A look back at April: Uncertainties weigh

Crypto markets ended in negative territory in April, ending a seven-month rally with geopolitical tensions in the Middle East, headwinds faced by tech stocks and this year’s first bank failure in the US weighing on investor sentiment. “Predictable unpredictability is the new normal… For markets in the short term, this should lead to position reduction,” Handelsbanken noted.

This increasing unpredictability combined with the delay of the anticipated rate cuts caused by inflation concerns now that the US economy is chugging along faster than expected, put pressure on leading asset classes, including cryptocurrencies and stocks during April.

“While the market has digested that six rate cut expectations have been cut in half (to three), we are concerned that the Fed might not cut at all this year,” the crypto consultancy 10x Research said. US interest rates are currently set at 5.25 percent, a 23-year high.

 In April, the monthly cryptocurrency exchange volumes dropped to $1.6 trillion, compared to the $2.5 trillion reached in March, when Bitcoin reached an all-time high.

 Sam Bankman-Fried, the founder of the now bankrupt crypto exchange FTX, was sentenced to 25 years in prison and ordered to pay $11 billion during the month.

Bitcoin upward trend reversed as geopolitics & macro data caught up

 The largest cryptocurrency, Bitcoin, saw its upward trend reversed in April, as the above-mentioned geopolitical and macroeconomic risks caught up, despite its successful halving on April 19. Analysts disagree on its future price trajectory. Read more here.

Meanwhile, inflows continued into the nine spot Bitcoin exchange traded funds (ETFs) launched in the US mid-January. SPDR’s gold ETF “took 800+ days since inception to achieve the same AUM as iShares Bitcoin ETF ($IBIT) has in just 70+ days…” the co-founder of the ETF Institute, Nate Geruci, commented. The nine ETFs now manage $32 billion, or a whopping $49 billion if the assets of GBTC (the incumbent Grayscale Bitcoin trust that was converted into an ETF) are included. The world’s largest asset manager, BlackRock, held more than 274,400 Bitcoins worth $16.4 billion on May 1 in its $IBIT ETF, though its 71-day streak of consecutive inflows into it ended on April 24.

The Securities and Exchange Commission (SEC) also approved the conversion of Hashdex’s Bitcoin futures fund into a spot Bitcoin ETF ($DEFI) during the month, making it the 11th spot Bitcoin ETF trading in the US.

The price of Bitcoin fell 18 percent over the past month over the past month, but up 34 percent since the beginning of the year.

US financial players slowly but surely embrace the Bitcoin ETFs

Morgan Stanley may soon allow its 15,000 brokers to advise the bank’s clients to buy the spot Bitcoin exchange traded funds (ETFs) launched in the US earlier this year. The bank already offers these financial products to interested clients, but does not actively recommend them. As for South Carolina-based Burkett Financial Services, it is among the first financial services companies to disclose investments in the spot Bitcoin ETFs launched mid-January. The CEO of JP Morgan, Jamie Dimon, remains unimpressed and once more voiced his skepticism vis-à-vis Bitcoins, judging them as a “fraud” and a “public decentralized Ponzi scheme.”

Financial products related to Bitcoin ETFs hit the market, while SEC slows down US

The first ETFs tracking Bitcoin’s volatility, ProShares’ $BITU and $SBIT, were launched early April. Two Xtrackers ETCs (exchange traded cryptocurrencies) were launched a couple of days later on Deutsche Börse by Galaxy Digital and DWS. In the US, the SEC delayed its decision on whether to allow or reject derivatives trading on spot Bitcoin ETFs to May 29.

First spot Ethereum ETFs launched in Hong Kong, delayed in the US

 Hong Kong’s regulator approved the spot Bitcoin and Ether exchange traded fund (ETF) applications of three issuers – Harvest Fund Management, Bosera Asset Management/ HashKey Capital and China Asset Management – during the month. These started trading on April 30 and could see inflows of $1 billion within two years after their launch, according to Bloomberg estimates. Inflows only reached $12 million during their first trading day, far below estimates of up to $300 million.

