SEC

MicroStrategy scoops up 480 Bitcoin amid market slump

The business intelligence firm has now amassed 129,699 BTC at an average price of $30,644, according to CEO Michael Saylor.

Business intelligence firm MicroStrategy has added to its Bitcoin (BTC) holdings, reaffirming CEO Michael Saylor’s bullish outlook on the digital asset despite its recent struggles. 

In a Form 8-K filing with the United States Securities and Exchange Commission (SEC), Microstrategy disclosed that it had acquired an additional 480 BTC at an average price of roughly $20,817. The total purchase amount was $10 million in cash.

With the purchase, MicroStrategy now holds 129,699 BTC, making it the largest corporate holder of Bitcoin. The total value of its holdings is roughly $3.98 billion.

The business intelligence firm is scooping up Bitcoin during a period of extreme market volatility. On Wednesday, Bitcoin’s price briefly dipped below $20,000, which is more than $10,000 lower than the company’s average acquisition price. The company’s BTC stash is currently sitting at a net unrealized loss of nearly $1.4 billion, according to data provided by Bitcoin Treasuries.

Related: MicroStrategy may explore ‘future yield generation opportunities’ on 95,643 BTC holdings

Michael Saylor, the firm’s CEO, remains bullish on Bitcoin’s long-term prospects. Earlier this month, he told his 2.5 million Twitter followers that the firm plans to “HODL through adversity” and has no plans to offload its holdings. The bullish reaffirmation came amid rumors that the company risked a margin call if Bitcoin’s price fell below $21,000. According to Saylor, the margin call rumor is a “nothing issue.”

MicroStrategy reported first-quarter revenues of $119.3 million. Gross profit for the quarter was $93.6 million. 

Hester Peirce expresses strong support for crypto spot ETFs and regulatory structure

The pro-crypto SEC commissioner and “Crypto Mom” had sharp words for SEC behavior toward Bitcoin spot ETF sponsorship applicants, delivered at a libertarian forum.

United States Securities and Exchange Commission (SEC) commissioner Hester Peirce, sometimes known as Crypto Mom for her ardent support of the industry, spoke Tuesday at a conference hosted by the conservative-libertarian Federalist Society titled “Regulating the New Crypto Ecosystem: Necessary Regulation or Crippling Future Innovation?” Her lengthy remarks — over 4,000 words in the prepared version, which was augmented extemporaneously as she presented it — contain some of the bluntest criticisms of SEC policy she has made yet.

Peirce characterized the SEC’s attitude toward the crypto market as a “refusal to engage” and suggested that the SEC’s refusal so far to approve a spot-traded Bitcoin (BTC) product showed the agency’s determination to hold everything related to Bitcoin to a higher standard than other products it regulates.

Related: Bitcoin investment giant Grayscale debuts ETF in Europe

Peirce pointed to an ETP disapproval order issued last month as an example of the SEC’s “standard denial rationale,” demanding a higher level of resistance to fraud and manipulation than those to which traditional markets are held. It is difficult to see how approval can be gained, Peirce said, and the agency’s position becomes more entrenched with every disapproval. Peirce adds:

“Why does this matter? Investors might prefer a spot bitcoin ETP to other options, and we ought to care about what investors want.”

Peirce continued this line of thought as she considered those who do not want to see cryptocurrency “dragged” into a traditional financial regulatory structure. She countered:

“The concern for liberty and personal autonomy that drives you to prefer ‘we-at’ to fiat ought also [to] cause you to reject a government that arbitrarily limits people’s investment options.”

Peirce linked the SEC’s resistance to approving a Bitcoin spot product to a general unwillingness to create a regulatory infrastructure for crypto. She pointed out a variety of initiatives that have been suggested to move forward with regulation.

Messari co-founder and CEO Ryan Selkis, Center for American Progress director of financial regulation and corporate governance Todd Phillips and Coin Center executive director Jerry Brito were panelists for the ensuing discussion.

SEC boss worries crypto bill undermines financial protections

A provision in the bill gives authority over some cryptocurrencies to the Commodity Futures Trading Commission (CFTC), with the agency head saying it cares about having “rigorous oversight of markets.”

