The crypto market has taken a downturn just as Bitcoin (BTC) seemed poised for a price breakout. On May 16, Bitcoin hit a 7-day low of $26,970, causing concern among traders that a larger price dip may be on the horizon. Adding to these worries, a CME gap is currently sitting at $24,000. Ether (ETH) also experienced a similar drop, trading above the $2,100 level after the Shapella upgrade only to drop to an intraday low of $1,804 on May 16.
Regulatory Uncertainty Causes Outflows
The crypto price drop coincides with increased regulatory uncertainty, and digital asset markets have seen outflows surpassing $200 million. The drop occurred a day after SEC lawyers responded to Coinbase’s lawsuit for clarity on what tokens are securities, calling the suit baseless. SEC Chairman Gary Gensler has reiterated that most crypto tokens are securities, stating that business models in the industry tend to be built on non-compliance and conflicts.
Democrats Seek to Cement SEC Authority Over Crypto
Democrats in the United States legislature are seeking to cement the SEC’s authority over crypto, which may result in most tokens being classified as securities. Gensler believes that even network nodes are in violation of securities laws, adding further regulatory pressure on the crypto industry.
Volatility to Remain Amidst Macro Headwinds
The crypto industry and regulators have a long history of not getting along, and after recent banking crises, some feel that US lawmakers are angry with the industry. While some analysts believe Bitcoin may see inflows in the event the United States defaults on its debt, there is a significant risk that the U.S. Treasury will run out of funds, straining liquidity. With heavy macro headwinds, it is likely that volatility in the crypto market will remain.