The Wolf Den #718 - Coinbase's Race Against Regulation
Coinbase went public just in time.
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In This Issue:
Coinbase's Race Against Regulation
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
EU Passes MiCA Regulation
Safemoon Cut A Deal
Is Bitcoin A Safe Haven? DeFi Wins Over CeFi | Live Panel
Coinbase's Race Against Regulation
In under 48 hours, the crypto market shifted from embracing an 'all news is good news' mentality to worrying about Coinbase leaving the U.S. and fearing the imminent death of crypto.
Life moves pretty fast.
Had prices continued to rise, Coinbase's departure from the U.S. might have been twisted by the media and interpreted as a bullish event. Nevertheless, this topic warrants thorough discussion. I briefly touched upon the Bermuda news and Brian Armstrong's hints in yesterday's newsletter, but as FUD emerges like Whac-A-Mole, I come prepared with my intellectual hammer.
Let’s smack some moles.
Before delving into the details, let's clarify Brian Armstrong's 'hinting' about Coinbase possibly leaving the U.S. The exact quote is provided below, and I have included additional quotes further down to support my thesis that Coinbase is NOT departing next week or anytime soon. While I am speculating, I present evidence to back this thesis.
"Anything is on the table, including relocating or whatever is necessary. I think the U.S. has the potential to be an important market for crypto, but right now we are not seeing the regulatory clarity that we need. I think in a number of years if we don't see that regulatory clarity emerge in the U.S., we may have to consider investing more elsewhere in the world."
A crucial question to consider is why the SEC is targeting Coinbase if it was the SEC that approved the company's public debut in the first place. This leads to a follow-up query: did Coinbase go public 'just in time?' To analyze this, let's construct a timeline of the events.
May 4, 2017 – December 23, 2020: SEC Chairman Jay Clayton is in office
December 17, 2020: Coinbase confidentially files for an IPO with the SEC.
January 18, 2021: Joe Biden announces his intention to nominate Gary Gensler as Chairman of the SEC.
January 28, 2021: The SEC approves Coinbase's S-1 registration statement, clearing the way for the company to go public.
March 10, 2021: The Senate Banking Committee approves Gensler's nomination and sends it to the full Senate for consideration.
March 23, 2021: Coinbase announces that it will go public through a direct listing on the Nasdaq stock exchange.
April 14, 2021: The Senate confirms Gensler's nomination as SEC Chairman with a vote of 53-45.
April 14, 2021: Coinbase goes public on the Nasdaq under the ticker symbol COIN.
After examining the relevant dates, it seems plausible that Coinbase aimed to gain approval before the arrival of the new gatekeeper, Gary Gensler. It is also worth noting that when Gensler was nominated, the consensus was that he would benefit the crypto space. The most logical conclusion is that Coinbase wanted to secure its position before there was any chance that their entrance could be reconsidered or revoked. Perhaps Gensler took Coinbase's swift action personally – who knows?
However, the timeline only reveals part of the story. The context of Coinbase's decision was intriguing, to say the least. At the time, the crypto market was trading at all-time highs, institutions were just beginning to enter the space, and the IPO/Direct Listing was expected to raise significant capital. Yet, behind the scenes, leadership changes were brewing in the SEC, and the SEC was preparing for an intense regulatory campaign. Coinbase recognized its opportunity and seized it.
Furthermore, in the background, SEC Chairman Jay Clayton announced a lawsuit against Ripple Labs on his last day in office, and Telegram had lost to the SEC earlier in the year for offering an unregistered security to its users. ICOs were being shut down left and right, and Coinbase had a front-row seat to witness Bitconnect's collapse while it underwent its own approval process. So, while Coinbase was being thoroughly scrutinized, the regulators were essentially eliminating the competition. For Harry Potter fans, Coinbase is the boy who lived.
With the backstory established, I want to remind everyone why Coinbase decided to conduct business in the U.S. in the first place – in their own words. You can read more HERE.
“Coinbase decided to become a public company in the US because we believe America is well suited to lead the technological transformation enabled by blockchain technology. The stakes are high for crypto in the US. Clear and responsible regulation that enables the blockchain industry to thrive in the US is critical to our preeminence in the finance and tech sectors, and this work needs to happen transparently, not through one-off enforcement actions.”
From what I gather, Coinbase did not endure the SEC's rigorous scrutiny (up to this point) only to suddenly change course. We already know that Coinbase is prepared to go to court and may even have to confront the SEC following Ripple's legal battle. After all, Ripple is still headquartered in the U.S., and their lawsuit began in December 2020. Coinbase understands that the industry relies on them to hold their ground if the day comes, which is why I doubt they will back down given their stance thus far. Call it a crusade or a choke point, but ultimately, crypto is engaged in an all-out battle with regulators, and Coinbase is our stronghold. The FUD is somewhat accurate; without Coinbase, the industry's presence in the U.S. is significantly weakened.
