Bitcoin’s price gains this year bring needed relief to cash-strapped crypto mining industry

https://forkast.news/bitcoin-price-relief-cash-crypto-miners/

The recovery of Bitcoin prices since the start of the year has brought some breathing space to the companies that mine the world’s largest cryptocurrency after 2022 drove many to warn of cash shortages or even in the case of Core Scientific, one of the biggest publicly traded miners, to file for Chapter 11 bankruptcy.

Miners rode the boom in 2021 as Bitcoin rose to all-time highs of more than US$68,000 in November of that year, with Core Scientific listing shares on the Nasdaq exchange just two months later. 

But the euphoria went up in smoke in 2022 as Bitcoin prices took a downturn, the US$40 billion Terra-Luna stablecoin collapsed in May and Bahamas-based crypto exchange FTX failed in November amid charges of fraud. Bitcoin plunged more than 75% from that all-time high to around US$16,000 at the end of 2022, squeezing profit margins at mining companies.

Bitcoin has since kicked off this year with price gains to top US$25,000 in February for the first time since June 2022.

“With Bitcoin closer to US$24,000 it’s obviously a lot better and a greater share of the industry is now profitable,” said Daniel Roberts, co-founder and chief executive of Nasdaq-listed Iris Energy, in an interview with Forkast. Roberts said at US$25,000 per Bitcoin, Iris can make US$100 million a year in gross profit. 

The change in fortunes is reflected in the share price of Iris, which traded at US$2.82 as of last Friday from an all-time low of US$1.02 in late December.

The Bitcoin network is secured by network participants trying to crack complex cryptographic equations required to validate transactions on the network. This process requires enormous computing power and energy use and these validators or “miners” are typically rewarded in Bitcoin. 

Iris was just one of many Bitcoin mining operators to report a cash shortage at the end of last year, as did London-listed miner Argo Blockchain and Greenidge Generation Holdings. But Iris appears to have resolved the shortage, according to the company’s recent earnings report.

Hard times

Bitcoin’s mining difficulty, a variable that measures how much computing power is required to verify blocks on the blockchain, rose to an all-time high on Feb. 25. This has offset profitability at the miners, even as Bitcoin gained.

Another Bitcoin mining operator said it was not just the crash in Bitcoin prices that hit the industry last year but a series of factors, including mining difficulty and energy prices.

The Bitcoin price crash was compounded by mining difficulty going “through the roof” and the volatility in energy prices as global inflation surged, Tim Broadfoot, chief corporate officer of Australian cryptocurrency mining firm Mawson Infrastructure Group, said in an interview. 

“So, it has been hard,” he said. Broadfoot added that the Bitcoin price surge in late 2021 led to a rush in orders for the specialized computers customized for crypto mining. Those machines are now coming online but are required to run to be profitable.

Energy prices also took a toll on the Bitcoin mining industry, after Russia’s invasion of Ukraine caused household energy prices around the world to almost double, according to a recent report from the World Economic Forum.

Sticky Bitcoin

Both Mawson and Iris have been somewhat insulated from the surge in energy costs as both rely primarily on renewable sources of energy that have been less affected by volatility in prices of electricity generated from fossil fuels such as oil and gas.

Iris uses surplus renewable energy to power its mining operations, which the company believes could provide a market incentive to build additional renewable energy facilities based on wind, solar and others.

“[Iris’s] strategy has always been to target excess renewables, which almost by definition is the lowest cost energy you can get,” said Roberts. “So, we’ve remained very competitive and increasingly competitive in the global cost curve.”

Mawson is powered by a nuclear energy power station in Pennsylvania, U.S., and also operates as an energy retailer. Broadfoot said throughout December, Mawson earned US$4 million from the energy market, but mined very few Bitcoins.

“So that’s really helped the company over the past few months and will continue to be a part of our strategic process,” he said.

Roberts said the slump in crypto prices and failures of various trading platforms ultimately help Bitcoin by distinguishing it as a monetary alternative.

