THE COIN STREET JOURNAL
Market News - June 21st 2024
BITCOIN PRICE DECLINES : IS IT TIME TO BUY?
Bitcoin’s recent decline from its all-time high has some investors questioning whether to buy the dip. Despite Bitcoin’s price being up over 50% for the year, the past three months have seen a significant drop. Currently, Bitcoin trades more than 10% below its mid-March peak of $73,797, and on June 18, it fell below $65,000 for the first time in over a month. This scenario isn’t new for seasoned crypto investors who often view such dips as long-term buying opportunities.
One key factor supporting Bitcoin’s price is the influx of investments into new spot Bitcoin ETFs. Although there was a brief slowdown in May, the pace of investments picked up again in June, with a 19-day streak of net inflows. So far, these ETFs have attracted over $30 billion. However, the primary buyers of these ETFs are Wall Street hedge funds, not retail or large institutional investors, which may explain why Bitcoin’s price hasn’t surged despite these inflows.
Retail investors are increasingly allocating funds to Bitcoin, and institutional investors are expected to follow. Major asset managers like BlackRock anticipate that pension funds, endowments, and sovereign wealth funds will soon enter the Bitcoin market, which could drive prices higher. These developments suggest a potential for significant long-term growth in Bitcoin’s value as more mainstream financial players invest.
The much-anticipated Bitcoin halving event has not immediately led to a significant price increase. Halving events, which reduce the rate at which new Bitcoin is created, often set off a series of events that eventually boost prices. However, the effects can take several months to manifest, similar to how monetary policy changes take time to impact the broader economy.
Past halving cycles indicate that Bitcoin’s price may start to rise significantly several months after the halving event. For instance, during the previous halving cycle that began in May 2020, Bitcoin’s price did not begin to soar until several months later, eventually reaching a peak of $69,000. This historical pattern provides optimism for future price increases following the recent halving.
Analysts remain optimistic about Bitcoin’s potential to reach new highs, with some predicting it could hit $100,000 by the end of the year. Standard Chartered has pointed to the increasing pro-Bitcoin rhetoric in political campaigns as a factor that could drive the price up to $100,000, or even an ultra-bullish $150,000. However, predictions vary, with JPMorgan Chase forecasting a potential drop to $42,000 post-halving due to disruptions in the mining industry.
The lower end of predictions, such as JPMorgan Chase’s $42,000 forecast, is seen as a bearish scenario. This perspective considers the possible negative impacts of the halving on Bitcoin mining. However, the influx of ETF investments and growing mainstream adoption make a significant drop in Bitcoin’s price seem unlikely.
Given the current market dynamics, investors with a long-term bullish outlook on Bitcoin may see the current dip as an attractive buying opportunity. While there are risks, the combination of ETF inflows, increased retail and institutional interest, and historical patterns following halvings support the case for potential future price increases.
In conclusion, Bitcoin’s recent price decline, driven by various market factors, may present a unique buying opportunity for those willing to take a long-term view. The influx of capital into new Bitcoin ETFs and the anticipated participation of larger institutional investors suggest that Bitcoin’s price could rise again in the future. As always, potential investors should weigh the risks and conduct thorough research before making investment decisions.
CIVIL LAWSUIT AGAINST RIPPLE WILL PROCEED TO TRIAL
A civil securities lawsuit against Ripple and its CEO Brad Garlinghouse will proceed to trial in California. U.S. District Court Judge Phyllis Hamilton has dismissed four of the class action claims but has allowed one state law claim to continue. This decision means the lawsuit alleging that Garlinghouse violated state securities laws in 2017 will now be argued before a jury.
The lawsuit centers on allegations that Garlinghouse made misleading statements in a 2017 televised interview related to the sale of securities. Specifically, the plaintiff claims Garlinghouse misled investors by stating he was “very, very long XRP” while concurrently selling millions of XRP on various cryptocurrency exchanges. Judge Hamilton dismissed the four class action claims, known as the “failure to register claims,” but retained the individual state law claim for trial.
Ripple’s Chief Legal Officer, Stu Alderoty, expressed satisfaction with the dismissal of the class action claims, emphasizing that only one individual state law claim remains. Ripple’s defense argued that XRP does not qualify as a security under the Howey Test, which is used to determine what constitutes a security under U.S. law, and thus should not give rise to claims of misleading statements connected to a security.
Judge Hamilton’s ruling did not align with a prior decision by U.S. District Court Judge Analisa Torres in a parallel case in the Southern District of New York (SDNY). Torres had ruled that XRP did not meet all the prongs of the Howey Test when sold directly to retail participants on crypto exchanges. This ruling was seen as a partial victory for Ripple and was celebrated within the crypto industry for advancing regulatory clarity.
Despite Torres’ ruling being seen as a precedent, it has not significantly influenced subsequent cases. Notably, SDNY District Judge Jed Rakoff rejected Torres’ reasoning in a separate SEC case against Terraform Labs. This indicates that Torres’ decision has not created a binding precedent in other jurisdictions or cases.
In her decision, Judge Hamilton diverged from Torres’ legal interpretation regarding XRP sold to non-institutional traders. Hamilton did not agree that these traders had no expectation of profits from Ripple’s efforts, one of the Howey Test’s criteria. She stated that a reasonable investor might expect profits due to Ripple’s activities, which means the court could not conclusively determine that Ripple’s conduct did not lead investors to expect profits.
