yields indicate that investors are nervous and want to find a safer asset to store value. If public bond interest rates drop, investors will leave and find other assets such as stocks, BTC, … to invest. At that time, these assets will have growth.
Kucoin is sued with ETH, Kucoin token
Yesterday, New York State Attorney General Letitia James filed a lawsuit against KuCoin exchange saying that the exchange violated securities laws when it “sells, offers to sell, buys and offers to buy cryptocurrencies as commodities and securities” for New Yorkers, not registered with the attorney general’s office. Additionally, the lawsuit also states that “ETH, LUNA, UST, and KuCoin Earn are all securities under Waldstein,” a test established by the New York Supreme Court of Albany County in 1936, as well as the article check Howey. Detailed article you can see here.
If you consider keeping LUNA, UST with ETH, which token is more like a security. We can see that LUNA will be more like a security because Terraform Labs, the founder of LUNA and UST has a very close relationship with these two coins. Terraform Labs once stated that they have an important position in this ecosystem, they also propose to sell LUNA to get money to build the ecosystem. They are the middle man that makes the LUNA-UST protocol work.
As for ETH, although in the early days there was an ICO sale to raise funds and was held by the Ethereum Foundation and Vitalik. To date, the network of ETH has grown and not only the Ethereum Foundation but also many other teams have joined hands to develop this ecosystem. It is very important that the Ethereum Foundation has never stated that they are a unit without them ETH would not be able to develop.
In addition, ETH staking participants receive profits according to the distribution of the network, not dependent on the Ethereum Foundation. LUNA staking depositors can get back 20% of the profits and a part of that profit is funded directly by Terraform Labs. Given these, LUNA and UST will be more like securities than ETH.
Regarding securities, “The Howey Test was established as a definition of investment contracts and securities, and it has become a widely used standard in US law. As defined by the Howey Test, an investment contract is a security when it satisfies all four conditions:
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As an investment in money
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Invest in a joint business
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Investors expect profit
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Profits mainly from the efforts of others
Of the four conditions above, the fourth, “the return that investors expect mainly from the efforts of others” is a very difficult point to prove with crypto tokens. This is also the reason why the SEC lawsuit against Ripple has been going on for more than 2 years and has not come to an end. With Ethereum, its general business is difficult to determine. Because the Ethereum Foundation is not the only unit developing the network. Also, every network change (e.g. proposal EIP 1559) requires a community vote for adoption. Ethereum Foundation has a big role but does not have the power to decide everything.
In addition, there are many times when ETH does not have any updates, and the price movement is not dependent on the activity of the Ethereum Foundation. On the ETH ecosystem, many applications, GameFi, NFT, …. have been developed in the past time, promoted by many different companies, not by the Ethereum Foundation. These developments and price increases are not attributed to the main development team. Therefore, to prove ETH is a security according to Howey Test is very difficult.
Recently, the chairman of the SEC shared an article that the SEC wants to regulate the entire crypto market. Maybe that’s why ETH is mentioned in the New York attorney general’s lawsuit. One person who disagrees with the SEC is the chairman of the Commodity and Futures Trading Commission (CFTC). Rostin Behnam, president of the CFTC told the Senate Agriculture Committee that Ethereum, the second largest cryptocurrency next to Bitcoin, is a commodity. The CFTC seems to be looking to regulate the crypto market, as it only has regulatory authority over commodities and futures contracts.
Overall, the charges against ETH coming from the New York state attorney general will still need to go to court. This is just a word from one side of this agency, not a decision. Because these agencies have legal functions, there are laws on crypto that need to come from Congress. So it’s understandable to be nervous about this news, but it doesn’t lead to panic selling right now with investors.
Although the crypto market is facing many legal attacks from law enforcement agencies such as the SEC, etc. However, there are still many congressmen who still have active support for this market. Statements by Republican lawmakers ahead of the opening hearing of the US House of Representatives subcommittee focusing on digital assets, financial technology and inclusion reveal partisan divides on cryptocurrency regulation. Difficulty moving towards acceptance is inevitable, but the crypto market will still grow and move towards acceptance.
Other information:
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The company Grayscale went to court against the SEC to argue that the SEC’s rejection of their ETF application was “arbitrary”. Because the SEC approved the Bitcoin Future ETF fund but rejected the Bitcoin spot ETH fund. SEC Senior Attorney Emily Parise makes the SEC’s argument that the price of the Bitcoin futures contract underlying the ETF futures is more resistant to manipulation than the spot bitcoin market can be. out if a spot bitcoin futures ETF is approved. However, this argument is not valid. Because the price of BTC in the spot and futures markets move together 99.9% of the time. Thus, a panel of judges was skeptical of the SEC’s arguments and judgment.
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In a new update from the SEC lawsuit, Ripple has had a small victory in the judge’s approval to remove an expert witness who was invited to prove that the purchaser of XRP tokens was in order to make a profit. From the lessons of the Ripple case, the SEC will be more careful in the subjects it chooses to sue crypto companies.
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The Joe Biden administration proposes a 30% tax on electricity used to mine BTC as well as crypto. Besides, they also proposed amending a number of crypto-related laws to increase tax revenue and reduce public debt burden. These include increasing taxes on crypto profits from 20% to 40% or eliminating the wash trading loophole.
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Amazon has announced plans to link real-world assets purchased on Amazon with tokens and NFTs. If history were to repeat itself, Amazon could become the world’s largest seller of NFTs. By combining real-world assets with NFTs, Amazon is creating a new asset class that can attract more buyers and investors.
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Germany’s federal financial watchdog (BaFin) has decided that not all (NFTs) are securities. At this time, regulators do not see how the NFT meets the criteria for being considered a security. They propose to classify NFTs on a case-by-case basis.
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On March 7, The Gazette of India published an announcement from the Ministry of Finance, following a series of cryptocurrency transactions under the Prevention of Money Laundering Act (PLMA) 2002 – namely, exchanges, transfer, safekeeping and management of crypto assets. India has no longer banned crypto but introduced legislation to regulate this market.
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As Russia continues to delay the adoption of cryptocurrency regulations, local advocates have called on Russian President Vladimir Putin to change the government’s approach to regulating the market. Russia does not ban crypto, but gradually opens up and accepts cryptocurrencies, especially in the context that the country is under sanctions related to the war with Ukraine.
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