The Crusade Against Crypto

by Alex Benfield
By Alex Benfield

There seems to be a recurring theme in the crypto markets over the past year: The average (re: nonaccredited) U.S. investor getting blocked out of yet another great investment opportunity.

Like how, over the past six months, the Securities and Exchange Commission (SEC) has shot down multiple proposals for spot-price Bitcoin exchange-traded funds (ETFs). That means the only Bitcoin-leveraged ETF product available in the U.S. is a futures ETF — a product that few average investors properly understand how to trade without assistance.

And don't get me started on the SEC's inaction on the Grayscale Bitcoin Trust (GBTC). That product is currently trading at a value almost 25% cheaper than the spot price of Bitcoin (BTC, Tech/Adoption Grade "A-"). That should be great news as, in theory, that would allow investors leverage to Bitcoin at a discount.

But that's not the case in reality. GBTC investors have no means to cash out for actual spot BTC, since the SEC has kindly protected them from any such means.

The SEC claims its regulatory decisions are in the interest of protecting U.S. investors. But their zealousness is only protecting average investors from opportunities.

In this latest round, SEC Chair Gary Gensler has recently turned his attention toward "protecting" U.S. investors from earning the high yields offered by crypto platforms.

Over a month ago, the regulatory hammer came down on BlockFi, forcing changes to its interest-bearing account program. Now, Celsius has been ordered to follow suit.

Like with BlockFi, existing Celsius interest-bearing accounts will be grandfathered in and will continue to earn interest. However, any new investor who would like to create an interest-bearing account will need to be accredited. All nonaccredited — i.e., not rich — U.S.-based investors moving forward will be restricted to only storing and trading crypto on Celsius and will no longer be eligible to earn yield.

It's not hard to see this and understand these regulations are less about protection and more about control. Especially when they come at the expense of the average crypto investor.

Source: Twitter

 

High-yield opportunities like BlockFi and Celsius that generate 5%–9% annual percentage yields (APY) on stablecoins — crypto assets pegged to fiat designed to barely fluctuate in price — are hardly opportunities average investors need to be protected from.

This is a targeted attack against the new financial frontier of crypto, one that showcases the inefficiencies in the traditional financial (TradFi) system. That's because these yield opportunities are far superior to anything available in TradFi at the moment, as the 10-year bond yield is less than 3% and the country is facing 8.5% inflation.

Unfortunately, the average U.S. investor has been caught in the crosshairs.

U.S. regulators will need to wake up to the fact that they are shooting themselves in the foot when it comes to cryptocurrency adoption. Their recent actions don't benefit investors and certainly don't follow their mission "to protect investors; maintain fair, orderly and efficient markets; and facilitate capital formation."

After all, how can things be considered fair when average investors like you are left out of the best opportunities in mainstream crypto?

And if the SEC believes any of this is helping to "promote a market environment that is worthy of the public's trust," then they don't understand the meaning of the word.

I'll let Elon Musk sum it up:

 

But there is a silver lining: You're a Weiss Crypto Daily subscriber.

That means you get the latest updates about all developments in the crypto space, from price action to regulation buzz.

And you get the actionable insight to help you navigate this new frontier.

Speaking of, let's check in on the price of Bitcoin.

The latest "protective" measures and the newest CPI numbers were both forces that could have pushed down on the market leader. But BTC is holding support at $40,000 confidently. It's also maintaining its pattern of higher lows and higher highs that it established over the past few months.

Given the macroeconomic backdrop of rising inflation and the likelihood of an aggressively hawkish Federal Reserve, just maintaining its current levels is a feat that should be recognized. The real test moving forward, though, will be if Bitcoin can jump back above key resistance at $45,000.

If it can, that could set it up to make a run to a new cycle high. If it can't, this market is likely to continue sideways trading for a while.

Here's BTC in U.S. dollar terms via Coinbase (COIN):

 

Notable News, Notes and Tweets

What's Next

The crypto market is still holding on to important support levels despite an almost unimaginable series of unfortunate macroeconomic events that would make Lemony Snicket blush.

From targeted, uninformed regulation to out-of-control inflation sparking massive fears in market investors, to the situation in Ukraine and, of course, supply-chain disruption affecting all aspects of the economy, this year has been rough on investors.

That the crypto market hasn't descended into a full-on bear market — as it did in 2018 — showcases its maturation that's taken place over the past few years. Who knows: Bitcoin may even be on its way to shaking off its risk asset association.

We can only hope it is. Maybe then, the SEC will see less need to "protect" us from the opportunities only crypto can provide.

Best,

Alex

 

About the Crypto Analyst

Alex has been actively researching and investing in cryptocurrencies since 2017. He contributes research and reports to several Weiss crypto publications, with a primary focus on helping to create crypto trading strategies.

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