This week, the SEC filed lawsuits against the two biggest exchanges on the planet, intensifying the lovely regulatory crackdown of 2023. On Monday, Binance was sued, and less than a day later, Coinbase received the same treatment.
Because the crypto space digests the information, we glance on-chain to check what the cash is saying in this section.
withdrawals of bitcoin are particularly frequent.
Bitcoin stability on Binance decreased from 704,000 on Sunday to 689,000 on Tuesday. This is a loss of approximately 15,000 Bitcoin, which is negligible in the context of both the general stability and the typical stability circulate we observe over any given 48-hour period.
We now have a smaller window to deal with because Coinbase was sued a day later (on Tuesday as opposed to Monday). However, this too was not unusual; on Tuesday, there was a small outflow of 550 Bitcoin, or about 0.1% of the total balance.
Therefore, as of Wednesday morning, when I’m preparing this, there is actually nothing to see in close proximity to Bitcoin’s on-chain movements. Additionally, Bitcoin’s value has successfully recovered, currently trading at $26,800. Before the legal actions, it traded for $27,000. It was trading at around $25,500 for the majority of Monday, down 5.5%, before rallying back.
Ethereum withdrawals from exchanges are increasing.
The problems are quite different when it comes to Ethereum. Flows are not loopy, but they are noticeable. Tuesday saw the withdrawal of about 5% of Coinbase’s ETH, with Binance releasing about 3%.
That is most likely related to the nature of the claims, the main claim of which is a violation of securities law. Ethereum was a notable omission from the SEC’s laundry list of tokens that were listed as securities. However, SEC head Gary Gensler has declined to comment on whether ETH does or does not represent a security, and there has been much speculation (and anxiety) in the cryptocurrency market over where Ethereum fits in.
Additionally, the SEC stated that Coinbase’s Ethereum-based staking programmed violated the law: “At the moment we charged Coinbase, Inc. with…failing to register the supply and sale of its crypto asset staking-as-a-service programmed.”
This might be one factor in the higher withdrawal rates for Ether than for Bitcoin. At least in the perspective of the law, the latter is considered to be the most similar to a commodity. It makes sense intuitively also because Bitcoin has a fixed supply and pays no return or dividend. Ether switched to proof-of-stake in September and now resides in a legal limbo, most likely not neatly fitting into any established class.
Although many are adamant that it isn’t a security – and, at least so far, the SEC appears to agree – this fight for cryptocurrency’s future does seem to be more focused on altcoins than Bitcoin. Not only that, but Bitcoin typically has lower volatility than other forms of payment, like Ether. On this background, the reduction motion won’t be all that shocking.
Finally, even though Ether has had more withdrawals than Bitcoin, these are not particularly noteworthy. They don’t even come close to being on the same level as earlier instances, including the flow of money out of exchanges after FTX crashed in November or other crises last year like Terra or Celsius’ meltdowns.
What will happen to crypto?
In terms of what happens next, it might not be as clear-cut as just counting the amount of money that has changed on the blockchain. I discussed how the Binance lawsuit was unavoidable and how difficult of an upgrade it was for your entire region when I blogged about it yesterday morning.
This happened hours before Coinbase’s lawsuit was made public. As I said yesterday, I believe that Binance brought the lawsuit upon themselves in many ways due to their murky business model, refusal to be transparent, and complicated corporate structure. Additionally, some investigations are still underway, so stories about related purchasing and selling organizations breaking the law on money laundering were never going to come to a satisfactory conclusion.
For me, the Coinbase case is more of a turning point for cryptocurrency. That profession made an effort to adhere to and practice the foundations, at least outwardly. According to Binance’s own top compliance officer, regulation was never something the company wanted. Coinbase, however, floated on the stock market in 2021—a transfer that the SEC obviously approved. Because it traded unregistered securities, it is currently being sued. I’m not a lawyer, but it seems like an intriguing issue that might unavoidably have a significant impact on your entire region.
Contrarily, I find Binance to be considerably less engaging. They have blatantly offered speedy and free services, and it is commonly known that they have loose limits for US customers. They continue to insist that they don’t have a physical headquarters and continue to operate in an unusual manner. That rarely affects lawmakers in any way.
The last few days have been extremely important for cryptocurrency in general in both ways. It seems as though the roof is about to collapse, and the gathering is coming to an end. I’m not overly startled, regardless of your opinion on whether this can be a good or a bad element. That is the case, and the market won’t be terribly surprised either, as evidenced by the rather subdued price and withdrawal activity.