Rapture #276: Market commentary, Coinbase wells notice, CFTC sues Binance and Chinese banks embrace crypto
Looks like I might have gotten too bulled up too quickly. While funding rates are largely negative right now, a positive sign for bearish sentiment potentially being overblown, volumes have plummeted in the last week, which is not what you want to see for supporting the thesis that we are entering a sustained bullish trend.
Volumes significantly dropped off after Coinbase received a wells notice (meaning there is a pending enforcement action coming against them) and the CFTC announced that they were suing Binance/CZ.
The US federal government is really throwing every anti-crypto enforcement action they can against the market right now (knock on wood).
The good news is nearly every major crypto institution has been named at this point, meaning there are likely not much more significant actions to come in the near term. Potentially the SEC ends up suing Binance alongside the CFTC, but that is the only major one I could think of off the top of my head.
Of course, the fact the SEC is getting their hands on CZ + Binance messages likely does not bode well for future actions against them, though that will take time.
If Binance does not imminently implode, I think the worst of the regulatory announcements are likely behind us in the near term.
Coinbase receives wells notice
Last week, the SEC issued Coinbase a wells notice. There are potentially pending enforcement actions against Coinbase that relate to the company's spot market, Coinbase prime, Coinbase wallet, and Coinbase earn. The civil action might seek civil penalties, disgorgement, and injunctive relief.
Coinbase's Chief Legal Officer responded in a tweet to the wells notice that Coinbase will vigorously defend themselves in court against an overreaching SEC.
Coinbase also announced that they would become more active in donating to pro-crypto candidates in US elections.
After these moves, the industry's positive sentiment towards Coinbase skyrocketed, as they are largely seen as the heroic defender of crypto against an overreaching government.
CFTC sues Binance
While the SEC is going after Coinbase, the CFTC is hotly pursuing Binance/CZ. The suit states that Binance/CZ willfully evaded federal law and operate an illegal digital asset derivative exchange. The CFTC also accused Binance of trading against its own customers via accounts owned by CZ.
I will be watching closely to see if this suit causes people to remove deposits from Binance en masse. If Binance is in a financially weak state and does topple over, the market would likely be adversely affected. This scenario is the one that I think is plausible but not likely. It could significantly wreck my bullish thesis.
Chinese banks embrace crypto
Seperate from the big exchange news, China's state-owned banks are now seeking crypto clients in Hong Kong. This switch further displays how China is really pivoting towards being more friendly towards crypto, a topic I have discussed in previous Raptures. China almost assuredly views crypto as one tool to use in order to dethrone the USD as the world's reserve currency.
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