Bitcoin (BTC) is trading at $68,940 at the time of writing, after a rapid decline from its peak of $71,769. Investors had been optimistic about the continued rise in altcoins following consistent closures above $69,000 for a while. So, what happened today that cryptocurrencies fell despite net inflows into ETFs?
Bitcoin (BTC)
In the five days leading up to March 27, the Bitcoin price rose from $63,800 to over $71,000, triggering the liquidation of $151 million in short positions. Although net inflows through ETFs resumed this week, developments in the Coinbase case have turned everything upside down. The consideration of staking services as investment contracts could significantly restrict exchanges.
The provision of staking services to customers in the US could be halted. This could have much broader implications as the working mechanisms of altcoins like Ethereum are based on staking. Therefore, in the future, PoS altcoins could also face investment contract/security lawsuits.
The decision has not been finalized yet, but it is quite normal for the markets to fall with a ruling that could support the SEC’s goal of stamping altcoins as securities. Moreover, this FUD could continue to pressure the market for a while. An important development that could counterbalance this negativity was the letter sent to the SEC by US Representatives yesterday.
Politicians are clearly criticizing the SEC’s lack of guidance and clarity regarding crypto securities, their legal compliance process, and other issues.
Will Cryptocurrencies Rise?
Experts expect a slight easing in the appetite for risk markets due to macro pressures following the S&P 500 index’s failure to maintain its all-time high of 5,320 reached on March 21. Uncertainty regarding the Federal Reserve’s interest rate decisions for 2024 is confusing investors.
While an initial rate cut was expected in March, it is still not certain whether the SEC will make a cut in one of the next two meetings. Paul Hickey, co-founder of Bespoke Investment Group, shared his concerns about the lack of earnings growth, which poses the biggest risk to the stock market, indicating weakness in the stock markets. This situation could negatively affect crypto due to the positive correlation between them.
