Last week, Bitcoin and the broad cryptocurrency market started lower but ended up higher, with green still persisting. Now, the largest cryptocurrency with a market cap of $529 bln is starting this new week above $27K, while the second largest Ether is exchanging hands at $1,650. Meanwhile, the total crypto market cap is currently up 1% at $1.11 trillion.
Last week's volatility has been in the light of recent developments at bankrupt crypto exchange FTX receiving court approval to liquidate its crypto assets. The defunct crypto trading platform is expected to liquidate approximately $3.4 billion worth of crypto assets by the end of this year, with Solana ($1.16 billion), Bitcoin ($560 million), and Ether ($192 million) being its top three holdings.
As per its liquidation plan, FTX would be gradually selling its holdings with a $100 million weekly cap to avoid a negative impact on crypto prices, but this limit could expand to $200 million upon approval from committees representing FTX customers.
“Sales of this size are destined to have an impact,” wrote blockchain research firm K33 in its report. “Especially altcoins with limited liquidity are exposed, making it vital for altcoin traders to maintain comprehensive oversight of FTX's holdings.”
For altcoins, there is an additional risk of being labeled as ‘securities' while majors, Bitcoin and Ether, have spot exchange-traded fund (ETF) approvals to look forward to, although the market is not expecting it this year. For now, this week has a couple of big events coming up that could result in heightened volatility. Let's take a look!
Binance SEC Hearing
The world's largest cryptocurrency exchange, Binance, is facing mounting regulatory challenges. Notably, its US affiliate Binance.US has cut down its workforce by one-third. Adding to the turmoil, Binance.US recently lost its legal and risk executives along with CEO Brian Shroder, who cited the US Securities and Exchange Commission's (SEC) “aggressive attempts to cripple” the crypto industry.
Amid these corporate shake-ups and high-level departures, the ongoing legal battle between the SEC and Binance has reached a critical juncture. Recent developments have escalated the conflict, setting the stage for a pivotal hearing. The case is scheduled to be heard on September 18, 2023, in front of Magistrate Judge Zia M. Faruqui.
The US securities regulator has accused Binance.US of non-cooperation in the ongoing investigation against the crypto exchange and withholding crucial information regarding the control of customer assets, according to a court filing dated September 14. The agency noted in its court filing that Binance.US's holding company, called BAM, has produced only 220 documents during the discovery process, with many of the submitted documents under the Consent Order consisting of “unintelligible screenshots and documents without dates or signatures.”
BAM has further refused to produce essential witnesses for deposition, rather only agreeing to four depositions of witnesses it has unilaterally deemed appropriate, said the SEC, adding: “It has responded to requests for relevant communications with blanket objections and has refused to produce documents kept in the ordinary course of its business, claiming those documents do not exist, only for the SEC to later receive such documents from other sources.”
The Commission has also raised concerns over Binance.US's use of wallet custody software called Ceffu, which is provided by the global entity Binance Holdings Ltd, noting that BAM made inconsistent statements about Ceffu's and Binance's involvement in the wallet and customer funds management. As per the SEC, the BAM first claimed Ceffu was its own wallet custody software and services provider only to later state that Binance was, in fact, BAM's wallet custody software provider, which violates a prior agreement meant to prevent funds from being diverted abroad.
However, Binance has dismissed the SEC's concerns over Ceffu, calling it “much ado about nothing.”
The SEC filed a lawsuit against the exchange in June, pressing 13 charges against the crypto exchange, including unregistered securities offerings and the Simple Earn and BNB Vault products. The agency claimed that Binance.com should have registered as a clearing agency, Binance.US as a broker-dealer, and BAM Trading as an exchange. Furthermore, the lawsuit brought charges related to wash trading and sale of its staking-as-a-service program, among other violations.
According to former SEC official John Reed Stark, the SEC's request for a Temporary Restraining Order (TRO) in the Binance case is much larger and more significant than usual, leading the judge to oversee the creation of a consent order.
According to the SEC, Binance's refusal to provide comprehensive information raises concerns about the safety of customer assets and their potential control by Binance Holdings and CEO Changpeng Zhao, who are named in the SEC's enforcement action. The agency wants the court to order BAM to provide all the documents and inspection access, deny the company's Motion for a Protective Order that limits the regulator's discovery, and extend the period of expedited discovery.
Amidst all this, trading activity on Binance.US has reached new lows this month, with about $5 million recorded in volume on September 16, as reported by Amberdata on The TIE Terminal. The exchange hit its lowest point of the month on September 9 when it saw $2.97 million in volume, down from $230 million a year ago. Moreover, Binance.US has halted trading for over 100 token pairs since the lawsuit, which has contributed to this sharp decline in activity.
Meanwhile, Binance's native token, BNB, is up 2.2% in the past 24 hours to now trade at $219.46 while managing $624 mln in volume. BNB is the 4th largest crypto asset by market cap of $3.376 bln, and its price is down over 10% in 2023 so far and 21% over the past year. It has also lost 68% of its value since hitting its all-time high (ATH) at $686.3 in May 2021.
