SEC Flexes Its Muscles: Binance and Coinbase in the Crosshairs
SEC Flexes Its Muscles: Binance and Coinbase in the Crosshairs
Macro Economics: The US economy is showing signs of resilience despite the ongoing geopolitical tensions and inflationary pressures. The recent agreement on the US debt ceiling has provided some stability, removing the risk of a potential government shutdown and default. However, the Federal Reserve's stance on interest rates remains a key factor. The central bank is expected to continue its tightening policy to combat inflation, which could potentially slow down economic growth.
Digital Asset Market: The U.S. Securities and Exchange Commission (SEC) has initiated lawsuits against two major cryptocurrency exchanges, Binance and Coinbase, alleging violations of securities laws. The SEC accuses Binance and its CEO, Changpeng Zhao (CZ), of providing securities services without the necessary registration, unlawfully offering unregistered securities, and making false statements about Binance US. Similarly, Coinbase is alleged to have violated securities laws and failed to register as a broker, national securities exchange, or clearing agency. The lawsuit against Coinbase also names several tokens, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO, as securities. These lawsuits, which are civil and aim to seek compensation and prevent future illegal activities, follow a Wells notice issued to Coinbase in March. The SEC's actions against both Binance and Coinbase have served as a warning to other exchanges operating in the U.S., potentially impacting the availability of certain tokens for U.S. customers.
Forex Market: The US dollar has been strengthening against a basket of major currencies, reflecting the market's expectation of more aggressive interest rate hikes by the Federal Reserve. The Euro and the British Pound have been under pressure due to concerns over economic growth and inflation in the Eurozone and the UK.
Equities: Apple shares hit an all-time high but fell by the close of trading following the announcement of its Vision Pro headset at the Worldwide Developers Conference. The headset, available early next year for $3,499, offers a new way to interact with apps, including 3-D movies, video games, and work tools. Despite the VR hype, sales for existing VR headsets have underperformed, and the expected boom in successful VR software companies hasn't materialized.
Geopolitical: Senior officials from approximately two dozen of the world's major intelligence agencies convened in a secret meeting on the sidelines of the Shangri-La Dialogue security meeting in Singapore. This meeting, organized by the Singapore government, has been held discreetly for several years alongside the security summit. The U.S. was represented by Director of National Intelligence Avril Haines, and China was also present despite the ongoing tensions between the two superpowers. The meeting is an important fixture on the international shadow agenda, promoting a deeper understanding of intentions and bottom lines. The discussions reportedly touched on Russia’s war in Ukraine and transnational crime.
View from our desk
For the last few weeks, we've highlighted how BTC held steady within a range and expected upward movement barring any regulatory or legal actions. The SEC came in strong this week with lawsuits against Binance and Coinbase, pushing BTC outside the range. We expect continued volatility, and downside risk, in the digital asset space as the SEC pushes markets towards regulated venues, eg. BSTX and Prometheum.
The June rate hike expectations keeps oscillating and went from ‘very likely’ to ‘less than likely’ in the last week. Currently, the hike as implied by FF Futures is at 22.9%. We don’t think that this is over yet and continue to take a cautionary approach. The Fed have not shown their cards yet.
The US Dollar continues to exhibit strength coming off the debt ceiling agreement and the potential for higher interest rates for longer. We don't see signs of weaking anytime soon. We always considered debt ceiling to be more political theater than market fact, and in the end, that’s what it was. In the end, the agreement lifts the debt ceiling for through Jan 1 2025, pushing the next debt ceiling deal right in the middle of a lame-duck session of Congress, that can act without worry from voters. We see an increased Treasury issuance through 2025/2026 and expect the national debt to continue growing unabated.
Happy Trading!
The 1Konto Team
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