The crypto market is down today as regulatory enforcement against the sector reaches a head and short-sellers jockey for the lead in liquidations.
The crypto market is down today as a slew of regulatory enforcement events weigh on Bitcoin (BTC), Ether (ETH) and altcoin prices. The markets continue to reel since the Nov. 21 Department of Justice (DOJ) settlement against Changpeng “CZ” Zhao and Binance to the tune of a $4.3 billion fine.
Price action across the crypto market remains tilted to the downside as investors and money managers further digest the potential fallout from increased regulatory actions taken against the industry.
US-led regulatory pressure against crypto is in full-steam-ahead mode
The cryptocurrency industry and regulators have a long history of not getting along either due to various misconceptions or mistrust over the actual use case of digital assets.
On Nov. 21, the DOJ announced enforcement actions and a settlement related to CZ and Binance in which both pleaded guilty.
According to the settlement, Binance will pay $4.3 billion in fines, and CZ will pay $159 million in penalties. The settlement covered civil regulatory enforcement actions by government departments, including the U.S. Treasury and Commodity Futures Trading Commission (CFTC).
Following the settlement, CZ announced that he had stepped down as CEO of Binance. On Nov. 28, CZ made his departure as Binance.US chair official. The departure comes after reports suggest the Securities and Exchange Commission (SEC) is still looking for potential FTX-style fraud at Binance.U.S.
Cardano founder Charles Hoskinson reflected on the settlement, calling it “the end of an era.” The initial indication from the DOJ and Attorney General Merrick Garland suggested that strong actions would be taken against the crypto sector, but the message was not specific. On Nov. 28, Coinbase warned customers about a subpoena in a CFTC probe against Bybit exchange.
Risk assets are heavily impacted by investor sentiment, and this trend extends to Bitcoin and altcoins. To date, the threat of unfriendly cryptocurrency regulation or, in the worst case, an outright ban continues to impact crypto prices on a monthly basis.
ETH and BTC spot ETF euphoria could be waning
Market sentiment boomed due to optimism about a potential spot Bitcoin exchange-traded fund (ETF) approval to happen in November but was later delayed by the SEC on Nov. 17. The euphoria helped to send Bitcoin price to an 18-month high above $38,000.
However, the euphoria seems to be easing, with the BTC price down below the key $38,000 level on Nov. 29 intraday. Now, Bitcoin is struggling to maintain positive momentum for the month of November after a strong “Uptober.”
While BlackRock does not believe the SEC has any legitimate reason not to approve a cryptocurrency spot ETF, the SEC seems poised to delay until 2024.
On Nov. 15, the SEC delayed a decision on Grayscale’s Ether futures ETF. Some analysts believe the 19b-4 form submitted by Grayscale is a potential “trojan horse” for the agency.
Related: Real AI use cases in crypto, No. 3: Smart contract audits & cybersecurity
Notably, the securities regulator decided to delay applications from Hashdex and Global X ETFs on Nov. 17. On Nov. 28, the SEC extended the public comment window of Franklin Templeton’s Bitcoin ETF, pushing approval further into 2024.
For now, traders are likely securing profits at the current multi-month high prices in the crypto market because of this potentially long wait. Some analysts see the Bitcoin ETF as a “Buy the rumor, sell the news” event.
Related: Bitcoin price fails $38.5K breakout as US GDP fuels Fed hard landing woes
Futures liquidations send the crypto market lower
The decline across major cryptocurrencies has led to a rush of liquidations across the derivative market. While long and short position derivative traders are battling, short-sellers are in command on Nov. 29.
In the past 24 hours, over $44.9 million in long positions have been liquidated across the crypto market, with $34 million being wiped out in the previous 12 hours. Crypto market prices are negatively affected when long derivative positions are liquidated without buying pressure from trading volume.
In the short term, the cryptocurrency market will continue to navigate multifaceted challenges, and the ebb and flow of various economic and regulatory factors will undoubtedly shape its trajectory for the foreseeable future.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