“People are now starting to learn that Bitcoin is different from crypto and Bitcoin is different from these centralized exchanges,” he said. 

“I think that continued level of interest from individuals, high net-worth family offices and institutions is a little bit stickier and is staying through the cycle rather than potentially going to ground for a couple of years during previous bear markets.”

Judge denies Dapper Labs request to dismiss NBA Top Shot security lawsuit

https://forkast.news/headlines/judge-dapper-labs-nba-top-security-lawsuit/

A U.S. district court judge on Wednesday denied Dapper Labs’ request to dismiss a lawsuit that alleges that the NBA Top Shots non-fungible token (NFT) collection is an unregistered security. 

See related article: NBA Top Shot: Dapper Labs’ slam dunk NFT | NFT Moments in History Ep. 9

Fast facts

  • District Judge Victor Marrero wrote that the Dapper Labs’ NFT collection appears to meet the requirements of a security under the Howie Test — named after a landmark U.S. Supreme Court case to determine if an asset could be deemed a security.
  • NBA Top Shots was one of the break-out NFT collections in 2021 and is in the top 10 collections of all time by sales volume. The project allows users to collect “Moments,” or NFTs in the form of video highlights from the National Basketball Association.
  • In May 2021, Dapper Labs was sued by a plaintiff who alleged that the Top Shots collection is an unregistered security. By failing to register them with the Securities and Exchange Commission (SEC), Dapper Labs violated securities law and harmed her and other consumers.
  • “If Upper Deck or Topps, two longtime producers of physical sports trading cards, were to go out of business, the value of the cards they sold would be wholly unaffected, and may even increase, much like posthumously discovered art,” Judge Marrero wrote.
  • “That is not true here, where plaintiffs allege that the pooling of capital generated from the sale of Moments propped up the Flow Blockchain and where the value of Moments is intertwined with the success of that blockchain and Dapper Labs.”
  • Judge Marrero added that this decision should not broadly apply to all NFTs, and each should be assessed on a case-by-case basis.
  • The development comes amid a period of heightened scrutiny in the industry. In early February, the SEC fined U.S. crypto exchange Kraken US$30 million for offering staking products, which the agency considers to be a security.

See related article: SEC’s Gensler says proof-of-stake cryptocurrencies may be securities

Bitcoin back above US$24,000, Fed releases February minutes

https://forkast.news/headlines/bitcoin-above-24000-fed-february-minutes/

Bitcoin fell in a mixed morning of trading for the top 10 non-stablecoin cryptocurrencies by market capitalization on Thursday in Asia. XRP posted the biggest gains in the list while Solana led losses. The U.S. Federal Reserve released its February meeting minutes on Wednesday, hinting at further interest rate hikes.

See related article: Coinbase reports growth in Q4 earnings despite decline in users

Fast facts

  • Bitcoin fell 1.0% in the last 24 hours to trade at US$24,190 as of 8 a.m. in Hong Kong, after falling to as low as US$23,644 overnight. The world’s leading cryptocurrency was trading down 0.5% over the past week, according to CoinMarketCap. Ethereum fell 0.9% to US$1,643, dropping 1.8% over the past seven days.
  • XRP rose 0.9% to US$0.39, though the token was still trading down 1.4% for the past seven days. FTX Japan, the Japanese arm of bankrupt cryptocurrency exchange FTX.com, reinstated XRP withdrawals overnight. 
  • Solana dropped 3.1% to trade at US$24.2, while rising 1.2% in the past seven days. Solana Spaces, a startup funded by Solana Foundation that promotes its namesake blockchain with its physical stores in New York and Miami, announced on Tuesday it will shut down its locations by the end of the month.
  • Toncoin, the 26th largest cryptocurrency by market capitalization, rose 5.5% to US$42.47, bringing its weekly gains to 5.6%. The Open Network, a blockchain powered by Toncoin, released a governance platform on Tuesday that allows Toncoin validators to vote on decisions in the network.
  • The total crypto market capitalization dropped 1.5% to US$1.08 trillion at 8 a.m. in Hong Kong. The total trading volume over the past 24 hours was down by 4.9% to US$63 billion.
  • U.S. equities had a mixed day of trading on Wednesday. The Dow Jones Industrial Average fell 0.3% and the S&P 500 Index slipped 0.2% while the Nasdaq Composite Index rose 0.1%.
  • Investors reacted with trepidation to the release of the Fed’s meeting minutes on Wednesday, which showed that the central bank recognized that inflation was cooling in the economy, but said labor markets “remained very tight, contributing to continuing upward pressures on wages and prices.“
  • The minutes also revealed that there were some members of the Fed that were pushing for a 50 basis point rise in interest rates at the Fed’s previous meeting, when the central bank instead announced a 25 basis point rate hike to a targeted range of 4.5%-4.75%, the highest level since October 2007.
  • Analysts at the CME Group predict a roughly 75% chance that the Fed will raise rates by another 25 basis points next month.
  • The latest Consumer Price Index data showed inflation was up 6.4% in January from a year ago, down from 6.5% in December and 7.1% in November. The Fed has indicates it is trying to bring inflation down to a target range of 2%.