In the US, leading asset managers including Fidelity, Bitwise, Grayscale are awaiting the approval of their spot Ether ETFs by the Securities and Exchange Commission (SEC). The meetings held have been one-sided and discouraging, according to the participants. A decision is expected by May 23, but the odds of approvals are deemed as low.   

As for technical news, the Ethereum blockchain has experienced the highest number of hacking incidents so far this year, totaling 33, followed by BNB Chain with 14 incidents. Another interesting piece of news is that more than 27 percent of the total supply of Ether are now being staked, valued at around $98 billion at ETH’s current price and total revenues from Ethereum’s transaction fees rose by 155 percent to $1.2 billion in the first quarter. The price of Ether dropped 19 percent during the month, but up 25 percent since the beginning of the year.

Binance’s market share drops as legal woes continue, ex-CEO apologizes for the mess

The market share of Binance dropped to 44 percent at the end of April from above 75 percent at the beginning of 2023. In the US, where a $4.3 billion settlement was reached with US regulators last November, this share has dwindled to 0.28 percent from more than 30 percent last year. Its competitor Coinbase now dominates as the largest US crypto exchange, with a market share exceeding 60 percent. Binance US has hired a former compliance chief from the New York Federal Reserve Bank to its board in an attempt to fix its legal woes. The CEO of Binance, Richard Teng also assured that the crypto exchange now operates within the realm of the law in an interview with CNBC.

The American Binance executive detained in Nigeria since the end of February, accused of tax evasion and money laundering on behalf of Binance’s clients, has pleaded not guilty to these charges. His colleague, who managed to escape from custody in March, has since been found in Kenya. The Kenyan authorities seek to extradite him to Nigeria. These arrests and the Nigerian authorities’ crackdown on crypto exchanges earlier this year have prompted crypto players to shun the country, as its rule of law in Nigeria is being questioned.

In Canada, an Ontario court filed a class action against Binance for security law violations, alleging that the crypto exchange sold crypto derivatives to retail investors without registration. But good news come from India, where Binance will be able to reenter the Indian market, following the payment of a $2 million fine for non-compliance with the country’s anti-money laundering rules. 

Meanwhile, Binance’s former CEO, Changpeng Zhao (CZ) apologized for his poor decision and accepted full responsibility for his actions, acknowledging he should have focused more on compliance. US prosecutors want to see him three years behind bars, but he was finally sentenced to a mere four months in prison.

On a positive note, Binance acquired a virtual asset service provider license in Dubai and has converted all the assets of its $1 billion Secure Asset Fund for Users (SAFU fund) into the stablecoin USDC to ensure stability. The price of Binance Coin shed 7 percent over the past month.

Ripple to launch stablecoin pegged to USD

Ripple Labs, the issuer of the cryptocurrency XRP, follows in the footsteps of other fintechs and announced the launch of a stablecoin pegged 1:1 to the US dollar later this year to tap into the rapidly growing global stablecoin market, currently valued at more than $160 billion.

Ripple Labs also filed its opposition brief to the SEC’s proposed $2 billion fine during the course of April, suggesting that this sum be cut to $10 million as there are no findings of recklessness or fraud. The US regulator has until May 6 to file its opposition brief to Ripple’s brief. Separately, Forbes judged Ripple’s blockchain, a ledger of XRP transactions, “largely useless.” XRP lost 18 percent during the past month.

Sell off of FTX’s Solana stake weighs on its price

In April, the bankruptcy estate of FTX sold $1.9 billion worth of Solana tokens at a 62 percent discount to Galaxy Digital. On its part, Pantera Capital acquired 2,000 Solana tokens at a discounted price. The remainder will be auctioned off to reap a higher price. The price of Solana dived 35 percent in April.

