Daily News | Regulatory Impact on Ethereum and Coinbase, Market Calm Amid Russian Geopolitical Upheaval

Crypto Daily Digest: Coinbase’s Legal Win Pauses Lawsuit, Though Regulatory Pressure Impacts ETH Staking; Brazil’s Largest Crypto Exchange Joins CBDC Pilot

The regulatory uncertainty surrounding Ether (ETH) in the United States has impacted its performance compared to Bitcoin. The US Securities and Exchange Commission (SEC) is considering classifying Ether as an unregistered security, which could complicate its trading. In contrast, Bitcoin is treated as a commodity, providing clarity on its status. Recent SEC lawsuits against crypto exchanges have identified 19 tokens as unregistered securities, leading to their value decline.

While Ether has remained stable, Bitcoin has seen significant gains, likely due to investors seeking to avoid regulatory risks and the anticipation of Bitcoin exchange-traded funds. Both cryptocurrencies have experienced substantial increases in value this year.

Although Ether was not mentioned in the SEC’s lawsuits, concerns persist about its classification, given similarities to tokens targeted by the SEC. It’s unlikely that the SEC would take enforcement action against Ethereum itself, considering its widespread use and the time since its initial sale. However, Ethereum might be deemed a security for certain secondary transactions. The naming of Ether staking services in the SEC lawsuits contributes to caution around Ether. The determination of Ethereum’s security status would be made by the court, not the commission.

In a significant development, the US Supreme Court granted Coinbase a reprieve by ruling that a lawsuit filed against the exchange cannot proceed until an appeal of a lower court ruling is defended. This allows Coinbase to continue its efforts to compel arbitration in the putative class action lawsuit, effectively pausing the case in the federal court . Although the ruling is a victory for Coinbase, its impact on the wider crypto industry is limited. The Supreme Court decision solely focuses on staying district court proceedings during the appeal and does not address broader crypto-related issues. With the Supreme Court’s decision, Coinbase can proceed with arbitration attempts, and the case will be remanded for further proceedings according to the court’s opinion.

Coinbase has experienced a decline in its market share in the ETH staking business due to regulatory pressure. Its share dropped to 9.7%, the lowest since May 2021, as per data from 21Shares.

This decrease coincided with a period of high demand for ETH staking following Ethereum’s Shanghai upgrade. Coinbase faced a net outflow of $517 million (272,315 ETH), potentially driven by concerns about regulatory risks associated with its staking services. Despite the decline, Coinbase remains the second-largest staking service provider, but competitors like Figment, RocketPool, and Kiln are gaining ground. The decrease in staked tokens also means reduced revenue for Coinbase, which charges a 25% commission on staking rewards.

Outside of the US on the regulatory front, Brazil’s central bank has authorized Mercado Bitcoin, the country’s largest crypto exchange, to participate in the pilot of the digital real, Brazil’s CBDC. The consortium led by Mercado Bitcoin includes partners like Mastercard, Genial, Cerc, and Sinqia. Additionally, the central bank allowed Caixa, Elo, and Microsoft to join the CBDC pilot. Initially excluded due to the lack of a regulated financial or payment institution with direct access to Brazil’s financial network, Mercado Bitcoin obtained a payment institution license, enabling its participation. The central bank plans to incorporate participants into the Real Digital Pilot platform in mid-June 2023. The CBDC is expected to launch by 2024, aiming to enhance financial participation in Brazil.

Bitcoin (BTC) $30,508 (+0.13%) - Neutral Outlook

Overview:

• Closest daily support zone: 30025 - 29475
• Closest daily resistance zone: 30690 - 31015
• Key Level: 28420 (Weekly High Between Dec. 21-28, 2020)

Daily Resistance zones

1. 30690 - 31015
2. 31530 - 32255
3. 33100 - 33600

Daily Support zones

1. 30025 - 29475
2. 29095 - 28420
3. 27970 - 27265

Macro: Market Calm Amidst Russian Geopolitical Upheaval and Central Bank Concerns

Global markets remained relatively calm following a geopolitical shock in Russia that challenged President Vladimir Putin’s rule. Despite initial concerns, oil prices rebounded slightly, US equity futures showed modest gains, and major currencies traded within narrow ranges. The market’s response reflected a deal that halted the advance of the Wagner mercenary group towards Moscow, including dropping mutiny charges against Yevgeny Prigozhin and his fighters. However, the long-term impact on markets will depend on how the political situation in Russia unfolds.

Meanwhile, there were growing worries over central banks raising interest rates to address inflation, which led to a decline in US stocks. Bonds rallied in Australia and New Zealand, aligning with the trend in Treasuries. The second-quarter stock rally, particularly in AI stocks, showed signs of weakening due to concerns about further rate hikes and the potential economic consequences of aggressive central bank policies. Additionally, economic data from Germany and France raised fears of a European downturn, resulting in increased demand for safe-haven assets like Treasuries.

In China, travel spending during the dragon boat festival holiday fell short of pre-Covid levels, signaling a slowdown in consumption. Domestic tourism revenue reached 94.9% of the pre-pandemic amount in 2019, with 106 million domestic trips made, surpassing 2019 figures. This slowdown, along with downgraded growth forecasts, has led to calls for economic stimulus to revive consumption, which is vital for achieving China’s economic growth target. The dragon boat festival holiday’s performance indicated fading recovery momentum compared to the Labor Day holidays in May, suggesting potential weakening in in-person services consumption growth as pent-up demand diminishes and the risk of an economic double-dip becomes more apparent.

Amidst these developments, Amazon and Google have committed to increasing their investments in India. Amazon plans to invest an additional $15 billion by 2030, focusing on enhancing cloud infrastructure through its AWS division. Google, on the other hand, aims to establish a global financial-technology center in Gujarat International Finance Tech-City (GIFT City) and expand its AI chatbot, Bard, to more Indian languages. These investments aim to leverage India’s fintech leadership and capitalize on technologies like Unified Payments Interface and Aadhaar. Despite regulatory challenges, major US tech companies consider India a high priority market. Other economic deals were also announced during Indian Prime Minister Narendra Modi’s visit to the US, including Micron Technology’s substantial investment in an Indian semiconductor facility.