See related article: Hong Kong to invest US$6.37 million to spur Web3 growth

Markets: Bitcoin, Ether fall as 2-year bond nears 15-year high

https://forkast.news/headlines/bitcoin-ether-fall-2-year-bond-15-year-high/

Bitcoin and Ether fell in Wednesday morning trading in Asia along with all other top 10 non-stablecoin cryptocurrencies by market capitalization. Polygon saw the biggest drop, while BNB dropped the least. A series of economic data in the U.S. released on Tuesday, including earnings reports from retail giants and the rising rate of some Treasury bills, weighed down on equity markets.

See related article: Bitcoin exceeds 154,000 inscriptions in a month as Litecoin Ordinals launches

Fast facts

  • Bitcoin fell 1.6% in the last 24 hours to trade at US$24,442 as of 8 a.m. in Hong Kong, though it was still up 10% over the past week, according to CoinMarketCap. Ethereum fell 2.6% to US$1,658, rising 6.5% over the past seven days.
  • Polygon lost 6.1% to US$1.39, though it still booked 10% gains over the past seven days. BNB fell 1.2% to US$311.48, but was still up 5.2% for the week.
  • The total crypto market capitalization dropped 1.8% to US$1.11 trillion at 8 a.m. in Hong Kong. The total trading volume over the past 24 hours was up by 3.3% to US$66.70 billion.
  • U.S. equities closed lower on Tuesday, which was the first trading day of the week, as markets closed on Monday for President’s Day. The Dow Jones Industrial Average fell 2.1%, the S&P 500 Index dropped 2% and the Nasdaq Composite Index finished the day down 2.5%.
  • The three key indices posted the biggest single-day losses since Dec. 15 as the S&P 500 cut its year-to-date gains in half while the Dow Jones wiped out almost all of its 2023 gains. 
  • The two-year Treasury note yield rose to 4.7% on Tuesday, the highest level since 2007, while the 10-year Treasury yield climbed to 3.9%. Elevated levels in Treasury bond yields represent a larger upside risk for yields, placing downward pressure on equities.
  • The U.S. Federal Reserve will release the minutes from its Jan. 31 to Feb. 1 policy meeting on Wednesday, which investors will look to for hints on how the central bank may act to tackle inflation.
  • Retail giants Walmart Inc. and Home Depot Inc., released their holiday season earnings reports on Tuesday. Walmart’s revenue rose 7.3% to US$164 billion from the previous year, while Home Depot fell short of expectations, reporting US$35 billion in Q4 revenue. Both companies projected a challenging quarter ahead due to headwinds from supply chain shortages and ongoing inflation in the economy. 
  • Economic data released on Tuesday suggested that business activity in the U.S. is expanding. The S&P Global services purchasing managers index (PMI) rose to an 8-month high of 50.5 in February, up from 46.8 in the previous month, while the manufacturing PMI rose to a four-month high of 47.8 from 46.9.
  • The Fed raised interest rates to the range of 4.5%-4.75% on Feb.1 to fight the inflation, the highest level since October 2007, with the latest Consumer Price Index data up 6.4% in January from a year ago, down from 6.5% in December and 7.1% in November.
  • Analysts at the CME Group predict a roughly 75% chance that the Fed will raise rates by another 25 basis points next month.