Gary Gensler and the SEC may not be pleased that Coinbase made it through, but they will have to forcibly drag us all away if they want to reverse their decision. The SEC recognizes that any lawsuit against Coinbase would awaken a formidable opponent and result in a challenging fight for them, which is why they have saved the final boss for last. Perhaps they won't sue, and we'll witness a fairy tale ending, but I wouldn't hold my breath – the only thing I'll be holding is my COIN stock as a supporter and, of course, my crypto.
I hope this introduction helps contextualize some of the FUD that has circulated over the past few days. As always, have a great weekend, and I'll see you all next week.
Bitcoin Thoughts And Analysis
Bitcoin is sitting in the last area of demand/support before the 50 MA below around $26,900 (and rising) and then the obvious area at $25,212. The current support area is a demand zone, drawn from the last down candle before price rocketed up.
There was bearish divergence with overbought RSI before the move and now RSI is trending towards oversold. As you know, RSI will eventually make it there. That said, 50 RSI (the dashed line) is technically considered support and anything above it is still “bullish” RSI.
If you have been following me for a while, then you know what I am currently watching for… bullish divergence with oversold RSI on the 4-hour chart. It is even better when we see these happening on multiple time frames, but that’s not the case for the moment.
If we get a price close below $28,104 and RSI makes a higher low and a clear elbow up, then I would expect a significant bounce and for the local bottom to be in.
This is all I am really watching for now.
Altcoin Charts
Here is an illustration of what I am looking for on Bitcoin… although not perfect.
ETH had oversold bullish divergence (blue), then hidden bearish divergence (red), which cancels the bullish divergence and shows indecision.
Now I am watching for the green POTENTIAL divergence to confirm.
Legacy Markets
European stocks and US futures experienced mixed results due to varying corporate earnings and as traders sought insights on inflation and economic growth prospects. The Stoxx Europe 600 index remained unchanged, with resilient service-sector activity in the euro area but declining manufacturing orders. Mining stocks fell, while SAP AG and EssilorLuxottica SA experienced gains. S&P 500 and Nasdaq 100 futures were uncertain after Wall Street losses, with investors awaiting PMI data. The 10-year Treasury yield remained flat, and the dollar strengthened against most of its G-10 counterparts. European Central Bank Vice President Luis de Guindos commented on the euro area's "very sticky" underlying inflation. The US labor market showed signs of cooling, with rising unemployment claims and falling home sales. The Federal Reserve is expected to raise interest rates again to combat inflation. Meanwhile, President Joe Biden is planning an executive order to limit US investment in key sectors of China's economy.
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.1% as of 10:38 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.8%
The MSCI Emerging Markets Index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.1% to $1.0956
The Japanese yen rose 0.3% to 133.89 per dollar
The offshore yuan fell 0.2% to 6.8952 per dollar
The British pound fell 0.5% to $1.2386
Cryptocurrencies
Bitcoin fell 0.6% to $28,024.83
Ether fell 0.9% to $1,919.71
Bonds
The yield on 10-year Treasuries was little changed at 3.53%
Germany’s 10-year yield advanced one basis point to 2.46%
Britain’s 10-year yield declined three basis points to 3.74%
Commodities
Brent crude was little changed
Spot gold fell 0.9% to $1,986.57 an ounce
EU Passes MiCA Regulation
While the U.S. grapples with regulatory coherence, Europe is showcasing its approach to crypto regulation. The European Parliament has officially passed the Markets in Crypto-Assets (MiCA) regulation, uniting the 27 EU countries under a single regulatory framework. Before this act, companies had to adhere to the rules and regulations of each individual country in which they operated; now, there is one unified set of rules. If only the U.S. could achieve the same level of regulatory harmonization, but that might be asking too much.
According to Patrick Hansen, director of EU strategy and policy at Circle, “the legal clarity will also foster innovation amongst financial institutions that have been previously hesitant to launch products and services due to regulatory uncertainty. Additionally, as MiCA is the first comprehensive regulatory framework for crypto assets from a major jurisdiction in the world, it is likely to attract considerable foreign capital and talent to the region.”
Safemoon Cut A Deal
The Safemoon saga has reached its conclusion. Following negotiations, the hacker will keep 20% of the stolen $8.9 million in BNB and return the remaining 80%. Labeling it a 'bounty' might be an overstatement, but at least the situation has been resolved without legal charges. In response to the news of the fund recovery, the token experienced a surge as community sentiment turned around.
Is Bitcoin A Safe Haven? DeFi Wins Over CeFi | Live Panel
Today's guests are: Aya Kantorovich (Fractal), Steven McClurg (Valkyrie), Matthew Sigel (VanEck), and Matt Hougan (Bitwise).
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
I guess the underlying fact is age..these guys like their cushy jobs especially ye old woman who doesnt know what day it is. These clowns are drafting meaningless legislation ..new fish are ready