The market is no stranger to\nunpredictable price movements in the world of crypto. You can have the price\nswings up one day and down the next. As a relatively nascent technology and\nindustry, the value of digital assets is understandably sensitive to various\ninfluencing factors, such as monetary policy from central banks, regulatory\npressures, liquidity issues, and prices set by the force of supply and demand.<\/p>\n\n\n\n
One might find it challenging to pin\ndown the exact contributors to cryptocurrency value fluctuation; but in this\narticle, we will look at some of the key drivers of crypto prices in recent\nweeks. <\/p>\n\n\n\n
Generally, to gauge the performance of the digital asset\nclass, market participants parse the price movements of the two largest\ncryptocurrencies in terms of market value \u2013 Bitcoin and Ethereum. And, as of\nJune 20, Bitcoin and Ethereum have fallen approximately 10% and 14%,\nrespectively, since their peaks in May.
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\nWhile this kind of negative return is a run-of-the-mill phenomenon in the\ncrypto sector, that would be considered a catastrophe for the conventional\nstock market if it changes that aggressively in such a short amount of time. For\ncontext, on average, the stock market only logs a 10% return on an annual\nbasis.<\/p>\n\n\n\n
Additionally, a confluence of adverse factors has\ncontributed to such downturns for the past month or so. First, the crypto market\njittered as the SEC handling down damaging lawsuits on Binance and Coinbase,\ntwo of the most prominent entities in the crypto space (more on this later). <\/p>\n\n\n\n
Next, two crypto platforms, Delio and Haru Invest, halted\ninvestor withdrawals, triggered by a flood of worried depositors pulling their\nmoney out. And finally, USDT, the world\u2019s largest stablecoin, just broke from\nits peg to the dollar.<\/p>\n\n\n\n
These catalysts, among other reasons, have led to\nundesirable price movements in the industry. Especially, the standing litigation\nbetween the SEC and Binance and Coinbase could entail a pivotal movement for the\ncrypto-verse. <\/p>\n\n\n\n
Binance (the largest crypto exchange)\nand Coinabase (the second-largest crypto exchange) have been the face of crypto\ncommunities for quite some time. They are the leaders in the field, and every\nmove they make will have influential implications for the whole industry. <\/p>\n\n\n\n
Well, recently Binance and Coinbase have\nbeen on a colliding path with the Securities and Exchange Commission (SEC). The\nSEC has sued Binance and its CEO Changpeng Zhao on allegations that the company\ncommingled billions of user funds and subverted the SEC\u2019s purview by allowing\nclients to trade on their unregulated exchange.<\/p>\n\n\n\n
Similarly, the SEC sued Coinbase on the ground\nthat the company operates as an unregistered national securities exchange and\nbroker. But more importantly, in what will likely cause a shockwave across the\nindustry, the SEC listed a number of cryptocurrencies as securities in the\nlawsuit. <\/p>\n\n\n\n
These contemporary events have\nnegatively affected digital coin value, with the question revolving around \u201cIs\na token a security?\u201d especially consequential. Being categorized as a security\nwill subject crypto to more stringent regulation and oversight by lawmakers.\nHowever, though that is true, digital asset advocates would also argue that a\nclearer regulatory framework also enables crypto to thrive and be embedded in\nthe global financial system.<\/p>\n\n\n\n
Much as crypto enthusiasts like to distance\nthemselves far away from the traditional finance system, the two are still\nintertwined. The most notable example is the Federal Reserve\u2019s ongoing interest\nrate-hiking campaign against rampant inflation. <\/p>\n\n\n\n
Since the Fed began raising rates in\nearly 2022, both the crypto and stock markets have seen their price and\nvaluation tumbling. The reason? As rates go up, consumers and businesses will\nface a higher borrowing cost. At the same time, they will enjoy a higher return\nholding cash, such as in a money market account. As a result, investors were in\na risk-averse mode, giving cryptocurrency, as well as the stock market, the\ncold shoulder. <\/p>\n\n\n\n