The SEC's Crypto Conundrum

by Alex Benfield
By Alex Benfield

It’s safe to say that 2023 has been an interesting year for the cryptocurrency industry. But one aspect has dominated the storylines and lingered on the forefront of investors' minds: regulation

To be specific, the U.S. Securities and Exchange Commission played the role of the crypto villain this year, with its numerous lawsuits and overall anti-crypto attitude.

Indeed, after failing to prevent the biggest case of fraud and mismanagement this industry has ever seen — and one of the largest financial frauds in history — with the FTX fiasco, the SEC responded by filing lawsuits against both Coinbase (COIN) and Binance … the two largest remaining centralized crypto exchanges.

Now, these high-profile lawsuits have caused many industry experts and crypto enthusiasts to believe the SEC has been reactive rather than proactive in its approach.

Instead of laying out clear, forward-thinking guidelines for exchanges and platforms to follow, this regulatory body has often chosen the route of enforcement actions. While these actions are sometimes necessary, they don't necessarily create a stable framework for future innovation.

As expected, the SEC has faced a barrage of criticism for this perceived lack of transparency in its regulatory approach to the burgeoning crypto industry. 

Furthermore, by putting hurdles in the way of reputable platforms like Coinbase, the SEC indirectly pushes potential investors toward less regulated — and potentially riskier — platforms and exchanges. This is especially the case when mainstream options are limited or face uncertainties. 

Although the intention to protect investors from fraud and scams is commendable, without clear guidance and consistent regulatory standards, the SEC risks doing the opposite. After all, this lack of clarity and predictability can unintentionally promote the type of behavior regulators aim to prevent, undermining the SEC's core mission.

Ever since the initial lawsuits were filed, this year has been dominated by regulatory ups and downs as crypto companies sought regulatory approval and battles raged within and between U.S. regulatory agencies. 

Thankfully, not everyone in the government or within these regulatory agencies are as anti-crypto as SEC Chair Gary Gensler.

In fact, there are some individuals within the SEC itself that are far kinder toward digital assets, like Hester Pierce. And there are plenty of newly minted, pro-crypto politicians in the House of Representatives and Senate. 

Today, Gensler is testifying in front of the House Financial Services Committee in a highly anticipated hearing that has captured the attention of the crypto industry. On the eve of the hearing, four congressmen issued a letter to Gensler urging him to approve the numerous crypto ETF applications sitting on his desk.

Right now, Congress is asking Gensler to adopt a more transparent and straightforward approach to cryptocurrency, which could start with approving the spot Bitcoin (BTC, “A-”) ETF applications from financial giants like Fidelity and BlackRock (BLK).

You heard that right: Senators are standing up for the rights of crypto investors. I don’t know about you, but I did not have that on my 2023 bingo card.

Perhaps in response to the news of this testimony, Bitcoin flashed some upside this morning, climbing above its 200-week moving average briefly before coming down to its current price of about $26,250. 

Since mid-August, BTC has been fairly consistent, but that’s likely to change sometime soon. After all, volatility will return to the crypto market sooner than later, and we want to make sure we’re prepared. 

Right now, there’s still a chance for a rally in crypto prices that could take BTC above $28,000 and perhaps close to $30,000. However, there's an even greater chance that support at $25,000 will be retested before the end of the year. 

Source: Coinbase.
Click here to see full-sized image.

 

Historically, Bitcoin has recorded some of its most prominent price movements in October. 

Indeed, October has typically brought positive returns for Bitcoin most years, often setting the stage for end-of-year rallies. 

For instance, in 2019, after a September downturn, Bitcoin saw an impressive recovery in October, recording a sharp 35% gain within a single month. Similarly, October 2020 experienced a bullish rally, signaling the beginning of a parabolic uptrend that lasted well into 2021. 

While this historical pattern does point toward potential optimistic price actions, it's essential to remember that the past doesn't always predict the future.

The cryptocurrency market, with its inherent volatility, always presents a challenge for investors and traders alike to forecast the next move. 

Prolonged periods of subdued volatility, like what we've been observing recently, often precede significant price shifts. These quiet phases can be nerve-wracking because a breakout can swing either upward or downward with equal potential. 

While it’s tempting to rely purely on historical data and patterns, the rapidly changing crypto landscape — especially in the wake of regulatory shifts — demands a more holistic approach. 

That being said, the entire crypto team here at Weiss is on top of these market conditions, monitoring every development closely. Rest assured, we aim to ensure that no matter the direction Bitcoin takes, our strategies are adaptive, resilient and well-positioned for any eventuality.

In fact, my colleague Chris Coney’s 2023 DeFi MasterClass breaks down a strategy utilizing yield farming that works in any market conditions. In 50 short, easy-to-follow modules, Chris’ MasterClass walks you through the entire process, from opening a wallet to identifying opportunities that can earn 39x what the average money market account offers.

Chris is even hosting a LIVE event tomorrow, Sept. 28 at 2 p.m. Eastern to break down the current market outlook and answer any of your DeFi or yield farming questions!

The event is only for those enrolled in his MasterClass, however. So, if you’re interested in joining, you can learn more here.

What’s Next

The crypto space is continually evolving, with regulatory measures, technological advances and market sentiments creating a dynamic landscape. 

As investors, it's paramount to stay informed, adaptable and prepared for any twists and turns. 

While the ongoing discussions between the SEC and the crypto industry are undoubtedly shaping the immediate future of digital assets, it's crucial to remain focused on the long-term potential and transformative power of blockchain and cryptocurrencies. 

Hopefully today's testimony takes us one step closer to regulatory clarity, and a crypto-positive regulatory environment in the United States. 

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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