United States Securities and Exchange Commission (SEC) Chair Gary Gensler said he’s worried that a proposed bill to create a regulatory framework for cryptocurrencies could weaken investor protections in the traditional financial market.

Speaking at The Wall Street Journal’s CFO Network Summit on Tuesday, Gensler was asked his thoughts regarding a recent bill introduced on June 7 by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY).

He responded, saying “we don’t want to undermine the protections we have in a $100 trillion capital market,” adding:

“We don’t want our current stock exchanges, mutual funds, or public companies to, sort of inadvertently by a stroke of a pen, say ‘you know what, I want to be non-compliant as well, I want to be outside of this regime that I think has been quite a benefit to investors and economic growth over the last 90 years.’”

The bipartisan Lummis-Gillibrand “Responsible Financial Innovation Act” aims to address many facets of crypto regulation such as tax treatment of digital assets, stablecoins, and agency jurisdiction.

One provision of the bill gives “clear authority” to the Commodity Futures Trading Commission (CFTC) over digital asset spot markets, Gensler has long been adamant in declaring most cryptocurrencies are securities, subject to the SEC’s authority.

The Senators have mostly agreed with Gensler’s point, saying some altcoins would likely be considered securities under the proposed law, with Bitcoin (BTC) and Ether (ETH) considered to be commodities.

At the summit, Gensler said the SEC wasn’t looking to extend its jurisdiction and that some cryptocurrencies are already under the jurisdiction of the agency since they qualify as being a security:

“We’re just looking out for the retail public […] These tokens are being offered to the public, and the public is hoping for a better future. That’s the characteristics of an investment contract.”

Meanwhile, CFTC commissioner Christy Goldsmith Romero — who says she hasn’t yet read the Lummis-Gillibrand bill — welcomed regulatory action by Congress when speaking at an event on Tuesday.

Related: SEC reportedly launches investigation into insider trading on exchanges

Romero, also a former senior counsel in the SEC’s enforcement division, was asked if the view that the CFTC was a more laissez-faire regulator in comparison to the SEC was accurate.

“No, not at all […] they’re actually pretty similar,” she said, adding that the CFTC has brought multiple enforcement actions in the crypto space, and each agency cares about having “rigorous oversight of markets.”

Explaining the differences she’s witnessed, Romero said the CFTC has allowed more cryptocurrency products to trade on its regulated exchanges, with 18 products trading across 11 regulated entities:

“What that means is that the CFTC is pretty experienced and how to regulate trading in this market, and that’s really, really helpful as we move forward. It’s still going to take cooperation and coordination with the SEC, I’m 100% committed to that, that’s my former home.”

SEC chair warns about ‘too good to be true’ returns amid market downturn

Gary Gensler added that he continued to be “intrigued with the technology,” but did not directly address if the SEC would approve a Bitcoin exchange-traded fund.

Gary Gensler, chair of the United States Securities and Exchange Commission, or SEC, reiterated his call for investor protection in securities offered by crypto firms.

Speaking virtually at the Robert F. Kennedy Human Rights Compass Investor Conference on Tuesday, Gensler said the SEC would use its existing authority to focus on cryptocurrency projects and exchanges, warning people of potentially “too good to be true” returns on investments. According to Gensler, the bulk of the tokens currently in the crypto market fall under the regulatory purview of the SEC, subject to the same disclosure requirements as securities.

“We’ve seen again that lending platforms — they’re operating a little like banks,” said Gensler. “They’re saying: “Give us your crypto. We’ll give you a big return” [….] How does somebody offer 4.75% in the market today and not give a lot of disclosure?”

The SEC chair added:

“If it seems too good to be true, it just may well be too good to be true.”

SEC chair Gary Gensler speaking at the Compass Investor Conference on Tuesday

In response to a question on the recent volatility in the crypto market, Gensler said that he continued to be “intrigued with the technology,” but did not directly address if the SEC would approve a Bitcoin (BTC) exchange-traded fund in the near future. He added that most projects in the crypto space were “likely to fail,” reiterating his warning of high returns without appropriate disclosures to the public. 

