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SEC driving activity on-chain and off-shore
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This week we dive into the recent actions by the SEC and a brief outlook on its impact on the crypto space.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether.
- Fees on both Bitcoin and Ethereum dropped for the fourth consecutive week as on-chain activity stalls, although they remain at significantly higher levels than they were at the beginning of the year
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Both Bitcoin and Ether recorded nine figures of CEX outflows, relatively low amounts considering the regulatory scrutiny on Binance and Coinbase this week
- For comparison, BTC saw $1.5B in outflows each during the week of the FTXÂ collapse
The Effects of the US Crypto Crackdown
After months of tensions building up against crypto in the US, the SEC came out with their strongest claims thus far this week. On Monday, the SEC sued Binance US and CZ alleging they had been operating a securities exchange illegally. Just 24 hours later, the SEC also sued Coinbase for the same reasons. Shortly after, 11 US states issued cease and desist orders, forcing them to prove within 28 days that they are in fact not selling unregistered securities or be forced out of these states.
This week’s news have had an impact on Coinbase’s stocks and are likely to have a long-term effect in shaping the future of the industry.
Via IntoTheBlock’s free capital markets insights
COIN & Alleged Securities Crash — Coinbase’s stock dropped 10%+ this week alongside many of the tokens the SEC claims to be securities
- Crypto-assets worth as much as $37B in aggregate were deemed as securities in the recent SECÂ lawsuits
- The list includes large cap assets such as Cardano, Solana and Polygon, all which have dropped double digit percentages in value this week
- Notably, the SEC did not include Ethereum as a security despite Gary Gensler calling ETH a security himself, nor Ripple, which is currently going through a previous lawsuit claiming that XRP is a security
- Following the news, Bitcoin and Ether traded at a premium on Binance US, relative to global prices, likely due to traders selling some of the accused tokens for the largest two crypto-assets
These news are expected to drive crypto activity off-shore and on-chain.
Via The Block’s data dashboard
On-Chain Economy Gaining Relative Momentum — The market share of decentralized exchanges out of all crypto volume reached an all-time high in May
- If Coinbase and Binance delist the assets the SEC claims are securities, their volumes are likely to drop
- Some US traders may leave these centralized exchanges and instead acquire tokens through a decentralized exchange
- The market share of DEXs surpassed 20% for the first time last month and could be set to continue climbing in light of the harsh conditions imposed on American exchanges
Via ITB’s Bitcoin ownership indicators
Long-term Holders Reach Record Highs — the total amount of Bitcoin owned by addresses holding for over a year reached a new all-time high this week
- This appears to be the market shrugging off the SEC’s actions
- While some low-conviction traders may have sold this week’s news, now more Bitcoin is held by long-term investors than ever before
Overall, the SEC’s actions may accelerate the trends towards crypto moving overseas and activity moving on-chain as opposed to through a centralized exchange. While there still is much to be processed and legal cases may go on for a while, long-term investors appear unfazed by the news.
The Effects of the US Crypto Crackdown was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.