Regulatory Actions Stall the Crypto Rally; Traders Want Clarity

• Recent regulatory actions are spreading mixed signals across the industry. 
• Traders are waiting for clarity on the ongoing actions before investing. 

Recent regulatory actions have slowed the crypto rally, with market trading in approximately a 5% range since March 17. In the last seven days, the market cap hiked by 3.8%, with Bitcoin at 3.9% and Ethereum at 5.32%, the driving factor. 

The Recent Regulatory Actions Over the Crypto Industry

Crypto exchange Coinbase received a Wells notice on March 23, from the country’s financial watchdog, the Securities and Exchange Commission (SEC), regarding their staking program, wallet, digital assets and digital assets and Coinbase Prime services. However, they have not sued the exchange yet, they only wanted clarification, but the notice issuance suggests something is wrong. 

The infamous case between Ripple and SEC has been going on since December 2020, where the company is accused of selling unregistered securities in the form of their token XRP. Both parties have submitted testimonies and documents and are awaiting results. If SEC wins and XRP is redefined as a security, it might not be favorable for the crypto industry. 

The US is not the only one targeting crypto entities– on March 31, 2023, Japan’s Finacial Services Agency (FSA) said many foreign crypto exchanges working in the country, like Bybit, MEXC Global, Bitget, etc., are violating their laws and operate without required registrations. 

Regulatory After Effect

These recent regulatory actions have caused the market to be indecisive and move sideways. The trend can be seen to have begun in mid-March and has tested the market cap support of $1.4 trillion. This movement hits investors’ doubtful nature, as most are afraid to invest, at least until the regulatory dust is settled. 

Someone’s Loss is Someone’s Benefit

Not everyone is losing due to regulatory ambiguity; Fintech stocks grew, and commodities and certain stocks emerged as great options. From March 15, the S&P 500 index hiked by 6.6%, Gold by 4.6%, and oil prices rose by 18.6%. 

The subsequent fall of major banks made the Federal Reserve deploy two emergency lending programs. Swiss National Bank had to give liquidity of around $100 billion to soften the impact of Credit Suisse and their sale of UBS. 

The funding rates for Bitcoin and Ethereum were neutral for the last seven days. Suggesting a balance between buyers and sellers. The put-to-call ratio suggests Bullish sentiments, while a 1.40 suggests bearish. This ratio is now close to its highest value since March 9; interestingly, call options were rising on April 1. 

Will the Market Climb Again?

The market is speculating greater chances for a slide in the derivatives market. But the balanced demand in the futures market makes traders think twice before gambling unless the regulators clarify. Everyone is hoping for the market to break the $1.2 trillion barrier. 

If the regulators clarify their actions and chalk out clear guidelines, it would be a relief. 

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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