Five Things to Know in Crypto: Inflation Jitters Send Market South

Key Insights:

• The crypto market cap tumbled by $40.20 billion in a single hour, with risk aversion also hitting the European and US equity markets.
• Republican Warren Davidson announces proposed legislation to remove Gary Gensler as the SEC chair.
• XRP slides to sub-$0.47 despite hopes of a Ripple win in the ongoing SEC v Ripple case.

On Tuesday, investor sentiment toward the crypto market improved as investors tuned into the Securities and Exchange Commission Oversight hearing. The SEC Chair Gary Gensler faced a difficult four hours plus, with Patrick McHenry exposing Gensler to further scrutiny on crypto regulation.

Crypto Market Cap Tumbles by $40.20 Billion in One Hour

Crypto market conditions soured this morning. Economic indicators from the UK and the euro area spooked investors. Sticky inflation spells rate hikes and the threat of a global economic recession.

The UK annual inflation rate softened from 10.4% to 10.1% versus a forecasted 9.8. Euro area core inflation rate accelerated from 5.6% to 5.7%.

Despite aggressive policy moves to bring inflation to target, the latest figures suggest that more work is needed to tame inflation. Energy prices may have tumbled, but food prices have surged, supporting elevated inflation.

FOMC member commentary reignited Fed Fear this week. Following Christopher Waller’s hawkish comments last Friday, FOMC member James Bullard played down fears of a recession while pushing for more rate hikes to combat inflation.

There were no crypto market events to fuel the sell-off, with the pullback coinciding with the release of the UK and euro area CPI reports.

Beyond the crypto market, the DAX was down 0.20%, with the NASDAQ and Dow mini falling by 104.5 and 108.0 points, respectively.

Crypto investor reaction to the latest CPI reports was evident, with the total crypto market cap sliding by $40.20 billion in response to the euro area numbers.

SEC Chair Gary Gensler in Hot Water with US Lawmakers

Overnight, Republican Warren Davidson called to remove Gary Gensler as Chair of the Securities and Exchange Commission.

Following the Securities and Exchange Oversight hearing on Capitol Hill, Davidson had this to say,

“To correct a long series of abuses, I am introducing legislation that removes the Chairman of the Securities and Exchange Commission and replaces the role with an Executive Director that reports to the Board, where all authority resides. Former Chairs of the SEC will be considered ineligible.”

Davidson grilled SEC Chair Gary Gensler over a lack of transparency and Gensler’s comments during the SEC Oversight hearing.

The SEC Chair’s Twitter account has been silent since Tuesday when Gensler wrote,

“On my way to testify before the Financial Committee in the Rayburn House Office Building, I shopped by Sam Rayburn’s statue. Mr. Sam worked with FDR to establish our first federal securities laws. Excited to testify on our important work to realize his vision.”

XRP Slumps to Sub-$0.50 Despite Hopes of a Ripple Win Against the SEC

This morning, XRP was down 6.83% to $0.49558. Tracking the broader crypto market, XRP tumbled to a session low of $0.46477 before finding support.

The sell-off comes despite investor hopes of a Ripple win in the ongoing SEC v Ripple case.

Amicus Curiae lawyer John Deaton shared his views on the Gensler testimony in a one-minute video. The video was a collage of SEC Chair Gensler interviews.

The Hinman documents remain a focal point for the Ripple defense team and the SEC. By way of background, the former SEC Director of the Division of Corporation Finance, William Hinman, said that bitcoin (BTC) and ethereum (ETH) are not securities in a famous 2018 speech.

The contentious issue with the speech relates to Hinman’s connection with Simpson Thacher. Simpson Thacher is part of a group that promotes Enterprise Ethereum. After leaving the SEC, Hinman returned to Simpson Thacher.

This year, the SEC has redirected its attention to ethereum, with Gensler labeling ETH and all cryptos, except bitcoin, as securities.

Hong Kong Gives Crypto Platforms and Investors a Different Perspective

On Tuesday, a Hong Kong court ruled that cryptocurrencies are property and qualify to be held in trust.

Hogan Lovells shared the details of the ruling, saying,

“In a landmark ruling, the Honourable Madam Justice Linda Chan, in Re Gatecoin Limited (2023) HKCFI 91, found that cryptocurrency inherently has all the attributes of property but that in this case, Gatecoin Limited’s (Gatecoin) 2018 terms and conditions made it clear that cryptocurrencies were not held on trust for its customers due to lack of certainty of intention.”

Hong Kong aims to be a crypto hub. In February, the HK Securities and Futures Commission announced the launch of a consultation on the proposed requirements for operators of virtual asset trading platforms.

Intel (INCT) Discontinues Bitcoin Mining Chip Production

On Tuesday, Intel (INTC) announced it discontinued the production of its Bitcoin mining chip series. The chip manufacturer reportedly plans to stop taking orders by October 20, 2023, and end shipping by April 20, 2024.

Intel Corp. ended Tuesday down 0.96% to $31.83.