The cryptocurrency market saw a decline in prices on Monday, causing the total market capitalization to drop below $1 trillion for the first time in three weeks, News About Nigeria reports.
The drop was attributed to the upcoming release of U.S. inflation data and the recent regulatory action taken against crypto companies, including the New York Department of Financial Services’ order for Paxos to stop creating new units for Binance’s BUSD stablecoin.
Crypto industry insiders are concerned that these actions are “de-banking the industry” and “cutting off stablecoins,” as well as clarifying unregistered securities.
Additionally, investor enthusiasm for crypto assets has tempered in recent weeks due to the strength of economic factors such as inflation and the labor market, which suggest higher interest rates for longer. As a result, the options market for bitcoin looks less optimistic than it did last month, with elevated volumes and prevalent liquidations on the long side.
Demand for “downside protection” or puts for both bitcoin and ether has increased over the past week, as positions are negative across the board, with bearish regulatory concerns also playing a role.
In the midst of this regulatory action, the SEC has brought four enforcement actions against crypto firms since the beginning of the year, including a $30 million settlement with U.S. exchange Kraken last week. Kraken was ordered to eliminate its staking program for U.S. customers, leading to a sell-off of shares in competitor exchange Coinbase Global, which has been under scrutiny for its own staking program.
The company’s chief legal officer, Paul Grewal, argued that Coinbase’s program is “fundamentally different” than Kraken’s and the company has no plans to shutter its own program, despite analyst estimates that it would account for $347 million of the company’s full-year revenue.
As the crypto market faces increased regulatory scrutiny and investor uncertainty, it remains to be seen how these factors will impact the long-term growth and adoption of cryptocurrency.