Bitcoin and most major crypto currencies dropped lower over the weekend as early dip buyers decided to cash out and wait for further instructions.
There’s been a lot of buzz around the SEC’s recent announcement to go after both Binance and Coinbase, which of course had been a long time coming.
Nevertheless most of the write ups I’ve seen are chock full of FUD, and what few talk about is that this move sets the stage for an intense political battle in the U.S.
Say what you will about Gary Gensler’s but he’s been pretty straight forward about his desire to take down the crypto industry.
Plus with Binance being a global player and Coinbase facing charges relating to unregistered securities traded on its platform, the SEC is implicitly attempting to cast its reach beyond US borders.
Which may not go down very well with the rest of the world, if you get my drift.
Here’s my take on this:
First up cases like these usually take years to settle, and the SEC’s resource-challenged enforcement team may face a high workload.
Second, the SEC’s hardline stance appears to not be universally accepted, meaning a lot of heavy hitters with political pull aren’t happy about Gensler’s efforts to drive a death knell into the industry.
In fact a draft bill soon to be presented to the House of Representatives seeks to set parameters for classifying digital assets and that would effectively limit the SEC’s interpretive powers.
This is clear political pushback, and given that we’re heading into the 2024 election season, wiping out the crypto assets of a good portion of tax paying Americans may not exactly play out very well.
In fact crypto is already becoming a wedge issue with some candidates showing support, including Robert F. Kennedy Jr., Florida Governor Ron De Santis, and biotech entrepreneur Vivek Ramaswamy.
And finally, the Supreme Court has sought to limit the authority of other executive agencies, which could mean that the SEC will be a target in a potential perfect political storm.
Bottom Line:
This final move to castrate the U.S. crypto industry has been a long time coming, and while I expect it to inflict temporary FUD the final outcome is most likely many years and millions of Dollar’s worth of corporate attorney hours from being resolved.
And by that time a harsh stance against the crypto industry will most likely fare poorly against a global community that is increasingly embracing it.
Finally I should also point out that I actually would welcome equitable regulation of the crypto space. Emphasis on equitable, as in fair and impartial.
If nothing else the 2022 train wreck and the flaming dumpster fire that was FTX has proven that the a large section of the space is either unwilling or unable to auto-regulate.
Thus far both Binance and Coinbase appear to have been playing their cards well and barring any surprise drama my sense is that they have a solid basis to defend their position.
In the end a large settlement, despite all the noise and drama in between, is usually how these things get sorted out.
Now if you’ve followed me for more than 10 minutes then you know that I usually keep my eye on the price, meaning when comes to trading I fade the noise and simply follow the charts.
The lines painting the current correction in the chart above were actually drawn in March when a retest of the previous resistance cluster around BTC 25k was to be expected.
Since then nothing has really changed my perspective. In fact this retest is needed in order to prepare the market for any run-up that we may see in the near future.
Remember that nothing ever moves in a straight line in the financial markets (at least for long).
Any additional context painted here will be useful moving forward as a support cluster from which a new leg higher can be launched.