Bitcoin: The Untouchable Winner in the SEC’s Crypto Clash

Bitcoin The Untouchable Winner in the SEC's Crypto Clash
Bitcoin The Untouchable Winner in the SEC's Crypto Clash by echotelegraph

Key Takeaways

  • The SEC is suing Coinbase and Binance over the registration of cryptocurrencies as securities, but bitcoin is exempt.
  • Bitcoin’s exceptional status as a non-security is boosting investor confidence in the leading cryptocurrency.
  • Bitcoin’s performance remains strong, with a 5% increase and a rising market share within the crypto market.
  • Bitcoin supporters express optimism about its future amid the regulatory challenges.
  • Bitcoin does not meet the criteria set by the Howey Test and was not created for profit-seeking purposes like other cryptocurrencies.
  • SEC Chair and former Chair have indicated that they view bitcoin as a commodity, not a security.
  • The SEC has identified 19 cryptocurrencies as securities, leading to declines in their market value.
  • Coinbase and Binance faced stock fluctuations, and customers withdrew significant amounts of funds after the SEC lawsuits.

The Securities and Exchange Commission (SEC) filed lawsuits against major cryptocurrency exchanges Coinbase and Binance on Monday and Tuesday, claiming that many cryptocurrencies traded on these platforms should be registered as securities. However, there is a significant exception to this classification: bitcoin. The SEC has made it clear that Bitcoin is not considered a security, which has boosted investor confidence in the leading cryptocurrency.

Bitcoin’s Performance and Investor Sentiment 

Despite the industry turbulence caused by the SEC lawsuits, bitcoin has shown resilience, leading investors to stick with it as a safe bet within the crypto market. At the time of reporting, bitcoin experienced a 5% increase, reaching $26,759, before settling at $26,400. Its market share, indicating its dominance in the overall crypto market, rose by 0.85% during the same period.

  • Year-to-Date Performance: Bitcoin has risen by 58% since the beginning of the year, although it remains down by a similar percentage from its peak in November 2021 at $68,790.

Optimism Among Bitcoin Supporters 

Proponents of bitcoin expressed optimism on social media, suggesting that the ongoing legal battles could work in favor of their favorite digital asset. Industry figures such as Cory Klippsten, CEO of bitcoin financial services firm Swan Bitcoin, and Pierre Rochard of bitcoin miner Riot Platforms, shared positive sentiments about bitcoin’s future amid the regulatory challenges.

The Howey Test and Bitcoin’s Exemption 

The SEC’s evaluation framework for determining whether digital assets qualify as securities is based on the Howey Test. This test originates from a 1946 Supreme Court case involving a Florida orange grove investment scheme. Bitcoin, according to its defenders, does not meet the criteria set by the Howey Test. Unlike other cryptocurrencies, it was not created by entrepreneurs seeking profits through pre-listed private sales to institutional investors. Instead, it was developed as an open-source concept by anonymous software developer Satoshi Nakamoto in January 2009.

Bitcoin as a Commodity 

While there is no explicit legal declaration on whether bitcoin is a security or a commodity, SEC Chair Gary Gensler and former Chair Jay Clayton have both indicated in public statements that they do not view bitcoin as a security. Most investors consider it to be a commodity, similar to gold or wheat. Bitcoin’s status as a commodity is expected to persist, providing further reassurance to investors.

Impact on Other Cryptocurrencies 

The SEC has identified 19 different crypto tokens, accounting for approximately 11% of the total crypto market capitalization, as securities in its lawsuits against Coinbase and Binance. Consequently, these coins experienced declines following the legal action. BNB, Cardano’s ADA, Polygon’s MATIC token, and Solana’s SOL token were among the cryptocurrencies affected.

Market Reaction and Withdrawals 

Coinbase’s stock initially fell by 12% following the SEC lawsuit but later rose by 2.8% at the opening of the next trading day. Customers reacted to the news by withdrawing $105 million from Coinbase within 24 hours of the lawsuit, adding to the $1.3 billion lost in the previous 24 hours. Similarly, Binance witnessed customer withdrawals of $492 million and $1.4 billion in the two preceding 24-hour periods.

Despite the challenges faced by the cryptocurrency industry due to the SEC lawsuits, bitcoin’s exempt status from being classified as a security has provided a level of stability and confidence to its investors.

References:

Yahoo Finance: One winner in the SEC’s clash with crypto: bitcoin

U.S. Securities and Exchange Commission (SEC): Framework for “Investment Contract” Analysis of Digital Assets