Crypto News

Biden Wields Authority to Halt Repeal of Controversial Accounting Bulletin 121

President Joe Biden recently exercised his executive authority by vetoing a decision aimed at reversing a ruling set forth by Congress and the Senate. This ruling targeted the Securities Exchange Commission's Accounting Bulletin 121 rule, known as SAB 121. This ruling dictates that cryptocurrencies, such as Bitcoin, held by financial institutions on behalf of their clients must be accounted for as the institutions' own assets on their balance sheets. Many stakeholders view this requirement as unjust, positing it would impose significant challenges for banks and investment institutions, adding unnecessary financial risks and regulatory burdens.

President Biden's rationale for vetoing the reversal stems from his concern for consumer and investor protection. He contends that nullifying the SEC ruling would undermine the agency's ability to maintain essential safeguards. This development underscores the stark disparity in perspectives within the political landscape, revealing contrasting views between the parties and the U.S. President. Notably, the recent resolution passed by Congress and the Senate to cancel the SEC's rule highlights this divide.

Democratic Senator Ron Wyden is among those who argue that the SEC's rule unfairly targets cryptocurrencies, creating obstacles to their growth compared to traditional financial assets. With President Biden's veto, financial institutions are now mandated to include cryptocurrencies held for customers on their balance sheets, a decision likely to have significant implications for the financial sector moving forward.

Trump: Guilty Verdict Sends Meme Tokens Crashing

Donald Trump meme coins experienced a significant drop on Thursday night following the former president's conviction by a New York jury on all 34 charges against him. Trump, who remains the favourite to defeat Joe Biden in the upcoming November presidential election, was found guilty of felony charges related to falsifying business records. This unprecedented event in U.S. history underscores a remarkable scenario: a sitting president can not only run for re-election with a criminal record but could also potentially govern from prison, as no laws are preventing this in the U.S. 

Immediately after the verdict, the Trump token plummeted by 35%, while the Joe Biden token surged by 20%.

Trump has officially stated that he would support the cryptocurrency sector if he wins the election. This stance will gain significant backing from cryptocurrency companies, investors, and traders. As the presidential election campaign trail is set to begin in a few weeks, it remains to be seen how this outcome will affect the polls. However, there is a consensus within the crypto community that this might boost Trump’s ratings. One platform placed Trump at a 56% chance of defeating Biden in the November election. 

Meme coins have experienced a notable surge in the past few months, outpacing most altcoins, which have not increased as sharply as Bitcoin. The popularity of presidential meme coins has been particularly strong. Whether this trend will continue remains uncertain, but it appears highly likely as we approach the election.

SEC, Terraform Labs, and Do Kwon Reach Tentative Truce: Regulatory Battle Nears End

The Securities Exchange Commission (SEC), Terraform Labs, and its founder Do Kwon, have reached a tentative settlement ‘in principle’, as announced on Thursday. Do Kwon was found guilty of civil fraud on charges related to misleading investors and making false claims in April. Do Kwon, along with co-founder Daniel Shin, ran one of the largest blockchains in the world, the Singapore-based Terra blockchain. Together, they created two tokens within the company: TerraUSD (UST), a stablecoin pegged to the U.S. dollar, and Terra’s native token, Luna.

The company developed a decentralised financial infrastructure by leveraging blockchain technology, providing customers and investors with low-fee digital payments and a high-yield staking service for its UST stablecoin. However, their business collapsed in May 2022 when they could not maintain UST’s peg to the U.S. dollar. This failure had a significant negative impact on the cryptocurrency markets and led to the Luna token's value plummeting, resulting in losses of over $40 billion for investors and widespread repercussions across the cryptocurrency space.

The SEC sued the company and Do Kwon, alleging that they made false statements about UST’s stability and falsely claimed their technology was used in a Korean mobile payment app. U.S. District Judge Jed Rakoff has asked the SEC and Do Kwon to file documents supporting the settlement, although the terms of the case have not been disclosed.