Related: SEC chair: Retail crypto investors should be protected

The SEC chair’s remarks came after Senators Cynthia Lummis and Kirsten Gillibrand proposed a bill that, if passed, would give the Commodity Futures Trading Commission “clear authority over applicable digital asset spot markets” as opposed to the SEC. Both U.S. lawmakers met with Gensler in June to discuss finding the best balance of regulatory authority between the CFTC and SEC on cryptocurrencies.

Many in the crypto space have criticized the lack of regulatory clarity in the United States, which can be subject to interpretation from multiple government agencies. Gensler has repeatedly called on crypto projects to register with the SEC in an effort to provide investor protection.

This key Ethereum price metric shows ETH traders aren’t as bearish as they appear

Traders keep saying ETH price will collapse below $1,600 soon, but a key trading metric shows most are unwilling to place bearish bets below $1,900.

Ether (ETH) is down 25% in just a month and even the recent upgrade to a proof-of-stake (PoS) consensus on the Ropsten testnet failed to move the altcoin’s price. 

The merge is meant to address energy-use issues and open a path for higher transaction output, but the actual full transition for the Ethereum network is not expected until later in the year. Ethereum developer Parithosh Jayanthi also noted that some bugs on the PoS implementation emerged, but those should be fixed over the coming weeks.

Luckily for Ethereum, two of its top competitors recently faced challenges of their own. The Solana (SOL) network faced the fifth outage in 2022 after no new blocks were produced for four hours on June 1. Every decentralized application was halted until the validators were able to address the problem and re-sync the network.

More recently, Binance’s native BNB token dropped 7% on June 7 after news that the United States Securities and Exchange Commission announced that it had opened an investigation into the initial coin offer (ICO) from 2017. According to Bloomberg, at least one U.S. resident claimed to have taken part in the ICO, which could be crucial for an SEC case.

Regulatory uncertainty could be partially responsible for Ether’s sharp correction. On June 6, Hong Kong’s Securities and Futures Commission (SFC) released a note warning about the investment risks of nonfungible tokens. The regulatory agency highlighted the sectors’ opaque pricing, illiquid markets and frauds.

Options traders are still extremely risk-averse

Traders should look at Ether’s derivatives markets data to understand how larger-sized traders are positioned. The 25% delta skew is a telling sign whenever whales and arbitrage desks overcharge for upside or downside protection.

If those traders fear an Ether price crash, the skew indicator will move above 10%. On the other hand, generalized excitement reflects a negative 10% skew. That is precisely why the metric is known as the pro traders’ fear and greed metric.

Ether 30-day options 25% delta skew: Source: Laevitas.ch

The skew indicator has been above 10% since May 22, and it recently peaked at 20% on June 3. Those levels signal extreme fear from options traders, and despite the modest improvement, the current 17% delta skew shows whales and arbitrage desks unwilling to take downside risk.

Long-to-short data is showing a few positives

The top traders’ long-to-short net ratio excludes externalities that might have solely impacted the options markets. By analyzing these top clients’ positions on the spot, perpetual and quarterly futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

There are occasional methodological discrepancies between different exchanges, so viewers should monitor changes instead of absolute figures.

Exchanges’ top traders Ether long-to-short ratio. Source: Coinglass

Even though Ether has struggled to sustain $1,800 as a support, professional traders did not change their positions between June 5 and 9, according to the long-to-short indicator.

Binance displayed a modest decrease in its long-to-short ratio, as the indicator moved from 0.99 to the current 0.96 in four days. Thus, those traders slightly net increased their bearish bets.

Huobi data shows a similar pattern and the indicator moved from 1.02 to 0.98 on June 9, which was a small change favoring shorts. At OKX exchange, the metric oscillated drastically within the period but finished nearly unchanged at 1.35.

Related: DeFi contagion? Analysts warn of ‘Staked Ether’ de-pegging from Ethereum by 50%

Mixed derivatives data provides hope for bulls

Overall, there hasn’t been a significant change in whales and market makers’ leverage positions despite Ether’s failure to break the $1,900 resistance on June 6.

From one side, options traders fear that a deeper Ether price correction is likely in the making, but at the same time, futures market players have no conviction to increase bearish bets.

