First Mover Asia: When It Comes to Crypto, Hong Kong Isn’t the World’s ‘Freest Economy’; Bitcoin Has a Late Fall Below $30K

A memo by the city’s securities and futures regulator reminds investors of the risks of NFTs; altcoins surge and then drop.

AccessTimeIconJun 7, 2022 at 12:59 a.m. UTC
Updated Jun 7, 2022 at 2:15 p.m. UTC

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

Good morning. Here’s what’s happening:

Prices: Bitcoin and other major cryptos take a late dive.

Insights: Hong Kong is hardly laissez-faire when it comes to crypto.

Technician's take: BTC's current price range remains intact after several weeks of negative returns.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.

Prices

Bitcoin (BTC): $29,515 -5.3%

Ether (ETH): $1,752 -6.5%

Biggest Gainers

Asset Ticker Returns DACS Sector
Solana SOL +2.2% Smart Contract Platform
Cardano ADA +1.5% Smart Contract Platform
Bitcoin BTC +0.9% Currency

Biggest Losers

Asset Ticker Returns DACS Sector
Internet Computer ICP −4.6% Computing
Polkadot DOT −3.7% Smart Contract Platform
Litecoin LTC −3.3% Currency

Markets

S&P 500: 4,121 +0.3%

DJIA: 32,915 +0.05%

Nasdaq: 12,061 +0.4%

Gold: $1,842 -0.5%

Bitcoin and Other Cryptos Take a Late Dive

Crypto investors were feeling more confident for much of Monday, sending bitcoin over the $31,000 level for the first time in six days before the largest cryptocurrency by market capitalization took a late dive.

Bitcoin was recently trading at about $29,500, down 5% over the past 24 hours. Ether, the second-largest crypto by market cap, was changing hands at roughly $1,730, down about 6% over the same period. Other major altcoins that had risen significantly earlier in the day, including SOL and ADA, were more in the red as investors wrestled with the months-long flow of more troubling news.

Still, a number of analysts said that bitcoin was unlikely to take any deeper drops for the time being.

"I think we may be putting in a bottom here with bitcoin," Greg King, CEO and founder of crypto asset manager Osprey Funds, told CoinDesk's "First Mover" program.

King noted that the presence of institutional investors has differentiated the latest price slump from previous crypto winters in 2013 and 2018, when bitcoin lost over 80% of its value. Bitcoin has currently dropped about 60% since hitting its all-time peak just short of $70,000 in November.

"Institutional buyers are buying this dip and then don't forget the macro environment," King said, noting the four-decade high inflation rate in the U.S. "Zero yield assets such as gold and Bitcoin do very well" at these times, he added.

Stocks rose slightly on Monday with the tech-focused Nasdaq and S&P 500 increasing about a half percentage point, as was the case for the Dow Jones Industrial Average. Gold, a traditional safe-haven asset, fell about a half-percentage point. Investors were buoyed by last week's job report that suggested the economy might not plunge into recession any time soon. Some analysts also believe that inflation has peaked, although markets will be nervously eyeing this Friday's consumer price index report, which is expected to show inflation remaining stubbornly above 8%, a four-decade high.

Volatility continued to fade in crypto markets, while the fear and greed index ticked higher, although it is still registering squarely in extreme fear territory. Bitcoin has been trading in a tight range between $28,000 and $31,500 for the past month as investors wait for clearer signals about whether the economy will sink into recession or power through its current headwinds.

King believes the increasing correlation between cryptos and stocks will reverse to some degree, calling it a "reflection of this kind of wild situation in macro markets where we have awful conditions and so it's more of a risk-on, risk-off type of mindset."

"I personally think that crypto will emerge as – certainly things like bitcoin – as a relative safe haven as we continue to chop through an uncertain macro environment and especially if rates continue to rise and equities continue to tank, but I don't think that a long term correlation makes a lot of sense," he said.

Insights

Hong Kong Is Hardly Laissez-Faire When It Comes to Crypto

Hong Kong’s political freedom has eroded thanks to Beijing, though its laissez-faire economics – which have won accolades from the likes of Cato and the Heritage Foundation as the "world’s freest economy" – are still in its DNA.

For crypto, this isn’t the case. There are rules aplenty.

The Hong Kong Securities and Futures Commission’s (SFC) issued a memo this week reminding investors about the inherent risks of non-fungible tokens (NFT).

“As with other virtual assets, NFTs are exposed to heightened risks, including illiquid secondary markets, volatility, opaque pricing, hacking and fraud. Investors should be mindful of these risks, and if they cannot fully understand them and bear the potential losses, they should not invest in NFTs,” the SFC wrote.

All of which is true.

But the problem is this looks like the beginning of a regulatory push into the NFT market by the SFC, which currently says that most NFTs fall outside its regulatory remit. And when the SFC regulates crypto, it takes a heavy hand. This severity is ironic considering the accolades that Hong Kong has received by the likes of Koch Foundation-funded Cato, which advocates for less economic regulation.

Consider the SFC’s prohibition on non-accredited investors trading crypto at exchanges. If this were the case in the United States, Coinbase (COIN) wouldn’t have a business model; its total market would be limited to the 13.6 million accredited investors in the country. For all the criticism the U.S. Securities and Exchange Commission has gotten about harming domestic innovation because of restrictive rules on crypto, banning non-accredited investors from trading crypto is something even SEC head Gary Gensler wouldn’t do.

