Cryptocurrency prices have declined based on a number of different factors, with Thursday bring improvements in its inflation report for September and another U.S. government agency takes aim at a a sector participant.
In mid-afternoon U.S. trading, Bitcoin (BTC) dropped by about 4 per cent over the past 24 hours, reaching USD$59,000. This marked a return to levels last seen when the U.S. Federal Reserve unexpectedly cut its benchmark interest rate by 50 basis points in mid-September.
Altcoins performed slightly better, with the broad-based CoinDesk 20 Index down just under 3 per cent during the same period. Ether (ETH) fell 3.5 per cent, while Uniswap’s token (UNI) was the only one to post gains, following news about the platform’s plans for its own layer-2 solution.
However, cryptocurrencies began the day on a weak note after the U.S. Consumer Price Index report revealed an unexpected re-acceleration of inflation in September. This development dampened hopes that the Federal Reserve might cut interest rates by another 50 basis points in November.
Some market participants are now speculating that the central bank could even pause its rate-cutting cycle at the upcoming meeting, especially with inflation heating up and oil prices spiking due to Middle East tensions.
“Hot CPI and oil price spike due to Middle East tensions have created a fear that the Fed will not cut as much as the market previously thought,” said Quinn Thompson, founder of hedge fund Lekker Capital. “Mix in [Atlanta Fed President] Bostic’s hawkish comments today regarding a potential pause and that’s the tinder to run the levered traders’ stops.”
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SEC continues regulatory moves against crypto
The sell-off liquidated around USD$147 million of leveraged long positions across crypto derivatives markets, according to CoinGlass data. Prices dropped further in the afternoon after news broke that the U.S. Securities and Exchange Commission (SEC) sued major digital asset market maker Cumberland DRW.
This reignited concerns about the tough regulatory environment for U.S. crypto firms. The SEC alleged that DRW traded crypto assets sold as securities without registering as a securities dealer.
Cumberland responded to the lawsuit in a post on X, stating that it would not make any changes to its business operations or the assets in which it provides liquidity as a result of the SEC’s action.
The SEC lawsuit followed a series of regulatory moves by the U.S. government targeting crypto this week. On Wednesday, the Department of Justice charged four market makers and over a dozen individuals with market manipulation.
Also on Wednesday, SEC Chair Gary Gensler dismissed the idea of bitcoin or crypto gaining widespread use as a payment method. He criticized the crypto industry, labelling it as rife with “fraudsters” and claimed that the sector’s “leading lights” were either in jail or soon headed there.
He does have a point.
In 2023, around USD$2.6 billion worth of cryptocurrency was stolen through hacks, fraud, and ransomware attacks, according to cryptocurrency analysis firm, Chainanalysis.
While this figure is significant, it’s a drop compared to previous years, which reflects enhanced security measures and reduced activity in certain crypto sectors like decentralized finance (DeFi). Approximately USD$675 million of these stolen funds were successfully recovered. Notably, many of the losses stemmed from vulnerabilities in smart contracts, price manipulation, and compromised private keys.
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joseph@mugglehead.com
