Crypto market cap falls below $1 trillion after BUSD halt, ahead of inflation data
Cryptocurrency prices were under pressure on Monday ahead of key inflation data and the latest US regulatory action
The total market capitalization of the cryptocurrency market fell below $1 trillion on Monday afternoon, according to data from CoinMarketCap, the first drop below that threshold in three weeks.
Early Monday, stablecoin issuer Paxos said the New York Department of Financial Services (NYDFS) had ordered the company to stop creating new entities for Binance’s BUSD stablecoin, the latest regulatory action in what has already been a busy year for actions against crypto companies.
“If you look at what has happened, it is removing the bank [crypto] industry, it intercepts stablecoins, and it also clears up unregistered securities,” Caitlin Long, founder and CEO of Wyoming-based crypto custodian bank Custodia Bank told Yahoo Finance Live on Monday.
After attempting to become a member bank of the US Federal Reserve System, Long’s firm was denied approval on January 27.
In addition to regulatory actions, investor enthusiasm for cryptoassets has also moderated in recent weeks after a sharp rally to start 2023.
Jan van Eck, CEO of global asset manager VanEck, told Yahoo Finance that the first half of the year for risk assets such as stocks and cryptos does not look bright given the strength of economic factors such as inflation and the labor market, suggesting “higher interest rates further.”
With January’s US CPI set for release tomorrow, expectations in the crypto options market look less rosy than last month according to Christopher Newhouse, a crypto options trader for industrial investment firm GSR.
“Prior to this CPI print, there has been elevated volumes and widespread liquidation on the long side and a large supply of calls sold at the $25,000 price, which could act as a strong resistance level,” Newhouse told Yahoo Finance of bitcoin’s options market.
Demand for “downside protection,” or puts, for both bitcoin and ether has picked up in the past week, Newhouse said. Positions are “negative across the board,” he added, also pointing to “bearish regulatory concerns.”
The price of bitcoin (BTC-USD) fell around 1% on Monday afternoon to trade near $21,600.
Since the beginning of the year, the SEC has filed 4 enforcement actions against crypto firms, including a $30 million settlement with US exchange Kraken last week. As part of the settlement, Kraken immediately eliminated its betting program for US customers.
Shares from competitor exchange Coinbase Global (COIN) have continued to sell off in the wake of this news. Coinbase shares fell 1.2% on Monday in a day that led the Nasdaq to gain around 1.5%. Over the past five trading days, Coinbase shares have fallen around 24%.
Speaking to Yahoo Finance on Thursday, Coinbase’s legal director Paul Grewal argued that Coinbase’s program is “fundamentally different” than what Kraken offered, and said the company had no plans to shut down its own program.
The venture last quarter brought in $63 million in revenue for Coinbase. According to analyst estimates compiled by Bloomberg, Coinbase’s stake program was previously projected to grow in 2023, to account for 12.5%, or $347 million, of Coinbase’s full-year revenue.
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