This reading is likely a “glass half full” scenario as the top traders’ unwillingness to short below $1,900 can potentially create a support level.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

LUNA2 traders are increasingly short despite 67.5% rally, $4 million liquidated

Downside pressure for Terraform Labs’ LUNA2 mounts amid investigations and rumors from a “Terra insider.”

Terra (LUNA2) reversed a portion of the losses this June 9 as its price per token rose by as much as 67.5% on the day, catching many traders off-guard with their perpetual swap positions.

LUNA2 traders are shorting it

In detail, LUNA2’s price soared from $2 to as high as $3.58. The volatile intraday move coincided with the liquidation of nearly $4 million worth of LUNA2 trades on Binance and Bybit, including $2.46 million worth of short positions, data from Coinglass shows.

Total LUNA2 liquidations. Source: Coinglass.com

Interestingly, LUNA2’s funding rates across Binance and Bybit remained negative, suggesting that traders are still short despite the price bounce. 

LUNA2 funding rates history. Source: Coinglass.com

Shadow wallets FUD

The downside sentiment in the LUNA2 market has strengthened largely because of its underperformance in recent weeks, led by its association with Terra, an algorithmic stablecoin project whose native tokens LUNA Classic (LUNAC; formerly known as LUNA) and TerraUSD (UST) collapsed in May.

Terraform Labs (TFL), the firm behind the Terra blockchain, formed LUNA2 from the ashes of the $40 billion project. It distributed the revamped token among investors who had suffered losses from their LUNC and UST investments via an airdrop.

As it appears, those LUNA2 recipients decided to dump the token to recover some of their losses, thus pushing its price down by 85% less than two weeks after it peaked at $12.24.

LUNA2/USD daily price chart. Source: TradingView

Investors are also likely keeping their distance from LUNA2 amid allegations that Do Kwon, the founder/CEO of TFL, has lied about having zero LUNAC tokens. Notably, a self-proclaimed Terra insider, known by the pseudonym “FatMan,” claims that TFL and Kwon own 42 million LUNA worth over $200 million.

The user also revealed five “shadow wallets” that hold 42.81 million LUNA2 (worth over $110 million at June 9’s price), noting that they all belong to Kwon.

“[Do Kwon] used his shadow wallet to approve *his own proposal* through governance manipulation (TFL is not supposed to vote), told everyone it would be a community-owned chain, and then gave himself a nine-figure score,” Fatman alleged, adding:

“These are just the verified wallets — there are many others.”

TFL, Kwon under investigation

LUNA2 struggles because of the growing scrutiny around TFL, particularly after it was alfined $78 million by South Korea’s tax regulator in May. 

Related: Anchor dev claims he warned Do Kwon over unsustainable 20% interest rate

What’s more, South Korean prosecutors and police have launched an investigation following allegations that a TFL employee embezzled an undisclosed amount of Bitcoin (BTC) fro the company.

Additionally, the U.S. Securities and Exchange Commission (SEC) is also investigating whether TFL’s crypto tokens are illegal unregistered securities.

As a result, LUNA2’s price has a high chance of heading lower in June with the ongoing problems for TFL, legal pressures and overall bearish sentiment. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Lummis-Gillibrand bill establishes SEC-CFTC balance of power over crypto markets

The comprehensive new bill sorts out regulators and addresses taxes, environmental impact, security and other major questions surrounding digital assets.

The long-awaited Responsible Financial Innovation Act to create a regulatory framework for digital assets was introduced in the United States Senate on Tuesday. The official text of the 69-page document was also released. 

The bipartisan bill, sponsored by Senators Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York, “addresses CFTC and SEC jurisdiction, stablecoin regulation, banking, tax treatment of digital assets, and interagency coordination,” according to a statement. The statement continues, “Understanding that most digital assets are much more similar to commodities than securities, the bill gives the CFTC clear authority over applicable digital asset spot markets.”

The senators appeared on CNBC Tuesday morning, and a large part of the interview revolved around splitting responsibilities between the SEC and CFTC.

