Feb 23, 2023

U.S. Crackdown Leads to Crypto Market Volatility

The crypto market has seen a downturn today, as investors digest the Federal Reserve’s minutes which indicate that interest rate hikes could extend for longer than most investors expect. This comes after the Feb. 14 consumer price index (CPI) print showed higher-than-expected inflation, along with increased regulatory enforcement from the United States Securities and Exchange Commission (SEC).

The primary downside catalyst of the day appears to be investors’ concerns over enforcement action against the crypto industry. The SEC crackdown on Paxos and Binance and enforcement action centralized exchanges offering staking-as a service, was followed by $32 million in digital asset outflows on Feb. 20.

The SEC started the recent string of enforcement actions by going after Kraken’s earn program on Feb. 9. In the $30 million settlement announcement, the commission claimed that Kraken had failed to register the offer and sale of their crypto-asset staking-as-a-service program, which qualified as a sale of securities. In addition to the monetary fine, Kraken agreed to cease earn program operations.

Nexo also recently decided to end its centralized staking program, and Coinbase CEO Brian Armstrong has vowed to fight the action if brought to court. On Feb. 13, the SEC issued a notice to Paxos, a stablecoin issuer, claiming that BUSD is an unregistered security. Following the SEC announcement, on the same day, New York regulators ordered Paxos to stop issuing BUSD, which is the third-largest stablecoin in the crypto market.

Binance has stated they intend to continue supporting BUSD despite the order against Paxos. American lawyers believe the securities argument against BUSD is complicated due to potential profit from arbitrage, hedging and staking opportunities.

The lack of clarity and transparency on this matter weighs on growth and innovation within the sector, and many analysts believe that the mainstreaming of cryptocurrencies cannot happen until a more universally agreed-upon set of laws is enacted. The Financial Stability Board (FSB) believes that many stablecoins will fall short of meeting the forthcoming onerous regulation.

The Commodity Futures Trading Commission (CFTC) has also called for clearer regulation, but the pace of these changes is unknown. On Jan. 28, the Biden Administration released a roadmap for cryptocurrencies that suggests preventing pension funds from investing into high-risk investments.

Crypto prices are still highly correlated with the Dow and S&P 500. After the January CPI print showed inflation higher than expected with a 0.5% increase, the FOMC minutes confirmed that the Fed will continue to raise interest rates as long as they view it necessary. Adding to the tender sentiment surrounding inflation, most major banks still expect the U.S. to experience a sharp recession at some point in 2023.

The crypto market has witnessed a strong start to 2023, seeing billions of USD Coin (USDC) flow into BTC to generate a 6-month high of $24,800 on Feb. 16. Even struggling Bitcoin miners saw massive growth, with revenues rising by 50% to $23 million, signaling a recovery for the beleaguered industry.

While Bitcoin had the second-best January on record, it’s possible that the enforcement actions from the SEC and headwinds from macro markets contributed to the current crypto price correction and brief decoupling from U.S equities.

Data shows that Bitcoin’s price 7-day volatility on Feb. 20 reached the highest level since the FTX collapse. The increase in volatility comes after crypto prices have outperformed major U.S. indices. Top crypto investors believe more sell-offs are on the horizon and Bitcoin analysts push warnings of the long-term downtrend continuing as macro headwinds will continue to impact crypto prices.

As investors’ appetite for risk is likely to remain muted, and potential crypto traders might consider waiting for signs that U.S. inflation has peaked, or for the Fed to signal that smaller-sized interest rate hikes are on the cards. A more transparent roadmap for crypto industry regulation would also help to improve sentiment across the sector.

In the meantime, crypto businesses are turning to NFTs as an alternative way to promote their products and services. NFTs are digital assets that exist on the blockchain, and they can be used to create unique digital collectibles, artwork, and even digital tokens. NFTs are becoming increasingly popular as a way to promote products and services, and many businesses are now turning to NFT marketing agencies to help them create promotional campaigns for their NFTs.

These agencies can help businesses create custom NFTs, create promotional campaigns on Twitter, and even help them sell their NFTs. They can also help businesses create unique NFTs that are tailored to their specific needs, such as creating digital tokens for loyalty programs or creating digital tokens for special events.

As the crypto market continues to grow and evolve, NFTs and NFT marketing agencies are likely to become increasingly important for businesses looking to promote their products and services. With the help of an experienced NFT marketing agency, businesses can create unique and engaging promotional campaigns that can help them reach a wider audience and promote their products and services in a more effective way.

Disclaimer: All investment or financial opinions expressed by MoonLanding Media are not recommendations and are intended for entertainment purposes only. Do your own research prior to making any kind of investment. This article has been generated based on trending topics, has not been fact checked and may contain incorrect information. Please verify all information before relying on it.