Signs 'crypto winter' ending as regulatory fog begins to lift

Cryptocurrencies were testing year highs on Friday as a run of favourable regulatory and investment moves have started to shift momentum in markets that had been stuck in a rut for months.

Bitcoin traded at its highest price since June 2022 overnight, touching US$31,818 (about RM144,000) on the Bitstamp exchange. It is up more than 90% for the year so far and nearly 30% in a month.

Second-biggest token Ether had its best session since March and Ripple, which a US judge ruled could be legally sold on public crypto exchanges, soared 73%.

"The regulatory environment is changing," said Matthew Dibb, chief investment officer at crypto asset manager Astronaut Capital. "And by what we have seen in the last 24 hours, it could be for the better."

The Ripple ruling came together with fraud charges against the former boss of bankrupt crypto lender Celsius Network, which are contested, and on the heels of moves into the market by finance firms BlackRock and Fidelity.

Investors say it is driving a mood shift.

"Ripple stakeholders were waiting for some regulatory clarity. Yesterday the court seems to have provided just that," said Justin d'Anethan, head of business development in Asia at Keyrock, a digital assets market maker in Hong Kong.

The language remains somewhat unclear, he said, but finding that XRP tokens sold on public crypto exchanges were not securities under law "probably serves as a precedent."

It unleashed a rally in smaller cryptocurrencies called "altcoins," with tokens such as Solana, Matic and Stellar up between 15% and 50% and shares in exchange Coinbase up 24% to a year high.

"If centralised crypto projects aren't securities, then that may make it more likely for the Commodity Futures Trading Commission to be primary regulator for the industry, which is something most people in crypto would prefer," said Greg Moritz, chief operating officer of crypto hedge fund Alt Tab Capital.

He said further cases would probably shed more light on how courts will treat private crypto offerings.

Traders said liquidity was low on the altcoin moves, but steadily improving in bitcoin and ether. Turnover for Coinbase stock was the highest in 14 months on Thursday, giving weight to a move that has more than doubled the stockprice in a month.

Momentum

Crypto assets are now trading near or above levels plumbed when the collapse of the FTX exchange last November plunged the sector in the depths of what has been called the "crypto winter".

FTX imploded when it was unable to honour a rush of withdrawals and its failure, exposing customers to losses, added momentum to global regulatory efforts at reining in the sector, especially to protect small investors lured by fast returns.

China has all but banned crypto. US investigators raking over FTX have accused founder Sam Bankman-Fried of multibillion-dollar fraud, to which he has pleaded not guilty.

Celsius founder Alex Mashinsky also pleaded not guilty to his charges on Thursday and to be sure, plenty of other legal challenges remain pending and market setbacks are expected.

Coinbase and bigger rival Binance face lawsuits, which they are contesting, from the SEC and in Binance's case from other regulators as well. A top SEC official said last month the industry has "an ethos built around noncomplicance."

The entrance of traditional finance businesses into crypto, bringing in large sums has evoked memories of the rally that lifted bitcoin 300% in 2020.

The world's biggest asset manager, BlackRock, filed to launch a bitcoin exchange traded fund last month and earlier in July exchange operator Cboe refreshed its filing for a similar fund to be run by asset manager Fidelity.

"We'd gone through this long period of just consistently negative news to make the space look pretty grimy," said Chris Weston, head of research at brokerage Pepperstone in Melbourne.

"For the first time in a while, it's been consistently positive news coming though and that means you've got momentum."