“We’re trying to just fit the digital asset world into our current regulatory framework. […] We spent a lot of time on the definition of the modern Howey test,” Lummis added. She said that she was meeting with SEC chairman Gary Gensler that day, and Gillibrand had met with him the day before. She added:

“We’re going to continue to work with both the CFTC and the SEC to make sure that we both have found the right mix of using the Howey test to sort out which of those agencies best can regulate. We think that, because we’re using the Howey test, it’s going to come out just fine.”

“It is our job fundamentally for Congress to write these laws and the regulators to implement them. They don’t decide what they get to keep and what they don’t,” Gillibrand said in that interview.

Gensler has been adamant in declaring most cryptocurrencies are securities subject to his agency’s authority.

Related: SEC chair uses crypto enforcement in justification for FY2023 budget

The CFTC, which is far smaller than the SEC, will be authorized to collect fees from entities engaged in cash or spot digital asset activities to finance its additional regulatory responsibilities.

The bill addresses a range of issues relating to crypto. It commissions a study on the environmental impact of digital assets, creates an advisory committee on innovation and orders the development of cybersecurity guidelines. It also creates a tax structure and mandates an analysis of the use of digital assets in retirement savings.

“It takes a long time to build a regulatory framework for a new industry,” Gillibrand said. The bill now has to pass through the Senate banking, agriculture, intelligence and financial services committees.

Blockchain Association executive director Kristin Smith said in a statement on the association’s website, “The bipartisan legislation announced today by Senators Lummis and Gillibrand represents a milestone moment for crypto policy and a major step forward for the crypto industry in Washington.”

BNB price risks 40% drop as SEC launches probe against Binance

Downside risks for BNB also come from a recent Reuter exposé that claims Binance laundered “at least $2.35 billion in illicit funds.”

Binance Coin (BNB) price dropped by nearly 7.3% on June 7 to below $275, its lowest level in three weeks.

What’s more, BNB price could drop by another 25%–40% in 2022 as its parent firm, Binance, faces allegations of breaking securities rules and laundering billions of dollars in illicit funds for criminals.

Bad news twice in a row

BNB was issued as a part of an initial coin offering (ICO) in 2017 that amassed $15 million for Binance.

The token mainly behaves as a utility asset within the Binance ecosystem, primarily enabling traders to earn discounts on their trading activities. Simultaneously, BNB also functions as a speculative financial asset, which has made it the fifth-largest cryptocurrency by market capitalization.

BNB market capitalization was $45.42 billion as of June 7. Source: CoinMarketCap

As a result, the U.S. Securities and Exchange Commission (SEC) is investigating whether the ICO of BNB tokens in 2017 was a sale of securities that should have been registered with the regulator, according to sources contacted by Bloomberg.

This risks putting downward pressure on BNB’s price, which has already lost more than half of its value after peaking out in May 2021 at around $700.

BNB holds above May–July 2021 support

In addition to the bad news, BNB’s plunge also came as a part of a broader correction trend elsewhere in the crypto market, with top coins Bitcoin (BTC) and Ether (ETH) dipping by 7% and 7.25% on the same day.

Now, BNB tests the 61.8 Fib retracement level (near $274) of the Fibonacci retracement graph sketched from its $10-swing low to $700-swing high. Interestingly, the same level was instrumental as support during the May–July 2021 session that preceded a 170% price rally.

But weak fundamentals, including the Federal Reserve’s hawkish policy, have raised BNB’s possibility of dropping below the 61.8 Fib line.

Related: The crypto market dropped in May, but June has a silver lining

If this happens, then BNB’s next downside target could be its 200-week exponential moving average (200-week EMA; the blue wave) near $200, down about 25% from June 7’s price.

The BNB/USD pair’s weekly relative strength index (RSI), now at 34, also shows more room to drop until the reading hits 30, an oversold level that indicates buying sentiment.

BNB/USD weekly price chart. Source: TradingView

Meanwhile, a further drop below the 200-week EMA could have BNB eye the 0.786 Fib line near $160 as its support, down by 40% from June 7’s price.

Conversely, if BNB manages to hold strong above $274, it could rebound toward the area defined by its 0.5 Fib line around $355 and its 50-week EMA (the red wave) near $380, up over 20% from the current price level.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bad day for Binance with SEC investigation and Reuters exposé

The SEC is reportedly suspicious that the world’s biggest crypto exchange sold unlicensed securities in its ICO, and the news agency tallied up some old cases.