See related article: FTX Japan resumes withdrawals through Liquid Japan web platform

Crypto hedge fund Galois Capital to close after losing US$40 mln in FTX

https://forkast.news/headlines/crypto-hedge-fund-galois-captial-close-ftx/

Cryptocurrency-focused hedge fund Galois Capital will close and return the remaining funds to investors after losing US$40 million worth of assets in the collapse of crypto exchange FTX.com, the Financial Times reported on Monday.

See related article: Former FTX executive Nishad Singh negotiating guilty plea on fraud charges: Bloomberg

Fast facts

  • Galois had halted all trading and closed out all positions. The hedge fund’s clients will receive 90% of the funds that are not trapped in FTX, and the remaining 10% will be withheld until discussions with administrators are finalized.
  • Galois reportedly sold its claim for 16 cents on the dollar as the legal process to recoup the funds was likely to last for more than a decade, and buyers of such distressed claims have greater expertise in pursuing such claims in court.
  •  “This entire tragic saga starting from the Luna collapse to the [Three Arrows Capital] credit crisis to the FTX/Alameda failure has certainly set the crypto space back significantly,” wrote Galois co-founder Kevin Zhou in a letter to investors seen by the Financial Times. “However, I, even now, remain hopeful for crypto’s long-term future.”
  • Galois managed roughly US$200 million in assets at one point last year. The firm reportedly had around half of its assets trapped at FTX when it collapsed.
  • FTX filed for Chapter 11 bankruptcy on Nov. 11, and its founder and former chief executive Sam Bankman-Fried is currently under house arrest at his parent’s residence in California on charges of securities fraud, wire fraud, conspiracy, money laundering, and violating campaign finance rules.
  • Bankman-Fried has pleaded not guilty to all charges, and the date of his first trial has been set for Oct. 2, 2023.

See related article: Sam Bankman-Fried pleads not guilty to fraud charges in FTX exchange collapse

Markets: Bitcoin, Ether up, Solana, Helium rise after merge announcement

https://forkast.news/headlines/bitcoin-ether-solana-helium-surge/

Bitcoin and Ether rose in a mixed morning for the top 10 non-stablecoin cryptocurrencies by market capitalization. Solana posted the biggest gains while Polygon’s Matic led losses on Tuesday morning in Asia.

See related article: Bitcoin surpasses Visa’s market cap to be 11th largest asset in the world

Fast facts

  • Bitcoin rose 2.1% in the last 24 hours to trade at US$24,833 as of 8 a.m. in Hong Kong, bringing its gains to 13.9% over the past calendar week, according to CoinMarketCap. Ethereum gained 1.3% to US$1,703, rising 13% over the past seven days.
  • Solana was up 5.5% in the last 24 hours and 26.1% for the week to US$26.22 after Helium Network, a blockchain project dedicated to improving connectivity in the Internet of Things, announced on Saturday that it plans to merge with Solana late in March. Helium’s token HNT, the 95th largest cryptocurrency by market capitalization, was up 10% to US$3.19, a weekly gain of 31.3%.
  • Polygon’s Matic fell 0.4% to US$1.47, but was still trading up US$24.4% for the week.
  • XRP rose 3.1% to US$0.39, bringing its weekly gains to 7.4%, after Ripple Labs Inc., the developer of the Ripple payment network which is powered by XRP, tweeted it is recruiting new engineering roles on Monday. The company now has 75 open positions in total, according to its website.
  • The total crypto market capitalization rose 1.2% to reach US$1.13 trillion at 8 a.m. in Hong Kong. The total trading volume over the past 24 hours was up by 16.4% to US$64.8 billion.
  • Many major U.S. retailers are slated to release their holiday season earnings this week, starting with Walmart Inc. and Home Depot Inc. on Tuesday. The earning reports are set to come amid growing recessionary concerns in the U.S., as the Federal Reserve has raised interest rates from near zero to 4.5% to 4.75% to cool inflation.
  • The latest Consumer Price Index data showed that inflation was up 6.4% in January from a year ago, down from 6.5% in December and 7.1% in November. Analysts at the CME Group predict a roughly 80% chance that the Fed will raise rates by another 25 basis points next month.
  • U.S. equities will resume trade on Tuesday after closing on Monday for Presidents’ Day.

