Bitcoin falls 6% as House Committee Holds First Hearing on Split Digital Assets
Bitcoin, Ethereum, and many cryptocurrency-related stocks dropped by 6 to 10% on one of the busiest days in one of the busiest weeks for crypto in the first quarter of 2023.
The day included an editorial article by SEC Chair Gary Gensler, statements on digital asset regulation from the FED's Michael Barr, and, probably most importantly, the inaugural hearing of the Subcommittee on Digital Assets, Financial Technologies, and Inclusion.
The pricing movements of the day were a continuation, albeit in a more dramatic form, of tendencies witnessed since the beginning of the week. Most major digital assets and cryptocurrency-related stocks have been trading slightly down for most of the week, which has seen several significant good and bad developments for the sector.
Bitcoin is hovering just around $20,000 as the end of an active week approaches.
While Bitcoin has been fairly consistent since its January rise, its price has taken a significantly negative trend by Thursday afternoon. Its worth went from almost $21,500 to a little over $20,300 in a couple of hours. A similar pattern could be seen with Ethereum, the world's second-largest cryptocurrency, which was also down roughly 6%.
Many digital asset-related equities have also dropped significantly. MicroStrategy fell more than 9%, Coinbase fell almost 8%, and the Grayscale Bitcoin Trust fell over 11% after a significant victory against the SEC only a few days before. Silvergate, however, suffered the most significant collapse, falling 42% throughout the day's trade.
Yet, Silvergate's latest reduction comes as little surprise given that its parent business announced plans to wind down operations and liquidate the bank on Wednesday afternoon. Moreover, rather than being triggered by the present digital asset crisis, Silvergate's demise is a likely source of the cryptocurrency sector's decidedly gloomy mood.
Notwithstanding the failures, the current week has seen many digital asset coups. A bankruptcy judge recently accepted the acquisition transaction between Binance.US and Voyager Digital, despite regulatory resistance, in addition to Grayscale's victorious day in court.
Additionally, the largest creditor of the long-defunct Mt. Gox indicated that it will not be selling the Bitcoin it is expected to receive, easing some fears about the cryptocurrency's future valuation.
The FED wants more control over stablecoins, and Gensler backs up the SEC's approach.
The Federal Reserve's Michael Barr delivered a speech at the Peterson Institute for International Economics on Thursday. Barr stated that the FED's mandate regarding digital assets is obvious to him and that there is a huge need for robust guardrails that allow for just enough discretion to enable innovation.
Despite praising the potential provided by the blockchain, Barr remained cautious about the value of cryptocurrencies themselves. Furthermore, he restated Chair Powell's position that stablecoins are squarely within the FED's purview.
Later in the day, SEC Chairman Gary Gensler gave his thoughts on digital assets and the Commission's recent initiatives in the area. In his letter, Gensler asserted once more that the law regarding cryptocurrency is quite clear. Additionally, he noted that he considers the notion that there is little certainty for corporations from the sector "unpersuasive".
Gensler also stated that it appears that bitcoin firms are aiming to obtain SEC permission without making the necessary efforts to become compliant. He also stated that, despite claims made by several corporations, the number of digital asset enterprises ready to speak with his organization is limited.
He also emphasized that the Commission had previously brought over 100 lawsuits against corporations in the industry, and later that day, Lee Reiners, one of the witnesses at the day's hearing before Congress, stated that the SEC had won all of them.
The Digital Assets Subcommittee's Hawks and Doves
Thursday, March 9th, may also go down as a watershed moment for digital assets in the United States, as it included the inaugural hearing of the Subcommittee on Digital Assets, Financial Technologies, and Inclusion.
While the day failed to provide a clear path forward, it highlighted that the Subcommittee is comprised equally of digital asset supporters and bitcoin detractors.
The hearing's issues ranged from whether digital assets should be classed as securities or commodities to the potential terrorist danger presented if the cryptocurrency sector is forced to continue its development outside of the United States.
The viewpoints taken by the members and witnesses differed as well. Others, such as Representative Emmer, a vocal supporter of digital assets, have said that the current crackdown is part of the Biden Administration's strategy to curtail financial freedom and push America down a more authoritarian road.
Others, like Congressman Sherman, were strongly dismissive of the whole premise of cryptocurrencies claiming that their name already portrays them as "hidden" money which could only be tempting to "bad actors". Congresswoman Lynch also dismissed the notion that FTX, with all of its deceit, was just "a bad apple," and declared the entire sector to be rotten.
The fact that the United States is lagging far behind other industrialized nations in terms of cryptocurrency legislation was a key source of worry for the digital asset advocated, both among members and witnesses. The fear, as expressed by Coinbase CEO Brian Armstrong in a recent opinion article, is that the United States will lose its critical role in the global economy as a result of its inability to properly and swiftly manage digital assets.
Congresswoman Houchin, one of the Subcommittee's supporters, went so far as to argue that the race to properly foster the growth of digital assets is the space race of our time.