Original author:@MacroFang，PSE Trading Trader
Binance admits, faces huge fine
Binance and its CEO Changpeng Zhao pleaded guilty to charges of anti-money laundering and violating U.S. sanctions, which resulted in a massive $4.3 billion settlement with the U.S., the largest in the company’s history. Changpeng Zhao himself will pay a fine of US$50 million and resign as CEO. The resolutions conclude a long-running investigation into the exchanges failure to prevent suspicious transactions with terrorist groups and allow customers in the United States and Iran to trade.
In 2019, Binance, the worlds largest cryptocurrency exchange, and its chief compliance officer Samuel Lim admitted that the platform was used to funnel funds to terrorist groups such as Hamas. The U.S. Commodity Futures Trading Commission filed a lawsuit against the company and its CEO, Changpeng Zhao, resulting in a $4.3 billion fine and Zhaos guilty plea for failing to comply with anti-money laundering laws. Under the settlement, Binance will be required to report suspicious transactions in the future and review past actionable activity. The U.S. Financial Crimes Enforcement Network (FinCEN) will receive $3.4 billion of the fine paid by Binance, which is the largest fine in FinCENs history.
New CEO: Bullish on BTC
Zhao resigned as CEO and Richard Teng took over as CEO, marking the beginning of a new era for Binance that emphasizes compliance. Now that the legal issues have been resolved, creating a clear path to improved compliance, risk perception in the crypto market has decreased. This clearing of a significant resistance could be considered bullish for Bitcoin, potentially increasing investor trust and market stability.
BTC Halving: Bullish on Bitcoin to 220 K USD
Bitcoin’s “halving,” which occurs approximately every four years, is a key event for investors. This process, reducing Bitcoin supply inflation, is generally a strong bullish signal for Bitcoin’s price. Bitcoin Archive predicts that Bitcoin will exceed $220,000 within the next 18 months, based on a six-fold increase in the previous post-halving price. However, this prediction must be taken with caution due to the diminishing price gains seen after each halving. Overall, while Bitcoin’s halving event is generally a bullish sign, the volatility in the market and the reduced returns seen in past halvings should lead to a modest adjustment in expectations.
Cryptocurrency and SP Correlation: Parting ways
This year’s sharp decline in the correlation between crypto assets and equities began with the divergence between crypto assets and equities following the failure of Silvergate. This could lead to increased interest in the DeFi space. The current 1 m correlation is much lower than in early September, with BTC and ETHs correlation with the SP now negative. While broader banking stress has declined, the 3m correlation is still not comparable to levels seen in late 2022 and early 2023.
Since the beginning of this year, the global cryptocurrency market value has increased by approximately 79%, and Bitcoin trading volume has increased again. After a slump from March to mid-October, volume spiked late last month. Although this increase was short-lived, transaction volume is recovering and is currently approximately 14% below the 2022 average. Additionally, this year’s cryptocurrency rally has led to an increase in Bitcoin’s dominance, now stable at around 50%, with greater potential for growth due to the potential SEC approval of a spot Bitcoin ETF.
Cryptocurrency returns during U.S. trading sessions have been strong year-to-date, outperforming other time zones. The surge in U.S. returns began with the release of U.S. CPI in January, which initially showed the first sequential decline since the outbreak began. Returns during the U.S. trading session were most significantly boosted by increased optimism among June and October ETFs, particularly for BTC. Year-to-date, Bitcoin’s returns have been strongest during U.S. trading hours, while Ethereum’s returns have lagged significantly during EU trading hours.
Search interest in Bitcoin and Ethereum has begun to increase, showing correlation with price movements and special events such as the 2022 FTX and LUNA crashes.
Cryptocurrency performance amid rising volatility
Volatility has increased across multiple assets, and cryptocurrencies appear to be no exception. Despite the volatility adjustment, cryptocurrencies, especially altcoins, have consistently outperformed other currencies. The surge is consistent with improving indicators, including increased Bitcoin trading volume, Google search interest, and an increase in stablecoin market capitalization after months of sluggishness. The rally also coincided with a surge in Bitcoin ETP inflows. Due to the similarities between gold and Bitcoin (one of which is accessibility issues for investors), analyzing the impact of the launch of the first gold ETF GLD on the precious metal can reveal important insights.
The Impact of Conveniently Owning Bitcoin
There are several similarities between Bitcoin and gold, two non-interest-bearing assets, that could lead to related market impacts. Both are seen as barriers to acquisition for most investors, but the desire for them is certainly there. For gold (particularly physical gold bars), this has changed with the launch of gold ETFs, which accurately track the spot price of the treasure metal and provide an easy opportunity for the institutional and retail investor community to take a stake. There is currently a high probability that a Bitcoin spot ETF will be listed, so we are analyzing the impact of the first gold ETF on the corresponding assets.
Gold ETF inflows vs. relative performance
On November 18, 2004, the bachelors gold ETF, SPDR Gold Shares (GLD), was launched. Within a week of the release, gold slightly outperformed silver, but this trend was quickly reversed. Gold then reported a massive outperformance, but that move was quickly reversed. While golds relative performance may have been disappointing, the inflows into GLD were huge, causing the entire precious metals industry to move higher. In its first year since its inception, GLDs market capitalization increased by almost 500%. So while relative price performance may not reflect it, inflows clearly indicate demand for gold exposure, which is (at least partially) met by GLDs listing.
Market Optimism on Spot Bitcoin ETF Approval
When speculation about ETF approval began in June, inflows into Bitcoin exchange-traded products (ETPs) accelerated significantly. A new round of optimism about SEC approval has triggered another round of inflows that are growing even faster than the last round. Notably, the pace at which asset managers are buying Bitcoin futures has increased significantly. This has also been confirmed in ETH futures activity. Demand for Bitcoin ETFs was also evidenced by the cryptocurrency’s sharp rise following false reports of SEC ETF approval. However, the extent of Bitcoin demand that would be unlocked based on ETF approval is highly uncertain. This uncertainty will only increase if approvals are further delayed. It is possible that investors who already have the means to acquire BTC are preparing for approval and will sell their Bitcoin once the SEC gets the green light.