Good morning Here’s what happens:
Prices: Bitcoin continued its two-day swoon, falling below $28,000 at one point. The head of research at Canadian crypto asset manager 3iQ linked its demise to troubles from U.S. regulators, also noting that “market liquidity remains heavily biased towards Asia.”
Lessons learned: With MICA and a separate crypto-related rule, European lawmakers have created a promising regulatory foundation for digital assets. The US effort remains incoherent and counterproductive, writes CoinDesk columnist Daniel Kuhn in The Node.
Bitcoin decline due to US regulation issues
US crypto regulator troubles have weighed heavily on Bitcoin.
So wrote Mark Connors, the head of research at Canadian crypto asset manager 3iQ, in a series of articles discussing BTC tumbling from seemingly safe heights above $30,000.
“The Kabuki theater unfolding in Washington this week suggests that Asia and other jurisdictions will continue to gain market share from the U.S., Connors wrote to CoinDesk, adding, “Coinbase’s decision to license in Bermuda received to launch an exchange as soon as next week shows US digital asset companies are now voting with their feet. So this week we had both price and regulatory volatility, with only one clear loser being the US economy.”
The largest cryptocurrency by market cap recently traded at around $28,100, down around 2.7% over the past 24 hours. But earlier Thursday, bitcoin briefly fell to $27,991 on Coinbase, its lowest level since April 9. The drop continued a two-day slump that began early Wednesday amid a hot UK inflation report and a massive sell-off on Binance. BTC is down about 10% from last week’s peak of nearly $31,000, with investors more concerned than optimistic about the future path of crypto assets.
Connors noted that “Market liquidity remains heavily skewed towards Asia, so he was “not surprised to see Bitcoin’s downturn begin as markets in that part of the world shut down. “Remember that dislocations happened in a similar window last May and June,” he wrote.
Ether recently changed hands around $1,936, a few fractions of a point and well below its recent highs in Shanghai of over $2,100. Other large cryptos were mostly in the red, mostly darker hues. XRP, the token of the XRP open-source public blockchain XRP Ledger, and ARB, the native cryptography of the Arbitrum Layer 2 blockchain, are both down more than 3.5%. The CoinDesk Market Index, a measure of the overall performance of crypto markets, recently fell 1.3%.
Equity markets fell, albeit not sharply, with the technology-heavy Nasdaq Composite and the S&P 500, which has a strong technology component, falling 0.8% and 0.6%, respectively. Gold comfortably hovered above $2,000, suggesting that investor appetite for assets that hold their value through good times and bad has remained strong.
Despite encouraging first-quarter earnings from a number of major banks, investors remain cautiously cautious amid the decline in a number of key economic indicators that could herald a recession. Recent jobs data points to a slowdown in the hot job market, and on Thursday the National Association of Realtors’ monthly report showed house prices posted the biggest drop since 2012 and mortgage rates rose.
Meanwhile, Connors wrote that “more volatility” is likely to come, “but not the YTD upside volatility we’ve seen so far in 2023.”
“We may enter a period of consolidation as US regulation dampens hopes and prompts regulatory resets for many players. Both counteract the longstanding and structural tailwind for BTC,” which the company highlighted in its 2023 outlook.
Why there is confusion in securities law in the EU on MiCA and in the US
The European Parliament went ahead and did it: Today, after years of deliberations and at least two official delays, the landmark regulatory framework for markets in crypto assets (MiCA) was voted on. European Union lawmakers have also announced a separate crypto-related rule called the Funds Transfer Regulation, imposing stricter monitoring and identification requirements for crypto operators, CoinDesk’s Jack Schickler reported.
The rules have been called a “world first” by the European Commission’s Mairead McGuinness and also, according to Green MP Ernest Urtasun, “the end of the Wild West era for crypto assets.” The laws, which will be enforced at the state level, have yet to be formally approved by the supranational body the EU Council and are on the verge of being approved to come into force next year. (Council approval at this point is more of a formality, considering it approved the text of the law last year.)
This article is an excerpt from The Node, CoinDesk’s daily roundup of the top stories in blockchain and crypto news. You can subscribe to the complete newsletter here.
For many, MiCA represents a crucial step forward for the crypto industry. It’s the first major attempt to provide a comprehensive set of rules for crypto companies, so they know upfront what they can and can’t do and what their responsibilities are when they’re in want to operate in the 27-nation trading bloc. The European Union hopes to set the global standard (and is in a sense concerned about the effectiveness of MiCA in the EU unless similar rules are adopted everywhere).
CoinDesk has written a number of overviews of the legal framework. But. In short, MiCA requires crypto firms — like wallet providers and exchanges — to be licensed by the EU and comply with anti-money laundering and terrorist financing safeguards if they want to serve EU-based customers. Some have resisted the reporting standards, which will no doubt weaken the privacy of crypto users in the name of customer safety and national security.
Read the whole story here:
Lawmakers in the European Union on Thursday voted 517 to 38 with 18 abstentions to approve a new crypto licensing scheme, MiCA, making it the first major jurisdiction in the world to introduce a comprehensive crypto law. Bitstamp’s Chief Operating Officer John Ehlers joined the conversation. This came as Bitcoin (BTC) fell for the second straight day, hitting a 10-day low. Options Insights founder Imran Lakha shared his analysis of the crypto markets. And Marjorie Hernandez, co-founder of Lukso, discussed why the Layer 1 blockchain opens up a smart contract for creative types, allowing original validators to participate in the operation of the blockchain.
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