The SEC seeks to have Do Kwon hand over $5.3 billion, claiming that his profits were improperly earned from TerraUSD sales. Additionally, they are seeking a $420 million fine for the company and a $100 million fine for Kwon. However, Terraform Labs and Do Kwon argue that these amounts are excessive and propose that the company should be fined $3.5 million and Do Kwon less than $1 million.

Do Kwon is also facing criminal charges in the U.S. and his home country, South Korea, and faces extradition from Montenegro, where he was arrested in March 2023. Do Kwon denies any wrongdoing.

Crypto Analysis

Bitcoin (BTC/USDT)

Bitcoin has been moving sideways over the past week, with its price consolidating near the old all-time high of $73,777. The trading volume has been lacklustre, which is typical for a market moving sideways. Currently, at the current time of writing on Monday morning, the price fluctuates around the $69,000 mark, poised for another potential breakout.

Several positive indicators emerge when analysing the charts. Firstly, the price is in an undisputed uptrend, characterised by daily higher highs and higher lows, as depicted by the arrow on the daily chart. Additionally, the price is above the major moving averages, which also trends upwards.

The price managed to bounce along the old resistance, which has now become new support. This is illustrated by the horizontal black line and blue arrows marking each respective swing pivot point around this area.

There is a possibility that large players, known as "whales," may drive the price below this line. By doing so, they could stop short positions, feed off the liquidity, and then buy back into the market. This kind of liquidity trap is called a bear trap. Monday morning’s bullish price action shows this to be less likely.

The fact that price has held this support at the current time of writing, indicates its resilience. It suggests that the continuation of both the primary and secondary up-trends is still very much in play.

Finally, as discussed two weeks ago, the price has formed an inverse head-and-shoulders pattern. This pattern has a measured objective that would take the price up to $72,188. This target is derived by measuring the distance from the bottom of the pattern (the head) to the point of breakout from the neckline (the diagonal line) and then adding this distance to the breakout point.

All things considered, it appears that the price is consolidating for the next upward move within the primary trend. Based on last week's analysis, there is a strong possibility of reaching new all-time highs shortly. I look forward to revisiting the Bitcoin chart next week to assess its progress.

TOTAL 3 (excluding Bitcoin & Ethereum)

The Total 3 chart, which includes all cryptocurrencies except Bitcoin and Ethereum, shows a significant technical pattern. The price is approaching the apex of a triangle formation, suggesting an imminent breakout in either direction. While there is a possibility that the price could drift outside the triangle and continue moving sideways, the current contraction indicates a potential for a substantial move in either direction.

The primary trend remains upward, with the price consistently staying above the 100-day exponential moving average (EMA), which continues to rise. Additionally, the 50-day EMA is providing support for the price. The decreasing volume as the price moves sideways further suggests that the chart may be preparing for a larger move.

The Stochastic RSI is overbought and below the 20 line, crossing into a range that often precedes a move back above the 20 line. This movement would confirm the resumption of the uptrend. Overall, the left chart indicates a constructive outlook for the price.

On the right chart, we observed a bounce off the 0.618 Fibonacci retracement level, measured from the March 14th swing high to the April 13th swing low, which stands at $701.067 billion. As of this writing, the price is touching the upper trendline of the triangle pattern. Any break below this pattern would require a reassessment, potentially indicating a further retracement.

Bitcoin Dominance (BTC.D) excluding all major stablecoins

Updating the Bitcoin dominance chart for the second consecutive week has proven necessary. The price remains above a parallel trendline that has been respected since September last year. Currently, the price is at the bottom of this trendline, as illustrated in the chart on the right. We have observed multiple support touches along this trendline, which we will examine in detail.

On the daily chart, Bitcoin dominance has broken the support level at 57.98% and is currently retesting this line as new resistance. Two potential scenarios could unfold: the first scenario confirms a new downtrend following that break of support. The second scenario is a fake-out, where the price moves back above the trendline. This scenario would be extremely bullish for Bitcoin compared to altcoins, especially if Bitcoin's trading volume were to surpass that of altcoins.