Alderoty, in his statement, reiterated that Judge Torres’ ruling in the SEC case remains valid and unaffected by Hamilton’s decision. He emphasized that the recent ruling does not alter the prior legal victory for Ripple in the New York case. This ongoing litigation highlights the complexities and evolving interpretations of securities laws as they apply to cryptocurrencies.
ZRO TOKEN LAUNCH HAS LED TO CONFUSION
LayerZero Labs’ launch of the ZRO token, involving a unique “Proof-of-Donation” distribution method, has led to significant confusion among Polymarket bettors. This new mechanism requires eligible claimants to donate $0.10 per token to the Protocol Guild, a collective of Ethereum researchers and developers, deviating from the typical “airdrop” approach where tokens are distributed for free to stimulate interest and adoption. LayerZero argues that their method promotes long-term community building and protocol health, avoiding the term “airdrop” to emphasize the distinction.
The controversy centers around a $680,000 bet on Polymarket, a decentralized betting platform, where users wagered on whether a ZRO “airdrop” would occur before June 30. LayerZero’s unconventional launch method caused the odds for the “Yes” outcome to drop to 54% just before the bet concluded, leading many bettors to dispute the final outcome. They argue that LayerZero’s distribution does not qualify as an “airdrop” under traditional definitions.
Polymarket users have escalated the issue to the UMA protocol, which partners with Polymarket to resolve disputes. UMA’s “decentralized truth machine” relies on voting by UMA token holders to determine the factual nature of events. However, some bettors are skeptical of this process, fearing potential manipulation and biased decision-making.
The debate over the nature of the ZRO token launch is particularly intense on Polymarket’s Discord server. Some users assert that LayerZero cannot unilaterally redefine what constitutes an “airdrop,” referencing past disputes such as one involving Lens Protocol, where token sales were clearly distinguished from airdrops. Recent updates to Polymarket’s rules, however, suggest considering the broader context of token distributions like ZRO’s.
The outcome of this bet has broader implications beyond Polymarket bettors. It touches on fundamental questions about token distribution mechanisms within the crypto ecosystem. The resolution will likely influence how future distributions are perceived and defined, potentially setting a precedent for similar disputes.
LayerZero’s “Proof-of-Donation” method, while innovative, has sparked significant debate about its implications for community building and long-term protocol sustainability. The crypto community is closely watching the dispute’s resolution to understand how such mechanisms might shape the future of token distributions.
The controversy underscores the evolving nature of token distribution practices and the need for clear definitions and consensus within the crypto community. As new methods are introduced, the community must adapt and establish shared understandings to avoid confusion and disputes.
Ultimately, the decision on this bet will be a critical moment for Polymarket and the broader crypto ecosystem, highlighting the importance of transparent and well-defined token distribution practices to foster trust and clarity among users and developers alike.
WINKLEVOSS TWINS CONTRIBUTE TO THE TRUMP CAMPAIGN
Tyler and Cameron Winklevoss, the executives of Gemini Trust Co., have each contributed $1 million to the presidential campaign of former President Donald Trump. These contributions mark one of the first significant financial endorsements from high-profile crypto industry figures in the 2024 presidential race. The twins announced their donations on the social media platform X.
Previously, the Winklevoss twins had been significant donors to U.S. political campaigns, having contributed approximately $2.7 million each, mainly to the crypto industry’s super PAC, Fairshake. This move to support Trump financially is a notable departure from their earlier political donations, which were more broadly distributed among various Republican candidates.
Tyler Winklevoss articulated his reasons for supporting Trump in a detailed post on X. He criticized the Biden administration for its aggressive stance against the cryptocurrency industry, accusing it of using governmental agencies to target crypto businesses. This criticism is rooted in personal experience, as Gemini faced a lawsuit from the U.S. Securities and Exchange Commission over the alleged offering of unregistered securities.
Tyler Winklevoss framed his support for Trump as a counteraction to what he perceives as the Biden administration’s hostility towards crypto. He praised Trump as a pro-crypto, pro-Bitcoin, and pro-business candidate. Both Tyler and Cameron Winklevoss made their $1 million contributions in Bitcoin, directed to the Trump 47 Committee Inc., a joint fundraising committee.
The Winklevoss brothers have consistently matched their political donations, placing them among the major individual contributors in the 2024 campaigns. Prior to their support for Trump, they had already contributed to several Republican presidential hopefuls, including Vivek Ramaswamy, Nikki Haley, Sen. Tim Scott, and Florida Gov. Ron DeSantis.
The majority of their political donations have been funneled to Fairshake, the main political action committee for the crypto industry. Their combined $5 million contribution is a significant portion of Fairshake’s nearly $169 million in total funds, which are used to support congressional candidates sympathetic to the crypto industry.
The Winklevoss twins’ contributions to Trump are part of a broader pattern of significant donations from prominent figures in the financial and business sectors. Other notable donors include Jeffrey Sprecher, founder and CEO of Intercontinental Exchange, and his wife Kelly Lynn Loeffler, a former U.S. senator; Joe Ricketts, founder of TD Ameritrade; and Robert Bigelow, owner of Budget Suites of America.
These contributions underscore a growing trend of significant financial support from influential business leaders for the Trump campaign, highlighting the intersection of political and financial interests in the ongoing 2024 presidential race. The Winklevoss twins’ donations are particularly noteworthy due to their prominence in the crypto industry and their vocal opposition to the current administration’s regulatory approach.