Crypto Market Update: H1 2023 in Review

2023 has brought more volatility for the cryptocurrency market, but these digital coins are holding their value.

So far this year, investors have had plenty to celebrate in terms of price moves. However, the stability of the cryptocurrency sector has been called into question with investigations into two leading crypto firms following the collapse of FTX last year.

Binance and Coinbase face SEC investigations

This year has been marked by the US Securities and Exchange Commission’s (SEC) decision to ramp up oversight in the digital asset space. In June, the regulator went public with two separate lawsuits, one against Coinbase Global (NASDAQ:COIN) and the other against Binance and its founder Changpeng Zhao.

The SEC’s moves brought a massive blow to confidence and raised alarms about a potential repeat of 2022’s FTX fiasco.

One of the issues at the heart of the SEC’s challenge against Coinbase is that the regulator views cryptocurrencies as unregistered securities; in contrast, Coinbase has argued that the suit holds no ground since cryptocurrencies are not investment contracts — as such, they are not securities.

‘As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them,” said Gurbir S. Grewal, director of the SEC’s enforcement division.

He added, “While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled.’

“It highlighted the need for people to be working with well-regulated entities and well-regulated products,” he said. According to the expert, US regulators should have stepped in sooner to prevent financial damage to customers.

“It’s also healthy for people to be able to differentiate between bad actors due to an unregulated industry versus the digital asset itself. Bitcoin doesn’t have a morality component to it,” Johnson said.

In an email note to investors, Alex Tapscott, managing director of Ninepoint Partners’ Digital Asset Group and co-founder of the Blockchain Research Institute, quoted recent Bank of America (NYSE:BAC) research that indicates investors shouldn’t let the SEC’s recent actions “overshadow” the upside attached to cryptocurrency and blockchain opportunities.

Bitcoin price rises on new ETF speculation

Bitcoin has experienced a big price rally in 2023, with the coin up over 80 percent year-to-date by the end of June, a month that saw the popular cryptocurrency break through the US$30,000 mark for the second time this year.

Among other factors, including a resilient response to the SEC’s investigation of Binance and Coinbase, Bitcoin has been buoyed by the possibility that a large asset manager will launch a new fund.

Regulatory documents show BlackRock (NYSE:BLK) is interested in debuting a vehicle called the iShares Bitcoin Trust, which, if approved, would be the first Bitcoin fund of its kind in the US. Its success would likely provide a huge boost in confidence for the average investor.

Given the SEC’s past resistance to this type of fund and regulator’s general coldness around cryptocurrencies, it will be interesting to see the progress of BlackRock’s application.

Coinbase is attached to this fund as the custodian for its cryptocurrency assets.

The speculation surrounding BlackRock has increased as other fund providers join the race to launch similar offerings. “The other thing that the BlackRock filing does is it provides regulatory clarity for other institutions,” Johnson said.

Ethereum update signals new era for network

Alongside Bitcoin’s great first half of 2023, its fellow crypto coin Ethereum has also enjoyed a busy year.

In March, the network completed a significant update, dubbed the Shanghai Upgrade; it is another step in the Ethereum blockchain’s evolution into a full proof-of-stake network.

Per a report from Forbes, Ethereum’s staking system mirrors the traditional method of bond holding for investors and allows users to become validators by staking 32 Ether. The Shanghai Upgrade includes a few improvements, including the ability to withdraw staked Ether, adding more liquidity to the network.

“That was a great moment to see, okay, well, what’s the consensus view? What does the community think about Ether now? … If we’d see nothing but people taking their Ether out or fair staking, that would have been a bit of a bearish sign,” he said.

“It would have said, ‘Okay, you know what, people don’t have confidence’ — the second that we’ve opened the door, they’d all leave. But in fact the deposit contract grew in size after withdrawals were elapsed,” the fund manager said.

The risky upgrade is moving Ethereum into a new era, which some experts argue could bring more attention from senior investors.

Investor takeaway

This year has offered crypto enthusiasts plenty of market developments to get excited about, from regulatory disputes to renewed interest from more established parties in the investment landscape.

2023 is panning out to be a significant period for the market.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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