Bitcoin, Ether Remain Resilient After Binance, Coinbase Suits, and Amid Long-Running Crypto Industry Turmoil

What a difference a year makes?

The current environment in crypto bears some remarkable similarities to the turmoil of a year ago when prices plunged. Yet there are also fundamental differences that suggest markets are in a better place than before.

A year ago

In the space of 24 hours, starting June 13, crypto lender Celsius network paused user withdrawals on its platform and crypto hedge fund Three Arrows Capital (3AC) signaled its own insolvency issues.

BTC’s 15.4% decline that day , still ranks as the second largest single-day drop since 2019.

Fears of contagion roiled markets, as ETH simultaneously sold off 16.7%, its sixth largest decline since 2020.

Inflation was at the top of everyone’s mind as it is now. On June 16, the Federal Open Market Committee (FOMC) raised the target interest rate by 75 basis points, its largest increase in close to 30 years.

What’s still the same?

Similar to last year, the crypto world’s fortunes seem intertwined with the fortune of two entities. Last year, Three Arrows Capital and Celsius were in the limelight. Now crypto exchange giants Binance and Coinbase hold that position. Investors see the fate of many cryptos depending on the outcome of the suits and a determination about whether tokens are securities, commodities or otherwise. Prices of many of the 19 cryptos mentioned by the SEC plunged more than 20% last week before stabilizing.

Binance and Coinbase already appear to be suffering financially after the Securities and Exchange Commission’s decision to sue them for violating securities law – outflows from both soared last week, even if neither seems to have solvency issues. Binance faces charges that it commingled funds, while Coinbase is accused of selling unregistered securities, even though the SEC approved Coinbase’s initial public offering.

Still, the legal actions seem likely to keep markets off balance.

What’s different?

For starters, prices of BTC and ETH are 19% and 44% higher, respectively since last June 13, .

Relationships have changed also. BTC and ETH have not mirrored the 20% decline in Coinbase shares since the SEC’s filings.

Bitcoin and ether have decoupled from crypto entities in ways that did not occur last year.

BTC and ETH have traded more on their own accord, as their correlations with Coinbase shares have fallen 30% and 17%, respectively, over the last 365 days.

The SEC’s exclusion of bitcoin and ether from their seemingly arbitrary list of securities has offered the latest evidence that they should fall outside of the SEC’s purview.

Macroeconomic factors have taken precedence over risks to centralized entities, with data points like Tuesday’s Consumer Price Index (CPI) arguably drawing attention over the actions of the SEC.

Today’s CPI report showed annual headline inflation of 4%, slightly below expectations of 4.1%. The monthly CPI increase of 0.1% was also ahead of a projected 0.2% increase in prices.

The milder inflation data gives the FOMC room to pause its recent spate of rate hikes. Will crypto markets respond?

Last week’s dramatic events, those a year ago and the many others over the past months have occasionally affected bitcoin and ether but never broken them.

In the face of so much change, BTC and ETH have grown increasingly resilient.

Meanwhile, isn't it interesting that as we approach the anniversary of the 75 basis point hike, markets are now assigning a 97.6% probability that Wednesday's interest rate decision will result in no change, at all.

Edited by James Rubin.