24.11.2023 – Many investors are breathing a sigh of relief after the legal quake at Binance. However, some experts are warning Bitcoin disciples against too much euphoria – the market is by no means at its best after the settlement.
All-clear or not? Bitcoin has risen and has just formed an ascending triangle on the daily chart – in most cases, this is a bullish continuation formation. The price driver is the hope that index funds that invest in the spot market will be approved. The Binance case also seems to have brought a cleansing thunderstorm down on the market. Or has it?
We have borrowed the title for today’s analysis from the “Börsen-Zeitung”. It recently stated: “After the multi-billion dollar money laundering settlement between Binance and the US authorities, crypto enthusiasts are once again indulging in delusion.”
Many – including JPMorgan – believed that the resignation of CEO Changpeng Zhao and the fine of 4.3 billion dollars for money laundering and breaching sanctions was the best thing for the community. “But this is a dangerous simplification of the outlook for the crypto market,” the paper said. This is because the pressure from regulators will by no means disappear into thin air. If the decline of Binance gains momentum, this could have consequences for the entire segment.
As Binance had apparently done business with Russia, Iran and Hamas, only the most deluded crypto disciples would know how such serious criminal activities could create trust in the financial market, the “Börsen-Zeitung” concluded. And there’s more.
Campaign against the industry
The SEC has just taken on another heavyweight in the crypto market. On November 20, the SEC filed a lawsuit against Kraken with the federal court in San Francisco. According to Reuters, the allegation is that Kraken is not registered with the supervisory authority and is therefore operating illegally as a securities exchange. In addition, a decision in the US Congress on the regulation of the market is still pending – it is therefore unclear whether the SEC has jurisdiction at all. Kraken countered that the SEC had not yet issued any rules on what exactly registration should look like. And that brings us to the heart of the matter.
Because apparently SEC chief Gary Gensler is leading a crusade against the industry. Binance is a victory for him, even though the Commodity Futures Trading Commission played a leading role here. But there have also been defeats for the SEC – such as a ruling in July before the Southern District of New York that Ripple is not a security and therefore does not need to be regulated. And – more importantly – in October, Grayscale scored a triumph before the U.S. Court of Appeals for the District of Columbia Circuit – the financial manager wants to launch a spot index fund. Judge Neomi Jehangir Rao in Washington accused the SEC of arbitrary and capricious regulation: “arbitrary and capricious because the commission failed to explain its different treatment of similar products”. It was precisely this verdict that kick-started the recent bull market, as around a dozen spot ETFs are scurrying around.
Our conclusion: perhaps Gensler will become the Knight of the Sad Countenance and his obvious attempt to strangle the crypto market through overregulation will fail. Then he would be the real deluded one. If the industry is given fair and comprehensible guard rails, the path to the top is open for digital assets. But only as soon as the criminal black sheep have been weeded out. Whether long or short – Bernstein Bank wishes you successful trades and investments!
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