Then there are Hong Kong’s murky rules on crypto infrastructure. Stakeholders have previously complained that the rules spread across too many different agencies for things like custody. Some critics have even called it a “double standard.” The Hong Kong Monetary Authority, its central bank, only recently greenlit crypto companies to open bank accounts – provided they only interact with accredited investors.

All this was too much for Sam Bankman-Fried and FTX. The crypto exchange that once called Hong Kong home decamped for the Bahamas in September, citing Hong Kong’s hostility towards crypto and never-ending quarantine regime.

For the world’s freest economy, there sure are a lot of heavy-handed rules regarding the future of finance. NFTs are likely to be next.

Technician's take

CoinDesk - Unknown

Bitcoin daily price chart shows support/resistance, with RSI on bottom. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) experienced another relief bounce over the past 24 hours, similar to what occurred last weekend. The cryptocurrency is holding support above $27,000 and $30,000, which could keep short-term buyers active.

BTC is up by 4% over the past 24 hours and is down by 1% over the past week. That suggests the current price range remains intact, which is typical after several weeks of negative returns.

The recent downtrend in price has stabilized above the May 12 low at $25,338, which contributed to rising momentum on the daily chart. For example, the 14-day relative strength index (RSI) returned above the 50 neutral mark Monday after reaching extreme oversold levels on May 9.

Still, momentum remains negative on the weekly and monthly charts, which means an upswing in BTC could be limited. The next resistance zone is between $33,000 and $35,000.

Important events

U.S. Senate Homeland Security & Governmental Affairs hearing: Rising Threats: Ransomware Attacks and Ransom Payments Enabled by Cryptocurrency

4 p.m. HKT/SGT (8 a.m. UTC): China foreign exchange reserves (MoM/May)

CoinDesk's Consensus convention begins on June 9 and will run for three days. You can find an agenda and list of speakers here.

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover/" on CoinDesk TV:

Josh Fraser, Origin Protocol co-founder, joined "First Mover" to discuss the Yuga Labs' Discord hack that led to the theft of non-fungible tokens worth a total of 200 ETH. Plus, Greg King of Osprey Funds provided crypto analysis, and BaSIC President Clark Vaccaro discussed the implications of the New York mining moratorium.

Headlines

US Regulators Investigating Binance’s BNB Token: Report: The SEC is looking into whether the crypto exchange should have registered the initial coin offering of Binance coin as a security, according to Bloomberg.

Decentralized Exchanges Beat Centralized Counterparts for On-Chain Flows: Chainalysis: The data raises questions about regulation surrounding DEXs.

Yuga Labs Confirms Discord Server Hack; 200 ETH Worth of NFTs Stolen: The company behind the Bored Apes NFTs made the disclosure 11 hours after word of the exploit surfaced on Twitter.

Binance Labs Invests in PancakeSwap, CAKE Jumps Nearly 10%: Despite the rally, the token is still 36% below $7.46 a month ago after a challenging May for the crypto markets.

Consensus Festival Guide: Creator Summit, NFTs and Music: What not to miss this week at Consensus if you're into crypto-related creativity. We have you covered!

Longer reads

The Meme Economy: Those who grasp the memetic nature of not only crypto but all value can gain immense power from understanding natural flows of meaning. This piece is a preview of a talk to be given on the Big Ideas stage at Consensus 2022.

Said and heard

Coinbase’s decision to pull existing job offers is straightforwardly heinous. Imagine Coinbase offered you a job a week ago. You immediately put in your two weeks’ notice at the box factory where you’ve been grinding to feed your family while spending nights and weekends immersed in crypto. On Thursday you woke up excited to start a new gig in the exciting world of digital assets. Then you got a god-damned form email titled “Update to your Coinbase offer” and the update was “whoops, nevermind.” Seriously, Coinbase, get your act together. This is shameful behavior. (CoinDesk columnist David Z. Morris) ... "Yet, while Coinbase once again manages to excel in its public bumbling, it is not alone in facing headwinds. As the crypto economy slows, exchanges have been among the first to reveal cutbacks, in part because more of them are public or regulated firms. Robinhood (HOOD), which offers equity and crypto trading and saw hypergrowth during the coronavirus pandemic, has reversed course to cut 9% of staff. Mexican exchange Bitso and Middle Eastern exchange Rain Financial have also made cuts. The layoff announcement from the Winklevoss twins’ Gemini exchange may be the most provocatively framed. In announcing it is cutting 10% of staff, Gemini predicted the entire industry was “entering a period of stasis,” and explicitly warned of a coming 'crypto winter.'" (CoinDesk columnist David Z. Morris) ... Mr. (John) Kerry told the BBC that despite these drawbacks, "as a world we are still not moving fast enough" to rein in the emissions of warming gases that are driving up temperatures. (Former U.S. Secretary of State John Kerry)

UPDATE (June 7, 2022, 04:34 UTC): Updates bitcoin and ether price information and headline to reflect late declines.

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Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

CoinDesk - Unknown

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.