By Matteo Greco, Research Analyst in digital assets business and publicly listed fintech investments Fineqia International
BTC closed last week around $27,000, down 3.5% from its $28,000 price at the end of last week. It fell to around $25,500 on Monday, moving up slightly to $26,394 late Tuesday, after the SEC announced it would sue Binance and Coinbase, the world’s largest crypto exchange by volume, for trading in securities deemed unlicensed in the US. Trading volumes remain low, with BTC on-chain volume dropping 13% during May. The data points to a difficult time for digital asset markets in attracting investors and maintaining high trading volumes.
This can be attributed to two main factors. First, difficult macroeconomic conditions are making investors adjust their positions in anticipation of the announcement at the next FED meeting on June 14. While CME futures expect with 80% probability that there will be no new rate hike at the next meeting, investors are still cautious as monetary policy expectations have been changing rapidly day by day.
Second, the SEC is pressing hard on exchanges. US regulators argue that most digital assets qualify as securities and exchanges have sold them to American investors without being properly registered in the US. The recent actions taken by the SEC against Binance and Coinbase led to a market decline, followed by a slight rebound over the course of Tuesday.
US regulatory action could encourage many exchanges overseas, similar to what happened in Canada. This could benefit Asian markets, which are moving towards a friendlier environment for digital assets. On June 1, the Japanese government lifted the ban on stablecoins and the Hong Kong government legalized cryptocurrency trading by retail investors. Hong Kong asset manager First Digital is introducing a new stablecoin, for example, which will be pegged to the US dollar.
The move underlies efforts by Asian regulators to attract new investors in digital asset markets, a shift to the past, especially in China where cryptocurrency trading and bitcoin mining have been restricted.