Do Kwon arrested, bitcoin reclaims $28,000, SEC’s enforcement actions persists | Weekly recap
This week was mixed, punctuated by bullish and bearish patterns in the price action of top crypto assets, including bitcoin and ethereum. Noteworthy development included the recovery of bitcoin (BTC), which rejected bear pressure and rallied back above $28,000. The uptrend remains despite the United States Securities and Exchange Commission’s (SEC) enforcement actions. Meanwhile, after months of evading authorities, Terraform Labs founder Do Kwon was arrested in Montenegro.
Coinbase vs. the SEC; another long-standing tussle looming?
Amid the enduring battle on crypto staking launched by the SEC a few weeks ago, Coinbase continues to mount a defense. On Mar. 20, Monday, the American exchange filed a petition to the SEC, explaining why staking services should not be classified as securities.
In February, the regulator charged Kraken for offering staking services before settling for $30m. The exchange was also forced to discontinue its staking services as part of the deal with the watchdog. The SEC further relayed its intention to take action against other crypto-staking services in the country. This development was a warning to Coinbase, which also provides staking services. As such, the exchange took notice and initiated steps to address potential regulatory concerns.
However, it is worth noting that the conflict between Coinbase and the SEC extends beyond crypto staking services. The exchange has been the subject of regulatory scrutiny from the agency for some time. Three days after Coinbase’s petition was made public, the exchange revealed that it had received a Wells Notice. It indicates the regulator’s intention to pursue legal action against the exchange for alleged violations of securities laws.
Coinbase became the second company to receive a Wells Notice from the SEC in six weeks. Earlier, the agency issued a similar notice to Paxos, saying BUSD, a stablecoin, was a security. Shortly after, Coinbase’s CEO, Brian Armstrong, urged U.S. citizens to back politicians who support cryptocurrencies. In his view, this could help develop favorable regulations supportive of cryptocurrencies in the country.
Justin Sun gets hit in the latest slew of enforcement actions
The SEC regulator also brought charges against Justin Sun, a serial entrepreneur and Tron’s founder, and three of his companies. They accuse Sun of violating securities laws, illegal promotion of crypto assets, market manipulation, and fraud.
In response, Justin Sun challenged the SEC’s recent move, saying their accusations are baseless. Sun thinks the complaint “lacks merit,” adding that the stance held by the SEC concerning cryptocurrencies needs some improvement. He joins a list of crypto players bemoaning the SEC’s recent crusade against crypto entities.
Amid these actions, the SEC maintains that it is necessary to warn Americans regarding crypto investment officially. The agency noted that most platforms facilitating trading and investment in “crypto-asset securities” have not received the appropriate approval. Therefore, they lack the proper consumer protection measures.
The broader U.S. regulatory climate remains a concern
Overall, the broader regulatory climate concerning crypto in the United States remains a concern.
A report on Mar. 21 pointed out that the Internal Revenue Service (IRS) might be taking preliminary steps to enforce a tax framework for non-fungible tokens (NFTs) and collectibles. The tax authority has put up a proposal on the matter and is seeking public feedback.
The White House also released a report stating that cryptocurrency assets present challenges for the average American consumer. The 513-page report claimed that most digital assets lack intrinsic value, amplifying concerns that the U.S. government may be actively seeking to undermine the industry.
Do Kwon arrested
The arrest of Terraform Labs co-founder Kwon Do-hyung, commonly known as Do Kwon, also dominated headlines.
On Mar. 23, Filip Adzic, the Interior Minister of Montenegro, disclosed that the Montenegrin police had arrested an individual vaguely identified as Do Kwon in Podgorica, the capital and largest city of Montenegro. According to Adzic, the individual was arrested at an airport in Podgorica while in possession of falsified documents.
Adzic noted that an official announcement would follow shortly after his identity was officially confirmed. The disclosure was substantiated in subsequent reports that surfaced on Mar.25, Saturday, as videos of Kwon and Han Chang-Joon, an associate of his, surfaced. In the clips, Kwon was seen leaving a Montenegrin court in handcuffs and accompanied by a few policemen.
Following the disclosure from Adzic, U.S. prosecutors in New York leveled 8-count charges on Do Kwon bordering on wire fraud, securities fraud, and commodities fraud, among others. Last month, the U.S. SEC charged Do Kwon and Terraform Labs with fraud.
Bitcoin recaptures $28,000 amid an enduring rally
Notwithstanding the regulatory climate in the United States, bitcoin continued to lead the broader crypto market to recovery, leveraging concerns surrounding the deteriorating banking sector.
The asset’s continuous rally pushed it back above $28,000 for the first time in over nine months. This uptrend positioned bitcoin as one of the biggest-gaining risk assets this year, securing a place on the list of top-performing investment assets by Goldman Sachs.
Despite this comeback, renowned yet pseudonymous crypto analyst Capo of Crypto remains pessimistic about the coin, a stance he has held since last year. According to Capo, the inability of the broader market to rally in tandem with bitcoin as it broke above $25,000 suggested a case of market manipulation or overvaluation of the asset.
Considering this postulation, Capo forecasted that bitcoin and other crypto markets could retrace from spot rates.
However, on-chain data revealed that bitcoin’s long-term holders continue to retain their assets despite the price surge and Capo’s warnings of an impending dip. Data from Glassnode showed that the amount of BTC tokens that have remained dormant for over ten years recently hit an all-time high of 2,673,268 BTC. This demonstrates a firm conviction among long-term holders.
The bears leveraged the United States macro climate to fiercely oppose bitcoin’s rally on Wednesday. The crypto community expected a 25 bps rate increase from the Federal Reserve on Mar. 22. Despite falling inflation, the crypto market contracted on the rate hike. BTC dropped by over 6% to $26,700 before recovering in the second half of the week. As the uptrend resumed, a CryptoQuant report disclosed that the BTC Realized Price surged and looked likely to close above $20,000 in the wake of increasing demand.
Bitcoin’s promising position and the trajectory of the U.S. economy resulted in renewed optimism from former Coinbase chief technology officer (CTO) Balaji Srinivasan. As a result, he took up a bet with popular yet pseudonymous Twitter personality James Medlock that there would be hyperinflation in the United States. Srinivasan believes this would pump bitcoin prices to $1m by June, as the dollar devalues.
As of press time, BTC is changing hands at $28,222, up 4.11% in the past week after peaking at $28,868 on Mar. 22. If the uptrend continues, BTC could rally to register new Q1 2023 highs above $29,000.