The United States Securities and Exchange Commission is investigating whether Binance Holdings broke securities rules when it launched its BNB token in an initial coin offering (ICO) five years ago, Bloomberg reported on Monday.

Binance is the world’s largest crypto exchange, and BNB is the fifth-largest cryptocurrency.

The BNB ICO took place in July 2017 on several platforms during the height of the so-called ICO boom, and the Binance exchange opened just days afterward. According to Bloomberg, citing unnamed people familiar with the matter, at least one U.S. resident claimed to have taken part in the ICO, which could be a crucial fact for an SEC case, if the agency chose to pursue one. The SEC has claimed most cryptocurrencies are securities and brought cases against a number of ICO projects.

Binance founder and CEO Changpeng Zhao, often known as “CZ,” said in a 2020 blog post that the wording of the BNB white paper was changed in January 2019 because “the potential for being misunderstood as a security is higher in certain regions.” Binance’s American arm, Binance.US, was created later that year.

Related: Binance wins dismissal of class action over 2018 tokens that tanked

Also on May 6, Reuters published a lengthy special report alleging that Binance processed at least $2.35 billion of transactions from hacks, investment frauds and narcotics sales between 2017 and 2021, and had weak Know Your Customer (KYC) and Anti-Money Laundering (AML) protections for those years.

Among other cases, Reuters mentions the hacking of Eterbase, with some of the proceeds being laundered through Binance by North Korean hacker group Lazarus, and Binance’s association with Russian-language drug mart Hydra.

A Binance spokesperson disputed Reuters’ findings, and the exchange told Forbes in a statement that the report is a “woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations.”

Binance is already the object of several U.S. federal investigations, including another SEC probe. The U.S. Commodity Futures Trading Commission began an investigation of the exchange’s trading practices last year.

Binance Markets, its United Kingdom branch, was ordered by the Financial Conduct Authority to cease activities in that county after a review of its operations last year. Additionally, Binance was ordered to cease operations in Ontario last June, although it remained active in the Canadian province until March of this year.

OpenSea ‘insider trading’ could see NFTs labeled securities: Former SEC lawyer

Former SEC lawyer says OpenSea insider trading case could end with NFTs labeled as securities.

Former United States Securities and Exchange Commission lawyer Alma Angotti says this week’s news about an OpenSea employee being charged with insider trading could open the doors to nonfungible tokens (NFTs) being labeled as securities. 

On Wednesday, in a first for the industry, prosecutors in Manhattan charged former OpenSea product manager Nathaniel Chastain with insider trading.

The U.S. Attorney’s Office for the Southern District of New York said the exact charges were “wire fraud and money laundering in connection with a scheme to commit insider trading.” Until now, the phrase “insider trading” has not been used in regard to cryptocurrency and typically refers to the insider trading of securities.

Related: EU commissioner calls for global coordination on crypto regulation

Angotti was once an enforcement official at the SEC, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network and the Financial Industry Regulatory Authority. She is now a partner at a consulting firm called Guidehouse. She told TechCrunch:

“It could very well be a security under the Howey Test — if you’re buying a piece of an NFT and hoping the price will go up so you make money from it, that’s not very different [from securities].”

The Howey Test is used to determine if a transaction qualifies as an investment contract, or security, which is subject to disclosures and registrations. An investment contract exists if an investment results in the expectation of profit from the efforts of others.

The OpenSea case of insider trading against Nathaniel Chastain claims that he used anonymous hot wallets and accounts on OpenSea itself to purchase 45 NFTs over the course of a few months that he knew in advance would be featured on the home page. He would then sell them for a profit after they became featured and rose in value.

According to Angotti, the charges are not surprising:

“Misappropriating your employer’s confidential information is fraud, and once you move the proceeds of that fraud through the monetary system, it’s money laundering.”

In similar news today, the Commodity Futures Trading Commission, which regulates commodities rather than securities, is suing Gemini, claiming the crypto exchange lied in their futures contract evaluation. The CFTC claimed that Gemini misled them in 2017.