Key Insights:
- GBTC outflows slowed on Thursday, fueling a BTC return to $42,000.
- SEC v Ripple case-related updates continued to pressure XRP.
- JPMorgan Chase downgraded Coinbase, citing falling prices and associated fees.
BTC-Spot ETFs: Grayscale GBTC Outflows Slow
BTC rallied 4.68% on Friday, ending the session at $41,853. Significantly, BTC moved into positive territory for the week. Monday to Friday, BTC was up 0.61%.
Despite warnings the BTC-spot ETF is not the bitcoin market, investors reacted to BTC-spot ETF-related updates. Investor angst over Grayscale Bitcoin Trust (GBTC) outflows dragged BTC to a weekly low of $38,542.
However, Outflows slowed on Wednesday and Thursday, delivering a more bullish backdrop. Despite net outflows for the fourth consecutive day on Thursday, BTC struck a Friday high of $42,252 in response to the Thursday BTC-spot ETF statistics. GBTC outflows hit $640.5 million on day 7 of trading before falling to $394.1 million on day 10 of trading.
Market sensitivity to GBTC numbers increased midweek after JPMorgan Chase (JPM) cited GBTC flows as a focal point for BTC price trends. JPMorgan considered a slowdown in GBTC outflows as a bullish price signal.
On Wednesday, Bitwise Chief Investment Officer Matt Hougan discussed BTC price trends and the BTC-spot ETF market, saying,
“The market front-ran the ETF approval by piling into both spot Bitcoin and Bitcoin derivatives. It expected larger net flows into ETFs than we’ve gotten so far, and is now unwinding that bet.”
Concluding,
“IMO just as the market overestimated the short-term impact of ETFs, it is underestimating the long-term impact.”
On Friday, iShares Bitcoin Trust (IBIT) was a beneficiary of the BTC return to $42,000, with the market cap breaking the $2 billion barrier.
SEC v Ripple: Court Grants Ripple Motion to File Sur-Reply
Activity in the ongoing SEC v Ripple case drew investor interest. On Wednesday, Ripple filed a Motion to File a Sur-Reply. A Sur-Reply would allow Ripple to expand on its previous opposition to the SEC Motion to Compel.
On Thursday, Judge Analisa Torres granted the Motion to File a Sur-Reply.
The Sur-Reply Letter targeted SEC mischaracterizations within its Motion to Compel, requesting the court to disregard the misstatement of facts.
The court filings relate to Ripple breaching section 5 of the 1933 Securities Act for selling unregistered XRP to US institutional investors. In July, Judge Analisa ruled that Ripple should have registered XRP as a security when selling to institutional investors.
Ripple and the SEC are progressing through remedies-related discovery, which must end by February 12.
The Motion to Compel and Opposition to the Motion to Compel related to financial statements for 2022-23 and post-complaint contracts governing XRP sales to institutional investors. Ripple opposed providing the documents on the basis that,
“The SEC never argued that post-complaint conduct was relevant to remedies but instead took the position that post-complaint conduct was entirely irrelevant to the case […]. The SEC should not be permitted to reverse course now.”
Post-complaint conduct could influence the penalty Ripple must pay for breaking Section 5 of the Securities Act. Judge Torres could impose a punitive penalty if the SEC demonstrates Ripple continued to break Securities Laws after the July Court ruling.
The focus remains on the final stage of the SEC v Ripple case regarding XRP sales to institutional investors. However, SEC plans to appeal the ruling on Programmatic Sales of XRP remain a headwind.
Monday to Friday, XRP was down 2.58% to $0.5324. XRP tracked a broad-based crypto rally on Friday, reducing the deficit.
Coinbase Downgrade: JPMorgan Hits the Crypto News Wires
This week, JPMorgan Chase (JPM) downgraded Coinbase (COIN) from neutral to underweight. JPMorgan cited the threat of lower trading volumes and associated fees for the downgrade.
Coinbase shares fell by 3.14% on Tuesday as investors responded to the downgrade.
JPMorgan Chase CEO Jamie Dimon and the crypto tantrum put JPM under the crypto market spotlight. Attending a Bank Committee hearing on Capitol Hill in December, the JPM CEO ended an anti-crypto tirade, famously saying,
“If I were the government, I would close it down.”
Despite the downgrade, Coinbase ended the week up 0.36% to $125.20. Coinbase rallied 3.46% on Friday, reversing losses from earlier this week.
Investors responded to news of investment bank Oppenheimer upgrading Coinbase from perform to outperform.
Senator Elizabeth Warren vs. Senator Cynthia Lummis in Crypto Battle
Anti-crypto rhetoric on Capitol Hill and the SEC continues to influence the buyer demand for cryptos.
Senator Elizabeth Warren made the crypto news, retargeting the crypto market, saying,
“A new US GAO report confirms that rogue nations are using crypto to dodge sanctions and undermine our national security. It’s time for crypto to follow the same anti-money laundering rules as everyone else. I’ve got a bill to make it happen.”
The US Government Accountability Office (GAO) is a federal agency. The GAO Report considered the effectiveness of economic sanctions and the use of crypto to evade sanctions.
Senator Warren is gathering support for the Digital Asset Anti-Money Laundering Act. The bill proposes banking-style anti-money laundering (AML) and countering financing of terrorism (CFT) frameworks for the crypto market.
Senator Cynthia Lummis also drew investor interest. Responding to a post about a Sinaloa Cartel member laundering $900,000 in crypto, Senator Cynthia Lummis had this to say,
“$900 million in non-crypto (fiat currency) money laundering vs $900,000 in crypto money laundering. Crypto is clearly not the problem. Criminals and bad actors are. It would be a historic mistake to crush an entire emerging industry on incorrect data.”
Senators Cynthia Lummis and Kirsten Gillibrand proposed the Responsible Financial Innovation Act in 2022. The bill aims to support innovation while protecting retail investors. Contrasting with the Digital Assets Anti-Money Laundering bill, the Lummis and Gillibrand bill would give the CFTC greater oversight.
CFTC Chair Rostin Behnam Calls for Crypto Legislation
CFTC Chair Rosin Behnam spoke at the ABA Business Law Section Derivatives & Futures Law Committee Winter Meeting. Behnam called for legislation to regulate the crypto market. Noting that Congress has not granted federal regulators authority to regulate the crypto market, Behnam said,