See related article: Hong Kong begins public consultation on crypto licensing regime

Former FTX executive Nishad Singh negotiating guilty plea on fraud charges: Bloomberg

https://forkast.news/headlines/former-ftx-nishad-singh-guilty-plea-fraud/

Nishad Singh, a former executive at bankrupt Bahamas-based cryptocurrency exchange FTX.com, may plead guilty to fraud charges for his involvement in the company’s last November, Bloomberg reported on Friday.

See related article: Judge says Bankman-Fried could ‘conceivably’ have bail revoked: CNN

Fast facts

  • Singh is reportedly negotiating a deal with Manhattan prosecutors in the case, according to unnamed sources familiar with the matter cited by Bloomberg.
  • The U.S. Securities and Exchange Commission and Commodities and Futures Trading Commission are reportedly considering pressing additional charges against Singh for involvement with FTX.
  • Singh can place additional pressure on former FTX chief executive and founder Sam Bankman-Fried by accepting the deal with the prosecutors. Bankman-Fried pleaded not guilty to an eight-charge indictment related to the bankrupt exchange.
  • Bankman-Fried was arrested in the Bahamas on Dec. 12 at the request of U.S. authorities, who accuse him of fraud. He is currently under house arrest at his parents’ residency in California, with his first trial date set for Oct. 2, 2023.
  • FTX co-founder Gary Wang and the former CEO of FTX’s sister trading firm Alameda Research, Caroline Ellison, have pleaded guilty to related charges for their involvement in the firm’s collapse.
  • Singh was the former head of engineering at FTX after joining Alameda in 2017. He reportedly had a close relationship with Bankman-Fried as his housemate at a Bahamans penthouse. 
  • Singh received a US$543 million personal loan from Alameda Research, according to filings from the FTX bankruptcy estate, now headed by John J. Ray III.

See related article: Sam Bankman-Fried pleads not guilty to fraud charges in FTX exchange collapse

Bitcoin breaches US$24,000 to reach highest price since August as short sellers liquidated

https://forkast.news/headlines/bitcoin-highest-august-short-positions/

Bitcoin broke through the US$24,000 price ceiling for the first time in two weeks to reach its highest price since mid-August in Thursday morning trading in Asia, as investors liquidated almost US$70 million of mostly short-position bets, according to data aggregator GlassNode. The short positions, or bets the price of Bitcoin would fall, had grown following a series of U.S. regulatory crackdowns this month on crypto services. Ether rose with the rest of the top 10 non-stablecoin cryptocurrencies, with Solana leading the gains.

See related article: Sam Bankman-Fried banned from using VPNs while on bail: Bloomberg

