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Why is the crypto market down today?


The crypto market is down today as a slew of upcoming regulatory enforcement events weigh on Bitcoin (BTC), Ether (ETH) and altcoin prices. Ahead of the Nov. 21 Department of Justice (DOJ) announcement, The Wall Street Journal reports the first enforcement action will be against Binance to the tune of a $4.3 billion fine. 

Price action across the crypto market remains tilted to the downside as investors and money managers begin to digest the potential fallout from regulatory actions taken against the industry.

Cryptocurrency market performance, 1-day chart. Source: Coin360

US-led regulatory pressure against crypto reaches a head

The cryptocurrency industry and regulators have a long history of not getting along either due to various misconceptions or mistrust over the actual use case of digital assets.

On June 5 and June 6 of 2023, the United States Securities and Exchange Commission filed civil lawsuits against two of the largest centralized exchanges in crypto, Binance and Coinbase. The SEC has noted that 61 different cryptocurrencies, representing $100 billion in value, that are securities in its opinion.

On Nov. 21, The Wall Street Journal and Bloomberg reported that the U.S. Department of Justice (DOJ) is expected to announce enforcement actions at 3 pm Eastern on Nov. 21 related to Binance. The initial indication from the DOJ suggested that strong actions would be taken against the crypto sector, but the message was not specific.

Reports suggest Binance will pay $4.3 billion in fines and Changpeng “CZ” Zhao plans to plead guilty to violating U.S. Anti-Money Laundering requirements and will step down as CEO of Binance.

Risk assets are heavily impacted by investor sentiment, and this trend extends to Bitcoin and altcoins. To date, the threat of unfriendly cryptocurrency regulation or, in the worst case, an outright ban continues to impact crypto prices on a monthly basis.

On Nov. 20, the SEC filed a complaint in San Francisco federal court claiming that the Kraken exchange is operating a platform that unlawfully facilitates the buying and selling of crypto.

ETH and BTC spot ETF euphoria could be waning

Market sentiment boomed due to optimism about a potential spot Bitcoin exchange-traded fund (ETF) approval to happen in November but was later delayed by the SEC on Nov. 17. The euphoria helped to send Bitcoin price to an 18-month high above $38,000. However, the euphoria seems to be easing, with the BTC price down at intraday on Nov. 21.

Bitcoin historical returns by month. Source: Newhedge

While BlackRock does not believe the SEC has any legitimate reason not to approve a cryptocurrency spot ETF, the SEC seems poised to delay until 2024.

On Nov. 15, the SEC delayed a decision on Grayscale’s Ether futures ETF. Some analysts believe the 19b-4 form submitted by Grayscale is a potential “trojan horse” for the agency.

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Notably, the securities regulator decided to delay applications from Hashdex and Global X ETFs on Nov. 17. The SEC must also decide on Franklin Templeton’s Bitcoin ETF application by Nov. 21. Failing to do so would push the deadline to 2024.

For now, traders are likely securing profits at the current multi-month high prices in the crypto market because of this potentially long wait.

Related: BNB price rallies on news of DOJ-Binance settlement

Futures liquidations send the crypto market lower

The decline across major cryptocurrencies has led to a rush of liquidations across the derivative market.

In the past 24-hours alone, over $148.7 million in long positions have been liquidated across the crypto market, with $113 million being wiped out in the previous 12-hours. Crypto market prices are negatively affected when long derivative positions are liquidated without buying pressure from trading volume.

Crypto market liquidations. Source: Coinglass

In the short term, the cryptocurrency market will continue to navigate multifaceted challenges, and the ebb and flow of various economic and regulatory factors will undoubtedly shape its trajectory for the foreseeable future.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.