On a positive note, Solana processed nearly half of the stablecoin transfers in March – a whopping $1.4 trillion. This is more than twice as much as those made on Ethereum’s blockchain, $635 billion. Circle, the issuer of the second-largest stablecoin USDC, also announced that it will soon offer Web3 services to Solana.

Toncoin overtakes Cardano as 9th largest crypto coin

Cardano has been overtaken by Toncoin as the ninth largest cryptocurrency in terms of market cap. Toncoin fell 14 percent over the past month. Grayscale’s Digital Large Cap Fund has sold its stake in Cardano following its quarterly rebalancing of its portfolio, but kept its holding in Bitcoin, Ether, Solana, Avalanche and Ripple’s XRP. The price of Cardano shed 29 percent over the past month. 

Polygon’s blockchain tested by Japanese bank, Uniswap faces potential US legal action

In Japan, Sony Bank will use the Polygon blockchain to test a yen-pegged stablecoin. In the US, the issuer of the 25th-largest cryptocurrency Uniswap, Uniswap Labs, faces an enforcement action for operating an unregistered securities exchange. The price of Polygon dropped 29 percent over the past month, while that of  Uniswap fell 45 percent.

Stablecoin user cases rise, increasing need for regulation

Telegram, the encrypted instant messaging service, now allows its users to make instant cross-border transfers with the world’s largest stablecoin USDT, issued by Tether. As for the payment giant PayPal, it now enables the users of its money transfer platform Xoom to convert its stablecoin PYUSD to US dollars for free.

In the US, a bipartisan Payment Stablecoin Act was introduced during the month. It aims at protecting consumers, promoting responsible innovation, and cracking down on money laundering and illicit finance. It would also bring some regulatory clarity, which is likely to encourage banks into this growing market. The US crypto universe is not amused, as it would ban unbacked algorithmic stablecoins such as USDD, Frax and TerraClassicUSD.

Leading crypto exchanges target expansion abroad

The largest US crypto exchange, Coinbase, obtained the registration as restricted dealer in Canada earlier this month, while HashKey obtained a license from the Bermudan authorities. It will enable Hong Kong’s largest crypto exchange to tap into Chinese overseas clients, as well as clients from Southeast Asian countries. In South Africa, the regulator granted 75 institutions licenses to operate as crypto asset service providers (CASPs) in April, out of 374 license applications.

EU adopts tougher KYC rules, while UK facilitates seizure of crypto assets

The European Parliament adopted a package of laws aiming at combating money laundering. It includes tougher know your client (KYC) rules for obliged entities including crypto players. They will also have to report suspicious activities to the relevant authorities. In the UK, the new ‘Economic Crime and Corporate Transparency Act’ enables crypto assets to be confiscated more easily.

Extradition saga of Terraform Labs’ ex-CEO continued

It is now up to the Montenegrin Minister of Justice, Andrej Milovic, to decide whether Terraform Labs’ co-founder Do Kwon will be extradited to the US or his native Korea from the former Yugoslav republic. Kwon was arrested there almost a year ago while traveling with forged passports.

Milovic has previously voiced his preference for an extradition to the US, where Kwon faces criminal charges. In April, a New York court ruled that Terraform Labs and its CEO, Do Kwon, not only offered and sold crypto assets illegally but also defrauded investors. As for the SEC, the regulator wants to impose a $5.3 billion fine on Terraform Labs and Kwon, as it claims they made more than $4 billion in “ill-gotten gains from their illegal conduct.”

Terraform Labs was behind the stablecoin TerraUSD and cryptocurrency Luna that both collapsed in May 2022 and caused $40 billion in market losses.

Google charges crypto scammers & BitMEX co-founder faces charges in the US

Google sued a group of crypto scammers that it claims defrauded more than 100,000 people by uploading fake crypto apps on its Google Play store. Separately, Ben Delo, one of the crypto exchange BitMEX’s co-founders, faces price manipulation charges in the US.