Fast facts

  • Bitcoin rose 9.4% in the last 24 hours to trade at US$24,318 as of 8 a.m. in Hong Kong, bringing its gains over the past seven days to 6%, according to CoinMarketCap data. Ethereum rose 7.5% to US$1,674, a total gain of 1.4% for the week.
  • Solana jumped 9.4% to US$23.88, up 2.9% for the past seven days. Cardano added 8.3% to US$0.41, a weekly gain of 6.1% following the successful deployment of the network’s Valentine upgrade yesterday. The upgrade aims to make it easier for developers to build cross-chain applications on the Cardano blockchain.
  • BNB rose 7.1% to US$317.39. The token is still down 3.2% after the New York Department of Financial Services told Paxos Trust Co. to stop issuing the U.S. dollar-pegged Binance USD (BUSD) stablecoin. BUSD is issued through a collaboration with Paxos and BNB’s issuer Binance Global Inc., which runs the world’s largest crypto exchange. 
  • The total crypto market capitalization in the 24 hours rose 6.9% to US$1.10 trillion, the highest since mid-August, with total trading volume up 7.9% to US$63.61 billion.
  • U.S. equities rose on Wednesday. The Dow Jones Industrial Average gained 0.1%, the S&P 500 Index added 0.3% and the Nasdaq Composite Index finished the day up 0.9%.
  • Wednesday’s gains follow the release the day before of January’s Consumer Price Index that showed prices rose 0.5% for the month and 6.4% year-on-year. While these figures were slightly higher than the expected monthly increase of 0.4% and annual 6.2%, they do show that inflation has followed a downward trajectory for the past several months in the world’s largest economy.
  • The year-on-year CPI in December came in at 6.5% from the 7.1% recorded in November, which in turn declined from October’s 7.7% and 8.2% in September.
  • The Fed, which has said it wants inflation back in the 2% range, has raised interest rates multiple times since last March to reverse the inflation surge.
  • Analysts at the CME Group predict a more than 90% chance that the Fed will raise rates by a further 25 basis points at its meeting next month. U.S. interest rates are currently at 4.5% to 4.75%, the highest in 15 years, and Fed officials have repeatedly indicated they could raise rates to as high as 5% to get inflation back to the central bank’s target range.

See related article: Be careful what you wish for? Regulators pick up pace in the crypto industry crackdown

Markets: Bitcoin, Ether, other major tokens rise despite hotter-than-expected CPI reading

https://forkast.news/headlines/markets-bitcoin-ether-tokens-cpi-reading/

Bitcoin rose in Wednesday morning trading in Asia to move back above US$22,000 as investors shrugged off a seeming U.S. regulatory crackdown on digital assets and data showing U.S. inflation for January was above forecasts. The world’s leading cryptocurrency led other tokens higher, with Ether and all other top 10 non-stablecoin cryptocurrencies gaining ground. Cardano posted the largest increase. However, most tokens remain underwater when compared to prices seven days ago.

See related article: Singapore’s DBS bank plans to apply for crypto license in HK: report

Fast facts

  • Bitcoin rose 1.9% in the past 24 hours to US$22,220 at 8 a.m. in Hong Kong, but is down 4.4% over the past seven days, according to CoinMarketCap. Ether jumped US$3.3 to US$1,556. The token is off 6.9% for the week.
  • Cardano gained 7.5% to trade at US$0.38, though not enough to make up the 3.2% decline for the past seven days. Cardano’s gain comes amid the successful deployment of the Valentine upgrade, which is intended to make it easier for developers to build cross-chain applications on the Cardano blockchain. 
  • Polygon rose 6.1% to change hands at US$1.26, though off 0.8% for the previous seven days. Solana jumped 5.1% to US$21.84, but is down 8.5% from Wednesday last week.
  • The crypto market capitalization rose 3.1% to US$1.03 trillion, with total trading volume up 1.64% to US$58.83 billion. Markets have been rocked the past week after regulatory authorities in the U.S. took aim at crypto staking services and certain stablecoins.
  • U.S. equities had a mixed day of trading on Tuesday. The Dow Jones Industrial Average lost 0.5% and the S&P 500 Index was little-changed at 0.1% lower, but the Nasdaq Composite Index finished the day 0.6% higher. 
  • Tuesday’s Consumer Price Index (CPI) report showed prices rose 0.5% in January from the previous month or slightly higher than the 0.4% forecast by economists. The increase year-on-year came in at 6.4%, according to the U.S. Labor Department. While this was also higher than the forecast 6.2% it shows inflation for the past several months remains on a downtrend in the world’s biggest economy. 
  • The year-on-year CPI in December came in at 6.5% from the 7.1% recorded in November, which in turn declined from October’s 7.7% and the 8.2% in September.
  • The Fed, which has said it wants inflation back in the 2% range, has raised interest rates multiple times since last March to reverse the inflation surge. 
  • Analysts at the CME Group predict a more than 90% chance that the Fed will raise rates by a further 25 basis points at its meeting next month. U.S. interest rates are currently at 4.5% to 4.75%, the highest in 15 years, and Fed officials have repeatedly indicated they could raise rates to as high as 5% to get inflation back to the central bank’s target range.