FOMC Meeting: Monetary Policy Decision
In this new week, not only is the crypto market in the green, but the US stock futures also edged up as investors await the Federal Reserve's interest rate decision this week. Amidst this, the US dollar index is down on Monday at 105.24 — up from this year's low of 99.5 in mid-July but down from its multi-year peak of 114.70 hit a year ago. The greenback retreated as investors capitalized on upbeat US economic data before the upcoming policy meeting.
At the same time, gold rebounded and is now trading at $1926.69 per ounce, up from a $1,900 low at the beginning of the month and a $1,617.50 low from late 2022. In May this year, gold's price surpassed $2,075, moving closer to its ATH. Oil prices are also surging on supply constraints and growing Chinese demand.
This comes after, late last week, mixed economic data in the US moderated the investor's risk appetite. The US industrial production rose 0.4% by month in August, beating the analysts' expectations. This rebound in industrial production followed the August consumer price index (CPI) release last week that showed the core CPI — the Fed's favored inflation gauge — logged its smallest annual increase since Sep. 2021. The unemployment rate, meanwhile, is currently at 3.8%.
According to the CME FedWatch Tool, the majority of investors, at a whopping 99%, are expecting the central bank to maintain the current rate unchanged in the current range between 5.25% and 5.50% in its meeting on September 20. Additionally, the tool gives a 73% chance for yet another pause in November.
Leaving the interest rates unchanged will give the crypto and stock markets both a positive boost, but at the same time, if the Fed takes a contrarian view and, in fact, raises the rates, that could prove to be really detrimental for the markets.
With that, now all eyes are on the Federal Open Market Committee's (FOMC) meeting and monetary policy decision due later this week. The two-day meeting will conclude on Wednesday when Fed Chair Jerome Powell will also be making his remark.
“With last week's higher-than-expected inflation data and the ongoing rise in oil prices, Fed Chair Powell could communicate a relatively hawkish message. However, based on our analysis, we would not expect the market to buy into this for much longer as the inflation trend is still lower,” said Markus Thielen, head of research and strategy at Matrixport, a digital asset service platform.
Besides the FOMC meeting, this week will also see the National Association of Home Builders releasing the Housing Market Index for September on Monday. This will follow the Census Bureau unveiling residential construction data for August on Tuesday.
Then, on Thursday, there will be the National Association of Realtors releasing the existing home sales data for August and the Leading Economic Index for August by the Conference Board. The Labor Department will also release the initial claims for unemployment benefits for the week ending Sunday, the same day.
This week, the Bank of England is also expected to raise its target interest rate by 0.25% to 5.5%, and the Bank of Japan is anticipated to maintain its rate at negative 0.1%.
Elsewhere, China's retail sales and industrial production recorded an annual increase of 4.6% and 4.5% in August, both accelerating from the previous month and beating analysts' expectations. However, embattled real estate developer China Evergrande Group delayed a decision to restructure its debt, and some of its wealth management unit staff got detained.
This week's Token Unlocks
This week is pretty light when it comes to crypto projects that will have additional tokens to be released in the market and affect their prices, according to the data provided by TokenUnlocks.
One of the unlocks that'll happen this week is of DEX 1Inch, which will be releasing 53.57k tokens worth $13.4k on Friday. These tokens belong to the team and investors and are locked to keep such big holders from liquidating their holdings all at once, negatively affecting the token's market value severely.
1INCH is a $264 million market cap coin trading at $0.255 while managing $13 mln in 24-hour trading volume. The token's price is up 12.6% in the past week but down 59% over the past year. Late last month, the DEX aggregator integrated with Coinbase's layer 2 network called Base in an attempt to stay ahead of the game by offering efficient and cost-effective solutions.
The $58.6 million market cap token ID will see the unlock of almost 18.5 million tokens worth $3.75 mln on September 22. Out of this new supply that'll be brought into the market, 5.83 million is for community airdrop, 2.78 mln belongs to the ecosystem fund, 5 million is for the foundation, and the remaining 4.88 mln is for the project's marketing efforts. According to CoinGecko, currently, only 286 mln ID tokens are circulating in the market out of the total supply of 2 billion. Most recently, Injective Labs collaborated with Space ID to launch the native .inj domains.
Another project that'll be adding to its market supply is PENDLE, a $59.8 mln market cap coin. This Wednesday, 57.35k PENDLE tokens will be released in liquidity incentives, which will continue to happen each week until April 2026. The token has seen its value increase by 10% over the past week and a whopping 932% over the past year.
Just last month, Binance Labs, the VC arm of Binance, invested in the DeFi protocol focused on yield tokenization to provide a more accessible and optimized yield management experience for all users, ranging from retail to institutions. Additionally, the project that offers users yields in the form of tradable tokens also jumped on the growing real-world assets (RWA) trend through MakerDAO's Boosted Dai Savings (sDAI) and Flux Finance's fUSDC stablecoin.
As we saw, this week is another interesting one with Binance's face-off with the US securities regulator and the FOMC meeting. So, whether the crypto asset prices go up or down, volatility is sure to be expected in the coming days.
In the traditional market as well, the CBOE Volatility Index is keeping low, hovering around 13, which means markets have been lacking volatility in recent weeks. According to Charles Schwab Investment Strategist Jeffrey Kleintop, volatility hasn't been “this low since the pre-pandemic period,” adding, “The market's certainly pricing in clear sailing from here, and it may not be that smooth of a ride.”