The Stochastic RSI is currently mid-ranging but trending upwards, which suggests the possibility of a bear trap and a bullish fake-out. The retest of the lower trendline on the weekly chart further supports this scenario. However, there is substantial evidence against this bullish outlook. The daily chart's breach of support, a bearish rising wedge on the weekly chart, and the accompanying bearish RSI divergence all suggest a bearish trend. Last week's bearish candle also leans towards the likelihood of the downtrend scenario.

Given these mixed signals, monitoring price action closely for any further developments and any break of the weekly rising wedge is essential. A decisive move on strong price action will likely set the direction of Bitcoin against altcoins for the medium term.

In Summary

There is little doubt that Bitcoin's price will likely reach new all-time highs, but two key questions remain. The first is, when will this happen? Early-week price action suggests this could occur sooner rather than later. The second question is, will altcoins begin to outperform Bitcoin? This scenario is more complex to analyse.

Bitcoin dominance is at a critical support level, making this week a potentially pivotal moment for the markets. Even if Bitcoin reaches a new high, it does not necessarily mean we will see significant inflows in Bitcoin relative to altcoins. We could witness a stabilisation in Bitcoin's price and the onset of an altcoin season we have been anticipating.

As always, price action must guide our decisions, and the principle of trading what you see remains as relevant as ever. The weekly Bitcoin dominance trendline is critically important and will determine the trend for the foreseeable future. A break and a close below this line on daily and weekly charts could signal a significant move in favour of altcoins. Until then, we remain in a wait-and-see mode.

Wishing everyone a healthy and prosperous week ahead.

Macro News and Analysis

Equity markets across US, Europe and Asia all closed lower last week, although much of the US’s losses were clawed back in an incredibly strong rally just before US close Friday. Asian markets jumped in Monday trading, following Friday’s strong close in the US and hopes the Fed will cut interest rates this year. The UK and Germany indices started the week on a strong footing but much was given back in the first few hours of Monday. Commodities closed the week lower, with gold and silver flat after a volatile week. 2-year yields were closed down whilst 10-year yields closed higher – a bear steepening reflecting a week of uncertainty.

US Treasury Auctions Weaker Than Expected

US Treasury issuance was again high last week, with $183 billion in new debt sold across 2-, 5- and 7-year tenors. All three auctions performed poorly versus expectations. Whether this is due to economic uncertainty, lack of confidence in the sheer volume of fiscal spending or a combination of both, this level of issuance appears to have been difficult to digest by markets with risk assets, commodities and yields all seeing a week of volatility.

Speaking at a conference in Atlanta on Wednesday, Atlanta Federal Reserve President Raphael Bostic said he’s hopeful inflation will continue to normalise over the next year. Bostic said that whilst the breadth of inflation is still higher than their long-term target, he remains optimistic on a Q4 rate cut: “My outlook is that if things go according to what I expect — inflation goes slowly, the labor market slowly and orderly moves back into a sort of a weaker stance, but a stable-growth stance — I’m looking at the end of the year, the fourth quarter, as the time where we might think about and be prepared to reduce rates”.

Australia Facing Cashless Future?

Linfox Armaguard, the company that transports notes and coins from Australia’s central bank to commercial banks and cash machines, is facing an existential crisis as it conducts an extended round of emergency funding negotiations.

The company has raised concerns over the possibility that some locations may have to do without access to physical cash if further funding cannot be agreed upon. More than 75 meetings have been held over the past six months between Armaguard, the central bank, and commercial banks over declining cash usage, which now accounts for around 7% of payments in Australia.

Since the COVID lockdowns, electronic payments surged a massive 12,000% in Australia in 2022 compared with 2018. However, there are, of course, still minorities, such as remote locations and older citizens, for whom physical cash is either preferred or required.

But Armaguard’s costs have soared as inflation has increased the price of distributing physical notes and coins across a country two-thirds the size of the US. With 44% of bank branches outside of major cities and an ever-decreasing return on logistics costs, Australia faces a real crisis with how to get cash to those who rely on it for day-to-day transactions.