See related article: Hong Kong hopes to raise US$102 million in digital green bonds debut: Bloomberg

Markets: Bitcoin rises amid market jitters as Paxos stablecoin issuer next regulator target after Kraken clampdown

https://forkast.news/headlines/markets-bitcoin-paxos-stablecoin-kraken/

Bitcoin was the only top 10 non-stablecoin cryptocurrency to gain in Tuesday morning trading in Asia in a market unsettled by regulators in the U.S. targeting digital asset companies. Paxos Trust Co. was ordered on Monday to stop issuing its U.S. dollar-pegged Binance USD (BUSD) stablecoin by New York authorities and it reportedly faces an SEC investigation. BNB, the native currency of Binance the world’s largest crypto exchange, had the biggest drop on the list.

See related article: Paxos ordered to stop issuing Binance USD stablecoin: report

Fast facts

  • Bitcoin rose 0.1% in the past 24 hours to US$21,800 at 8 a.m. in Hong Kong, but is down 4.2% over the past seven days, according to CoinMarketCap. Ether dropped 0.56 to US$1,506, posting a 6.8% weekly loss.
  • BNB fell 5.9% to US$294.40, bringing weekly losses to 9.3%.
  • The New York Department of Financial Services ordered Paxos to stop issuing the BUSD stablecoin and the company received notice from the U.S. Securities and Exchange Commission that it may face an investigation as the regulator regards BUSD as an unregistered security, according to a Monday press release.
  • “Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws,” the firm said in the release.
  • A stablecoin is a crypto token pegged to the value of an asset, in this case the U.S. dollar, and collateralized by the underlying asset. BUSD was co-developed by Paxos and the Binance exchange. The Ethereum-based stablecoin is issued and managed by Paxos.
  • Paxos said the BUSD it issues is fully backed with U.S. dollar-denominated reserves and is fully segregated. Paxos reported about $16 billion in collateral backing BUSD as of Jan. 31.
  • The moves on Paxos by regulators follow the SEC slapping a US$30 million fine on the Kraken U.S.-based crypto exchange last week for what it called the illegal operation of a crypto staking program.
  • The actions by regulators unnerved some investors, with Polygon dropping 4.3% to trade at US$1.19, a loss of 0.3% for the past week. Solana fell 3.3% to US$20.78, a weekly loss of 8.4%.
  • U.S. equities rose on Monday. The Dow Jones Industrial Average and the S&P 500 Index both gained 1.1% while the Nasdaq Composite Index closed the day 1.4% higher.
  • The gains come ahead of Tuesday’s release of the U.S. Consumer Price Index (CPI) for January, a key measure of inflation that the Federal Reserve uses to set interest rates. Economists expect an 0.4% increase in the CPI for January from December, however, the year-on-year pace is slowing.
  • The CPI in December showed prices rose 6.5% year-on-year from the 7.1% recorded in November, which in turn declined from October’s 7.7% and 8.2% in September.
  • The Fed, which has said it wants inflation back in the 2% range, has raised interest rates multiple times since last March to reverse the inflation surge.  Analysts at the CME Group predict a more than 90% chance that the Fed will raise rates by a further 25 basis points at its meeting next month. U.S. interest rates are currently at 4.5% to 4.75%, the highest in 15 years, and Fed officials have repeatedly indicated they could raise rates to as high as 5%.

See related article: UAE central bank to issue CBDC, promote digital asset growth