Mexico’s Sheinbaum Wins Presidency

Claudia Sheinbaum has won the Mexican presidential election to become Mexico’s first female president. Sheinbaum will take the reins of incumbent Andres Manuel Lopez Obrador, or AMLO as he is known, who has led the ruling Morena party since 2018. Constitutional law states that Mexican presidents can hold a single six-year term and are not allowed to hold the position again.

The Morena party currently holds a supermajority coalition in the lower house. Should Morena also gain a two-thirds majority in the senate, that would mean Morena holds enough voting power to change the Constitution. This is a concerning scenario as when the Institutional Revolutionary Party gained power in both houses, they remained in power for more than seven decades.

AMLO has pitched reforms to elect judges, which, according to law and advocacy groups, violate international legal standards and has sparked concerns over judicial independence and democracy in Mexoci. The peso dropped -4% in Monday trading following the news and currently sits -2.75% lower than Friday’s close. All eyes now will be on the Senate vote results.

In Other News

• SEC Ordered to Pay $1.75M Receivership, Attorneys' Fees For “Bad Faith Conduct” in Crypto Cases – John Deaton/X, Paul Grewal/X

• Draft US Legislation to Classify Not Re-Using Bitcoin Addresses as Mixing – Alex Gladstein/X, Coin Center

• SEC’s Hester Peirce Proposes Joint US/UK “Digital Securities Sandbox” – Eleanor Terrett/X, SEC

• Biden Admin Seeks Guidance From Crypto Industry – The Block

• Biden Sends Presidential Delegation to Bukele Inauguration – The White House

• Selmer Scientific (NASDAQ:SMLR) Adds Bitcoin to Balance Sheet – Ben Werkman/X (here, here), CoinDesk, Matthew Sigel/X, PR Newswire

• BlackRock Buying IBIT for its Strategic Income Opportunities Portfolio – Bitcoin Archive/X

• Leveraged ETH Futures ETF Launches – Eleanor Terrett/X

• Bitcoin Hash Wars Have Begun; $RIOT’s Bid for $BITF Marks Start of Public Bitcoin Miner M&A Season – Bitfarms, Hashrate Index/X, Cryptoklepto/X, Global Newswire

• Hashrate Futures Now Trading – Bitcoin Bella/X, PR Newswire

• IBIT Overtakes GBTC as World’s Largest Spot Bitcoin ETF – Bloomberg (here, here)

• NYSE Collaborating With CoinDesk Indices to Launch Cash-Settled Index Options – Kim Greenberg/X, Businesswire

The Week Ahead

Events This Week

This week we have Canada, ECB and India interest rate decisions as well as slew of US jobs market data and GDP and PMI prints for multiple economies.

Monday

• Australia Judo Bank Manufacturing PMI

• Korea S&P Global Manufacturing PMI

• China Caixin Manufacturing PMI

• Indonesia Inflation

• US construction spending, ISM Manufacturing PMI & Employment, S&P Global Manufacturing PMI

• International Atomic Energy Agency board meets in Vienna

Tuesday

• Korea CPI

• UK BRC Retail Sales Monitor

• Germany unemployment

• South Africa GDP

• Brazil GDP

• US factory orders, JOLTS, RCM/TIPP Economic Optimism Index

Wednesday

• Australia GDP, Judo Bank Services PMI

• South Korea GDP

• Japan Jibun Bank Services PM

• China Caixin services PMI

• UK S&P Global Services PMI

• Eurozone S&P Global Services PMI, PPI

• Canada rate decision

• US ADP Employment Change, S&P Global Composite & Services PMI, ISM Services PMI

Thursday

• Australia balance of trade, home loans, investment lending for homes

• UK S&P Global Construction PMI

• Eurozone retail sales, ECB rate decision

• US balance of trade, imports, exports initial jobless claims

• Canada Ivey PMI

Friday

• China trade, forex reserves

• Eurozone GDP, employment

• Mexico CPI

• Chile copper exports, trade, CPI

• US unemployment rate, nonfarm payrolls, average hourly earnings, participation rate, wholesale inventories

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